Coronavirus, gas slump put brakes on Exxon's giant Mozambique LNG plan

MOSCOW (MRC) -- Exxon Mobil is likely to delay the greenlighting of its USD30 billion liquefied natural gas (LNG) project in Mozambique as the coronavirus disrupts early works and a depressed gas market makes investors wary, six sources told Reuters.

Top US oil and gas company Exxon said on Tuesday it was evaluating "significant" cuts to capital spending and operating expenses. Energy firms worldwide have slashed spending this month as oil prices plummeted to 18-year lows after global travel curbs and reduced economic activity destroyed demand.

The coronavirus pandemic is forcing delays to projects worldwide. Qatar, the world's largest producer of liquefied natural gas (LNG), is delaying a big expansion in which Exxon is a major partner.

The Rovuma LNG project, which will produce from a deepwater block off Mozambique containing more than 85 trillion cubic feet of natural gas, was expected to get the go-ahead in the first half of 2020.

But three sources familiar with the project told Reuters that Exxon's partners want to push back a final investment decision (FID).

A further three sources said the pandemic is disrupting work on the project to such a degree that FID before the second half is unlikely.

Any delay would leave Exxon's project further behind rival Total, which took FID last June on its neighbouring project.

Exxon might be left with no choice.

"COVID-19 is affecting guys going into Mozambique, it's affecting Chinese and Korean financiers, and clearly you've had the arse drop out of the oil market," said a source with knowledge of the project.

The pandemic is causing delays to the financing needed for the project, the source added.

Rovuma LNG is managed by Mozambique Rovuma Venture, a joint venture owned 35.7% each by Exxon and Eni ENI.MI with the remaining stake of 28.6% held by China National Petroleum Corporation (CNPC).

Another source with knowledge of internal discussions said with the energy outlook uncertain and LNG supplies set to rise sharply by 2025, some of the project partners want to "cool Exxon's heels" and delay.

Exxon spokesman Todd Spitler declined to discuss whether partners are seeking to push back the FID. "This is a complex project that will be developed over several years," he said.

China's CNPC did not respond to Reuters' request for comment and Eni declined to comment.

Mozambique's state oil firm ENH, Galp Energia GALP.LS and KOGAS, which each have 10% stakes in the project, either did not provide a comment or referred Reuters to Exxon.

Exxon has already committed to USD500 million in initial investment, and FID is the next stage in funding based on which banks can extend lines of credit.

But early works are being disrupted by coronavirus travel restrictions. International workers travel regularly to the project site on the Afungi peninsula in Cabo Delgado province, where they live cheek-by-jowl and share a canteen for six- or eight-week stints.

Many hail from countries that have been hit hard by the coronavirus and have put in place travel restrictions. Mozambique has imposed a 14-day quarantine for those entering the country.

That has left key personnel unable to reach the site.

"It seems as though they are electing to postpone some of the early stage works and contracts for now," another source familiar with the matter said. "I doubt we can expect their FID before the end of 2020."

Exxon's Spitler said employees' health and safety was a priority and declined to comment on the day-to-day details of its operations.

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).

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world's oil and about 2% of the world's energy.
MRC

MOSCOW (MRC) -- Overall imports of general purpose polystyrene (GPPS) and high impact polystyrene (HIPS) to Russia rose in January-February 2020 by 39% year on year to 8,100 tonnes, according to MRC's DataScope report.

This figure was at 5,800 tonnes in January-February 2019.

At the same time, last month's GPPS and HIPS imports to the Russian market grew by 28% to 3,800 tonnes from 2,900 tonnes in February 2019. Imports of material into the country were 4,300 tonnes in January 2020.

GPPS imports to Russia grew in January-February 2020 by 71% year on year, totalling 5,600 tonnes.

Russian companies increased their imports of material by 66% last month: from 1,600 tonnes in February 2019 to 2,600 tonnes, imports were 3,000 tonnes a month earlier.

HIPS imports have continued to decline since September 2019. They were 1,200 tonnes in February 2020 versus 1,400 tonnes a month earlier and 1,300 tonnes in February 2019. However, imports remained virtually unchanged year on year in the first two months of 2020, totalling 2,500 tonnes.

European material of Styrolution and Versalis accounted for about 90% of HIPS and GPPS shipments.

MRC

MOSCOW (MRC) -- Russia's output of chemical products rose in February 2020 by 9% year on year. Thus, production of basic chemicals increased by 6% in the first two months of 2020, according to Rosstat's data.

According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-February output.

Production of benzene was 129,000 tonnes in February 2020, compared to 133,000 tonnes a month earlier. Overall output of this product reached 262,000 tonnes over the stated period, up by 6.1% year on year.

February production of sodium hydroxide (caustic soda) was 107,000 tonnes (100% of the basic substance) versus 113,000 tonnes a month earlier. Overall output of caustic soda totalled 220,000 tonnes in the first two months of 2020, up by 4.5% year on year.

1,905,000 tonnes of mineral fertilizers (in terms of 100% nutrients) were produced in February 2020 versus 1,923,000 tonnes a month earlier. Overall, Russian plants produced 3,828,000 tonnes of fertilizers in January-February 2020, down by 3.7% year on year.

Last month's production of polymers in primary form grew to 819,000 tonnes from 818,000 tonnes in January. Overall output of polymers in primary form totalled 1,637,000 tonnes over the stated period, up by 22.2% year on year.
MRC

MOSCOW (MRC) -- Karpatneftekhim (Kalush, Ivano-Frankivsk region), Ukraine's largest petrochemical plant, has resumed its high density polyethylene (HDPE) production after a long and forced outage, according to ICIS-MRC Price report.

The plant's representative and customers said the Ukrainian producer had launched its HDPE production by 23 March. The shutdown of polyethylene (PE) production was forced and took place in early January due to high feedstock prices amid low PE prices.

The situation in feedstocks markets has changed dramatically since February, thus, oil prices fell significantly, which allowed to restart PE production.

As reported earlier, Karpatneftekhim's overall HDPE output exceeded 93,000 tonnes in 2019, up by 4% year on year.

Karpatneftekhim is one of the largest enterprises of Ukraine's petrochemical complex. Currently, the plant can produce annually 300,000 tonnes of PVC, 200,000 tonnes of caustic soda, about 180,000 tonnes of chlorine, as well as 250,000 tonnes of ethylene and 100,000 tonnes of polyethylene.
MRC

MOSCOW (MRC) -- Lotte Chemical of South Korea has announced an indefinite force majeure on supplies of products from its ethylene cracker in Daesan after an explosion that injured at least 31 people, according to Kemicalinfo.

The explosion occurred on March 4, about 3 am South Korea time from a fire at a compressor unit within the naphtha cracker. The fire has now been extinguished, and investigation to determine the extent of the damage is under way.

The cracker complex along with the 1.1 million ton per year ethylene cracker also produces 550,000 ton per year of propylene and 190,000 ton per year of butadiene. The cracker also feeds an aromatics unit that can produce 240,000 ton per year of benzene, 120,000 ton per year of toluene and 60,000 ton per year of solvent grade mixed xylenes.

Other downstream facilities were also subsequently shut as feedstock from the cracker dries up. These are a 130,000 ton per year of low-density polyethylene, 290,000 ton per year of LLDPE, 500,000 ton per year of polypropylene, 730,000 ton per year of ethylene glycol and 580,000 ton per year of styrene monomer.

The company is yet to announce on when the cracker will restart following this outage.

As MRC reported earlier, Lotte Chemical has shut down its Deasan cracker for maintenance turnaround on October 14, 2019. The cracker resumed production on November 10, 2019. Located at Daesan in South Korea, currently the cracker has an ethylene capacity of 1.1 million mt/year and propylene capacity of 540,000 mt/year.

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.

Lotte Chemical runs two naphtha crackers in South Korea. One cracker is located in Daesan county in Seosan which can produce 1.1 million tonnes per year of ethylene with the other 1.2 million tonnes per year cracker in the southwestern city of Yeosu.
MRC