Pertamina and Chandra Asri scrap joint venture deal

MOSCOW (MRC) -- State energy firm Pertamina is abandoning a deal with Chandra Asri Petrochemical, the country’s largest petrochemical producer, to establish a joint venture to build a petrochemical plant, as per GV.

In December, Pertamina and Chandra Asri signed a memorandum of understanding to perform a feasibility study for building a petrochemical facility. The agreement was predicated on the establishment of a joint venture.

"After conducting joint studies, Pertamina and Chandra Asri Petrochemical agreed to end the memorandum of understanding out of mutual interest for the reason that both parties can not reach an agreement on terms of the planned joint venture," said Ali Mundakir, Pertamina’s vice president for corporate communication, refusing to disclose further details.

Pertamina and Chandra Asri initially planned to build a petrochemcial plant to produce 250,000 tons of polypropylene a year. The cost of investment for the deal was estimated at USD 200 million.

The latest development comes just weeks after Pertamina announced a petrochemical business agreement with Thailand’s PTT Global Chemical and Chandra Asri signed a USD435 million joint-venture agreement with Paris-based Michelin to produce synthetic rubbers.

As MRC informed earlier, last month, Pertamina signed an agreement to purchase petrochemical products from PTT Global Chemical, as part of the pre-marketing strategy of the companies’ joint Indonesian petrochemical business.

Pertamina and PTT Global Chemical have already entered a joint venture agreement to build a petrochemical facility with an annual production capacity of 1 million tons and estimated cost of USD5 billion. The facility will produce ethylene and polypropylene, as well as polyethylene and polyvinyl chloride. Construction of the facility is expected to start next year, with production beginning in 2018.

Pertamina has said it plans to make petrochemicals a key part of its business and become a regional leader by 2025. The state-owned company holds a 10% share of the domestic petrochemical market, which, due to low refinery capacity, relies on around USD 5 billion a year in imports. Pertamina expects to hold 30% of the market when the facility, expected to be built near one of its existing refineries, commences operation.

Pertamina is an Indonesian state-owned oil and natural gas corporation based in Jakarta. It was created in August 1968 by the merger of Pertamin (established 1961) and Permina (established 1957). Pertamina is the world's largest producer and exporter of liquefied natural gas (LNG).

PTT Global Chemical is a leading player in the petrochemical industry and owns several petrochemical facilities with a combined capacity of 8.45 million tonnes a year.
MRC

MOSCOW (MRC) -- Saudi Arabia could well become a global hub of ethylene and its derivatives, according to a latest report released by the National Commercial Bank (NCB), according to Fibre2fashion.

The recent shale oil and gas deposit discoveries in Saudi Arabia would drastically change the global landscape of the petrochemical industry over the next five years, according to the NCB’s Semi-Annual Sector Review.

The review states large capacity additions are to be expected from both Asian as well as Middle Eastern producers due to these discoveries, whereas high-cost producers from other parts of the world would be squeezed out and petrochemical prices are likely to come under pressure in the long term, reports Saudi Gazette.

The abundance of ethane rich associated gas sold at a subsidized rate of USD 0.75 per million btu has initiated the launch of a series of projects in the country which would make it a global hub of ethylene and its derivatives.

The NCB report said the proximity to dominant Asian markets would allow producers from the country to capture a greater share of demand and also encourage foreign investment.

The country’s capacities of ethylene and polyethylene are forecast to reach 16.08 million tons per annum (mtpa) and 5.45 mtpa by 2015, respectively.

Saudi Arabia is considered among the largest producers of polymers in the world with an annual production of more than 8 million tons. In 2012, Saudi Arabia produced more than 18 million tons of ethylene, the most basic petrochemical that is also used as a raw material for the textile industry.

We remind that, as MRC informed previously, Saudi Arabia, the world's largest exporter of crude oil, has unveiled its intentions to remain a world energy powerhouse for the foreseeable future, partly by exploiting new technology which has unlocked vast quantities of oil and natural gas in North America. Saudi Arabia pushed ahead this year with exploratory drilling of shale and other unconventional gas reserves which could be twice the size of its conventional gas reserves, which total 286 trillion cubic feet.
MRC

MOSCOW (MRC) - Ukranian market of polyvinyl chloride (PVC) undergoes a shortage in the supply following limited export quotas from European producers and a significant decline in resin purchases from the US. The PVC prices in the local market have exceeded UAH12,000/tonnes by the end of July, according to ICIS-MRC Price Report.

The scheduled and unscheduled plants shutdowns in Europe amid stronger domestic demand made European producers cut their export quotas for Ukraine in July further. The supplies of North American PVC have been also reduced significantly.

All of these factors with a stable demand from Ukrainian converters have created a shortage in the local market.
The prices of European PVC by the end of July have reached UAH12,000-12,500/tonne CPT Kiev, including VAT.
Some Ukrainian companies said that their orders for July delivery from the European PVC producers have been cut in half.

The supply of European PVC in August is expected to be worsened further. Hungarian BorsodChem plans to stop PVC production for a month long maintenance works in early August. The share of the Hungarian PVC in the Ukrainian market accounts for 30%, and the average monthly PVC shipments of the company totals more than 2,000 tonnes. The reluctance of many Ukrainian companies to buy PVC in the US contributes to the situation.

The purchases of the North American resin by Ukrainian companies in May-June were limited because of the storng price (the European PVC was cheaper) and rumours of Karpatneftehim's restart. Rumours were heard in early June that an anti-dumping duty on US PVC at a rate of 50% would be introduced within next couple of months, which discourage the converters' desire to buy US material.

In line with a limited supply of PVC Ukrainian producers expect further price increases. Last week some European producers have announced an increase in export prices for PVC supplies in August by EUR15-25/tonne, compared with the July level.
MRC

MOSCOW (MRC) -- About 100 oil companies including units of Exxon Mobil Corp., ConocoPhillips Co. and BP Plc were sued by a Louisiana flood protection group seeking the repair of coastal storm buffers, reported The Washington Post.

The Southeast Louisiana Flood Protection Authority-East claims the oil companies degraded storm protections by dredging more than 10,000 miles of canals for pipelines and by conducting exploration activities in coastal wetlands, according to a complaint filed today in state court in Orleans Parish.

The authority sued for damages that it said can be used to repair the environmental buffer zone that helps protect the New Orleans region from catastrophic storm surge during hurricanes.

The U.S. Geological Survey cites oil and gas activities among the primary causes of the loss of an estimated 1,900 square miles of coastal lands Louisiana since the early 1930s, according to the complaint.

ЭThis is not a new issue because the conversation about the wetlands we’ve lost and who is responsible has been going on for years and years,Э Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, said in a telephone interview. Many of the firms sued by the levee group are members of his organization.

Louisiana’s wetlands have been degraded by a number of factors including hurricane storm surges and the diversion of the Mississippi River, which formerly replenished coastal wetlands with silt deposits, he said. Oil and pipeline companies have helped set up a trust fund that uses part of the state’s oil royalties to restore damaged coastal areas, he said.

A similar measure to divert part of the royalties from oil and gas activities in federal waters is pending in the U.S. Senate.

We remind that, as MRC wrote previously, BP Plc, Royal Dutch Shell Plc (RDSA) and Statoil ASA (STL) are under scrutiny by the U.S. Federal Trade Commission as the agency probes whether they manipulated oil benchmarks published by Platts. The FTC’s early-stage investigation into oil prices mirrors a review by the European Union, which raided the offices of the three companies and Platts in May.
MRC

MOSCOW (MRC) -- Belgian PVC window frame maker Deceuninck said on Tuesday it would cut costs after profit fell 22% in a tough first half-year due to weak consumer confidence in Europe and unrest in Turkey, one of its strongest growth markets, according to Reuters.

Its core profit in the first half of the year fell to EUR19 million (USD25.07 million) from EUR24.4 million in the same period last year.

Bank Degroof, ING and KBC Securities had on average seen Deceuninck reporting core profit of EUR22 million.

Deceuninck's sales in western Europe, its main market fell by 11%, while it said Turkish sales weakened in June due to the political unrest.

As MRC informed previously, last year Deceuninck had secured EUR140 million (USD171 million) of financing from a syndicate of banks to cover the next five years. The new five year funds will replace credit facilities put in place in September 2009, consisting of a syndicated bank facility expiring in September 2013 and senior secured notes maturing in September 2014.

Deceuninck NV is a Belgian designer and producer of PVC systems for windows and doors, interior, roofline & cladding and terraces. The company extrudes PVC and the single base material Twinson. Founded in 1937, with its headquarters in Hooglede-Gits, the Deceuninck Group operates in more than 75 countries and has 35 subsidiaries across Europe, North America and Asia, including the United States, United Kingdom, Russia and Turkey.
MRC