Liwa Plastics project in Oman is on track for 2020 completion

MOSCOW (MRC) -- Orpic, the nation’s refining and petrochemicals flagship, has revealed that Oman’s most anticipated transformational project, Liwa Plastics Industries Complex (LPIC), is currently 67 per cent complete across all four of its Engineering-Procurement-Construction (EPC) packages, as per GV.

The project is set to improve Orpic’s product mix and business model, double its profit and support the development of a downstream plastics industry in Oman. Taking advantage of the growing global market for plastics, LPIC will create new business opportunities and employment in Oman, and firmly reinforce Orpic as a significant player in the international petrochemicals marketplace as it will bring new business development opportunities for the Sultanate in the fast-growing plastics industry.

Construction is ongoing and is expected to be completed by 2020, said Orpic in a statement. With a total investment of USD 6.7 billion, LPIC is expected to boost Orpic’s contribution to develop In Country Value (ICV) for the national economy.

"With the global market for plastics growing, the Liwa Plastics Industries Complex will firmly reinforce Orpic as a recognized player in the international petrochemicals marketplace - enabling Oman, for the first time, to produce polyethylene… and increased the current production of polypropylene," the state-owned entity said.

Liwa Plastics Industries Complex consists of a gas extraction plant in Fahud, a 300 km pipeline from Fahud to Suhar, steam cracker plant, and polymers plant in Suhar Industrial area. The steam cracker plant will process light ends produced in Orpic’s plants in Suhar as well as rich gas received from Fahud plant. Its concept lies in rerouting high value elements of existing production streams, in combination with additional purchased feedstocks to deliver high value polymer products for the local and international marketplaces.

The primary goal of Liwa Plastics Industries Complex is to further increase the value-added that can be derived from Omani crude oil and natural gas. The project has six core components to it:

1) A natural gas extraction plant in Fahud,
2) 300km pipeline between Fahud and Suhar Industrial Port Area for gas transportation,
3) An 800+kTA Steam Cracker Unit,
4) An HDPE Plant,
5) A LLDPE Plant and
6) A Polypropylene Plant

Following commissioning, plastics production is forecast to have increased by more than 1 million tons, giving Orpic a total of 1.4 million tons of polyethylene and polypropylene production.

With the highly integrated complex in Suhar including the refineries, aromatics plant, steam cracker and the downstream polypropylene and polyethylene plants, the operation will be one of the best integrated refinery and petrochemical facility combinations in the world.

About USD 1.5 billion of the total project, cost is allocated to support ICV. The engineering, procurement and construction (EPC) works lasting for 4 years until the launch of the project in 2020 will lead to a great addition to the ICV platform across the Sultanate through the joint efforts of the Orpic’s ICV team and the key contractors of the four project packages.

Orpic supports ICV by reinforcing & developing businesses and taking human capabilities into consideration. This is achieved by reaching authenticated (made in Oman) products and materials bought by the company and grow the human capital in all Orpic projects by ensuring at least 30 per cent Omanisation in the companies working for the project.

As MRC wrote earlier, in 2014, Orpic selected LyondellBasell's Spheripol polypropylene process technology for a new 300,000 tpy PP plant to be built in Sohar, Sultanate of Oman. Start-up of the Liwa plastics project is planned for 2018.

ORPIC (Oman Oil Refineries and Petroleum Industries Company) is one of the leading companies in Oman and has two refineries in that country, in Sohar and Muscat. ORPIC is owned by the Government of the Sultanate of Oman and Oman Oil Company SAOC, the trading company created by the Government of the Sultanate of Oman for managing investments in the energy sector.
MRC

MOSCOW (MRC) -- BASF will launch the sale of its USD3 billion-plus construction chemicals business in the spring, as part of the German chemicals group’s drive to focus on more profitable operations, reported Reuters with reference to people close to the matter.

BASF, which flagged its intention to auction off or merge the unit in October, said on Tuesday it had hired Goldman Sachs to organize the transaction.

"We are still at an early stage of the process," a BASF spokesman said, declining to comment further on the timing.

Goldman Sachs declined to comment.

The world’s largest maker of chemical additives for concrete is expected to fetch roughly 3 billion euros (USD3.4 billion), the sources said.

First information packages are expected to be sent out to prospective bidders in March, the sources said, while one of them added that first-round offers were likely to be due before the summer break.

The company’s new Chief Executive Martin Brudermueller in October unveiled plans to hive off the unit as BASF looks for ways to boost the group’s share price.

The company said at the time that the business, whose products have been used to build major train tunnels in the Swiss Alps and in London, was not deeply integrated into BASF’s production network and that it had fallen short of profitability targets.

It has grown little since BASF purchased it from Degussa in 2006 for 2.7 billion euros including debt. The unit’s need to cater to a large number of small to mid-size builders goes against BASF’s focus on large industrial customers, industry analysts said.

BASF bought seeds and crop chemical assets from Bayer and is seeking to wrap up the purchase of an engineering plastics business from Solvay to bolster margins at a time when its basic petrochemical businesses are slowing down.

Switzerland’s Sika, which is buying French construction chemicals company Parex from CVC Capital Partners, said last month it would be interested in the BASF unit but doubted a deal for all of the business was possible because of antitrust restrictions.

Companies such as LafargeHolcim, Saint Gobain, GCP, RPM and Mapei are also seen as potential suitors for all or parts of the business, as well as buyout groups such as Advent, Carlyle or CVC.

As MRC wrote previously, in December 2017, BASF’s Coatings division inaugurated a new automotive coatings plant at its Bangpoo manufacturing site, Samutprakarn province, Thailand. The new plant is the first BASF automotive coatings manufacturing facility in ASEAN, and will produce solventborne and waterborne automotive coatings to meet growing market demand in the region.

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

MOSCOW (MRC) -- Abu Dhabi Crown Prince Mohammed bin Zayed al-Nahyan said in a tweet on Wednesday that state oil firm ADNOC had signed an agreement with South Korea’s SK E&C to build the world’s largest crude oil storage facility in the emirate of Fujairah, reported Reuters.

The storage project will cost 4.4 billion UAE dirhams (USD1.2 billion) and have a capacity of 42 million barrels, he said.

As MRC informed before, in September 2018, ADNOC Refining, a subsidiary of the Abu Dhabi National Oil Company (ADNOC), announced it had reached full production of polymer-grade propylene from its newly commissioned Propane Dehydrogenation (PDH) unit, located in the Ruwais integrated refining and petrochemical hub. The PDH unit processes propane from two major sources, ADNOC Gas Processing and Ruwais Refinery West, to produce half a million tons per year of polymer-grade propylene. The standalone unit is part of the recently commissioned Carbon Black and Delayed Coker project.
MRC

MOSCOW (MRC) -- Zhong Tian He Chuang Energy, a joint venture of Sinopec and China Coal Energy Group, hhas restarted its No. 2 low density polyethylene (LDPE) unit following an unplanned outage, as per Apic-online.

A Polymerupdate source in China informed that the company has resumed operations at the unit on February 24, 2019. The unit was shut owing to technical issues on February 12, 2019.

Located at Ordos in Inner Mongolia, China, the No. 2 LDPE unit has a production capacity of 120,000 mt/year.

As MRC wrote prevously, China's Sinopec group, parent of Sinopec Corp, will invest USD29.05 billion to upgrade four refining bases between 2016 and 2020 to produce higher-quality fuels.

China Petrochemical Corporation (Sinopec Group) is a super-large petroleum and petrochemical enterprise group established in July 1998 on the basis of the former China Petrochemical Corporation. Sinopec Group's key business activities include the exploration and production of oil and natural gas, petrochemicals and other chemical products, oil refining.
MRC

MOSCOW (MRC) -- BASF generated sales of EUR62.7 billion last year, said the company.

This represents an increase of 2% compared with the previous year. Income from operations (EBIT) before special items declined to EUR6.4 billion, compared with EUR7.6 billion in the previous year. This was mainly attributable to the Chemicals segment, which accounted for around two-thirds of the total decline in earnings. Isocyanate margins fell sharply in the second half of the year. Furthermore, cracker margins were lower than expected in all regions in 2018.

Overall, 2018 was a year characterized by difficult global economic and geopolitical developments and trade conflicts. In the second half of the year, BASF felt an economic slowdown in key markets, especially in the automotive industry, BASF’s largest customer sector. In particular, demand from Chinese customers declined significantly. The trade conflict between the United States and China contributed to this. Around the world, uncertainties grew. Many market participants therefore acted very cautiously.

"We are tackling these challenges. With our new corporate strategy, we will use 2019 as a transitional year to emerge even stronger. This year, we are adapting our structures and processes, and focusing our organization clearly on the needs of our customers," said BASF’s Chairman of the Board of Executive Directors, Dr. Martin Brudermuller, who presented the 2018 financial figures together with Chief Financial Officer Dr. Hans-Ulrich Engel.

BASF implemented price increases in all segments and divisions in 2018. Volumes rose slightly compared with the previous year: Higher volumes in the Functional Materials & Solutions and Agricultural Solutions segments were partially offset by lower volumes in the Performance Products and Chemicals segments. The main reason for the lower volumes in the Performance Products segment was the outage at the citral plant in Ludwigshafen, which started production again in the second quarter. Sales volumes in the Chemicals segment were negatively influenced by the low water levels on the Rhine River. Currency effects were minus 4% overall, while portfolio effects were plus 1%.

Lower earnings in the Functional Materials & Solutions, Agricultural Solutions and Performance Products segments also contributed to the decline in EBIT before special items. In the Agricultural Solutions segment, negative currency effects in all regions dampened earnings. In addition, there was a strongly negative contribution from the businesses acquired from Bayer, which BASF only took over in August. This timing was a disadvantage because of the seasonality of the seeds business, which primarily generates income in the first half of the year. Moreover, there were costs for integrating the acquired activities.

As well, the unusually long period of low water levels on the Rhine River posed a challenge for BASF. At the Ludwigshafen site, for much of the third and fourth quarter, it was nearly impossible to receive deliveries of raw materials via ship. Consequently, BASF was forced to reduce plant capacity utilization rates in Ludwigshafen. This lowered 2018 earnings by around EUR250 million.

Special items amounted to minus EUR320 million, primarily due to acquisitions. This compares with minus EUR58 million in the previous year. EBIT declined by 20% to EUR6 billion. At EUR9.5 billion, EBITDA before special items was 12% below the prior-year level. EBITDA amounted to EUR9.2 billion, compared with EUR10.8 billion in 2017.

Earnings per share fell from EUR6.62 to EUR5.12 in 2018. Adjusted for special items and amortization of intangible assets, earnings per share amounted to EUR5.87, down by EUR0.57 from the previous year.

BASF Group’s sales rose by 2% in the fourth quarter of 2018 to EUR15.6 billion. Supported by the segments Performance Products, Functional Materials & Solutions and Agricultural Solutions, prices could be raised by 2%. Volumes declined by 3%. This was primarily attributable to the prolonged low water levels on the Rhine River, which severely limited shipments of key raw materials to the Ludwigshafen site and thus forced us to reduce capacity utilization. Portfolio effects amounted to plus 3% due to the acquisition of Bayer businesses in the Agricultural Solutions segment.

EBIT before special items in the fourth quarter was EUR630 million, down 59% on the prior-year figure. This decline was due to significantly lower earnings in the Chemicals and Agricultural Solutions segments. In the Chemicals segment, the main reason for this was lower margins in the isocyanate and cracker business. Fourth-quarter earnings development in the Agricultural Solutions segment was hampered by acquisition-related expenses. BASF was able to improve earnings in the Performance Products and Functional Materials & Solutions segments. The supply bottlenecks resulting from the low water levels on the Rhine River had a negative impact of around EUR200 million on earnings in the fourth quarter.

Cash ?ows from operating activities declined from EUR8.8 billion to EUR7.9 billion. This was mainly due to the decrease in net income. In 2018, the change in net working capital reduced cash flows by EUR530 million; this compared with minus EUR1.2 billion in 2017. Cash used in investing activities increased from EUR4 billion to EUR11.8 billion. In 2018, net payments for acquisitions and divestitures amounted to EUR7.3 billion, mainly relating to the acquisition of businesses and assets from Bayer. Payments made for property, plant and equipment and intangible assets declined by EUR102 million to EUR3.9 billion. At EUR4 billion, free cash flow was once again strong, but EUR744 million lower than the 2017 level due to the decrease in cash flows from operating activities.
MRC