Total production slammed by OPEC+ cuts, but finances show 'resilience' in Q3

MOSCOW (MRC) -- Total's oil and gas production dropped 11% on the year in the third quarter, to 2.72 million b/d of oil equivalent and it forecast full-year output below 2.9 million boe/d on the back of OPEC+ cuts, as its third-quarter results showed financial improvement Oct. 30, reported S&P Global.

In a results statement, Total said its Q3 production had been affected by OPEC+ cuts in Angola, Iraq, Kazakhstan, Nigeria and the UAE as well as voluntary reductions in Canada and disruption in Libya, noting in particular the "reinforcement" of cuts by Nigeria.

The company's liquids production was down 16% on the year at 1.44 million b/d, although it noted OPEC+ cuts were offset by increases from the UK's Culzean gas field, Norway's Johan Sverdrup, Brazil's Iara and Italy's Tempa Rossa.

In the context of strong OPEC+ compliance and lower North American production, Total "anticipates full-year 2020 production below 2.9 million boe/d," compared with 3.01 million boe/d in 2019, it said.

However, CEO Patrick Pouyanne noted a "more favorable" business environment, and the company highlighted its July sale of the UK's Lindsey refinery, as well as its conversion of the Grandpuits refinery to a "zero-oil" producer of biofuels and bioplastics.

"The oil market environment remains uncertain and will depend notably on the speed of the global demand recovery, affected by the COVID-19 pandemic," Total said.

Europe's largest refiner added that margins in the region had recovered in the fourth quarter, averaging above $10/mt, but "remain fragile given the low demand for jet fuel that weighs on the valuation of all distillates."

It added that it anticipated a positive impact from improved fourth quarter LNG prices, expected to be over $4/MMBtu, as a result of the oil price recovery over the previous two quarters.

Total reported an adjusted profit of USD850 million, down 72% on the year, and reduced its debt gearing to 22% from the end of the previous quarter, making it again the least indebted of the European majors by far.

It reported an overall profit of USD202 million, impacted by relatively modest impairments of USD293 million, compared with an overall loss of USD8.4 billion in Q2, impacted by over $8 billion of impairments.

Noting the company's low cost of upstream production, of just USD5/boe, Total said the upstream division "carries" its corporate performance.

"The group is once again demonstrating its resilience thanks to its integrated model, by generating debt-adjusted cash flow of more than $4 billion [and] reducing gearing to 22% given its investment and cost discipline," Pouyanne said.

As MRC reported earlier, within the framework of its net zero strategy, Total will convert its Grandpuits refinery (Seine-et-Marne) into a zero-crude platform and will invest more then EUR500 mln into this project. By 2024 the platform will focus on four new industrial activities: production of renewable diesel primarily intended for the aviation industry, production of bioplastics, plastics recycling and operation of two photovoltaic solar power plants.

We remind that in November 2019, Total disclosed that itis evaluating construction of a new gas cracker at its Deasan, South Korea, joint venture (JV) with Hanwha Chemical.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

Petkim earnings rise on higher volumes, strong thermoplastics demand

MOSCOW (MRC) -- Turkish petrochemical company Petkim Petrokimya Holdings A.S. said that its non-consolidated net profit fell 33% on the year to 446.4 million lira (USD52.4 million/44.1 million euro) in the first nine months of 2020, said Chemweek.

Total revenue decreased by 9.4% year-on-year in the January-September period, to 8 billion lira, the company said in an interim financial statement on Thursday.

The cost of sales fell by an annual 8.8% to 6.9 billion lira. However, finance costs jumped to 2.8 billion lira in the nine months under review, from 1.8 billion lira in the like period of 2019.

Petkim, founded in 1965, manufactures more than 50 petrochemical products that are used in the construction, electricity, electronic, packaging, textile, medical, dying, detergent and cosmetic sectors.

As MRC informed earlier, Petkim, Turkey's sole polymer producer, has applied to the Ministry of Trade to open an antidumping investigation into imports from Saudi Arabia. The application centres on low density polyethylene (LDPE). Petkim alleges that Saudi Arabian prices adversely affected the value of LDPE in the first six months of 2020. Although Petkim concedes that it did not lose any sales volume during the period, it claims that its prices were damaged by an increase in Saudi-origin material.

According to MRC's ScanPlast report, September estimated LDPE consumption in Russia fell to 23,930 tonnes from 47,610 tonnes a month earlier. Russian producers reduced their domestic LDPE shipments due to shutdowns for maintenance at production capacities in Ufa, Tomsk and Kazan. Russia's estimated LDPE consumption totalled about 406,500 tonnes in January-September 2020, which virtually corresponded to the last year's figure.

Petkim Petrokimya Holding A.S. is a Turkish chemical company. The controlling stake in the company (51.39%) is owned by the State Oil Company of the Azerbaijan Republic (SOCAR). The rest of the shares are held by TURCAS. The company produces polymers (PE, PP, PVC, PA), detergents, packaging, etc.
MRC

Brenntag posts lower third-quarter net profit, achieves YOY EBITDA growth

MOSCOW (MRC) -- Brenntag, the market leader in chemical and ingredients distribution, has reported a resilient third-quarter performance and says the impact from the COVID-19 pandemic on its business is “still limited", said Chemweek.

Net profit was down in the third quarter to EUR120.6 million (USD141.1 million) from a prior-year figure of EUR128.4 million on sales of EUR2.88 billion, down 7.7% year on year (YOY) on a constant currency basis. The company achieved YOY growth in operating EBITDA, up 4.9% to EUR264.4 million. The EMEA, APAC, and Latin America regions “showed a particularly good development,” but conditions in North America were tougher, Brenntag says. Group operating gross profit slipped 0.2% YOY to EUR690.6 million.

“Brenntag achieved strong results in the third quarter of 2020,” says CEO Christian Kohlpaintner. “The COVID-19 pandemic has been with us—as with many other companies—throughout the year and has significantly impacted the overall economic environment. Nevertheless, we once again show a positive business development and our operations remained with limited effect by the COVID-19 crisis in the reporting period."

Third-quarter operating gross profit in EMEA was EUR294.8 million, up 4.8% YOY. The company says that despite restrictions due to COVID-19, its business in the region achieved operating EBITDA growth of 11.3% YOY, to EUR112.9 million.

The business environment in North America remained “challenging with the oil and gas industry particularly weak,” Brenntag says. Operating gross profit generated by Brenntag in North America was down 9.3% YOY to EUR273.9 million and operating EBITDA was EUR110.0 million, down 11.7%.

Brenntag reports robust third-quarter results for its business in Latin America on slowly recovering volumes, good margin management, and cost control. Regional operating gross profit of EUR44.5 million was up 15.7% YOY and operating EBITDA jumped 39.8% YOY to EUR15.1 million.

The company says its results in APAC reflect the recovery in the regional economy in the third quarter after strict lockdown for several months due to the pandemic. At EUR72.5 million, operating gross profit in the region was 12.0% above the prior-year level of EUR68.1 million. Third-quarter operating EBITDA leapt 35.9% YOY to EUR33.0 million.

Brenntag has confirmed its full-year outlook, which it reinstated in September after suspending guidance in April. The company expects 2020 operating EBITDA of EUR1.000–1.040 billion, compared with EUR1.001 billion in 2019. The forecast assumes “no further significant government measures to contain the pandemic and related negative effects on the economy,” the company says. It also does not envisage any special items or significant changes in current exchange rates by the end of the year. The forecast includes contributions to earnings from acquisitions. “As the COVID-19 pandemic will most likely impact the economy for the rest of this year and also in 2021, the presumed business environment continues to be volatile,” Brenntag says. The company announced details recently of its transformation program, which includes job cuts and site closures.

As MRC informed earlier, Brenntag Essentials and Brenntag Specialties. Each division will have a focus on customer- and supplier needs. The new operating model forms part of the company’s previously announced transformation program, Project Brenntag. Brenntag says that with the two new divisions it will better leverage on its strengths and sharpen its profile toward relevant industry segments.

In August 2020, Brenntag acquired the operating assets of Suffolk Solutions’ (Suffolk, Virginia) caustic soda distribution business. Financial terms of the deal have not been disclose.

We remind, Russia's September production of sodium hydroxide (caustic soda) were 108,000 tonnes (100% of the basic substance) versus 99,200 tonnes a month earlier. Overall output of caustic soda totalled 945,600 tonnes in the first nine months of 2020, down by 1.6% year on year.
MRC

Reducing human error in gas pipeline operations

MOSCOW (MRC) -- At the virtual 2020 GPA Midstream Fall Technical Conference, Jill Watson, Senior Probabilistic Risk Engineer at Enercon in Texas, provided a working-level understanding of human reliability analysis for gas pipeline operations, said Hydrocarbonprocessing.

One of nine PHMSA pipeline threat categories that are required to be addressed under an integrity management plan is incorrect operations (IOs). This threat occurs as a result of an operator action that results in an unintended consequence due to human error.

IOs resulted in approximately 6% of significant events and around 8% of non-significant events that occurred during pipeline incidents from 2010 to 2013, Watson noted. Both significant and non-significant IOs can be addressed through a comprehensive human reliability analysis (HRA). HRA is the incorporation of human "contributions" into the analysis of safety and risk. The results derived from performing an HRA can be used to improve operator responses and reduce human errors.

Mitigating human error. PHMSA risk guidance published in February 2020 states that operator actions and IOs are a leading contributing cause of pipeline incidents. "Audits show that humans don't always diagnose or execute actions correctly, even if they have perfectly written procedures," Watson explained. "We need to find a better way to advance human performance in completing critical tasks and providing additional administrative controls in order to provide safety and quicker responses in the gas industry."

Error-reduction tools and well-written documentation and procedures are essential. Such tools and procedures include awareness training, self-checking and peer-checking, procedure steps defined with action verbs (e.g., "close," "verify," "check"), short series of listed steps in dual-column or checklist format, and place-keeping or sign-off for tracking steps.

Examining human reliability. Industries that already use HRA include nuclear, offshore oil and gas, aerospace, pipeline, aviation and chemical production. A number of factors can cause human errors, including adverse environmental conditions, unclear roles or responsibilities, fatigue, time pressures (especially in facility control rooms), high workloads, confusing displays or controls, and lack of clear directives. Human errors can result in a reduction of system reliability and/or safety margins, increased risk, or degraded conditions. The HRA method is a structured approach used to identify potential human failure events (HFEs) so that they can be prevented.

Watson shared an example HRA, wherein a study of operator actions was completed using pipeline procedures to identify critical human interactions; potential errors of commission, omission and cognition; and performance-shaping factors.

In performing an HRA, safety-related actions or critical tasks performed by operators and plant personnel must first be identified, Watson explained. The procedures required to execute these actions and critical tasks are then outlined and analyzed. Finally, these procedures are revised for clarity and simplicity in light of the risk of associated human errors. The HRA method can help improve facility operations and personnel safety.

As per MRC, Abu Dhabi National Oil Co., the UAE's biggest energy producer, has recently inked a USD20.7 billion deal with a group of investors to acquire a 49% stake in its gas pipelines a year after striking a similar transaction for its oil pipelines.

We remind, Russia and the US continue to clash over the future of the Nord Stream 2 gas pipeline, with Moscow hitting out at calls from Washington for the creation of a "coalition" of nations aimed at blocking completion of the project. A little over 150 km of Nord Stream 2 remains to be laid in Danish and German waters, but with the political debate becoming ever more frenzied, it remains unclear how and when the pipeline will be completed.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

Mainland China to continue lead role in global styrene demand, prices

MOSCOW (MRC) -- Asia, especially mainland China, will continue to lead global styrene demand and price directions amid massive capacity additions and anti-dumping duties that will result in industry-wide restructuring, according to Brian Lee, executive director at IHS Markit, said Chemweek.

Impacted by COVID-19, the global styrene market this year will be slightly under 29 million metric tons, compared to more than 30 million metric tons previously, says Lee, speaking at IHS Markit’s Asia Chemical Conference 2020, being held in a virtual format. In terms of end use demand, the largest styrene application is for electronics and appliances at 32%, followed by packaging at around 32%, and building and construction at about 21%.

Northeast Asia capacity at 14 million metric tons/year (MMt/y) accounts for 49% of worldwide styrene production in 2020, while forecast demand in the region totals 16.1 million metric tons, with mainland China accounting for 63%, South Korea at 15%, and Taiwan at 12%. Hence, demand or supply shifts in mainland China will impact the overall industry.

The styrene market has rebalanced following limited capacity additions over the last 7-8 years, with producers enjoying healthy margins in the last five years. However, heavy capacity additions came onstream this year while demand was much lower than expected, leading to a longer market and poorer styrene margins than the previous few years, Lee says.

This situation will continue for the next couple of years as capacity additions outweigh demand growth, he says. Most of the new additions are integrated facilities in China, with Hengli Petrochemical (720,000 metric tons/year), Liaoning Bora (360,000 metric tons/year), and Zhejiang Petrochemical (1.2 million metric tons/year) starting up this year. In 2021 at least another 2.6 MMt/y of new capacity is expected, according to IHS Markit data.

Separately, the propylene oxide–styrene monomer (POSM) process of styrene production, despite its smaller capacities, is also making a comeback due to improved styrene margins over the last five years. The POSM portion of styrene production is forecast to increase to around 22% of total capacity within a couple of years, compared to around 18% in 2020. This means that propylene oxide (PO) balances and margin will also impact styrene.

The elasticity of styrene demand growth is around 0.7% of GDP growth. Prior to COVID-19, IHS Markit forecasted global GDP growth for 2020 of around 2.4%, with styrene demand growth at slightly less than 2% with a similar trend in 2021. However, as the pandemic spread, IHS Markit revised the long-term balance based on global GDP growth for 2020 at around negative 5.5%, with styrene demand growth at around minus 5%.

Demand growth in Northeast Asia during the first quarter of 2020 fell 15% year-on-year but the COVID-19 situation stabilized faster than expected, with monthly styrene demand growth turning positive from June onwards. The demand recovery increased further during the third quarter, supported by pent-up demand from China. If this trend continues in the fourth quarter, actual demand growth in 2020 would to be much better than previous IHS Markit forecasts.

As MRC informed earlier, AmSty is announcing its commitment that all products designed for foodservice and food packaging applications will contain 25 percent recycled content by 2030. The leading integrated producer of polystyrene and styrene monomer continues to reach milestones toward this goal with its circular recycling process operating commercially at Regenyx LLC, its joint venture with Agilyx Corporation.

According to ICIS-MRC Price report, October prices of Russian PS continued their upward trend. A shortage of material remained in the domestic market. Traders said Nizhnekamskneftekhim reduced its offer prices for this month's PS purchases to 40%. October prices of Nizhnekamskneftekhim's GPPS grew for the agreed with buyers quantities to Rb89,000-95,000/tonne CPT Moscow, including VAT, whereas HIPS - to Rb93,000-99,000/tonne CPT Moscow, including VAT.
MRC