U.S. to fill strategic oil reserve "to the top"

MOSCOW (MRC) -- President Donald Trump said the United States would take advantage of low oil prices and fill the nation’s emergency crude oil reserve, in a move aimed to help energy producers struggling from the price plunge, said Hydrocarbonprocessing.

"Based on the prices of oil, I’ve ... instructed the secretary of energy to purchase, at a very good price, large quantities of crude oil for storage in the U.S. strategic reserve,” Trump, a Republican, told reporters at the White House. “We’re going to fill it right up to the top,” he added without offering details.

The Strategic Petroleum Reserve has the capacity to store up to an additional 77 million barrels of oil, a Department of Energy official said, after Trump spoke. The official did not immediately comment on how fast the oil would be purchased for the reserve which currently holds 635 million barrels.

It was the first move by a president to fill the SPR since President George W. Bush, a Republican, ordered a fill to capacity in the wake of the Sept 11, 2001 attacks.

Oil prices posted the worst week in more than a decade, collapsing to about USD31 a barrel on a rare combination of severe shocks to both supply and demand. The spread of coronavirus has hit demand by shutting travel around the world. Meanwhile, the launch of a price war between Saudi Arabia and Russia over the weekend has flooded global markets with crude.

Analysts were divided about the move, with one calling it an “unambiguously smart step.” “Better to do it before an emergency,” said Bob McNally, the president of the Rapidan Group consultancy. “We still need a large SPR because our economy remains vulnerable to price shocks from disruptions anywhere,” said McNally, who was a White House energy adviser at the national security council under Bush.

Daniel Yergin, an energy historian who advises U.S. officials on energy matters, told reporters at the Energy Department late Thursday he was skeptical that buying oil for the reserve could quickly help energy producers. “I don’t see how you can use the SPR,” he said. “With the amount of oil coming into market this is really going to lead to swollen inventories, it’s going to take a long time to bring down."

McNally agreed it could take a while, even years, to fill the reserve, and added he did not know how the Trump administration would pay for it. Former Secretary of State Henry Kissinger pushed for the creation of the SPR in 1975, after the Arab oil embargo spiked gasoline prices and damaged the U.S. economy. It is held in a series of caverns along the Texas and Louisiana coasts.

An oil and gas industry group welcomed Trump’s directive. Anne Bradbury, chief executive of the American Exploration and Production Council, said it could “help alleviate the oversupply disruptions in the marketplace."

An environmentalist said Trump was putting energy companies first. It is “wildly inappropriate” for Trump to use the SPR “as a tool to prop up the oil and gas industry at a time when the White House should be focusing on how to help everyday people,” said Alex Doukas, of Oil Change International.

As MRC informed earlier, Saudi Arabia has stepped up efforts to squeeze Russia’s Urals oil grade out of its main markets by offering its own cheap barrels instead after their long-standing deal to support global oil prices fell apart, reported Reuters with reference to seven oil sources. Cooperation between Moscow and Riyadh dramatically collapsed last week after Russia refused to support deeper oil output cuts desired by Saudi Arabia to fight falling oil demand as a result of the spread of the coronavirus outbreak.

As MRC informed before, in October 2018, Saudi Aramco and Total launched engineering studies to build a giant petrochemical complex in Jubail. Announced in April 2018, the world-class complex will be located next to the SATORP refinery, operated by Saudi Aramco (62.5%) and Total (37.5%), in order to fully exploit operational synergies. It will comprise a mixed-feed cracker (50% ethane and refinery off-gases) - the first in the Gulf region to be integrated with a refinery - with a capacity of 1.5 million tons per year of ethylene and related high-added-value petrochemical units. The project represents an investment of around $5 billion and is scheduled to start-up in 2024.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC

MOSCOW (MRC) -- Debt-laden Sasol (Johannesburg) says that it is in "active discussions" on a potential partnering of its US base chemicals assets, principally the Lake Charles Chemical Project (LCCP) in Louisiana, the escalating costs of which are the main cause of its financial problems, reported Chemweek.

The size of the rights issue, which would take place after the reporting of the financial year 2020 results, could be reduced, depending on the progress made on the other elements of the recovery program.

Sasol also said that it aims to generate USD6 billion by the end of its 2021 financial year, through 30 June 2021, by a combination of measures, including a potential USD2-billion rights issue of new shares, accelerated asset sales significantly ahead of the current USD2-billion target, and a cash conservation program targeted at a further USD2 billion of operational savings.

The company is targeting immediate measures to deliver approximately USD1 billion in cash by the end of its current financial year, including approximately USD800 million to be realized from working capital optimization and reprioritizing capital expenditure, and another USD200 million from cost savings. In financial year 2021, it expects to save USD700 million from reprioritizing capital expenditure and working capital, and another USD300 million from cost savings and business optimization.

Sasol’s shares dropped last week, falling to a 21-year low after oil prices plunged, raising concerns about its around $8-billion debt level following delays and cost overruns at the LCCP. "The immediate focus is on the actions to stabilize the company and protect the balance sheet so that the underlying value of the portfolio is not compromised, and instead the potential realized in the interests of all Sasol's stakeholders," Sasol says.

In a note to shareholders, Sasol said it needed to enhance cash flow and reposition its balance sheet on the assumption that there would be a sustained low oil price until the end of financial year 2021. It said that it can withstand recent market volatility in the short term, owing to its available liquidity of $2.5 billion and no significant debt maturities before May 2021. “Sasol believes it can maintain liquidity headroom in excess of $1 billion over the next 12 to 18 months with a $25 per barrel oil price before the benefits of hedging,” the company says. It adds that the global portfolio of its foundation business remains cash-positive under prevailing spot market conditions.

Sasol has entered into a standby underwriting agreement for the rights issue with BofA Securities, Citigroup, and J.P Morgan Securities. It intends to convene a general meeting of shareholders around July 2020 to approve the issue. It is also in discussions with lenders about additional flexibility in its debt covenants to improve balance-sheet flexibility in financial year 2021.

As MRC reported earlier, in mid December 2019, Sasol announced that the LCCP Ethane Cracker was increasing production rates following the successful replacement of the acetylene reactor catalyst. Sasol’s Ethane Cracker with a nameplate capacity of 1.54 million tons per year achieved beneficial operation in August 2019 but has run approximately 50-60% of nameplate capacity due to underperformance of the plant’s acetylene removal system. The company stated that the issue had been resolved then.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.

Sasol is an international integrated chemicals and energy company that leverages technologies and the expertise of our 31 270 people working in 32 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of high-value product stream, including liquid fuels, petrochemicals and low-carbon electricity.
MRC

MOSCOW (MRC) -- U.S. producers Hess Corp, Concho Resources Inc and Callon Petroleum Co followed oil major Exxon Mobil Corp in cutting their spending for the year, as oil prices continued to trade below USD30 a barrel, said Hydrocarbonprocessing.

Oil producers are trying to shore up cash as a double-whammy from the Saudi-Russia price war and dwindling demand because of the coronavirus outbreak threatens to hold oil prices hostage for an uncertain period of time. Prices fell below USD30 per barrel on Tuesday, extending losses after shedding a tenth of their value on Monday, while most shale producers need oil prices at low USD40s to make a profit.

In a major reversal from just a few weeks ago, oil major Exxon said on Monday it would make “significant” cuts to spending in the face of the price slide that has sent its shares to a 17-year low.

Chevron Corp earlier said it was looking at ways to trim spending that could lead to lower near-term oil production. It originally expected 2020 organic capital expenditure of USD20 billion. Hess, Concho and Callon slashed their 2020 capital budget by about a quarter while Callon said it would cut its rig count to five from nine before the end of the second quarter.

Hess also lowered its 2020 average production by 1.5% to between 325,000 barrels of oil equivalent per day (boepd) and 330,000 boepd, excluding Libya. Kosmos Energy , listed on the London and New York Stock Exchange, on Tuesday suspended its dividend and said it was aiming to reduce 2020 capital spending by 30%.

Since last Monday, North American producers have slashed their spending by about 30% on average, according to data compiled by Reuters.

Reuters reported on Monday that Chesapeake Energy Corp , which once helped spearhead the U.S. shale revolution, had tapped debt restructuring advisers amid the rout in energy prices.

As MRC informed before, in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

MRC

MOSCOW (MRC) - A fire occurred at the factory of the Ukrainian Polymer plant in Zaporozhye, the Voice of Zaporozhye reports.

Black puffs of smoke rise above the roofs of the building. Rescuers were called to the scene. Now the moment the cause of the fire is unknown.

Cossacks note the smell of smoke even in the city center.

According to a DataScope survey by Market Report, last month foreign supplies of PE to Ukraine grew to 20.5 against 19.4 thousand tons in January, local companies increased supplies for all types of ethylene polymers except for ethylene-vinyl acetate (EVA) . Thus, in January - February 2020, the total volume of external deliveries of polyethylene reached 39.9 thousand tons against 41.8 thousand tons a year earlier.

The company "Polymer" is engaged in the sale of secondary polymers. The company has three lines for the production of secondary low-pressure polyethylene, high-pressure polyethylene, polypropylene, polystyrene, polyamide and other types of plastics.
MRC

MOSCOW (MRC) -- Russia’s budget revenues from oil and gas sales are set to be 3 trillion roubles (USD39 billion) lower than previously expected this year due to the slump in crude prices, reported Hydrocarbonprocessing with reference to Finance Minister Anton Siluanov's statement.

Siluanov’s had initially estimated a 2 trillion rouble shortfall, with a deficit that could reach 0.9% of gross domestic product (GDP).

Oil prices fell for a third session on Wednesday to be down about 17% so far this week as the outlook for fuel demand darkened because of travel and lockdowns in place to curb the spread of the coronavirus epidemic.

Prices for Brent crude, a global benchmark for Russia’s main export, were down 1.25% at USD28.41 a barrel by 0832 GMT.

Despite the expansion of the deficit, Gazprombank analysts said the finance ministry has sufficient reserves to carry out its spending, including with its National Wealth Fund.

The Fund “has enough to cover for the shortfalls in income from lower oil prices for more than five years,” the bank said in a note.

As of March 1, the NWF held 8.2 trillion roubles, or 7.3% of GDP, according to the ministry.

The ministry has said that the country could weather oil prices of $25 to 30$ per barrel for between six and 10 years.

The Kremlin said last week that Russia’s economy had sufficient international reserves and was sufficiently robust to weather any temporary market instability.
MRC