Idemitsu, Showa Shell to merge key operations next spring

MOSCOW (MRC) — Japanese refiners Idemitsu Kosan and Showa Shell Sekiyu will combine management of their key businesses, an Idemitsu spokesman said on Tuesday, pursuing a merger bitterly opposed by a core investor—Idemitsu's founding family, as per Reuters.

Japan's second- and fourth-biggest refiners will form an office next spring with a staff of about 300 to manage crude oil purchases, refining and sales, seeking to cut costs by 30 B yen (USD266 MM) over 3 yr, Idemitsu spokesman Akitaka Yoshino said, confirming a Nikkei newspaper report.

The cost-cut target was raised from a forecast of at least 25 B yen when the companies said they would start integrating operations. A spokeswoman at Showa Shell confirmed the plans. About two-and-a-half years after Idemitsu announced it was buying nearly a third of Showa Shell as part of a takeover, the companies are still trying to complete the marriage while Japan's refining market goes through the biggest shakeup in its history.

This week the family of Idemitsu's founder said it had raised its stake in Idemitsu in the clan's latest gambit to halt the merger plans, after having their holdings diluted by a new share sale earlier this year. "The merger with Showa Shell is the best option for us. Our policy won't change," Idemitsu chief executive officer Takashi Tsukioka said in an interview in the Nikkei. Company spokesman Yoshino confirmed the comments.

"Our No.1 wish is to try to gain understanding from the founding family on the creation of 30 B yen of cost synergies, but we have not gained their understanding yet," Yoshino said. A spokeswoman for the family said it could not immediately comment.

In a rare public corporate battle, the founding family and the Idemitsu board have been in dispute through court and shareholder actions. The family, led by Shosuke Idemitsu, has said Idemitsu and Shell are too different for any merger to work, while the board says the combination is necessary to compete in Japan's shrinking oil products market.

JXTG Holdings, the dominant player in a country where a falling population is using ever more efficient vehicles, was formed this April out of the merger of JX and TonenGeneral, with government encouragement. Idemitsu shares were 3% higher by the morning close of trading, while Showa Shell was up 1.1%. JXTG shares were up 2.2% and the Nikkei 225 average was down slightly.
MRC

MOSCOW (MRC) -- Evonik has invested in the startup HPNow ApS through its venture capital unit and now holds a minority stake in the company, which is headquartered in Copenhagen (Denmark), as per the company's press-release.

HPNow has developed a technology for producing hydrogen peroxide (H2O2) in a fully automatic system using water, air, and an electric current. The transaction took place in the context of a Series A round of financing. The parties have agreed not to disclose the amount of the investment. Evonik will be represented by a seat on the company’s supervisory board. “HPNow can facilitate a breakthrough in the electrochemical production of hydrogen peroxide,” says Bernhard Mohr, head of Venture Capital at Evonik. "Evonik possesses a great deal of expertise and extensive experience in the hydrogen peroxide business, so we’re an ideal match for HPNow."

With an annual capacity of more than 950,000 metric tons and 13 production plants, Evonik is one of the world’s largest producers of hydrogen peroxide. The HPNow technology solution enables low concentration H2O2 production on demand, directly at the intended point of use, and using only electricity, water and air as feedstock. The system is based on a modular generator in which a proprietary electrocatalytic cell is used to produce hydrogen peroxide from water and oxygen in a single step. "This patented technology offers the possibility of cost-efficient provision of hydrogen peroxide as needed, directly at the customer’s point of use,” says Michael Traxler, head of Evonik’s Active Oxygens Business Line. "The investment supports our strategy of supplying our customers with tailored system solutions."

HPNow’s technology will permit the use of H2O2 in applications where transport and storage issues have so far restricted the use of the material, for example in various areas of agriculture. HPNow plans to use the capital to further scale up and commercialize its technology. "In Evonik we’ve gained a strategic investor with extensive experience in innovative technologies connected with hydrogen peroxide as well as expertise in tapping new markets," says Ziv Gottesfeld, co-founder and CEO of HPNow. "We very much look forward to working with them in bringing our on-site hydrogen peroxide generation solutions to new markets and customers."

As part of its venture capital activities, Evonik plans to invest a total of EUR100 million in promising start-ups with innovative technologies and in leading specialized venture capital funds. Regional focus is Europe, North America and Asia. Evonik currently holds stakes in more than twenty start-ups and specialized funds.
MRC

MOSCOW (MRC) -- Ineos said repairs to Britain’s Forties crude pipeline were underway on Wednesday, after a crack was found that closed the pipeline on Dec. 11., reported Reuters.

The pipeline normally carries around 450,000 bpd of Forties crude to Britain, along with a third of the UK’s total offshore natural gas output.

Ineos has a timescale of two to four weeks for the repairs starting from Dec. 11.

The firm has a preferred option for the repairs which it is currently working through and has had some parts specially fabricated in case it needs to try different options, it said.

As MRC informed before, in November 2017, Ineos completed its acquisition of the Forties Pipeline System (FPS) and associated pipelines and facilities from BP. The 235-mile pipeline system links 85 North Sea oil and gas assets to the UK mainland and the Ineos site in Grangemouth, Scotland, delivering almost 40% of the UK’s North Sea oil and gas production.

Ineos Group Limited is a privately owned multinational chemicals company consisting of 15 standalone business units, headquartered in Rolle, Switzerland and with its registered office in Lyndhurst, United Kingdom. It is the fourth largest chemicals company in the world measured by revenues (after BASF, Dow Chemical and LyondellBasell) and the largest privately owned company in the United Kingdom.
MRC

MOSCOW (MRC) — Czech downstream oil group Unipetrol's largest minority shareholder Paulinino Limited will sell its stake to majority owner PKN Orlen when it opens a voluntary tender offer next week, Reuters said.

Polish group PKN Orlen, with 63% in Unipetrol, last week announced plans to try to buy up all remaining shares and de-list the Czech refiner as it seeks to reap benefits from its investments and upgrades. The buyout, set at a price of 380 crowns per share, would also end a period of uneasy relations with minority shareholders, led by 20% owner Paulinino, part of the Czech-Slovak investment group J&T, which has questioned PKN Orlen's strategy and sought higher dividends.

The shares traded at 376.20 crowns on Wednesday. Unipetrol has been making progress in the past few years thanks to rising refining and petrochemical margins that have boosted profits to the highest levels since PKN Orlen acquired the company in 2005.

Paulinino, in its decision to sell, said it expected the high performance in the sector would be hard to maintain, evidenced in margins starting to fall. "Such favorable macro conditions, as the sector enjoyed between 2015 and 2017, will be very difficult to maintain over the long term together with low oil prices," Paulinino representative Pavel Muchna said in a statement.

"We have decided to accept the offer and we will sell our shares in Unipetrol to the Offeror (PKN Orlen) under the proposed terms." Paulinino said it would use proceeds to consider other investments, using its experience in the petrochemical and energy sectors.

The offer values Unipetrol at 68.9 B crowns (USD3.2 B). It will run from Dec. 28 to Jan. 30. While Paulinio's sale alone will not get PKN Orlen to its conditional target of 90%—the legal threshold allowing a forced buyout of remaining shares—it is likely to prompt other shareholders to follow suit.

Some analysts, though, have said the offer looked low given Unipetrol's outlook once it opens a new polyethylene unit, an investment worth 8.5 B crowns. Unipetrol reported earnings before interest, tax, depreciation and amortization (EBITDA) of 11.9 B crowns in 2016, a bumper year. Analysts have said the new unit could boost core profit by 1 B crowns a year.
MRC

MOSCOW (MRC) - Production of polyethylene (PE) in Russia reached about 1.547,4 tonnes in first eleven months of this year, up 0.5% year on year, compared to the same period of 2016. The linear low density polyethylene (LLDPE) segment accounted for the greatest increase in the output, according to MRC's ScanPlast report.

November PE production in Russia grew to 139,600 tonnes, whereas this figure was about 105,500 tonnes a month earlier. Low indicator of October was a result of scheduled maintenance works at two producers: Kazanorgsintez and Stavrolen. Overall PE output reached 1.547,400 tonnes in January-November 2017, compared to 1.554,700 tonnes a year earlier. Output of low density polyethylene (LDPE) and LLDPE increased, whereas HDPE production decreased.

The structure of PE output by grades looked the following way over the stated period.

November HDPE production fell to 63,700 tonnes from 46,400 tonnes a month earlier, the largest producers - Kazanorgsintez and Stavrolen - shut their production capacities for maintenance in October. Russian plants' overall HDPE output reached 823,700 tonnes in January-November 2017, down by 9% year on year.

November LDPE production in the country increased to 60,100 tonnes, compared with 59,100 tonnes in October; Kazanorgsintez increased production volumes. Overall LDPE production exceeded 600,000 tonnes over the stated period, up by 5% year on year.

Nizhnekamskneftekhim, Russia's only LLDPE producer, significantly increased its output this year, its LLDPE production was about 123,300 tonnes in the first eleven months of 2017, whereas this figure did not exceed 73,700 tonnes a year earlier.


MRC