Shell to write down up to USD22 billion as COVID-19 affects all business segments

MOSCOW (MRC) -- Shell provided an update of expected second-quarter results warning of the severe impact the COVID-19 pandemic is having on all segments, said Chemweek.

Oil production slowed, fuel sales fell, and shipments of liquefied natural gas (LNG) and petrochemicals suffered. Reductions in long-term price forecasts will lead to write-downs to global assets of between USD15 billion and USD22 billion, Shell said ahead of quarterly results due on 30 July. Shell’s impairments are expected to have a pretax impact in the range of USD20 billion to USD27 billion.

The company says oil-product sales volumes will be 3.5–4.5 million barrels/day (b/d) in the second quarter, down from 6.6 million b/d a year earlier, on significant drop in demand because of the pandemic. Shell has revised its mid- and long-term pricing and refining margin outlook and expects gearing to increase by 3% due to the impairment charges.

Shell’s integrated gas production is expected to be between 880,000 and 910,000 b/d of oil equivalent, upstream production between 2.3 million and 2.4 million b/d of oil equivalent, and LNG liquefaction volumes at between 8.1 million and 8.5 million metric tons (MMt). Shell’s second-quarter refinery utilization is expected to be between 67% and 71% and chemical manufacturing plant utilization at between 75% and 79%. Chemicals sales volumes are expected to be between 3.4 MMt and 3.7 MMt.

Upstream is expected to account for up to USD6 billion of the impairments, largely related to Brazil and American shale, while integrated gas will take write-downs of USD8–9 billion. Oil products will take USD3–7 billion across the company’s refining portfolio.

Shell warns that second-quarter realized gross refining margins are expected to be significantly lower compared with the first quarter of this year. The company says the pandemic had forced a review of a significant portion of its upstream, integrated gas and refining assets. “The refining asset valuation updates reflect Shell’s strategy to reshape and focus its refining portfolio to support the decarbonization of its energy product mix, leveraging assets and value chains in key markets," the company says.

As MRC wrote before, in May 2020, CNOOC Oil & Petrochemicals Co. Ltd (CNOOC), Shell Nanhai B.V (Shell) and the Huizhou Government have announced a strategic cooperation agreement to further expand the CNOOC and Shell Petrochemical Company (CSPC) 50:50 joint venture in Huizhou, Guangdong Province, China.

The expansion is planned to serve the growing number of intermediate and performance chemicals customers in the key market of China, supplying products including SMPO, polyols, ethylene glycol, polyethylene (PE) and polypropylene (PP). These chemicals are used in a wide range of end products, in healthcare, construction, fabrics, packaging, transport and electronics. For the first time in Asia, Shell would apply its advanced technology for linear alpha olefins. The project is intended to include construction of a new 1.5 million-tonnes-per-year ethylene cracker, with the mega-site bringing economies of scale and enhanced competitiveness.

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.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.

MRC

MOSCOW (MRC) -- Berry Global Group (Evansville, Indiana) says it is investing in a new melt-blown nonwovens production line in the UK that will supply fabric to be used in the manufacture of protective face masks. No investment figure has been given, reported Chemweek.

The production line will be outfitted with Berry’s proprietary charging technology at one of the company’s UK facilities to increase capacity for the production of European-standard Type IIR and N99-equivalent FFP3 masks, it says. The company is collaborating with The Medicom Group, which has a long-term contractual agreement with the UK government to supply the masks and is scheduled to open a new UK-based production facility later this year.

The investments in the new production facilities have been enabled through a long-term contractual commitment by the UK government, says Berry. “This move highlights the focus governments are placing on securing a supply chain that helps ensure a local supply of personal protective equipment,” it says.

Berry said in May it was expanding its melt-blown nonwovens production capacity in Berlin, Germany, to help meet the surge in demand for protective face masks due to COVID-19, while the previous month it also said it was accelerating investment in another production line at Biesheim, France, for the supply of high-efficiency filtration media for masks.

As MRC wrote before, in November 2019, Berry Global Group announced a collaboration with SABIC to drive the innovation and use of polyolefin resins made from chemical recycling.

We remind that in the first week of September 2019, SABIC Europe, an affiliate of SABIC, started maintenance work at its cracker No.3 at Geleen site in the Netherlands. The planned maintenance is slated to last around 2 months. The company operates two steam crackers in Geleen which are capable of producing 1,250,000 tons/year of ethylene and 675,000 tons/year of propylene in total.

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.
MRC

MOSCOW (MRC) -- PKN Orlen (Plock, Poland), the country’s largest oil refiner and petrochemicals producer, is set to gain EU antitrust approval for its takeover of smaller rival Lotos (Gdansk, Poland) after agreeing some concessions aimed at allaying competition concerns, reported Chemweek with reference to Reuters citing people familiar with the matter.

PKN wants to buy at least 53% of Lotos. EU said it was concerned that the deal may push up prices and reduce competition in Poland, the Czech Republic, Estonia, Lithuania, Latvia, and Slovakia.

PKN last month offered to sell Lotos’s stake in a joint venture with BP called Lotos–Air BP Polska (LABP) and also pledged to supply jet fuel to LABP with the aim of creating a viable competitor. The company has since made some minor changes to the package after rivals and customers provided feedback to the European Commission, Reuters says.

The acquisition of Lotos by PKN was initiated in February 2018 by signing a letter of intent with the Polish State Treasury, holding 53.19% of voting rights. In April 2018, a due diligence process was commenced at Lotos to examine its commercial, financial, legal, and tax positions ahead of the planned acquisition. In November 2018, a draft application for approval of the concentration was submitted by PKN to the European Commission.

PKN says the aim is to build a strong entity with international potential, which would be an important player on the oil supply market. This is particularly important for the fuel and energy security of supply for Poland, but also for Central and Eastern Europe. The creation of such an entity would also increase its ability to finance large, multibillion-dollar projects. With the closing of the acquisition, Poland would join the global trend toward building major players on the fuel and energy market, PKN says.

As MRC wrote before, Honeywell has recently announced that PKN Orlen plans to use the UOP Q-Max and Phenol 3G technologies to produce 200,000 metric tons per year of phenol at its facility in Plock, Poland. UOP is providing a license for the technology, in addition to basic engineering design services, plus key equipment, catalysts and adsorbents and technical services.

Phenol is one of the main feedstocks for the production of bisphenol A (BPA), which, in its turn, is used for the production of polycarbonate (PC).

According to MRC's ScanPlast report, Russia's estimated consumption of polycarbonate (PC) granules (excluding imports and exports to/from Belarus) rose in January-May 2020 by 19% year on year to 38,900 tonnes (32,700 tonnes a year earlier).
MRC

MOSCOW (MRC) -- Pertamina (Persero) PT was forced to take its polypropylene (PP) unit in West Java, Indonesia off-line last weekend following an unspecified technical glitch at the upstream RFCC unit that causes a disruption of the propylene feeds, reported CommoPlast with reference to market sources.

It is expected that the PP line would remain shut for about 12 days.

The RFCC unit produces 45,000 tons of propylene annually while the PP plant has a capacity of 45,000 tons/year.

“Due to the technical difficulties, the producer has to reduce the contract allocation to local buyers. This might continue to support the current firming trend into July,” a distributor added.

As MRC informed earlier, in May 2016, PT Pertamina and Russia’s Rosneft OAO signed a cooperation agreement that includes a plan to build a new oil refinery in the Southeast Asian nation. Pertamina, which hasn't built a new refinery since 1997, will be the majority shareholder in the facility at Tuban, East Java. The two companies may invest USD12 billion to USD13 billion in the refinery project which includes a petrochemical unit, Dwi Soetjipto, president director of Pertamina, told a press conference after signing the accord.

According to MRC's ScanPlast report, 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.

Pertamina is an Indonesian state-owned oil and natural gas corporation based in Jakarta. It was created in August 1968 by the merger of Pertamin (established 1961) and Permina (established 1957). Pertamina is the world's largest producer and exporter of liquefied natural gas (LNG).
MRC

1. Saudi Polymers to permanently shut down PS complex

MOSCOW (MRC) -- National Petrochemical Co. (Petrochem) said that the board of directors of its subsidiary, Saudi Polymers Co., decided to shut down the polystyrene unit and amortize its value, due to difficulties in achieving profits amid the global polystyrene market conditions, said Argaam. The company expected this process to have an impact of up to SAR 277 million on its financial statements for Q2 2020.





MRC