COVID-19 - News digest as of 09.12.2021

1. Crude oil prices drop as investors assess impact of Omicron coronavirus variant

MOSCOW (MRC) -- Oil prices edged lower in choppy trade on Wednesday, taking a breather after gains earlier this week, as investors assessed the impact of the Omicron coronavirus variant on the global economy, reported Reuters. The market had a muted reaction to US weekly inventory figures, which showed a smaller-than-anticipated decline in crude stocks and another bump up in overall production, giving credence to expectations that supply will increase in coming months. Brent crude futures were down 15 cents, or 0.2%, to USD75.29 a barrel at 10:52 a.m. EDT (1552 GMT). US West Texas Intermediate crude was at USD71.94 a barrel, down 16 cents or 0.3%. Brent crude prices have rebounded by over 9% since Dec. 1 on signs Omicron has had only a limited impact on oil demand, after a 16% drop since Nov. 25.

MRC

MOSCOW (MRC) -- Russia's overall production of unmixed polyvinyl chloride (PVC) totalled 918,900 tonnes in the first eleven months of 2021, up by 3% year on year. Three producers increased their output, according to MRC's ScanPlast report.

November production of unmixed PVC rose to 86,600 tonnes from 85,600 tonnes a month earlier, higher output was due to the increased capacity utilisation of Kaustik (Volgograd) after a scheduled turnaround. Overall output of polymer totalled 918,900 tonnes in January-November 2021, compared to 891,000 tonnes a year earlier. Three producers increased their production, whereas one manufacturer maintained its last year's figures.

The structure of PVC production by plants looked the following way over the stated period.

RusVinyl produced slightly over 29,600 tonnes of PVC in November, with emulsion polyvinyl chloride (EPVC) accounting for 2,600 tonnes, compared to 30,000 tonnes a month earlier. RusVinyl's overall output of resin reached 318,800 tonnes in the first eleven months of 2021, compared to 306,000 tonnes a year earlier. Higher production was mainly caused by the absence of a shutdown for maintenances this year.

SayanskKhimPlast slightly reduced its output last month slightly and produced just over 27,100 tonnes of suspension PVC (SPVC), compared to 28,000 tonnes in October. The Sayansk plant managed to produce 281,500 tonnes of PVC in over the stated period, compared to 270,900 tonnes a year earlier.

Baskhir Soda Company produced about 23,000 tonnes in November versus 23,400 tonnes a month earlier. Baskhir Soda Company's overall output of resin reached 245,300 tonnes in January-November 2021, which virtually corresponds to the last year's figure.

Kaustik (Volgograd) produced 6,900 tonnes of SPVC last month, whereas this figure was 4,100 tonnes in October. The plant's overall production of resin reached 73,300 tonnes over the stated period, up by 5% year on year.

MRC

MOSCOW (MRC) - UAE sovereign wealth fund Mubadala Investment Company is buying 1.9% of SIBUR Holding, reported Interfax, citing Mubadala Investment's statement.

The terms of the deal were agreed upon prior to TAIF joining SIBUR.

The announcement did not disclose the terms of the purchase, but it was noted that it is Mubadala's largest investment in Russia.

The deal is a continuation of a long-standing partnership between the companies. In 2015, the fund invested in SIBUR's logistics terminal in Ust-Luga, and also participated in debt financing of ZapSibNefteKhim, said the investor.

At present, Leonid Mikhelson (31%) is the largest shareholder of SIBUR, Gennady Timchenko has 14.45%, Chinese Sinopec and the Silk Road Fund have 8.5% each, SOGAZ has 10.625%, the current and former top management has 12.325%, TAIF shareholders - 15%.

During the merger with TAIF, the merged company was valued at Rb1.9 trillion, or USD26.8 billion. Hence, the cost of the 1.9% stake may be about USD0.5 billion.

As MRC reported earlier, in October 2021, SIBUR closed the deal to acquire 100% of TAIF JSC, which includes Nizhnekamskneftekhim, Kazanorgsintez and TGK-16.

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 January-September 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 statistical copolymers of propylene (PP random copolymers) decreased significantly.

SIBUR manufactures and sells petrochemical products in the Russian and international markets in two business segments: olefins and polyolefins (polypropylene, polyethylene, BOPP, etc.), as well as plastics, elastomers and intermediate products (synthetic rubbers, expanded polystyrene, PET, etc.).
MRC

MOSCOW (MRC) -- Amur Gas Chemical Complex LLC, hereinafter “Amur GCC”, has agreed and signed loan documents to finance the completion of Amur GCC’s construction, reported PRIME with reference to SIBUR's press release.

Amur GCC will act as the borrower; SIBUR and Sinopec will be sponsors proportional to their stakes (60/40, respectively) in the joint venture (JV).

Upon completion of standard conditions precedent, AGCC will begin to draw on the loan which will total USD USD9.1bn and has a final maturity of 2035. Project costs in excess of USD 9.1bn will be covered by the JV parties pro rata.

The credit facilities are provided by international banks under coverage from Italian (SACE) and German (Euler Hermes) export credit agencies and also from Chinese and Russian banks on a commercial basis. The total amounts of ECA-backed and commercial credit facilities will equal USD 2.6 bn and USD 6.5 bn, respectively.

Peter O'Brien, member of the Management Board and Managing Director for Economics and Finance at SIBUR, said: “SIBUR continues to demonstrate proven expertise in raising competitively priced capital for large-scale investment projects. With financing secured, the construction of Amur GCC, one of the world’s largest polymer production facilities, will continue towards completion on schedule. The project is set to contribute much-needed additional supply of polyethylene and polypropylene to global markets to address the needs of modern consumers.”

As MRC reported earlier, SIBUR and Sinopec closed the deal to create a JV based on Amur GCC in late December 2020. As a result of the deal, the parties obtained joint control over the JV in shares of 60% and 40%, respectively.

SIBUR is implementing an Amur GCC project for processing ethane fraction and liquefied petroleum gases (LPG) at Gazprom's Amur GPP.

The capacity of the Amur GCC, as the future world's largest complex for the production of base polymers, will be 2.7 mln tons per year: 2.3 ml tons of polyethylene (PE) and 400,000 tons of polypropylene (PP). The complex's products will be represented by a wide range of grades. The construction of the complex is synchronized with the gradual reaching full capacity of Gazprom's Amur GPP. The approximate time frame for completion of construction and commissioning is 2024.

Due to the geographic location of the complex, Amur GCC's products will be focused on Asian markets, primarily the Chinese market, the world's largest consumer of polymers. It is expected that the project for the construction of Amur GCC can be included in the intergovernmental agreement between the Russian Federation and China.

SIBUR reported that Amur GCC's budget is tentatively estimated at USD10-11 bln and will be updated during its implementation.

It was also reported that last December, SIBUR Holding chose Spheripol LyondellBasell polyolefin technology for its Amur GCC under construction. The technological process will be used at the PP plant with a capacity of 400,000 mt/year, which will be built in the town of Svobodny, Amur Region.

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.

Sinopec corp. is one of the world's largest integrated energy and chemical companies. Business Sinopec Corp. includes oil and gas exploration, production and transportation of oil and gas, oil refining, petrochemical production, production of mineral fertilizers and other chemical products. In terms of refining capacity, Sinopec Corp. ranks second in the world, in terms of ethylene capacity - fourth.

SIBUR Holding is the leader in the Russian petrochemical industry and one of the largest global companies in the sector with over 23,000 employees. Over the past 10 years, SIBUR has implemented a number of large-scale investment projects worth about Rb1 trillion.
MRC

MOSCOW (MRC) -- Finnish oil refiner and biofuelmaker Neste’s Chief Executive Officer Peter Vanacker has resigned, reported Reuters with reference to the company's statement on Thursday.

“Three years as Neste’s President and CEO has been a time of growth and transformation,” Vanacker said in a statement.

Neste has already started looking for a new CEO while Vanacker will stay until June 2022 at the latest.

As MRC reported before, the EU Innovation Fund has recently given a positive grant decision of EUR88 million funding to Neste’s green hydrogen and CO2 capture and storage project, which aims to quickly and efficiently reduce greenhouse gas emissions at the Porvoo refinery in Finland.

We remind that in July, 2021, Neste and LyondellBasell announced a long-term commercial agreement under which LyondellBasell will source Neste RE, a feedstock from Neste that has been produced from 100% renewable feedstock from bio-based sources, such as waste and residue oils and fats. This feedstock will be processed through the cracker at LyondellBasell’s Wesseling, Germany, plant into polymers and sold under the CirculenRenew brand name.

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 January-September 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 statistical copolymers of propylene (PP random copolymers) decreased significantly.

Neste (Helsinki) creates solutions for combating climate change and accelerating a shift to a circular economy. The company refines waste, residues and innovative raw materials into renewable fuels and sustainable feedstock for plastics and other materials. The company is the world’s leading producer of renewable diesel and sustainable aviation fuel, developing chemical recycling to combat the plastic waste challenge. In 2020, Neste's revenue stood at EUR11.8 billion, with 94% of the company’s comparable operating profit coming from renewable products.
MRC