BASF places chemical industry first green bond, anchors sustainability in its financing strategy

MOSCOW (MRC) -- BASF says it has successfully issued corporate bonds with a total volume of EUR2.0 billion (USD2.28 billion) on the capital market, including its first-ever placement of a green bond that will be used purely to finance sustainable products and projects, according to Chemweek.

The green bond placement has a term of seven years ending June 2027, a volume of EUR1.0 billion, and an annual coupon of 0.25%, it says. The green bond is the first to be issued by a chemical company, a BASF spokesperson confirms to CW. The other tranche also had an issue volume of EUR1.0 billion, but with a term of three years ending June 2023 and an annual coupon of 0.101%, and will be used for general corporate financing purposes, BASF says. The company was able to secure attractive conditions "thanks to its very solid financial structure and its leading sustainability position," it adds.

"The strong demand from investors for BASF bonds underscores the capital market’s confidence in our solid financial policies and our sustainability-driven corporate strategy," says Hans-Ulrich Engel, BASF’s chief financial officer. "The initial issue of a green bond now firmly anchors sustainability in BASF’s financing strategy as well," he says.

The company says it has established a framework for financing instruments based on sustainability criteria. The green finance framework will enable it to finance sustainable products or projects "offering a clear benefit to the environment and society" via green bonds on the capital market, and are fully aligned with BASF’s corporate purpose, it says.

Environment, social, and governance (ESG) principles are now a major theme in publicly traded chemical companies’ discussions with investors. Tim Balensiefer, BASF’s investor relations manager/sustainability, told CW in March that "financial markets recognize the opportunities of sustainable business approaches and investors are increasingly interested in sustainable business management. We can see a larger group of investors becoming more attached to the ideas of ESG investment."

As MRC reported earlier, BASF has recently announced the commercial launch of Fourtune which is a new Fluid Catalytic Cracking (FCC) catalyst product for gasoil feedstock. Fourtune is the latest product based on BASF’s Multiple Framework Topology (MFT) technology. It has been optimized to deliver superior butylene over propylene selectivity while maintaining catalyst activity and performance.

We remind that BASF has restarted its No. 1 steam cracker following a maintenance turnaorund. Thus, the company resumed operations at the plant on September 30, 2019. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

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. BASF generated sales of EUR59 billion in 2019.
MRC

BP licenses PTA technology for large plant in China

MOSCOW (MRC) -- 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., said the company.

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.

Weilian Chemical selected bp’s proprietary PTA production technology for its new PTA unit after a competitive, global bidding process initiated in 2019. The design phase for the unit is underway and is expected to be completed during the first half of 2020. First production is anticipated by the second quarter of 2022.

"We are pleased to be able to provide bp’s most advanced PTA technology, bpPTAg5, to Weilian Chemical, helping our partners to grow their business to meet the demand for high quality products with a lower carbon footprint. Together, we hope to lay strong foundations for future cooperation,” said Rita Griffin, chief operating officer, bp Petrochemicals.

"Adding a PTA production facility is an important step for our company to accelerate industrial transformation, while improving quality and efficiency. We are delighted to work together with bp, providing us with leading technology and services. With bp’s support, we believe our PTA project will start-up successfully, showcasing the fruitful cooperation between us,” said Li Zhanchen, chairman of Dongying United Petrochemical Co., Ltd.

The key characteristics of the technology licensed to Weilian Chemical have been proven at bp’s Zhuhai plant in southern China, bp’s largest PTA production facility worldwide so far. Based on internal comparisons with conventional PTA technology, there are significant reductions in both operational costs and capital costs, which should help achieve high investment returns. The electricity generated by the Zhuhai plant from applying bp’s technology is expected to result in a surplus that can be transmitted to the external power grid, supporting the energy needs of the local community. bp's anaerobic wastewater technology allows for increased treatment capacity, while its world-class compression process reduces land use.

The Zhuhai plant and technology have also been recognized for environmental performance, receiving Chinese government award. In July 2019, the facility was named “Energy and Efficiency Front Runner” by the China Petroleum and Chemical Industry Federation and was ranked first in China for PTA manufacturing.

China is the world’s largest PTA producer, a key feedstock for the production of polyester plastics, and accounts for more than half of global production.

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, March estimated PET consumption in Russia was 65,3700 tonnes, up by 1% year on year. Russia's estimated PET consumption decreased in January-March 2020 by 3% year on year to 175,170 tonnes.
MRC

US crude, diesel stocks pile up on lackluster fuel demand

MOSCOW (MRC) -- US crude oil and distillate inventories rose sharply last week, the Energy Information Administration said, while fuel demand remained slack even as various states eased movement restrictions that were put in place to stem the coronavirus pandemic, reported Reuters.

Crude inventories posted a gain of 7.9 million barrels in the week to May 22, largely due to imports. That brought overall US stocks, excluding strategic reserves, to 534.4 million barrels, about 1 million barrels away from an all-time record.

Analysts expected stocks to fall by 1.9 million barrels.

Overall, weak consumer demand has kept stocks of crude and fuels brimming nationwide. Distillate stockpiles, which include diesel and heating oil, rose by 5.5 million barrels in the week, to levels not seen since 2017.

Despite the inventory increases, US oil futures rose. US crude futures jumped 3.2% to USD33.85 as of 3:00 p.m. ET (1900 GMT), while Brent gained 2.1% to USD35.48 a barrel.

"The data didn’t seem to indicate the optimism that we’re seeing from the market," said Regina Mayor, global and US head of energy at KPMG in Houston. "Generally speaking, the oil price indicates more optimism than frankly we’re sensing in the industry."

Crude stocks had been declining as refining picked up in recent weeks due to a recovery in fuel demand from a drastic fall in April.

Still, four-week moving average figures on products supplied, a rough proxy for demand, shows gasoline demand down 25% from the year-ago period, while diesel demand is off 14%.

Diesel product supplied fell in the most recent week while gasoline demand rose.

"The rally still has its legs on it but if there’s any deviation in any factors like demand returning or production being reduced, given how high global supply is, that could still change," said Gene McGillian, vice president of market research at Tradition Energy.

The big jump in crude inventories came even as stocks at the Cushing, Oklahoma, delivery hub for crude futures fell by 3.4 million barrels in the week, the EIA said. Total stocks rose due to a hefty jump in net crude imports of 2.1 million barrels per day.

Refinery utilization rates increased 1.9 percentage points to 71.3% of total capacity, the EIA said.

US gasoline stocks fell 724,000 barrels to 255 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 100,000-barrel rise.

As MRC informed previously, global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
MRC

Marathon Galveston Bay, Texas, refinery shuts HCU, alky unit for work

MOSCOW (MRC) -- Marathon Petroleum Corp shut the hydrocracker (HCU) and alkylation unit at its 585,000 barrel-per-day (bpd) Galveston Bay Refinery in Texas City, Texas, as part of a multi-unit overhaul that began on Saturday, said sources familiar with plant operations, said Hydrocarbonprocessing.

Marathon spokesman Sid Barth declined to comment. The 60,000-bpd hydrocracker, called Ultracracker 4, and 31,500-bpd alkylation unit were shut along with a sulfur recovery unit and a 47,500-bpd aromatics recovery unit, the sources said.

The first units shut were the 65,000-bpd Ultraformer, as the reformer is called, a 60,000-bpd residual oil hydrotreater and an aromatics unit, the sources said. The first shutdowns began on Saturday.

The overhaul is expected to be completed as early as mid-July but may extend through Aug. 1. Because of the COVID-19 pandemic, the overhaul has twice been delayed from an initial start date scheduled in late March.

Hydrocrackers use a catalyst under high heat and pressure in the presence of hydrogen to produce diesel from gas oil along with other motor fuels. Alkylation units convert refining byproducts into octane-boosting components added to gasoline.

Reformers also convert refining byproducts into components used to boost octane in gasoline through a different process from that in reformers. Hydrotreaters use hydrogen to reduce sulfur in motor fuels in compliance with U.S. environmental rules.

As MRC informed before, a portion of Marathon Petroleum Corp’s 363,000 barrel-per-day Carson refinery in California was shut in late February 2020, following a fire.

We also remind that the gasoline-producing unit at Marathon Petroleum Corp’s 585,000-barrel-per-day (bpd) Galveston Bay Refinery in Texas City, Texas, remained shut for six weeks for repairs in late Juney-early August 2019. The 140,000-bpd gasoline-producing Fluidic Catalytic Cracking Unit 3 (FCCU 3) was shut on June 29 2019 to repair a leak. The refinery’s 65,000 bpd reformer, called Ultraformer 4, was also shut down.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC

Rosneft finds extended oil cuts painful

MOSCOW (MRC) -- Rosneft does not have enough crude to ship to buyers with which it has long-term supply deals, making it hard for the Russian company to continue with record oil cuts beyond June, four sources familiar with the matter told Reuters.

Rosneft has told the energy ministry it would be difficult to maintain cuts to the end of the year, as it has had to cut shipments to major buyers, such as Glencore (GLEN.L) and Trafigura, despite good demand, two sources close to the talks said on condition of anonymity.

"There is no doubt Rosneft will strictly fulfil all obligations under supply contracts with its foreign and Russian counterparties despite output cuts made by the company as a part of OPEC+ deal,” Rosneft CEO Igor Sechin said in a statement on Friday. Glencore and Trafigura declined to comment. Russia’s Energy Ministry did not respond to Reuters’ request for comment.

President Vladimir Putin, who decides on oil policy, spoke with Saudi Crown Prince Mohammed bin Salman on Wednesday about “close coordination” on output cuts, agreed in April to tackle oil market weakness because of the coronavirus pandemic.

Saudi Arabia, de facto leader of the Organization of the Petroleum Exporting Countries, proposes to extend the record cuts until December.

“Rosneft is in pain... They must supply refineries, term buyers. There are simply no resources,” a source familiar with Rosneft’s operations told Reuters. Rosneft, run by one of Putin’s closest allies, Igor Sechin, has long opposed output cuts in tandem with OPEC, but has been overruled by the president, who is keep to deepen political cooperation with the Middle East.

The company, which sells mostly to long-term buyers, has cut output by 17% so far in May versus April, a source familiar with daily output data said.

It will export 800,000 tonnes in 8 cargoes from Baltic ports in June compared to 27 cargoes in April and 13 in May even though buyers wanted more oil as demand recovers in Europe and the value of Russian crude Urals URL-E has strengthened.

Glencore, which has a 5-year supply deal with Rosneft, will get two Baltic cargoes in June compared to eight in April. Trafigura will get one compared to ten. The remaining five June cargoes of Urals were allocated to Total (TOTF.PA) and Gunvor - the winners of Rosneft’s 6-month tender for April-September loading. The volumes are the minimum under tender terms.

Rosneft also exports from the Black Sea and the Pacific and could compensate buyers on those routes or in the Baltic in the future, the sources said.

As MRC informed earlier, Rosneft produces at its facilities and sells ethyl alcohol and acetone in Russia, which are used in the manufacture of antiseptics. 15 thousand tons of these substances are produced per month. On the day the quarterly report was published, Rosneft told how its work has changed in the context of the coronavirus epidemic.

Acetone, along with phenol, is the main raw material component for the production of bisphenol A (BPA, by condensation), which, in turn, is used to produce polycarbonate (PC).

According to ScanPlast of Market Report, the total estimated consumption of PC granules in the Russian market (excluding imports and exports to Belarus) amounted to 22.7 thousand tons in the first quarter compared to 17 thousand tons for the same period last year. Demand increased by 33%.

Rosneft became Russia's largest publicly traded oil company in March 2013 after the USD55 billion takeover of TNK-BP, which was Russia’s third-largest oil producer at the time.
MRC