BP reports rising profit, warns that further Russian sanctions may hurt

MOSCOW (MRC) -- BP, the UK oil company with the single-biggest foreign investment in Russia, warned that more sanctions against the country could hurt its business, said Hydrocarbonprocessing.

BP, with a 20% stake in OAO Rosneft, stands to lose the most from further sanctions in response to Russia’s annexation of Crimea. The European Union and the US are acting to intensify punitive measures aimed at key sectors of the economy -- finance, defense and energy.

"Any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation," BP said in an earnings statement.

BP reported a 34% increase in second-quarter profit, beating analyst estimates, including USD1 billion underlying net income from Rosneft. That compares with USD218 million from the Russian company a year earlier. BP received a USD690 million dividend from Rosneft last week and doesn’t expect this to be at risk next year. Its stake is worth USD15 billion.

"To date, these sanctions have had no material adverse impact on BP or Ruhr Oel GmbH," a joint refining venture between BP and Rosneft, it said. "However, BP will continue to keep this under review."

EU governments agreed Tuesday in Brussels to bar Russian state-owned banks from selling shares or bonds in Europe and restricted the export of equipment to modernize the oil industry, a key prop for Russia’s economy, two EU officials told reporters.

A Dutch court ruled Monday in favor of former Yukos Oil Co. officials, ordering Russia to pay USD50 billion for seizing what was once the country’s largest oil producer. The decision risks dragging Rosneft and natural gas exporter OAO Gazprom into extended legal wrangling. The state-run companies may be targeted because they were beneficiaries of expropriated Yukos assets. "We are monitoring events in Russia,” CEO Bob Dudley, who was re-elected to the Rosneft board in June, said at a media briefing in London. “Sanctions are a matter for governments to resolve through dialog and diplomacy."

Earnings adjusted for one-time items and inventory changes rose to USD3.6 billion from USD2.7 billion a year earlier, the London-based company said in the statement. That beat the USD3.4 billion average estimate of 13 analysts in a Bloomberg News survey. While total energy production declined because of disposals, the company brought online projects with better returns, it said. US output rose 28% in the quarter from a year earlier, boosted by new assets in the Gulf of Mexico.

As MRC wrote before, BP Zhuhai is in plans to start a new purified terephthalic acid (PTA) plant in China. A Polymerupdate source in China informed that the plant is likely to start in Q4, 2014. The exact start-up schedule of the plant could not be ascertained. To be located in Zhuhai province, China, the plant will have a production capacity of 1.25 million mt/year.

BP is one of the world's leading international oil and gas companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items.
MRC

LDPE prices in Russia hit the historical record high

MOSCOW (MRC) - Low density polyethylene (LDPE) prices in Russia increased to record high on scheduled maintenance works at Gazprom neftekhim Salavat and Tomskneftekhim, reaching Rb80,000/tonne this week, said MRC analysts.

July is traditionally difficult month for Russian LDPE buyers. The market was seriously affected in June by maintenance works at Gazprom neftekhim Salavat and Tomskneftekhim, as well as reduced capacity utilisation at Kazanorgsintez this year because of ethylene shortage.

As a consequence, LDPE supply was significantly tight, with price offers exceeded Rb76,000/tonne. Deals for LDPE in the spot market reduced a minimum in the late July because of tight supply. Price offers for 158 PE reached Rb76,000-76,500/tonne FCA, including VAT. LDPE prices for shrinkable films production reached Rb77,000/tonne FCA, including VAT.

Tomskneftekhim announced an increase in PE prices this week of Rb1,000/tonne. Ufaorgsintez will announce its contract LDPE prices for the first half of August delivery this week.

The availability of LDPE in Russia will improve not earlier than in October.

Angarsk Polymers Plant has also shut its PE capacities for scheduled maintenance, although this producer is mostly export-oriented, the shortage of the producer's PE in some regions will be offset by the material from other local plants.

Ufaorgsintez will shut its capacities for a month long turnaround, which will go in two stages, on 15, August.

Kazanorgsintez will shut its LDPE capacities for two weeks maintenances in the second half of September.

These factors (maintenance works) will result in a certain shortage of LDPE in the Russian market in the next couple of months.

MRC

SIBUR reduces export EPS prices

MOSCOW (MRC) -- SIBUR has informed its customers that its has reduced its export expandable polystyrene (EPS) prices for August shipments, according to ICIS-MRC Price report.

Buyers in foreign markets said offer prices of Russian EPS of SIBUR dropped to USD30/tonne for all contract shipments in August. The price cut was caused by devaluation of the rouble against the dollar in July, as well as weaker demand for EPS in Ukraine amid stronger demand for Chinese EPS.

According to MRC ScanPlast report, SIBUR-Khimprom produced 47,630 tonnes of EPS in the first half of 2014, down by 3% year on year. SIBUR-Khimprom is the largest EPS producer in Russia and the CIS countries.
MRC

Britain sets out shale rules with new oil, gas licensing round

MOSCOW (MRC) -- The British government took steps to speed up energy exploration including controversial hydraulic fracturing for shale gas with a new licensing round for companies looking for onshore oil and gas, reported Reuters.

Concerns about the potentially dangerous impact of hydraulic fracturing, or fracking, in the search for shale gas has prompted protests in Britain and outright bans on the practice in France and elsewhere.

The licences are the first step in the exploration process but do not give outright permission to drill. Oil and gas exploration companies must also obtain planning permission, environmental permits and health and safety approvals before they can receive final go-ahead to drill in Britain.

"Ultimately, done right, speeding up shale will mean more jobs and opportunities for people and help ensure long-term economic and energy security for our country," said Business and Energy Minister Matthew Hancock.

Britain is betting on the development of shale gas to help curb its growing dependence on imports and to stem a decline in oil and gas tax receipts as output from the mature North Sea basin dwindles.A third of Britain's gas needs can come from its own shale gas by the early 2030s if government policies and economic growth allow firms to invest in gas exploration, the National Grid said this month.

Britain's technically recoverable shale gas resources are estimated at around 26 trillion cubic feet and the government has offered tax breaks to drive investment in a sector which has transformed the US energy market.

However, Britain is still in the early stages of exploring for shale gas and opposition has grown on grounds that it is potentially harmful to the environment and after one project triggered earth tremors.

As MRC wrote previously, in late December 2012, the UK's Energy Secretary, Edward Davey, lifted a ban on the drilling for shale gas in the country, thus, giving green light to gas "fracking". We remind that the ban was put in place after the UK's first project near Lancashire caused tremors last year.

In early 2014, Total, Europe’s third-largest oil company, acquired a 40% interest in two shale gas exploration licenses in the UK. The acquisition marks the French oil and gas firm’s first entry into shale gas exploration in the UK, while the company is already involved in shale gas projects in the US, Argentina, China, Australia, Poland and Denmark.

Besides, INEOS Group is considering investing in UK shale-gas exploration to secure raw materials for its chemicals operations in the country after a shortage threatened to close a plant employing at least 800 people.
MRC

Ukraine group may have to sell TiOx plant in Crimea

MOSCOW (MRC) -- Group DF, the industrial business of Ukrainian tycoon Dmitry Firtash, may be forced to sell off Eastern Europe’s biggest producer of titanium oxide, Crimea Titan following the Russian invasion of the Crimea, said Europeanplasticsnews.

Crimea Titan, a supplier of the plastics industry intermediate chemical to customers across Europe, is one of two group companies isolated by the territory’s occupation. The TiOx producer has been unable to obtain vital feedstock supplies of ilmenite concentrate from companies across the new border with Ukraine.

Since the Russian takeover, Group DF has also had major difficulties trying to manage the Titan plant in Armyansk in northern Crimea, as well as soda ash producer Crimea Soda Plant, its other local business incorporated in Crimea.

"We are a Ukrainian group and that’s why we will certainly act according to Ukrainian laws. In any case, if we cannot manage these companies, we will be forced to sell them," commented Group DF’s managing director Borys Krasnyanskiy.

He admitted the group is experiencing problems in paying salaries to its Crimean employees. "As you know, the hryvnia (the Ukraine’s currency) is no longer in circulation. As a Ukrainian company registered as a legal entity in Kiev, Crimea Titan, for instance cannot make payments in Russian currency," he explained.

In April, the local subsidiary, formerly registered in Armyansk, was re registered in the Ukraine capital Kiev because of the Russian occupation. Crimea Soda Plant kept its legal address in the Crimea.

Private Joint Stock Company "Crimean Titan" was found in August, 2004. 100% of the shares belong to Ostchem Germany GmbH, a member of the Group DF. The main activity of PJSC "Crimean Titan" - the production of titanium dioxide pigment grades, which is used in paint, rubber industry, plastics industry and many other industries.
Titanium dioxide accounts for about 90% of the companie's total exports. The company supplies its products to more than 60 countries.
MRC