Shell sells some Egyptian assets for up to USD926 mil as part of divestment strategy

MOSCOW (MRC) -- Two Shell units plan to sell some upstream assets in Egypt for up to USD926 million in a bid to focus on other operations in the North African country amid company plans to downsize future upstream operations globally, reported S&P Global.

Shell Egypt and one of its affiliates will sell the assets to subsidiaries of Cheiron Petroleum Corp. and Cairn Energy for a base consideration of USD646 million and additional payments of up to USD280 million between 2021 and 2024, depending on the oil price and result of further exploration, Shell said in a statement.

The sold assets include Shell Egypt's interest in 13 onshore concessions and the company's stake in Badr El-Din Petroleum Co., it added. The transaction is subject to regulatory and government approvals and is expected to be finalized by the second half of 2021.

Shell Egypt recently acquired seven new offshore concessions in the West Mediterranean, the Red Sea and in the West Nile Delta.

The deal "will enable Shell to concentrate on its offshore exploration and integrated value chain in Egypt, including seven new blocks in the Nile Delta, West Mediterranean and Red Sea," said Wael Sawan, Shell's Upstream Director. "It will help Egypt maximize the potential of its onshore assets through new investment, helping secure energy and revenue for years to come."

Shell has estimated its 2020 reserves replacement ratio would be minus 53%, reflecting lower prices, postponed investment decisions and asset sales, it said Feb. 4. For the first quarter, Shell expects its upstream output would be in a range of 2.40 million-2.60 million b/d of oil equivalent, up from fourth quarter 2020 levels of 2.37 million boe/d, but well below the Q4 2019 level of 2.76 million boe/d, it added.

The company plans to slim down its future upstream and refining operations and direct more spending to grow its low-carbon businesses, the company said Oct. 29, flagging for the first time that its oil production has likely already peaked.

Shell wants to pursue more "value over volume" by simplifying its upstream assets to nine core positions; Brazil, Brunei, Gulf of Mexico, Kazakhstan, Malaysia, Nigeria, Oman, Permian and UK North Sea.

As MRC informed previously, in early November 2020, Royal Dutch Shell announced it was closing its refinery in Convent, Louisiana, the largest such US facility and first on the US Gulf Coast to shut down since the coronavirus pandemic devastated worldwide demand.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC

COVID-19 - News digest as of 09.03.2021

1. North American petrochemical producers might see long-term cost advantage by reducing CAPEX

MOSCOW (MRC) -- The shale gas advantage of North American petrochemical majors provides a boost for investments in the region, primarily in the U.S., said Hydrocarbonprocessing. However, the oil price crash narrowed this advantage and is likely to affect profitability. North American petrochemical majors that strive to pace investments efficiently, in line with market trends, will boost their competitiveness and seize further opportunities for growth over the long-term, says GlobalData, a leading data and analytics company. John Paul Somavarapu, Oil and Gas Analyst at GlobalData, comments: “The sudden decline in crude oil prices have distinctly affected the planned investments by the North American producers and they now need to efficiently pace investments while preserving long-term gains. GlobalData expects companies to lower their operating expenses and capital expenditures and focus on less capital intense investments to position themselves well while the market recovers." The pandemic and the resulting impact on feedstock costs have prompted petrochemical majors in North America to announce project delays.


MRC

Crude oil futures rise on bullish fundamentals as dust from Saudi attacks settles

MOSCOW (MRC) -- Crude oil futures rose during the mid-morning trade in Asia March 9, as expectations of higher oil demand amid an improved economic climate encouraged buying activity from investors, even as the market recovered from the chaos brought about by an attempted attack on a Saudi oil shipping port, reported S&P Global.

At 11:29 am Singapore time (0329 GMT), the ICE Brent May contract was up by 51 cents/b (0.75%) from the March 8 settle to USD68.75/b, while the April NYMEX light sweet crude contract was up by 41 cents/b (0.63%) to USD65.46/b.

Earlier on March 8, news of an attempted March 7 drone attack on a petroleum storage tank at the heavily protected Ras Tanura port had sent the Brent and NYMEX light sweet crude markers surging, with the front-month Brent contract crossing USD71/b briefly. Prices however came right back down after reports emerged that oil supply had not been affected.

This morning, after the volatility seen on March 8, prices increased, as the market fell back onto the promise of an improved supply-demand equation.

The demand prospect for oil has brightened considerably as COVID-19 infection numbers have fallen in major economies, and as the global economic climate continues to improve. A USD1.9 trillion US stimulus package, which has been approved by the US Senate and is now pending final approval by the US House of Representatives, promises to further expedite the demand recovery for oil.

Meanwhile, supply remains tight as the OPEC+, in its March 4 meeting, decided to largely roll over its March production quotas into April, and therefore keep 8 million b/d of OPEC+ production - or roughly 8% of pre-pandemic supply - off the market for at least another month.

"We have seen what looks like a classic V-shaped recovery in oil prices in the past few months, and that has been prompted by a broader improvement in the economic climate. Fundamentals for oil look good, and in the absence of noteworthy events, we are likely to see oil trending higher," David Lennox, resource analyst at Fat Prophets, told S&P Global Platts on March. 9.

Meanwhile, in inventory data, commercial US crude stocks are expected to have increased 2.7 million barrels to around 487.3 million barrels in the week ended March 5, analysts surveyed by Platts said. The build would leave inventories 3.6% above the five-year average of US Energy Information Administration data, in from 4% the week prior.

The weekly inventory reports from the American Petroleum Institute and the EIA, are due to be released later March 9 and March 10 respectively.

As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.
MRC

Spainish Cepsa expects COVID-19 to keep squeezing oil refining margins

MOSCOW (MRC) -- Spanish oil company Cepsa said it expects the coronavirus pandemic to keep downward pressure on its refining margins and demand for refined products in Europe in the next few months, reported Reuters.

The profit it makes per barrel of oil rebounded to USD2.40 in the fourth quarter of 2020 from USD0.50 in the third, but was still more than 35% lower than in the same period of the previous year.

The Madrid-based company, which is owned by Abu Dhabi state fund Mubadala and private equity firm Carlyle, said it ended 2020 with positive free cash flow and would set out a plan to address a global shift to lower-carbon fuels in the coming months.

"The COVID-19 pandemic also acted as a catalyst for the energy transition," Chief Executive Philippe Boisseau said in a statement.

As MRC wrote before, in December 2020, driven by a shared vision of sustainability and strong collaboration, DSM, SABIC, Cepsa, Fibrant, and Viscofan together created a multi-barrier casing for meat products made via advanced recycling of post-consumer plastics.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.
MRC

Chinese March styrene exports surge past total for 2020 amid global supply tightness

MOSCOW (MRC) -- China's exports of styrene monomer (SM) have surged in the first quarter amid tight global supply, accelerating its shift from net SM importer to exporter despite being the world's major demand center, reported S&P Global.

More than 60,000 mt of SM has been scheduled to date to load from China in March, according to market estimates. This is nearly 160% higher than China's total styrene exports of 27,020 mt over the full year 2020, customs data showed. Another 10,000 mt has already been scheduled to load for export in April, market sources said.

China is the world's key demand center for styrene, consuming 11.92 million mt and importing 2.83 million mt in 2020, according to S&P Global Platts estimates and customs data.

Of the 27,020 mt exported in 2020, more than 85% was supplied to South Korea, where plant outages and turnarounds shortened domestic supply in the second half of the year.

Demand for China's styrene exports is being driven by production losses due to turnarounds in Asia and plant outages in the US and Europe. In Asia, a heavy turnaround season over February to June and unplanned maintenance in Northeast Asia have tightened supply in the region.

Several Asian countries including South Korea and India typically rely on US-origin supply, but this is expected to remain scarce in Asia in the near term as the polar vortex takes its toll on styrene production. More than 2.5 million mt/year of styrene production capacity was offline in the US on Feb. 26 due to severe weather, according to Platts estimates.

The cargo shortage has exacerbated already tight fundamentals and boosted prices in the US and European markets, but price increases have lagged in China where supply remains available amid high run rates. Domestic prices in East China are also lower than import prices at present, which is further encouraging exports and curbing imports.

"China prices are depressed and have become the lowest among the three regions," a trader said.

The market has prompted traders to work a "reverse arbitrage" by moving China cargoes to Europe, where prices are currently at a premium of more than USD300/mt to CFR China values. Considering freight at USD100/mt, the spread is attractive to Asian sellers.

As such, market participants expected to see continuing interest in selling Chinese cargoes on an FOB basis to balance out the shortage in other regions, with active FOB China trading heard in H2 February. This trade flow is likely to increase in frequency as China's production expands at incredible speed, with 1.22 million mt/year of capacity slated to come online in H2 March and April.

As MRC informed earlier, LyondellBasell and Covestro's jointly-owned propylene oxide (PO)/SM unit at Maasvlakte, Netherlands, remains offline following an incident at the site on 10 February, 2021. The site produces 313,000 metric tons/year (mt/y) of PO and 680,000 mt/y of styrene.

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 520,630 tonnes in 2020, which corresponded to the same figure a year earlier. December estimated consumption of PS and styrene plastics grew by 5% year on year to 47,490 tonnes.
MRC