Sumitomo, Saudi Aramco lend USD2bn to boost Petro Rabigh working capital

MOSCOW (MRC) -- Sumitomo Chemical and Saudi Aramco have jointly loaned out a total of USD2bn to Rabigh Refining and Petrochemical Co (Petro Rabigh), which faced shortfall of working capital as “the market environment has rapidly deteriorated” since end-2019, said Hydrocarbonengineering.

This project has been undertaken by Rabigh Refining and Petrochemical Company (Petro Rabigh), jointly founded by both companies. The financial completion guarantee has been terminated as of 30 September 2020, as Sumitomo has confirmed its fulfillment of specific requirements for continuous performance and debt-repayment ability stipulated in the project financing agreements, after consultation with a syndicate of banks.

A financial completion guarantee is an arrangement whereby investing companies for a given project guarantee a full repayment of the loan to a lender on behalf of the project company during construction and for a specified period after the completion of the construction work, until confirmation is made that the project company is deemed capable of making repayment with continuous cash flow generated by stable operations.

In March 2015, Petro Rabigh signed project financing agreements with a syndicate of banks, including the Japan Bank for International Cooperation (JBIC) and the Public Investment Fund (PIF) of Saudi Arabia, to receive an aggregate loan of US$5.2 billion, which was 60% of the total cost of Rabigh Phase 2 Project (about USD9.1 billion). For these agreements, Sumitomo Chemical and Saudi Aramco have each offered a financial completion guarantee for 50% of USD5.2 billion based on the agreements with the syndicate of banks.

Petro Rabigh has already started the scheduled repayment of the debt principal since June 2019 (outstanding debt as of September 2020 is about USD4.6 billion). The company will continue to repay the balance of the loan out of cash flow generated from its operating activities.

Meanwhile, the market environment has rapidly deteriorated since the end of last year. Coupled with other factors including periodic shutdown maintenance, Petro Rabigh faced the shortfall of working capital. To cover this shortfall, Sumitomo Chemical and Saudi Aramco have decided to make a loan totalling USD2 billion (of which Sumitomo Chemical's portion is USD750 million, 37.5% of the ownership stake) to Petro Rabigh.

Sumitomo Chemical continues to provide necessary support so that Petro Rabigh can continue stable operation to achieve sustained growth.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) - The situation in the global suspension polyvinyl chloride (SPVC) market and the devaluation of the rouble continue to put pressure on prices in the Russian market. Russian producers announced a further price increase of Rb2,000-3,000/tonne, according to ICIS-MRC Price Report.

Russian producers traditionally cut SPVC prices in September - October in the previous years in the domestic market, including due to a decrease in demand. The current year was not typical for both the Russian and the global PVC markets in general.

Tight PVC supply in several regions of the world and record price levels put a serious pressure on PVC prices in Russia, as well as the weakening of the rouble. Russian producers also intend to achieve a price rise of Rb2,000-3,000/tonne for October shipments.

The demand for SPVC from Russian converters in September was at a good level, although some converters were cautious about purchases at the beginning of the month. At the same time, supply of PVC K58/70 has been tight since the middle of summer due to insignificant imports and problems with production from some producers.
Many converters intend to reduce the volume of PVC purchases in October, wishing to optimise their stocks of raw materials and finished products by November.

Nevertheless, weaker demand does not affect the prices of PVC from Russian producers, since the latter have an increased demand for PVC from consumers from other regions of the world. In addition, in some areas of export, PVC prices were significantly higher than the prices that Russian producers offer for supply to the domestic market in October. In particular, in Turkey last week PVC prices exceeded USD1,200/tonne CFR Istanbul. Prices in Asia have exceeded USD1,000/tonne CFR. Kaustik Volgograd plans to shut its 90,000 tonnes/year PVC capacities for the turnaround in the first ten days of October.

For most consumers in Russia, the current price situation was not typical. Buyers were used to the fact that in previous years, prices have been gradually decreasing since September until the end of the year.

And, as a result, consumers were not ready for the next wave of SPVC price increases. October deals for Russian PVC with K64/67 were negotiated in the range of Rb83,000-86,000/tonne CPT Moscow, including VAT, for quantities of less than 500 tonnes.
MRC

MOSCOW (MRC) -- The Abu Dhabi National Oil Company (ADNOC) has announced that one of its new trading entities, ADNOC Trading, has started derivatives trading as a direct market participant, said Hydrocarbonprocessing.

This represents a major milestone for the company, as it moves from being a traditional marketer of its products to a more sophisticated global trader. ADNOC has incorporated two trading units, ADNOC Trading (AT), which focuses on the trading of crude oil, and ADNOC Global Trading (AGT) a joint venture with ENI and OMV that will focus on the trading of refined products. The new offices of both AT and AGT are located in Abu Dhabi’s International Financial Centre at Abu Dhabi Global Market (ADGM).

ADNOC Trading is now operational and ADNOC Global Trading is on track in establishing the required processes, procedures and systems to begin operations in the coming months. The AGT trading team are already optimizing ADNOC’s flows (crude, feedstock and product optimization), and, as its new trading systems are finalized will ramp up its activities.

By entering trading, ADNOC is able to offer a broader range of services to its customers and capture more value through new revenue streams from the sale of its growing crude and refined products portfolio. This significant step is a critical enabler of ADNOC’s 2030 strategy and its drive to become a more commercially-driven and performance-led organization.

H.E. Dr. Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and ADNOC Group CEO, said: "This historic achievement is yet another important milestone for ADNOC as we become a more modern, agile and progressive energy company. Our steadfast focus is on providing a better service to our customers, while also stretching the margin from every barrel of oil that we produce, refine and trade. Our move into trading supports both of these goals."

“The opening of our trading offices at Abu Dhabi Global Market (ADGM) further reinforces its position and reputation as a leading and growing commodities trading hub for our nation and the Middle East region." HE Ahmed Ali Al Sayegh, UAE Minister of State and Chairman of Abu Dhabi Global Market, said: “We congratulate ADNOC on the auspicious launch of their trading operations, and setting another major milestone as they continue to unlock new potential and opportunities to further the UAE economy. We are pleased that ADNOC Global Trading and ADNOC Trading have chosen ADGM as their home base and warmly welcome the teams to the ADGM family. As an International Financial Centre, ADGM is committed to supporting ADNOC and Abu Dhabi institutions in their strategic development and future endeavors via our financial and business platforms. We will work closely together as one entity to propel the economic growth of Abu Dhabi and the UAE well into the future."

The opening of its trading offices further demonstrates ADNOC’s resilience in overcoming the unprecedented challenges of the COVID-19 pandemic. Khaled Salmeen, Executive Director of ADNOC’s Marketing, Supply and Trading directorate and Chairman of ADNOC Trading said: “ADNOC has continually adapted during COVID-19 to deliver on its commitments to domestic and international customers, including our landmark move to forward pricing of Abu Dhabi crudes. In 2020, our plans for ADNOC Trading and ADNOC Global Trading become a reality. In the weeks and months ahead, Trading will become integral to how ADNOC manages its business, helping us to better manage our product flows, deliver greater efficiencies, and provide our customers with a broader service and more integrated solutions."

Safeguards are in place to oversee and track all trading activity. The trading systems used by AGT and AT have undergone thorough testing to ensure that they are ‘air-tight and water-tight’ before operations begin. In order to manage and control risk, the expert trading teams use a suite of energy trading and risk management systems that cover the full life cycle of every trade.

The establishment of ADNOC’s new trading entities is part of the company’s broader transformation in its customer-facing Marketing, Supply and Trading directorate (MS&T). ADNOC’s marketing arm is moving from a supplier that customers historically collected products from, to a more customer and market-centric, shipping & integrated logistics, storage and trading organization. By better integrating its marketing related companies and capabilities, ADNOC will provide a broader service to its customers, better manage and optimize its product flows and ultimately deliver greater value to its customers, its shareholders and the UAE.

In shipping, ADNOC Logistics & Services (ADNOC L&S) is the largest, fully integrated logistics and shipping company in the UAE and provides highly specialized services that cover the entire oil and gas supply chain. ADNOC L&S is expanding its merchant fleet in line with ADNOC’s growing upstream and downstream portfolio and the company’s move into trading.

In storage, in addition to substantial storage in the UAE and international storage in Japan and India, ADNOC announced in 2019 a strategic investment in global storage terminal owner and operator VTTI BV (VTTI). VTTI is an independent global owner of 15 hydrocarbon storage terminals across 14 different countries, many of which are in locations that are complementary to ADNOC’s trade flows. Finally, by entering trading, ADNOC will be able to provide a wider offering to its customers, more nimbly take advantage of changing market dynamics, and better manage its product flows, assets and risks.

As MRC informed earlier, in early May, 2020, Abu Dhabi National Oil Company (ADNOC) began a gradual restart of its Ruwais oil refinery complex after a scheduled maintenance shutdown. The Ruwais complex, which has capacity of 835,000 barrels per day, was shut down early this year, the ADNOC spokesman said. And in late July 2019, ADNOC said its Ruwais refinery west cracker was offline for maintenance.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

MRC

MOSCOW (MRC) -- Preem announced it has scrapped plans for the expansion of Sweden’s biggest oil refinery that would potentially have created the country’s biggest polluter, blaming the economy, said Hydrocarbonprocessing.

The government had not yet decided whether to allow the planned USD1.65 billion (15 billion crown) expansion. A court ruled in June it could go ahead, running counter to the Social Democrats-Greens coalition’s promise to cut emissions.

"In light of the economic future prospects, Preem’s Board of Directors has decided that the environmental permit application for Preemraff Lysekil will be withdrawn, and that the ROCC (Residue Oil Conversion Complex) project will be discontinued,” Preem said.

It said the impact of the COVID-19 pandemic had contributed to the project no longer being commercially viable. “Dismantling the ROCC project is a commercial decision,” Magnus Heimburg, CEO at Preem since August, said in a statement. Climate activists and others had opposed the expansion.

Greenpeace this month in protest blocked a tanker from delivering crude oil to the refinery. It said the expansion would result in increasing carbon dioxide emissions by up to 1 MM tons per year, making it Sweden’s largest source of CO2 emissions.

Teen activist Greta Thunberg, who has said Sweden would fail to live up to its commitments to the Paris Agreement if it allowed the expansion, said on Twitter the news was “a huge victory for the climate and environmental movement”. Preem, owned by Ethiopian-born Saudi billionaire Mohammed Hussein al-Amoudi, is the largest refining company in Sweden. The group said it now instead planned to start production of renewable fuels at the Lysekil refinery.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- US propane and propylene stocks surged 4.1 million bbl during the week ended 25 September, according to the US Energy Information Administration (EIA), said Chemweek.

Nationwide stocks totaled 102 million bbl, up 4.2% on the week and 5.9% above year-ago levels. An OPIS survey of market participants on Tuesday called for an average build of 2.2 million bbl on the week, with estimates ranging from 500,000 bbl to 4 million bbl.

Demand, as suggested by product supplied, tumbled over the reporting period, coming in at 615,000 b/d, down 434,000 b/d. At the same time, refiner and blender net production increased by 123,000 b/d to 2.351 million b/d. Exports of propane and propylene increased by 276,000 b/d to 1.315 million b/d for the latest reporting week, while imports rose by 51,000 b/d to 161,000 b/d.

Regionally, PADD 3 (Gulf Coast) stocks rose 3.6 million bbl to 59.5 million bbl and were 2.8 million bbl higher than last year. PADD 2 (Midwest) increased by 400,000 bbl to 27.8 million bbl and were 300,000 bbl ahead of 2019. PADD 1 (East Coast) rose by 100,000 bbl on the week to 9.2 million bbl, up 1.3 million from 2019, and PADDs 4 and 5 fell 100,000 bbl to 5.4 million bbl (1.3 million bbl over last year).

Spot propane prices had limited reaction to the EIA data, with no post-report transactions confirmed at Mont Belvieu and bid/ask ranges largely holding to levels done earlier in the morning. TET (Lone Star) transacted from 49.5-51 cts/gal and non-TET (Enterprise) at 49.75-50.875 cts/gal. Conway propane last traded at 48.125 cts/gal, incrementally higher than a pre-EIA range of 46.5-48 cts/gal.

As per MRC's DataScope report, Russian companies significantly raised their purchasing of PP in foreign markets in August partially because of a major increase in demand, imports were 21,200 tonnes versus 17,200 tonnes a month earlier. Thus, overall PP imports into Russia reached 143,200 tonnes in January-August 2020, compared to 120,100 tonnes a year earlier. Purchasing of all grades of propylene polymers in foreign markets increased, with homopolymer PP imports accounting for the most noticeable rise.
MRC