BP slashes capital spending in 2020 due to COVID-19, expects outbreak to hurt downstream results

MOSCOW (MRC) -- BP says it will reduce its planned organic capital spending in 2020 to about USD12 billion as part of its response to the coronavirus disease 2019 (COVID-19) pandemic, down 25% compared with the company's prior full-year guidance, with an expected spending cut of about USD1 billion in its downstream business segment, which includes petrochemicals, reported Chemweek.

No further details on the cut in downstream expenditure have been given by BP’s CEO, Bernard Looney, who says that despite the company's actions to reduce spending and costs, "the challenging environment is expected to have an impact on our first-quarter results and there is uncertainty around how long current depressed commodity pricing and weakness in product demand will continue." Market conditions are "currently volatile and extremely challenging," says Looney.

"BP continues to monitor the impact of COVID-19 on our global operations and in the first quarter there was no significant operational impact. This could change through the second quarter," he says. BP expects its downstream business's first-quarter results to be squeezed by a "significant and growing decline in demand for fuels, jet fuel, and lubricants as countries implemented significant measures to address COVID-19. This has been particularly evident in China and, towards quarter-end, has extended into our larger US and European markets,” Looney adds. "In downstream, we expect a reduction in spend of around USD1.0 billion, which includes reduced spending across our fuels marketing, refining, and petrochemicals businesses," he notes.

Downstream refining availability for BP is expected to be in a range of 95-96%, with some reduction seen in utilization toward the end of the first quarter due in particular to falling demand for fuel, according to Looney.

Regarding the spending cuts and other measures to protect the company’s financial health, Looney says, “This may be the most brutal environment for oil and gas businesses in decades, but I am confident that we will come through it - we know what to do and we have done so before.” The company entered the current environment with good operating momentum and financial discipline, strong liquidity, and extensive optionality in its portfolio, he says. BP will continue to review these actions and any further ones that may be appropriate, in response to changes in prevailing market conditions, he adds.

BP says it has about USD32 billion of cash and undrawn facilities available at the end of the first quarter. The company’s existing divestment program to deliver USD15 billion of announced transactions by mid-2021 remains on track, although the phasing of receipt of USD10 billion of divestment proceeds by the end of 2020 "may be revised as transactions complete, particularly while volatile market conditions persist," it says. To date, USD9.6 billion of transactions have been announced since the start of 2019, with about USD3.4 billion of cash proceeds received, BP adds.

Cash cost savings of about USD2.5 billion are also expected by the end of 2021, compared with 2019, with digitization and increased integration across the company to be the key drivers of the savings, according to BP. It also continues to review potential first-quarter impairment charges and currently expects to take a noncash, nonoperating charge of about USD1 billion in the quarter.

BP says it has also implemented actions such as changed shift patterns at its various plants worldwide to make social distancing easier, restricted workplace access, and is reducing nonessential activity and manning levels at its development projects “where possible” to reduce the risk of the spread of COVID-19.

"Job security is a big worry at this time, so we have taken the decision that for the next three months no BP employees will be laid off as a result of virus-related cost cutting. We simply do not want to add another burden during what is already an incredibly stressful time for individuals and families," says Looney. The company has also donated USD2 million to the COVID-19 Solidarity Response Fund to support the work of the World Health Organization in leading and coordinating the international pandemic response, he says.

The company is using its own stocks and supply chain to donate personal protective equipment to health services in the US, UK, France, Belgium, Spain, the Netherlands, and Germany, he adds. In Brazil, BP is also diverting some of its sugarcane ethanol production via its biofuels joint venture to make a disinfectant product for supply to local health services serving a population of 1.4 million.

As MRC informed before, BP has entered into an agreement to license its latest generation technology for the production of purified terephthalic acid (PTA) to China’s Dongying Weilian Chemical Co., Ltd. Weilian Chemical is a subsidiary of Dongying United Petrochemical Co., Ltd, one of the leading manufacturers and distributors of petroleum and petrochemical products in China. Weilian Chemical intends to build a 2.5 million tonnes per annum PTA production unit at the Dongying Port Economic Development Zone in eastern Shandong province, adding to Dongying United Petrochemical’s existing refineries and paraxylene (PX) facilities portfolio.

PTA is used to produce polyethylene terephthalate (PET), which, in its turn, is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to MRC's ScanPlast report, April total estimated PET consumption virtually did not change year on year, totalling 60,840 tonnes (in April 2019 - 60,980 tonnes). 235,160 tonnes of PET chips were processed in Russia in January-April 2020.

BP is one of the world's leading international oil and gas companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items.
MRC

MOSCOW (MRC) -- Formosa Petrochemical plans to shut down its No.3 cracker in Taiwan for maintenance in mid-August, 2020, reported Chemweek with reference to OPIS.

The 1.2-MMt/y No. 3 cracker is due to be offline until end-September.

As MRC wrpte previously, Formosa took off-stream its No.2 cracker in Taiwan on 1 June, 2020. No reason for unplanned closure was given. The cracker is expected to be idle during one week. Located at Mailiao in Taiwan, the No.2 cracker has an ethylene production capacity of 1.03 million mt/year, propylene production capacity of 515,000 mt/year and butadiene production capacity of 162,000 mt/year.

Formosa, Asia's top naphtha importer, operates three naphtha crackers in Mailiao. These units have a total capacity of 2.93 million tpy of ethylene.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.

Formosa Petrochemical is involved primarily in the business of refining crude oil, selling refined petroleum products and producing and selling olefins (including ethylene, propylene, butadiene and BTX) from its naphtha cracking operations. Formosa Petrochemical is also the largest olefins producer in Taiwan and its olefins products are mostly sold to companies within the Formosa Group. Among the company's chemical products are paraxylene (PX), phenyl ethylene, acetone and pure terephthalic acid (PTA). The company"s plastic products include acrylonitrile butadiene styrene (ABS) resins, polystyrene (PS), polypropylene (PP) and panlite (PC).
MRC

MOSCOW (MRC) - Russia's production of unmixed polyvinyl chloride (PVC) decreased in April, including due to the scheduled maintenance works of one of the producers. Overall PVC output totalled 432,100 tonnes in January-May 2020, up by 2% year on year, according to MRC's ScanPlast report.

April production of unmixed PVC in Russia was 81,100 tonnes from 83,900 tonnes a month earlier, Kaustik Volgograd shut its capacities for three weeks turnaround. The total volume of PVC production increased to 432,100 tonnes in January-May against 422,900 tonnes a year earlier, only two producers increased production volumes, and one reduced PVC production.

The structure of PVC production by plants looked the following way over the stated period.

RusVinyl (JV of SIBUR and SolVin) produced about 29,900 tonnes of PVC in May, with emulsion polyvinyl chloride (EPVC) accounting for 1,800 tonnes, compared to 26,500 tonnes a month earlier. Total SPVC production at RusVinyl increased to 148,600 tonnes in the first five months of this year, compared to 140,700 tonnes in the same period in 2019.

SayanskKhimPlast produced 27,000 tonnes of suspension PVC (SPVC) in May, whereas this figure was 27,700 tonnes in April. The Sayansk plant managed to produce about 138,000 tonnes of PVC in January-May, compared to 135,700 tonnes a year earlier.

Baskhir Soda Company produced about 22,000 tonnes of SPVC in May, against 23,200 tonnes a month earlier. Total SPVC production at Baskhir Soda Company increased to 114,900 tonnes in the first five months of this year, which corresponds to the last year's figure.

Kaustik (Volgograd) last month stopped its repair capacities, as a result, the final PVC production amounted to only 1,500 tonnes of suspension PVC, while in April this figure was 7,200 tonnes. The plant's overall production of PVC reached 30,600 tonnes over the stated period versus 31,700 tonnes a year earlier.

MRC

MOSCOW (MRC) -- A US Senate bill introduced June 4 aims to block completion of the 55 Bcm/year Nord Stream 2 natural gas pipeline from Russia to Germany by expanding existing sanctions to target more companies involved in building the project's final segment, said S&P Global.

While US sanctions in place since December targeted vessels laying underwater pipeline, the new measure would also take aim at vessel insurers and service companies carrying out surveying, trenching, welding and other tasks, said Kevin Book, managing director of ClearView Energy Partners.

The Gazprom-owned pipeline developer had hoped to bring the project online by the end of 2019, but permitting issues in Denmark and the threat of US sanctions have delayed completion.

"There is bipartisan and bicameral consensus that Russia's Nord Stream 2 pipeline poses a critical threat to America's national security and must not be completed," said US Senator Ted Cruz, Republican-Texas, who introduced the bill with Senator Jeanne Shaheen, Democrat-New Hampshire, and three other Republican senators.

The Protecting Europe's Energy Security Clarification Act would modify an earlier Nord Stream sanctions law signed by President Donald Trump in December as part of the fiscal 2020 defense budget.

Cruz said Russian President Vladimir Putin "continues to try to circumvent" the existing Nord Stream 2 sanctions, "and so this new bill will once and for all clarify that those involved in any way with installing pipeline for the project will face crippling and immediate American sanctions."

ClearView's Book said the latest measure appears to give the sanctions a faster trigger, making banned activities immediately sanctionable as soon as it is signed into law.

Book said the fiscal 2021 defense budget could serve as a legislative vehicle for the new sanctions, as it did last year – which would set up a "low-speed race between a slow pipe and slow bill."

"Recent history — to say nothing of election-year partisanship — suggests that it could take months, rather than weeks, for the Republican-led Senate and Democrat-led House [of Representatives] to reconcile disparate versions and reach agreement on a common text," Book said in a June 3 note.


A Russian pipe-laying vessel expected to complete the Nord Stream 2 link — the Akademik Cherskiy — remains inside the port of Mukran in northeast Germany, according to cFlow, Platts trade flow software. The remaining Nord Stream 2 pipe is stored at the port.

The Akademik Cherskiy has been widely billed as a replacement for the Allseas ships that laid most of the line before the US sanctions in December forced the Swiss company to halt work. Just 160 km (99 miles) of Nord Stream 2 is left to lay in Danish waters out of the total 2,460 km length.

The project encountered a fresh setback in May when it was refused an exemption from the amended EU Gas Directive on gas pipelines from non-EU countries. It also lost an appeal to the EU General Court against the pipeline being subject to the amended legislation.

Despite the setbacks and delays, S&P Global Platts Analytics expects Nord Stream 2 construction to resume in around two months' time and to take three to four months to complete.

"If no further delays impact this timeline, Nord Stream 2 would be operational in the first quarter of 2021," it said in a note May 29.

As MRC informed earlier, Gazprom neftekhim Salavat shut down its dioctyl phthalate (DOP) production for a scheduled maintenance. Market participants and a plant"s representative said Gazprom neftekhim Salavat took off-stream its DOP production for a long scheduled turnaround. The outage began on 12 May and will last for about 30 day.

According to MRC's ScanPlast report, Russian producers of unmixed PVC decreased capacity utilisation in April. However, Russia's overall PVC output totalled 351,000 tonnes in January-April 2020, up by 2% year on year.

MRC

MOSCOW (MRC) -- Formosa Plastics, part of Formosa Petrochemical, has shut down its No.2 cracker in Taiwan on 1 June, reported Chemweek with reference to OPIS.

No reason for unplanned closure was given. The cracker is expected to be idle during one week.

Located at Mailiao in Taiwan, the No.2 cracker has an ethylene production capacity of 1.03 million mt/year, propylene production capacity of 515,000 mt/year and butadiene production capacity of 162,000 mt/year.

Formosa, Asia's top naphtha importer, operates three naphtha crackers in Mailiao. These units have a total capacity of 2.93 million tpy of ethylene.

As MRC informed earlier, Formosa Plastics' new 1.5 million mt/year cracker in Point Comfort, Texas, came online in early January, 2020, and was seen ramping up through January.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.

Formosa Petrochemical is involved primarily in the business of refining crude oil, selling refined petroleum products and producing and selling olefins (including ethylene, propylene, butadiene and BTX) from its naphtha cracking operations. Formosa Petrochemical is also the largest olefins producer in Taiwan and its olefins products are mostly sold to companies within the Formosa Group. Among the company's chemical products are paraxylene (PX), phenyl ethylene, acetone and pure terephthalic acid (PTA). The company"s plastic products include acrylonitrile butadiene styrene (ABS) resins, polystyrene (PS), polypropylene (PP) and panlite (PC).
MRC