Shale bankruptcies pile on, Lonestar latest to succumb to weak demand

MOSCOW (MRC) -- Lonestar Resources US Inc filed for Chapter 11 bankruptcy protection on Thursday, joining a clutch of shale companies that have succumbed to weak crude prices as COVID-19 pandemic crimps fuel demand, said Hydrocarbonprocessing.

Lonestar, which operates in Texas’ Eagle Ford basin and produced roughly 14,000 barrels of oil equivalent per day, had a total debt of USD546.3 million as of June 30 and made the move after defaulting on two debt payments.

Shares of the company fell 13% to 20 cents, shrinking its market capitalization to just over USD5 million from nearly USD350 million at its peak in 2014. Weak crude demand due to the pandemic has proved to be a double-whammy for shale companies, which grew rapidly early in the decade but in the process amassed a large pile of debt.

Through the end of August, 36 oil and gas producers with USD51 billion debt have filed for bankruptcy this year, according to the law firm Haynes and Boone. It includes Chesapeake Energy, Chaparral Energy, Whiting Petroleum Corp., and Oasis Petroleum Inc filed for Chapter 11 on Tuesday.

Industry experts expect more companies to file for bankruptcy before the year is over. Gas producer Gulfport Energy Corp, which has hired a debt restructuring adviser, has interest payments on its debt due on Oct. 15, Nov. 1 and Nov. 15.

The upcoming biannual review of how much money energy companies can borrow against the value of their oil and gas reserves can also push some of the smaller companies, already struggling to find other methods of financing, into bankruptcy.

As mRC informed earlier, US propane and propylene stocks surged 4.1 million bbl during the week ended 25 September, according to the US Energy Information Administration (EIA). 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.

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

MOSCOW (MRC) -- LyondellBasell and Sasol have agreed to form a joint venture (JV), under which LyondellBasell will pay USD2 billion to acquire 50% of Sasol’s new 1.5-million metric tons/year steam cracker, and low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE) plants with combined capacity for 900,000 metric tons/year, as well as associated infrastructure, at Lake Charles, Louisiana, said Chemweek.

The agreement includes customary rights for each partner regarding the potential future sale of its ownership interest, the companies say in a joint statement. The JV will operate under the name Louisiana Integrated PolyEthylene JV LLC. LyondellBasell and Sasol will each provide pro-rata shares of ethane feedstock to the cracker and offtake pro-rata shares of cracker and polyethylene (PE) products at cost, they say. LyondellBasell will operate the assets on behalf of the JV.

Sasol says it carried out a process to determine “the optimal partnership construct” for its US base chemicals business. The proposal by LyondellBasell “offered the best combination of upfront and long-term value, consistent with Sasol’s long-term strategic priorities,” it says. The transaction, subject to customary regulatory approvals and approval by Sasol shareholders, is expected to close by the end of the year. A number of Sasol’s US employees will transfer to LyondellBasell when the transaction closes.

Other companies that reportedly made offers to Sasol in discussions earlier this year for the assets include CPChem and Ineos. Sasol will retain full ownership and operational control of its existing 454,000-metric tons/year Lake Charles East Plant ethane cracker, an R&D complex, and its performance chemicals assets at Lake Charles producing Ziegler alcohols and alumina, ethoxylates, Guerbet alcohols, paraffins, comonomers, linear alkylbenzene, ethylene oxide, and ethylene glycol, it says.

LyondellBasell CEO Bob Patel describes the investment as a “unique opportunity” to create deep, long-term value that will also immediately realize the benefits of new, strategically located assets. The transaction is expected to be accretive to cash flow and earnings per share within a year, with “significant upside as market conditions continue to improve,” he says. The investment allows LyondellBasell to expand in a core area of its business and leverage its operational and commercial strengths, according to the company. It will also realize immediate returns while eliminating “customary construction risks associated with new project execution,” it says.

Sasol president and CEO Fleetwood Grobler says LyondellBasell is the “ideal partner to ensure the success of these world-class assets with its deep expertise in commodity chemicals.” The transaction represents a significant step forward for Sasol in creating a more sustainable and resilient company for the long term, he says. The deal also reduces the company’s net debt and helps to shift its portfolio focus increasingly toward specialty chemicals, according to Sasol. The US performance chemicals business is “consistent with the strategy to increase focus on specialty chemicals where Sasol enjoys differentiated capabilities and strong market positions,” it says. The company says it will also retain access to “competitively priced onsite ethylene to ensure value-chain integration."

Kirkland & Ellis is serving as legal counsel to LyondellBasell and Gordon Dyal & Co. and J.P. Morgan are serving as financial advisors. Latham & Watkins is serving as Sasol’s legal counsel and Bank of America is serving as financial advisor.

Sasol said in August that it had received “strong global interest” for its Lake Charles Chemicals Project (LCCP) base chemicals assets and that a deal was expected to close by the end of the year. The overall current forecast cost of the LCCP is USD12.8 billion, a cost that has soared from its original estimate of USD8.9 billion. Sasol also reported a net loss of USD5.3 billion for its full financial year ended 30 June.

The last remaining unit to come online at the LCCP complex is the 420,000-metric tons/year LDPE facility, damaged in a fire earlier this year. It is still expected to achieve beneficial operations by the end of this month, according to Grobler.

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) -- In order to reduce the sulfur dioxide (SO2) emissions released from vehicles and so to comply with more stringent specifications for transportation fuel standards, the government of India undertook an unprecedented decision by leapfrogging from Bharat Stage (BS)-IV to BS-VI national motor vehicle emission standards, said Hydrocarbonprocessing.

The BS-VI fuel specifications, equivalent to Euro-VI specifications, aim at mainly reducing the sulfur content in gasoline to 10 ppmwt (weight part per million) from 50 ppmwt (BS-IV) nationwide by 2020. As part of the objective to produce higher-quality BS-VI gasoline, Axens, with its leadership in cracked gasoline selective hydro-desulfurization technology, Prime-G+®, offered tailor-made and cost effective solutions for existing or grassroots units for 14 different sites.

These Prime-G+® projects, for a 250,000 BPSD cumulated capacity, carried out in fast-track mode represent 100% awards in FCC gasoline hydro-treatment of the Indian public-sector refineries. Axens is delighted to contribute to the successful accomplishment of this major step producing BS-VI-compliant fuels and thus improving air quality in India.

As MRC informed earlier, Axens says it will license its alpha-olefins production technology to Baltic Chemical Plant LLC (BCP LLC), a subsidiary of RusGazDobycha (Moscow, Russia), for its gas-based petrochemical project at Ust-Luga, near St. Petersburg, Russia.

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output.
MRC

MOSCOW (MRC) -- The Gazpromneft Omsk Oil Refinery (Omsk) in Siberia, Russia has significantly lowered its air emissions using BELCO wet scrubbing technology licensed by DuPont Clean Technologies (DuPont), said Hydrocarbonprocessing.

With an installed capacity of 22.23 MM tons of oil per year, the Omsk Oil Refinery is one of Russia’s leading oil refineries. The BELCO wet scrubbing technology was installed at Omsk during a fluidized catalytic cracking unit (FCCU) revamp and efficiently removes process impurities from the flue gas emitted by the FCCU thus reducing air emissions well below detection limits.

The introduction of the BELCO wet scrubbing technology was an important part of a large-scale modernization project that Gazpromneft began at the Omsk refinery in 2008. One of the aims of the project was to systematically introduce technologies that reduce the refinery’s environmental impact. This included treating the FCCU flue gases with the BELCO® scrubber to intensely clean them of atmospheric pollution. The BELCO® technology design allowed the Omsk Oil Refinery also to solve a challenging installation and plot space problem for the gas cleaning section. Thanks to the unique scrubber design, which is contained in a single upflow tower, the refinery was able to simply dismantle a pre-existing 70m tall, brick flue stack and install the scrubber on the previous chimney foundations. This was key for the site as the plot space for the unit at the refinery is very tight.

The BELCO scrubber uses a unique, proprietary design consisting of a water spray tower equipped with a filtering module and droplet separators. Larger particulate and SO2 are removed in the spray tower, and fine particulate is removed in the filtering module section, so that only cleaned flue gas leaves the tower. The process is fully automated, and the new custom-designed scrubber system comes with built-in control analyzers that allow for constant online monitoring.

“For the Omsk Oil Refinery, ecology is an absolute priority. The company systematically introduces technologies that reduce the impact on the environment. The Omsk Refinery was one of the first refineries in Russia to use this state-of-the-art fluid catalytic cracking regenerator flue gas cleaning technology. This is an exclusively environmental protection project that supports our high standards of environmental safety,” said Oleg Belyavsky, General Director of the Omsk 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.

BELCO wet scrubbing technology is the global standard for limiting flue gas emissions from FCCUs, fluid cokers, fired heaters and boilers. The BELCO® wet scrubbing system reliably controls particulate, SOx and NOx emissions in a single upflow tower, thereby eliminating the need for a separate control device to manage different emissions. With its unique open-vessel design and non-plugging features, the BELC® wet scrubbing system is extremely robust and proven to support uninterrupted FCCU operation, with units typically working continuously for 3-7 years without any maintenance or service shutdowns. The BELCO® wet scrubbing system is engineered to handle severe upset conditions including high-particulate carry over and high-temperature excursions.
MRC

MOSCOW (MRC) -- Japan’s biggest refiner, Eneos Corp, permanently shut the 115,000 barrels-per-day (bpd) crude distillation unit at its Osaka refinery on September 30 as planned, a company spokeswoman said, said Reuters.

The refiner, which was formerly known as JXTG Nippon Oil & Energy Corp and is now under Eneos Holdings Inc, is shifting its joint venture with PetroChina Co to Eneos’ Chiba refinery after shutting the venture’s Osaka refinery.

Eneos also shut the 127,500 bpd CDU at its Wakayama refinery on Sept. 27 for scheduled maintenance, with a plan to restart in early December, the spokeswoman said.

The company also shut the 120,000 bpd No.1 CDU at its Negishi refinery on Sept. 25, with an aim to resume operations in early November.

As MRC informed earlier, Eneos (formerly JXTG Nippon Oil & Energy), part of Eneos Holding, a major petrochemicals producer in Japan, set its October contract price for benzene in Asia at USD425 per tonne, up USD20 per tonne from the contract price in September. The price has been approved on CFR Asia delivery terms.

Benzene is a raw material for the production of styrene, which, in turn, is the main raw material for the production of polystyrene (PS).

As per ICIS-MRC Price Report, the high impact polystyrene (HIPS) and general purpose polystyrene (GPPS) market
participants in Russia said demand for material remained strong amid its shortage. Large buyers were generally provided with material according to their needs, whereas small ones could not fully meet their needs, as there were no free quantities of Nizhnekamskneftekhim's polystyrene (PS) for injection moulding, extrusion and production of XPS-boards at the beginning of autumn.

Eneos Holding (formerly known as JXTG) is Japan's largest oil company. Its activities include the exploration, import and refining of crude oil; production and sale of petroleum products (ethylene, propylene, butadiene, styrene, paraxylene, orthoxylene, etc.), including fuels and lubricants. In recent years, the company has been expanding its production facilities in other countries. Its products are sold under the ENEOS brand. On June 25, 2020, JXTG, founded in April 2017 after the merger of two Japanese companies, JX Holding and TonenGeneral, changed its name to Eneos Holdings, while its subsidiary JXTG Nippon Oil & Energy changed its name to Eneos.
MRC