Chinese teapot plants form new club to beat rivals

MOSCOW (MRC) -- A group of independent Chinese oil refiners is clubbing together to survive an onslaught by state-owned giants and the rise of private chemical giants, but industry analysts said the new alliance may find it hard to stick, reported Reuters.

Less than two years after becoming some of China's newest crude oil importers, around 20 independent plants in the eastern industrial heartland of Shandong province plan to form a joint venture to coordinate their production, marketing, crude oil imports and investments.

The new alliance, to be called the Shandong Refining & Chemical Group, is to be headquartered in the provincial capital Jinan, and as envisioned will be an upgrade on a crude-buying federation set up in early 2016 by some of the same members.

The new group of "teapot" refiners aims to pool funds and resources to produce fuels and chemicals more efficiently as they battle stiff competition in an increasingly saturated market and under tightened environmental and tax scrutiny.

"We see the need to advance to the next stage as we face competition from both the national team and the provincial team. We can't afford operating like a plate of scattered sand," said Zhang Liucheng, a vice president of Shandong Dongming Petrochemical Group, one of the initiators of the stronger alliance.

The earlier crude-purchasing club was too loose an organization and did not have much success, Zhang said.

But while Shandong Dongming and fellow founding member Qingyuan Group are trying to build a more formal structure, including registering the new company as early as next week with a capitalisation of USD7.7 B, there are few details such as a list of members and when they will start to commit funding.

Analysts said pooling the assets and coordinating the investments of 20 plants that have multiple private and local government owners will be a huge challenge.

"The new group shall have bigger political bargaining power, but it will be hugely difficult to align all the various interests," said Harry Liu, of consultancy IHS Markit.

That was reflected in the comments of an executive of a teapot refiner that was a member of the crude buyers' club: "Each plant has its unique product lines and marketing strategies, and every new investment is a result of thorough market studies. How would you expect the new group to coordinate?"

State-owned rivals Sinopec and PetroChina operate larger, more sophisticated plants, and have influence over government policies such as fuel export quotas, which are highly sought after as China's refined product output far exceeds demand.

Jiao Chong, managing director of Qingyuan Group, said the new venture could use its larger market presence to lobby the government.

The planned group would have a combined crude oil import quota of over 50 MMtpy, or 1 MMbpd, an amount on par with smaller state companies like Sinochem and China National Offshore Oil Company (CNOOC).

"We can become a stronger voice in lobbying for policies like fuel export quotas," Jiao said.

The need for the independent refiners to club together is heightened by the emergence of new rivals, such as provincial government-backed private chemical giants like Rongsheng Holding Group and Hengli Group that are building or planning refining complexes on China's eastern coast.

Rongsheng's first 400,000 bpd refinery is slated to start up as early as end-2018.

Hengli, a privately-owned chemicals producer, is building a similar-sized refining complex, industry officials said.

"New investments by the likes of Rongsheng have the integration skills and scale of production that teapots could barely rival, " said IHS' Liu.

Shandong Dongming is China's largest teapot refiner with a total operating capacity of 240,000 bpd.

We remind that, as MRC wrote previously, in March 2017, CB&I was awarded a substantial contract for the license, engineering design and catalyst supply for five proprietary technologies to be used in an integrated refining and petrochemical project in China. The complex will use BP Paraxylene OPEX advantaged crystallization technology exclusively licensed by CB&I, as well as technology for a vacuum gasoil hydrocracker, diesel hydrocracker, kerosene hydrotreater and delayed coker offered through Chevron Lummus Global (CLG). CLG is a JV between Chevron and CB&I.
MRC

China invests USD9.1 B in Rosneft as Glencore, Qatar cut stakes

MOSCOW (MRC) — Chinese conglomerate CEFC will buy a 14.16% stake in Russian oil major Rosneft for USD9.1 B from a consortium of Glencore and the Qatar Investment Authority, strengthening the energy partnership between Moscow and Beijing, said Reuters.

CEFC China Energy has grown in recent years from a niche oil trader into a sprawling energy conglomerate and the transaction will allow China, the world's second largest energy consumer, to boost cooperation with the world's top oil producer.

The deal comes as the United States imposes a new round of economic sanctions on Russia, making it difficult for large Western firms such as Glencore to develop partnerships and increase ties with state-owned firms such as Rosneft.

Glencore said in a statement that CEFC will buy shares at a premium of around 16% to the 30-day volume weighted average price of Rosneft shares without naming the price. A CEFC spokesman said the company would pay USD9.1 B.

Rosneft's market capitalisation stands at USD57 B and the deal makes it one of the largest investments ever made by China into Russia. Glencore and QIA will retain stakes of 0.5% and 4.7% in Rosneft respectively.

The Kremlin has been seeking to expand its ties with China, especially since the West imposed wide-ranging sanctions on Moscow to punish it for the annexation of Crimea and an incursion into east Ukraine in 2014.

Russia tops the list of Chinese crude suppliers where it competes with its arch-rival Saudi Arabia, the world's largest oil exporter.
MRC

AkzoNobel reclaims top ranking on Dow Jones Sustainability Index

MOSCOW (MRC) -- AkzoNobel has returned to the top of the influential Dow Jones Sustainability Index (DJSI) to lead the rankings again for the fifth time in six years, as per the company's press release.

The latest listing, published today, places the company first in the Chemicals industry group. It represents a quick and successful response from the company after its run of four consecutive years at the top came to an end in 2016.

"It’s a great achievement to be leading our industry again," said AkzoNobel CEO Thierry Vanlancker. "We made a huge effort to improve in areas that needed to be addressed and being ranked first again proves the impact we can have by putting sustainability at the heart of our business strategy."

The company has now featured in the top ten for 12 consecutive years, underlining AkzoNobel’s commitment to working with customers to develop sustainable solutions that make a positive impact on the whole value chain.

"The real value and purpose of the DJSI lies in its effectiveness as a benchmark tool to continue to improve our business," added Vanlancker. "So we’re well aware that just because we are leading the ranking again, we can’t afford to become complacent. As a leader in sustainability, we are playing a major role in transforming the industries in which we operate. We therefore need to keep improving in order to make the giant leaps required for us to create a more sustainable future."

He pointed to the progress being made by the Decorative Paints business in transitioning to water-based products, and the continued success of partnerships being forged by Specialty Chemicals, as examples of how the company is helping to transform the industries in which it operates. AkzoNobel is also aiming to become carbon natural by 2050.

Regarded as the most respected independent sustainability ranking system, the DJSI World Index benchmarks the sustainability performance of leading companies based on environmental, social and economic performance, including forward-looking indicators. It assesses various criteria, including supply chain management, operational eco-efficiency, product stewardship, human capital development, integrity and people, process and product safety.

As MRC reported before, on 9 June 2016, AkzoNobel said it was adding marine and protective coatings capacity at its existing performance coatings site at Lipetsk, south of Moscow. The new capacity was expected to be operational in the third quarter of that year. It will enable AkzoNobel to supply protective coatings for the regional oil and gas, mining, power and infrastructure markets, as well as marine coatings for ship building, maintenance and repair. The investment represents a further expansion for the multi-business site at Lipetsk.

Akzo Nobel N.V., trading as AkzoNobel, is a Dutch multinational, active in the fields of decorative paints, performance coatings and specialty chemicals. Headquartered in Amsterdam, the company has activities in more than 80 countries, and employs approximately 55,000 people.
MRC

Nghi Son refinery & petrochemical plants to begin commercial operations in Q4 2017

MOSCOW (MRC) -- The USD9.2-billion Nghi Son Refinery and Petrochemical (NSRP) plant in Thanh Hoa Province, Vietnam, is expected to begin commercial operations in the fourth quarter of this year, according to a report on NSRP's website, of which reported Apic-online.

NSRP has almost completed all preparation works for the project, which includes a 200,000-b/d refinery and petrochemical units to produce 700,000 t/y of paraxylene, 240,000 t/y of benzene and 370,000 t/y of polypropylene.

A joint venture of PetroVietnam, Kuwait Petroleum Europe, Idemitsu Kosan and Mitsui Chemicals, NSRP was originally expected to begin commercial operations in early 2017.

PEC Ltd., along with its subsidiaries and associated companies, received a seven-year single daily maintenance contract earlier this year for the NSRP complex.

As MRC wrote previously, in May 2017, there was a notice on a government website for Deputy Prime Minister Vuong Dinh Hue and a source close to the matter that the commercial start-up of Vietnam's new USD7.5 B Nghi Son oil refinery will be delayed to 2018. Trouble with a mechanical test on some of the refinery's components set back test runs at the plant, causing the delay, according to the notice.

Japan's Idemitsu Kosan and Kuwait Petroleum International each own 35.1% of Nghi Son Refinery and Petrochemicals, while PetroVietnam has 25.1% and Mitsui Chemicals 4.7%.
MRC

PP prices soared in Russia in the first week of September

MOSCOW (MRC) -- September began quite hard for Russian polypropylene (PP) consumers. Scheduled and unscheduled outages at local plants led to an acute shortage of polymer in the market and, consequently, to a major price increase, according to ICIS-MRC's Price report.

Supply of PP was tight from some producers in the Russian market back in the second half of August. The market situation deteriorated sharply in the first week of September because of the shutdowns at three plants: SIBUR Tobolk, Stavrolen and Ufaorgsintez. The shortage of PP amid strong demand led to a sharp and significant rise in prices of both propylene homopolymers (homopolymer PP) and propylene copolymers.

In early September, because of technical issues, SIBUR Tobolsk, Russia's largest producer (with the annual capacity of 500,000 tonnes), took off-stream some of its PP production capacities, the exact dates of the outage has not been announced yet. Since 6 September, Stavrolen (with the annual capacity of 120,000 tonnes) began a scheduled shutdown for about a two-week turnaround. Ufaorgsintez (with the annual capacity of 120,000 tonnes) plans a 12-day maintenance from 11 September.

And if the shutdowns in Budennovsk and Ufa were planned, then the outage at some production capacities in Tobolsk became a complete surprise for the market. Back in July, there was a surplus in the PP market, the market balance began to change in August, and many converters simply did not have time to build up additional inventories.

Last week, many sellers suspended or restricted their PP sales because they had scarce stocks, as a result, there were very few deals for homopolymer PP concluded. And in some cases, offer prices reached Rb88,000/tonne FCA, including VAT, for homopolymer PP raffia.

The propylene copolymers market responded following the homopolymer PP market. Deals for September shipments of Nizhnekamskneftekhim's propylene copolymers reached Rb98,000/tonne FCA, including VAT, in the electronic trades, whereas they were in the range of Rb90,000-92,000/tonne FCA, including VAT, in late August.
MRC