Mexico sticks to USD7B tax cut in Pemex plan, vows refinery support

MOSCOW (MRC) -- Mexico will reduce the tax burden of heavily indebted Pemex by some USD7 billion over the next two years and inject government capital to build a new refinery and raise output from onshore and shallow water fields, the company said, as per Hydrocarbonprocessing.

Presenting the outline of a business plan watched closely by investors, Pemex Chief Executive Octavio Romero said an onerous profit-sharing tax that hands much of the company’s income to the federal government made the company financially unsound.

He reiterated that the tax will be reduced 11 percentage points to 54% by 2021. The company has previously said that reduction would save the company USD7.1 billion in 2020 and 2021.

With few new details, the outline of the plan failed to excite markets, and Mexico’s peso weakened slightly against the dollar during the presentation. Pemex is the world’s most indebted company, and its credit was downgraded to junk by Fitch this year. Moody’s and S&P have the company, Mexico’s biggest, on negative outwatch.

High on ratings agencies’ list of concerns is the government’s plan to build a new USD8 billion refinery at Dos Bocas. Former Finance Minister Carlos Urzua cited his opposition to the refinery after he resigned last week, saying experts believed it would cost far more.

A more detailed, 200-page version of the plan would be unveiled later on Tuesday, Romero said. Focusing on easy to access on shore and shallow water fields, Romero vowed to raise Pemex production within three years, and to reach 2.7 million barrels per day (bpd) of oil by the end of the government of President Andres Manuel Lopez Obrador in 2024, from a current 1.8 million barrels a day.

Sticking to the government’s position since it took office in December, Romero said it made more sense to invest in these fields to rapidly increase output, rather than the deepwater area of the Gulf of Mexico which the last government wanted to tap.
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MOSCOW (MRC) -- Brazil’s Petroleo Brasileiro SA is reorganizing its trading business, the company told Reuters, as the state-run oil firm seeks to best take advantage of an expected increase in oil and gas exports.

Petrobras, as the company is widely known, is dividing its marketing and trading division into a domestic unit and an international unit, the company said in a statement, after two sources told Reuters of the changes.

"Petrobras is splitting its Marketing and Trading area into Trading in Foreign Markets (CME) and Trading in Domestic Markets (CMI)," the company said. "The change aims to align Petrobras with movements in the sector and bring more synergies, innovation and agility to its trading unit."

Petrobras is ramping up oil and gas production in Brazil’s so-called pre-salt area, located off the nation’s southeastern coast, which in turn has led the firm to eye new export markets.

In May, Reuters reported that Petrobras would store crude in China to better respond to immediate demand by local refineries. In late June, Petrobras’ head of downstream operations said exports could increase by over a third "in the coming years."

While Petrobras’ trading area has been divided principally by product - such as crude and various fuels - the main division will now be between domestic and international markets, said the sources, who requested anonymity as they were not permitted to speak publicly.

The reorganization also comes as Petrobras’ trading operation confronts a major corruption scandal that has engulfed major commodities trading houses, including Glencore PLC , Trafigura, Mercuria Energy Group and Vitol SA.

In December, Brazilian prosecutors charged 14 people, including six former Petrobras employees, with taking part in a multimillion-dollar scheme to defraud Petrobras.

In June, Reuters reported that Petrobras managers, at least one of whom is still at the company, ignored previous warnings from employees about a fuel broker who prosecutors now say was a key actor in the scheme.

As MRC wrote previously, in H2 June, 2019, Petroleo Brasileiro SA said it had signed a deal with local antitrust regulator CADE regarding the proposed sale of some of its refining installations. According to a securities filing, the company said the agreement will allow for increased competition in Brazil’s refining sector, by attracting new players to the business.

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.
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MOSCOW (MRC) -- Phillips 66 was preparing on Sunday to begin a restart on Monday of its southeast Louisiana refinery, which was shut because of the threat of Tropical Storm Barry, reported Reuters with reference to the company's statement.

Barry has shut in 73%, or 1.38 million barrels per day (bpd), of crude oil production in the U.S.-regulated areas of the Gulf of Mexico, the U.S. Bureau of Safety and Environmental Enforcement (BSEE) said on Sunday. That is a 3 percentage point increase from Saturday.

Hurricane Barry weakened to a tropical storm as it made landfall in Louisiana on Saturday, after a westward shift that appeared to spare low-lying New Orleans from the massive flooding feared earlier this week.

Five of seven other refineries in southeast Louisiana drenched by Barry’s passage were still in operation on Sunday, said their owners and/or sources familiar with operations at the plants.

Phillips 66 shut the 253,600 bpd Alliance, Louisiana, refinery on Friday due to the risk of flooding and a mandatory evacuation order for residents of Plaquemines Parish, where the refinery is located along the Mississippi River.

At Royal Dutch Shell Plc’s 225,300 bpd Norco, Louisiana, refinery a power pole broke, but production was not affected, said sources familiar with plant operations.

Shell spokesman Ray Fisher said the storm did not affect operations at the Norco refinery and Shell’s 211,270 bpd Convent, Louisiana, refinery.

Exxon Mobil Corp’s 502,500 bpd Baton Rouge, Louisiana, refinery was operating normally on Sunday, said company spokesman Jeremy Eikenberry.

Both Valero Energy Corp’s 125,000 bpd Meraux, Louisiana, refinery and PBF Energy’s 190,000 bpd Chalmette, Louisiana, refinery were also running as planned on Sunday, sources said.

The Chalmette refinery, located on the east side of New Orleans, cut production by a small amount on Saturday to stretch its on-hand crude supply.

The US Coast Guard reopened the port of New Orleans on Sunday.

A Marathon Petroleum Corp spokesman did not reply to a request for comment about the status of the company’s 564,000 bpd Garyville, Louisiana, refinery.

A Valero spokeswoman did not reply to a message requesting the status of the 215,000 bpd St. Charles Refinery in Norco.

BSEE also said 62% of daily natural gas output from the Gulf was shut.

Exxon’s Eikenberry said the company was assessing the status of offshore and onshore operations on Sunday to determine if employees could safely return and begin restarting.

As of 1 p.m. CDT (1800 GMT) on Sunday Tropical Storm Barry was 15 miles east of Shreveport, Louisiana, and moving north with sustained winds of 40 miles per hour (65 kph).
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MOSCOW (MRC) -- A unit at Royal Dutch Shell’s Pulau Bukom refinery and petrochemical complex experienced an operational upset, reported Reuters with reference to a company spokeswoman's statement.

"On July 14 at approximately 2pm, the Pulau Bukom Manufacturing Site experienced an operational upset at one of its units, which has resulted in flaring," she said.

"No injuries have been reported and the relevant authorities have been notified," she said, adding that the rest of the site’s operations had not been affected.

It was not immediately clear which unit was down. The spokeswoman declined to provide details of the unit citing commercial confidentiality reasons.

The Pulau Bukom manufacturing site is an integrated refinery and chemicals site and can process up to 500,000 barrels per day of oil.

Bukom is Shell’s largest wholly-owned refinery globally in terms of crude distillation capacity, according to the company website.

Typically, any unexpected outage at the refinery boosts margins for Asian oil products.

As MRC informed before, in August 2015, Royal Dutch Shell completed a revamp and upgrade of its Singapore ethane cracker. The project increased production for the 800,000-tpy ethylene plant on Bukom Island by 20%. The ethylene and olefins unit is also integrated with Shell’s 500,000-bpd refinery.

Royal Dutch Shell plc is incorporated in England and Wales, has its headquarters in The Hague and is listed on the London, Amsterdam, and New York stock exchanges. Shell companies have operations in more than 70 countries and territories with businesses including oil and gas exploration and production; production and marketing of liquefied natural gas and gas to liquids; manufacturing, marketing and shipping of oil products and chemicals and renewable energy projects.
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MOSCOW (MRC) - Seasonal growth in demand and reduced supply of high density polyethylene (HDPE) led to price increases.
Natural polyethylene prices increased by roubles (Rb) 1,000 - 2,000/tonne by mid-July, as per ICIS-MRC Price Report.

In the past few weeks, the demand for pipe HDPE has increased significantly under the pressure of seasonal factor, while the supply of polymer from some sellers decreased. There was no big rush in this regard, but some sellers last week increased prices of pipe HDPE. Natural polyethylene prices increased by Rb1,000–2,000/tonne, black PE100 prices increased more significantly.

The reduction in the supply of HDPE pipe in the Russian market largely was a result of Gazprom Neftekhim Salavat for scheduled maintenance works, which started from the first days of July and will last for the entire month.

The Bashkir enterprise is a key supplier of natural pipe HDPE in the Russian market. There is no rush in the pipe polyethylene market due to the turnaround of one of the suppliers, but this factor began to put pressure on prices.

Some sellers of natural pipe HDPE increased prices to Rb103,000-105,000/tonne CPT Moscow, including VAT by mid-July. Black PE100 prices increased more significantly, and such a rise in prices was largely a result of the approaching turnaround of the main supplier, Kazanorgsintez.

In the early June Price offers for Russian black PE100 started from Rb107,500/tonne CPT Moscow, including VAT and by the middle of the month the prices at some sellers rose to Rb113,500/tonne CPT Moscow, including VAT.

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