Valero posts smaller-than-expected loss, pins recovery hopes on vaccine rollout

MOSCOW (MRC) -- US refiner Valero Energy Corp posted a much smaller quarterly loss than Wall Street expected and pinned hopes on widespread COVID-19 vaccinations to ease travel restrictions and improve demand for fuel, accoring to Hydrocarbonprocessing.

Crude prices have continued to climb after rallying more than 20% in the last quarter, driven by optimism over the development of coronavirus vaccines, even as refiners struggled with uneven demand due to renewed lockdown measures.

"We expect to see continued improvement in product demand with widespread vaccine distribution around the world," Chief Executive Officer Joe Gorder said, adding that the company expects a faster recovery in margins from the shuttering of smaller, uncompetitive refineries.

Valero, the first US refiner to post fourth-quarter results, said refining throughput, or the amount of crude it processed, rose about 1% to 2.6 million barrels per day from the third quarter.

Refining margin for the fourth quarter rose 14.2% to USD1.09 billion from the third, although it was 64.1% lower than from a year earlier.

Adjusted net loss attributable to Valero stockholders narrowed to USD429 million, or USD1.06 per share, in the three months ended Dec. 31, from USD472 million, or USD1.16 per share, in the third quarter.

Wall Street analysts expected a loss of USD1.42 per share, according to Refinitiv IBES.

The San Antonio, Texas-based company said quarterly revenue climbed 5% to USD16.60 billion from the previous quarter, above analysts' average estimate of USD16.21 billion.

As MRC reported before, Valero Energy Corp restarted the large crude distillation unit (CDU) at its 335,000-bpd Port Arthur, Texas, refinery the first week of September, 2020. The 268,000-bpd CDU was shut with all other units at the refinery on Aug. 25 because of the threat from Hurricane Laura.

We remind that in June 2020, Valero Energy Corp’s Memphis, Tennessee, crude oil refinery was operating at two-thirds of its 180,000 barrel-per-day (bpd) capacity because of low demand in the COVID-19 pandemic. The Memphis refinery cut production by as much as 50% in early April and has been raising production gradually since then.

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

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Vopak (Rotterdam, Netherlands) says its new 63,000-cubic meter styrene storage hub at Botlek, Rotterdam, will be operational for customers in February 2021, reported Chemweek.

The project commissioning team is on track with testing of equipment and systems before the facility is officially handed over to the terminal organization, it says. Vopak’s expansion of the existing facility’s capacity at Botlek has included the addition of 15 stainless steel storage tanks of either 3,000 cu meters or 5,000 cu meters capacity.

The hub will connect seaborne trade flows via barges, block-trains, and trucks to the European hinterland, and is connected to multiple jetties and loading facilities, Vopak says. It also allows tank-to-tank transfers that will enable customers to benefit from the styrene trading hub, it adds.

As MRC wrote before, in November 2020, SABIC and Vopak Holding Terminals BV signed an agreement with the Jubail and Yanbu Industrial Cities Company (JYIC), owned by the Royal Commission for Jubail and Yanbu (RCJY). Under the agreement, JYIC will become a 20 percent stake partner in Jubail Chemical Storage and Services Company (Chemtank). The agreement aims to strengthen strategic integration among the three parties to scale up collaboration between local and international organizations. The deal will help achieve the goals of the National Industrial Development and Logistics Program, a key part of Saudi Vision 2030.

Styrene is the main feedstock for the production of polystyrene (PS).

According to MRC's ScanPlast report, Russia's estimated consumption of PS and styrene plastics totalled 454,990 tonnes in the first eleven months of 2020, which corresponds to the last year's figure. November estimated consumption of PS and styrene plastics grew by 4% year on year to 45,830 tonnes.
MRC

1. Chinese Jan-Feb crude throughput may remain at high levels despite slow demand

MOSCOW (MRC) -- China's crude throughput will likely remain at relatively high levels over January-February despite the slowdown in domestic fuel consumption for the Lunar New Year due to the resurgence in COVID-19 spread, as refiners aim to clear their hefty feedstock stockpiles and make full use of the country's sufficient refined product storage space, reported S&P Global. "Sufficient oil product storage space and hefty crude imports in January/February allow and force Chinese refineries to boost throughput prior to maintenance season in March-May," a Beijing-based analyst said. S&P Global Platts' data showed that average run rate at 39 refineries under the four big state-owned oil barrels - Sinopec, PetroChina, CNOOC and Sinochem - is at 80.3% in January, up from 78.2% in December.



MRC

MOSCOW (MRC) -- Saudi Arabia's "brilliant move" to unilaterally reduce oil output additionally by 1 million b/d has been a great contribution to the stabilization of the global oil market, reported S&P Global with reference to the statement of Kirill Dmitriev, the head of the Russian sovereign wealth fund RDIF, on Jan. 27.

Starting Feb. 1, Saudi Arabia is expected to severely lower its crude production to 8.119 million b/d instead of its OPEC+ quota of 9.119 million b/d. The pre-emptive cut was announced by energy minister Prince Abdulaziz bin Salman after the latest OPEC+ meeting on Jan. 4 in order to bring down oil inventories accumulated during the pandemic.

"The surprise cut that they have done recently is a really brilliant move that led to stabilization of the market joined by other OPEC members at the most critical time," Dmitriev, who has been leading Russia's diplomacy in Saudi Arabia alongside Deputy Prime Minister Alexander Novak, said at the Saudi Future Investment Initiative conference.

His comments come ahead of the group's next meeting on Feb. 3, where compliance with be monitored by the OPEC+ advisory committee.

Russia's own compliance with production quotas remains far from perfect, as the country seeks to gradually regain its market share.

Nevertheless, Dmitriev reiterated Russia's commitment to the OPEC+ agreement and applauded Saudi Arabia's leadership "in doing great things to producers and consumers."

"This partnership is an example of how we can also unite our efforts to address other issues that the world is facing. Energy is definitely something that we have done really well together," Dmitriev added.

His speech echoed Russian President Vladimir Putin's earlier address at the Davos forum. Putin deemed energy cooperation with Saudi Arabia and the US on energy productive "despite different and sometimes even opposite views on other global issues."

As MRC informed earlier, Saudi Aramco's shareholders may consider selling more shares of the company if market conditions are right. The Saudi government sold over 1.7% stake in Aramco in an initial public offering (IPO) in 2019 that raised a record USD29.4 billion.

We remind that in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.

Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.

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

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Argentina's state-backed energy company YPF plans to ramp up it investment 73% this year, with the brunt of the increased spending going toward rebuilding oil and natural gas production after a 10% slump in 2020, reported S&P Global with reference to a company source's statement Jan. 26.

YPF aims to increase investment in its upstream business more than 90% this year compared with 2020, making it possible to "stabilize" oil and gas production and set it up to return to growth despite the natural declines at maturing conventional fields, the source said on the condition of not being named, citing company policy.

The plan, however, hinges on "the availability of cash," the source added.

To free up cash for investment, the source said YPF is trying to restructure USD6.2 billion in international bonds, but so far bondholders have objected to its proposal. In response, the company has improved the offer to limit losses for bondholders while making a return to production growth more viable than if nothing were done.

"One of the objectives of this debt refinancing is to allocate funds to increase investments that make it possible to reverse the decline in the production of gas and oil in recent years," the source said.

Bondholders have until Feb. 8 to accept the offer.

Argentina's biggest oil and natural gas producer, YPF cannot readily borrow money on the international capital markets because the country is mired in its third year of a financial crisis, deterring lenders. This means it must rely on cash flow, which has been only slowly recovering after an eight-month lockdown of the economy last year slashed sales of diesel and gasoline. As a result, YPF's upstream and downstream investment plunged to USD934 million in the first nine months of 2020 from USD3.3 billion in all of 2019, according to company data.

In a November conference call with investors, YPF CEO Sergio Affronti said the company's total oil and gas production was likely to decline 10% in 2020 from 2019, but he added that as demand recovers the company will be able to gradually increase output.

YPF has since said that it plans to invest more in enhanced recovery techniques in its conventional fields to squeeze more out of the maturing reserves, while pursing growth in Vaca Muerta, one of the world's largest shale plays. The company wants to boost its share of crude production from Vaca Muerta to 25% of the total in 2021 from 20% in November 2020, and then take it to 45% or 50% in 2022 or 2023. YPF is the biggest producer in the play.

As MRC informed before, in 2015, Argentina's state-controlled YPF and the Argentinian unit of US-based Dow Chemical unveiled investment of USD500 mln to be dome in 2016, in orer to triple production at their existing shale gas joint venture, marking the first major upstream investment since a new government took over in December, 2015. The companies are partners in the El Orejano block, located in the Vaca Muerta shale formation in the southwestern province of Neuquen. That investment was aimed at increasing production to 2mn m3/d (70.6mn ft3/d) by the end of 2016, from the previous 750,000 m3/d, YPF said then.

As in March, 2019, YPF announced that it will invest around USD2 billion over the next five years to carry out a desulfurization process in two of its refineries. YPF will initially invest more than USD1 billion in its Mendoza province refinery and hire about 900 people to adapt the plant for the process. The rest of the investment will go towards the company’s refinery in La Plata.

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

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC