US slows down oil and gas mergers

MOSCOW (MRC) -- US antitrust regulators have extended the approval process for at least five oil and gas mergers and acquisitions in the last three months, as President Joe Biden's administration scrutinizes deals in a bid to tackle soaring energy prices, reported Reuters with reference to regulatory filings and corporate lawyers.

The slowdown comes amid growing pressure on policymakers to respond to consumer angst over skyrocketing retail gasoline prices, as US crude futures hit multi-year highs in late October. The White House has been calling US oil and gas producers to ask how they can help lower prices.

The move is also emblematic of a new push by the Federal Trade Commission (FTC) to protect consumers, workers, the environment and society at large. Under its new chair Lina Khan, the antitrust regulator has taken a tough stance on deals ranging from technology to healthcare.

Such scrutiny is rare in the oil and gas sector, where deals typically sail past regulators, more than a dozen industry sources, including lawyers and bankers advising on energy deals, said in interviews.

This is because these companies sell their output to a global market, and regional consolidation has no impact on energy prices dictated by supply and demand worldwide.

Maureen Ohlhausen, chair of antitrust & competition law at Baker Botts LLP, who served as acting FTC chair from January 2017 until April 2018 under the previous Trump administration, called the scrutiny unprecedented.

"Even though previous Democratic FTC commissioners wanted active enforcement, the industry was told what the standards were, deals got reviewed and things moved along. This is really different," Ohlhausen said. "I believe the FTC Chair, effectively, would like to deter mergers."

The FTC is subjecting more deals to so-called second requests, seeking additional information and documents, the deal advisers said and the filings show. Second requests can delay regulatory clearance of deals by several months.

"I am aware of two mergers in the last couple of months where FTC staff did not see a need to issue a second request but were overruled by their management," said Darren Tucker, chair of the antitrust practice at law firm Vinson & Elkins LLP. He declined to name the two deals.

Among the proposed transactions that received second requests in September were HollyFrontier Corp's USD2.6 B purchase of Sinclair Oil and Vertex Energy Inc's USD140 MM sale of motor oil collection and recycling assets to Safety-Kleen Systems Inc, the regulatory filings show.

Second requests involving oil and gas producers are rare, and it is more common for the FTC to scrutinize deals involving pipelines and gas stations. Pipeline operator Energy Transfer LP said in May it received a second request on its proposed $7.2 B takeover of Enable Midstream Partners LP.

The FTC's scrutiny threatens to put the brakes on dealmaking in the oil patch, which had already dropped to USD18.5 B of mergers and acquisitions between US oil and gas producers in the third quarter, down from USD33.4 B in the second quarter, according to data analytics firm Enverus.

The White House has been public with its requests for the FTC to act as the reopening of economies around the world in the aftermath of the COVID-19 pandemic drives up energy consumption. Brian Deese, director of the National Economic Council, wrote to FTC Chair Khan in August asking her to investigate soaring energy prices. Khan responded that the FTC will scrutinize consolidation among gas station operators, but also look at dealmaking in the energy industry more broadly.

The Biden White House has already irked the oil and gas industry by making climate change a priority in its administrative agenda. It temporarily halted the issuance of new leases for drilling on federal land and has proposed to end some fossil fuel subsidies. Energy companies argue these moves will push up energy costs.

To be sure, it is not clear whether the FTC will seek to block any of the energy deals it has subjected to second requests.

The regulator has not challenged a major merger of oil and gas producers since BP Plc's USD27 B acquisition of Atlantic Richfield Co in 2000. It sued to block the merger and only agreed to drop its objections after BP offered to divest oil production acreage in Alaska.

A major test for the FTC will be ConocoPhillips' proposed USD9.5 B acquisition of Royal Dutch Shell Plc's Permian Basin assets. It was announced in September, and any FTC second request would be made in the coming weeks.

As MRC informed earlier, Royal Dutch Shell plans to reduce its refining and chemicals portfolio by more than half, it said in July 2020 without giving a precise timeframe. The move is part of the Anglo-Dutch company's plan to shrink its oil and gas business and expand its renewables and power division to reduce greenhouse gas emissions sharply by 2050.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in the first nine months of 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.
MRC

MOSCOW (MRC) -- Trinseo, a global materials company and manufacturer of plastics, latex binders, and synthetic rubber, and its affiliate companies in Europe, have announced a price increase for all polystyrene (PS), acrylonitrile-butadiene-styrene (ABS) and acrylonitrile-styrene copolymer (SAN) in Europe, according to the company's press release as of November 3.

Effective November 1, 2021, or as existing contract terms allow, the contract and spot prices for the products listed below rose, as follows:

- STYRON general purpose polystyrene grades (GPPS) -- by EUR290 per metric ton;
- STYRON and STYRON A-Tech and STYRON X- Tech and STYRON C- Tech high impact polystyrene grades (HIPS) - by EUR290 per metric ton;
- MAGNUM ABS resins - by EUR230 per metric ton;
- TYRIL SAN resins - by EUR240 per metric ton.

As MRC reported earlier, Trinseo raised its prices for all PS, ABS and SAN grades on October 1, 2021, as stated below:

- STYRON GPPS -- by EUR55 per metric ton;
- STYRON and STYRON A-Tech and STYRON X- Tech and STYRON C- Tech HIPS - by EUR55 per metric ton;
- MAGNUM ABS resins - by EUR60 per metric ton;
- TYRIL SAN resins - by EUR45 per metric ton.

According to ICIS-MRC Price report, in Russia, prices of Russian PS rose significantly this month. Thus, November prices of Nizhnekamskneftekhim's GPPS went up to Rb167,750-178,700/tonne CPT Moscow, including VAT, whereas HIPS prices rose to Rb173,750-184,700/tonne CPT Moscow, including VAT.

Trinseo is a global materials company and manufacturer of plastics, latex and rubber. Trinseo's technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Formerly known as Styron, Trinseo completed its renaming process in 1Q 2015. Trinseo had approximately USD3.0 billion in net sales in 2020, with 17 manufacturing sites around the world, and approximately 2,600 employees.
MRC

MOSCOW (MRC) -- Crude oil futures were higher in midmorning trade in Asia Nov. 10, on track for a fourth straight day of gains, as a US Energy Information Administration report forecast supply to exceed demand next year and eased concerns about a possible Strategic Petroleum Reserve release, reported S&P Global.

At 10:49 am Singapore time (0249 GMT), the ICE January Brent futures contract was up 38 cents/b (0.45%) from the previous close at USD85.16/b while the NYMEX December light sweet crude contract rose 14 cents/b (0.17%) at USD84.29/b.

The EIA in its latest Short-Term Energy Outlook said growth in output from OPEC+ members, US shale and other non-OPEC countries will outpace slowing growth in global oil consumption in 2022. It forecast Brent prices easing from current levels to an average of USD72/b for the year.

For the remainder of 2021, it expects Brent prices to remain near current levels, averaging USD82/b in the fourth quarter.

The EIA trimmed the outlook for 2022 global oil demand growth by 130,000 b/d from last month to 3.35 million b/d, but raised its outlook for US oil production to 11.13 million b/d in 2021, up 110,000 b/d from last month's outlook, and to 11.9 million b/d in 2022, up 170,000 b/d.

The report has eased concerns that the Biden administration will tap its SPR to curb what it sees as an excessive run-up in oil prices, analysts said. President Joe Biden has been vocal in calling on OPEC to raise output beyond their quota levels, and senior officials of the administration have hinted in recent days that Biden might take action in the week started Nov. 7.

Oil prices have added 4.2%-5.3% in value since a brief correction mid last week and were now on track to surpass seven-year peaks touched in late-October. Investors have been quick to buy any dip as the narrative of a tight supply market continued to dominate the sentiment.

Media reports said that American Petroleum Institute data showed a draw in US crude oil inventories in the week ended Nov. 5. If confirmed by the EIA's weekly inventory numbers out later Nov. 10, this would mark the second weekly drop in crude oil inventories in seven weeks.

As MRC informed before, US commercial crude stocks fell 3.48 million barrels to 413.96 million barrels in the week ended Sept. 17, to more than 8% below the five-year average, Energy Information Administration data showed. Stocks were last lower Oct. 5, 2018.

We remind that in late August, 2021, US crude stocks dropped sharply while petroleum products supplied by refiners hit an all-time record despite the rise in coronavirus cases nationwide, the Energy Information Administration said. Crude inventories fell by 7.2 million barrels in the week to Aug. 27 to 425.4 million barrels, compared with analysts' expectations in a Reuters poll for a 3.1 million-barrel drop. Product supplied by refineries, a measure of demand, rose to 22.8 million barrels per day in the most recent week. That's a one-week record, and signals strength in consumption for diesel, gasoline and other fuels by consumers and exporters.

We also remind that US crude oil production is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, the US Energy Information Administration (EIA) said in a monthly report, a smaller decline than its previous forecast for a drop of 210,000 bpd.
MRC

MOSCOW (MRC) -- Scientific Design Company, Inc. (SD) has announced the successful commissioning and start-up of the Fujian Gulei Petrochemical Co., Ltd. EO/EG plant located in Zhangzhou, Fujian, China licensed by SD with a capacity of 700 KTA monoethylene Glycol (MEG) and 100 kta purified ethylene oxide, according to Hydrocarbonprocessing.

The plant was able to achieve capacity and produce high quality products within a few days of feed introduction.

Along with the use of SD’s process technology, the plant is operating with SD’s SynDox ethylene oxide catalyst.

The plant is part of a 50:50 joint venture between Sinopec’s Fujian Petrochemical Company Ltd and Taiwan Xuteng Investment Company Ltd and Gulei is one of the seven major petrochemical industry bases in China.

As MRC wrote before, the trial runs at Fujian Gulei's new MEG plant with the capacity of 700,000 mt/year began on 7 August, 2021, and Gulei Refining & Chemical was then in the proces of ramping up its production capacity.

We remind that Fujian Gulei Petrochemical received commercial production at its new steam cracker in Zhangzhou (Zhangzhou, Fujian Province, China) on August 18, 2021. And before that, the company supplied naphtha to this cracker with a capacity of 800,000 mt/year of ethylene on August 17, thereby starting test production there.

MEG is one of the main feedstocks for the production of polyethylene terephthalate (PET).

According to MRC's ScanPlast report, the estimated PET consumption in Russia increased to 56,960 tonnes in September 2021, up by 10% year on year. Russia's overall PET consumption reached 592,560 tonnes in the first nine months of 2021, up by 12% year on year.

SD has licensed over 100 ethylene oxide/MEG plants in 25 countries around the world.

Fujian Gulei Petrochemical Co. Ltd. headquartered in Xiamen (Xiamen, China) was established in November 2016. The company is a 50:50 joint venture between China's Fujian Petrochemical Company Limited (FPCL, part of Sinopec) and Taiwan's Taiwan Xuteng Investment Company Limited. It was established for the construction of an integrated petrochemical complex in Zhangzhou, Fujian province, southeastern China.
MRC

MOSCOW (MRC) -- The tight supply situation of natural gas in the global markets is expected to ease to a certain extent in 2022 as production growth is forecast to outpace demand, reported S&P Global with reference to a a statement of Luo Yizhou, vice president of PetroChina International Co. Ltd, a subsidiary of state-owned PetroChina.

"With the normalization of COVID-19 pandemic prevention and control measures, the continuous recovery of the world economy, and the stabilization of international oil prices, global natural gas demand is estimated to grow to around 4.070 trillion cu m in 2022, up 2.3% year on year," Luo said at the 10th China International Oil and Gas Trade Congress in Shanghai Nov. 8.

"On the other hand, global natural gas production is expected to be 4.12 trillion cu m in 2022, up 4% year on year," he said, expecting the tight gas supply to ease based on that scenario.

The tight supply has pushed up global gas prices in 2021, with the benchmark JKM, TTF and NBP all rising to historical highs in the September-October period.

"Supply has not been able to keep up with the rebound in demand post pandemic," said Chris Midgley, global head of analytics with S&P Global Platts, at the conference. This was the main reason that caused the tight natural gas supply situation this year, Midgley said.

Global demand for natural gas is expected to grow steadily in the next few decades due to accelerated actions against climate change.

"About 50% of the incremental global natural gas demand will come from Asia by 2035, with China and India as the main engines to boost the development of the LNG market," Luo said.

"Natural gas will play a very important role in the energy transition. We expect the global natural gas demand to grow to around 6.1 trillion cu m in 2050 while China's natural gas consumption will be around 670 billion cu m in the same year," he said, and adding that China's natural gas demand is expected to peak in 2040.

PetroChina targets reaching peak carbon by 2025, and the company is scheduled to have a changeover to renewable energy by 2035 and a near-zero emissions and green transformation by 2050, according to Luo.

China's peak carbon and carbon-neutrality targets of 2030 and 2060, respectively, have promoted the development of new trading categories, such as carbon emissions trading. PetroChina will monitor the progress of domestic carbon futures, and participate in their trading to help its subsidiaries lower the cost of compliance, Luo added.

As MRC informed previously, PetroChina, Asia's largest oil and gas producer,aims to have oil, gas and green energies to each account for a third of its portfolio by 2035, as the Chinese oil major shifts toward a lower-carbon future.

We remind that in August, 2021, PetroChina Liaoyang Petrochemical Co Ltd , part of the Chinese petrochemical major - PetroChina,successfully started up its new polypropylene (PP) plant last week. Based in Liaoning City, Liaoyang Province, China, the new PP plant has a production capacity of 300,000 tons/year.

According to MRC's ScanPlast report, PP shipments to the Russian market were 1,138,510 tonnes in the first nine months of 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.

PetroChina Company Limited, is a Chinese oil and gas company and is the listed arm of state-owned China National Petroleum Corporation, headquartered in Dongcheng District, Beijing. It is China's biggest oil producer.
MRC