TotalErg pump network sale hangs on refinery deal

MOSCOW (MRC) -- France's Total and Italy's Erg are looking to sell a stake in their Italian refinery business Sarpom to facilitate an auction of one of the country's biggest service station networks, sources said, reported Reuters.

The two companies jointly control TotalErg which operates close to 2,600 service stations in Italy with a market share of around 11% and also owns a quarter of Sarpom.

The sale of TotalErg, led by HSBC and Rothschild, is expected to begin by the end of the year, the sources said, noting that stripping out non-core assets such as refineries and lubricants would make the deal more attractive for prospective bidders.

Erg declined to comment while a spokesman for Total referred to previous comments by CEO Patrick Pouyanne who said in September the group continued to divest positions in Marketing & Services across Europe where its market share is too low.

TotalErg, 51% owned by Italian green company Erg, is valued at up to USD888 MM and has drawn interest from private equity and industry players, with some hoping to buy a retail business free of refineries, lubricants and other non-core assets.

TotalErg has a 25% stake in the northern Italian refinery Sarpom which is controlled by ExxonMobil's Esso unit with a 75% stake. There was no indication of how much the partners would want for their stake.

Sarpom is proving to be a stumbling block in clinching a deal for the pump network since prospective bidders would not have control, sources said.

Should a carve out of Sarpom fail, the asset would be wrapped back into the main deal, one of the sources said.

Italy's service station landscape is over-crowded, with around 21,000 points across the country, twice the number in France and almost three times that in Britain.

A change of ownership for TotalErg may lead to restructuring of the business with some possible closures and job cuts.

It comes at a time when the government of Prime Minister Matteo Renzi is at risk of losing support ahead of a referendum on constitutional reform that could cost him his position.

Italian privately-owned refiner API has shown interest in the deal and may team up with a private equity outfit to make a competitive offer, sources said.

If successful, a deal with API would create Italy's biggest petrol station player, leapfrogging Eni and Kuwait Petroleum International which last year bought a network of 830 Italian pump stations from Royal Dutch Shell.

US buyout fund Carlyle is also expected to enter the race for the Rome-based business attracted by its turnaround potential and has held talks with API to evaluate a joint offer, the sources said.

Any restructuring is expected to get the nod from Rome which is trying to push through legislation to cut the number of stations to bring them into line with demand, two sources said.

We remind that, as MRC informed previously, in December 2014, Total, Europe’s third-largest oil company, permanently shut its high density polyethylene (HDPE) line owing to weak margins which had arisen on account of cheap imports in the region. Located at Antwerp in Belgium, the line had a production capacity of 70,000 mt/year.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

SDK decides to cease production and sale of bionolle biodegradable polyester resin

MOSCOW (MRC) -- Showa Denko (SDK) will terminate the production of Bionolle biodegradable polyester resin by the end of December 2016 and will discontinue sale of the product by the end of December 2017, as per Apic-online.

SDK noted that it is "difficult for the company to continue production and sale of biodegradable plastic, since there has been no sign of improvement in the harsh market environment for biodegradable plastics business because of the delay in permeation of environmental regulations on plastic shopping bags and a fall in market prices of biodegradable plastics."

The company, as part of its medium-term business plan, will continue to focus on accelerating the expansion of its functional chemicals business.

As MRC reported previously, in August 2016, Showa Denko K.K., JX Nippon Oil & Energy Corp. (JX), and LyondellBasell Group reached final agreement concerning the sale and purchase of LyondellBasell’s shares in SunAllomer Ltd. (SunAllomer), a joint venture (JV) company among the three parties for the development, production and sale of polypropylene (PP) and PP-based advanced material.

Showa Denko K.K. is mainly engaged in the petrochemical business. The Petrochemical segment manufactures and sells olefin, organic chemicals and others. The Chemical Product segment supplies chemicals, industrial gases, special gas and functional drug for semiconductors, functional high molecular materials, among others.
MRC

Current expenses of SOCAR Polymer project total USD340 million

MOSCOW (MRC) -- As of today, expenditures within the implementation of the SOCAR Polymer project, which envisages the construction of plants in Azerbaijan on the production of high density polyethylene (HDPE) and polypropylene (PP), amounted to USD340 million, Farid Jafarov, general manager of SOCAR Polymer, told reporters in Sumgait.

Jafarov said that the work on construction of the PP plant continues in line with the schedule.

"Currently, the engineering work at the plant for the production of polypropylene has been completed by 95%, purchases - by 90%, and construction work - by almost 30%," said Jafarov. "The project is planned to the completed in the first quarter of 2018."

"As for the high density polyethylene plant, we are even ahead of the schedule by 3-4%, he noted it will be completed in mid-summer 2018 and the production will start.

He said also that Russia’s Gazprombank JSC allocated about USD230 million out of the bank’s USD489-million loan for the project.

Total cost of the SOCAR polymer project is USD750 million. The project is being implemented in the Sumgait Chemical Industrial Park (SCIP) of Azerbaijan.

At the initial stage, production capacity will be 120,000 tons of polyethylene (PE) and 180,000 tons of PP. The total capacity could reach 570,000 tons by 2021.

Thirty percent of the plant’s output will be sent to domestic market, while 70% - for export to Turkey, Europe and CIS countries, according to project estimates.

As MRC reported earlier, OCAR’s Polymer investment project, which is first of its nature and scale implemented for the last 40 years in Azerbaijan’s downstream oil and gas industry, will make USD10-11 billion of revenues during the plant’s lifetime. Some 30 percent of this sum will be the net profit of the company. In the meantime, cooperate taxes and property taxes worth USD800 million and value added tax worth USD700 million will be paid to the government.

SOCAR is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in domestic and international markets, as well as, supplying natural gas to industry and the public in Azerbaijan. Three production divisions, one oil refinery and one gas processing plant, a deep water platform fabrication yard, two trusts, one institution, and 23 subdivisions are operating as corporate entities under SOCAR.
MRC

European Commission clears acquisition of BASF's industrial coatings business by AkzoNobel

MOSCOW (MRC) -- The European Commission has approved under the EU Merger Regulation the acquisition of the industrial coatings business of German chemicals company BASF by AkzoNobel of the Netherlands, according to RISI Technology Channels.

BASF's industrial coatings business develops, manufactures and sells various industrial coating products. AkzoNobel is a global manufacturer of a wide range of paints, performance coatings and specialty chemicals. Both companies manufacture and supply industrial coatings, which are applied to various substrates to improve surface properties, including appearance, adhesion, corrosion resistance and scratch resistance. Their activities overlap in particular in the area of coil coatings, applied to aluminium or steel where they have a relatively strong combined market position.
However, the Commission concluded that the proposed acquisition would raise no competition concerns, because the merged entity will continue to face strong competition from other suppliers present on these markets. Although the companies are the leading suppliers of coil coating paint systems for domestic appliances, a number of well-established or expanding suppliers remain active in the market and customers are large sophisticated buyers.

As MRC wrote before, in February 2016, AkzoNobel said it is in discussions with BASF to acquire BASF’s industrial coatings business.

AkzoNobel Surface Chemistry is a global leader in the manufacturing and supply of specialty surfactants, synthetic and bio-polymer additives and specialty polymers. AkzoNobel currently employs more than 7,400 people in China.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries.
MRC

SOCAR inks contracts with Italian company on Sumgayit plant

MOSCOW (MRC) -- The AzeriKimya Production Union of the State Oil Company of Azerbaijan (SOCAR) has signed two contracts with Technip Italy Nov. 5, as part of the project for modernization and reconstruction of the ethylene-polyethylene plant in Sumgayit, said Azernews.

The engineering, procurement and construction (EPC) contract envisages work on the design, supplies, construction, setup, testing and commissioning of new facilities, equipment and infrastructure.

The AzeriKimya Production Union has also signed a contract for the provision of consulting services in project management (PMC) with SOCAR-KBR.

In March 2016, the AzeriKimya Production Union signed a contract with Technip Italy on conducting detailed designing and providing services to support supplies as part of the project for reconstruction of the ethylene-polyethylene plant in Sumgait.

During the signing ceremony, SOCAR's President Rovnag Abdullayev noted that processing installations will be modernized and the new ones will be constructed as part of the plant's reconstruction.

This will make it possible to increase the production facilities at Azerikimya, ensure the supply of raw materials to polyethylene and polypropylene production installations and to meet the demand in the country, he said.

It will also increase the country's export potential, enhance the security of the technological process and the quality of raw materials and finished products, noted the SOCAR president.

SOCAR Polymer is a subsidiary of the State Oil Company of the Azerbaijan Republic (SOCAR). The entity was formed at the end of 2013 to run investments at the Sumgait Chemical Industrial Park, a production park which intends to become a chemical hub in central Asia.
MRC