Reliance-Aramco deal delayed, Reliance to spin off oil-to-chemicals business into separate subsidiary

MOSCOW (MRC) -- Reliance Industries says that due to unforeseen circumstances in the energy market as well as COVID-19, its talks with Saudi Aramco to form an oil-to-chemicals (O2C) partnership have not progressed according to the original timeline, reported Chemweek.

Mukesh Ambani, chairman and managing director of Reliance, said during the company's annual shareholders' meeting on Wednesday that Reliance would approach the National Company Law Tribunal (Delhi, India) with a proposal to spin off its O2C business into a separate subsidiary to facilitate a partnership with Aramco. Ambani said he expects the spin-off to be completed by early 2021 but did not provide a date for the partnership with Aramco, which was originally due to be completed in March 2020.

Ambani said that Reliance remains "committed to a long-term partnership" with Aramco. However, he did not say whether this would involve Aramco buying a stake in the O2C business, as previously announced. Aramco had been planning to buy a 20% stake in the O2C division for USD15 billion, according to a nonbinding agreement reached in August 2019. However, the collapse in crude oil prices this year has complicated asset valuations and caused analysts to question whether the deal will go ahead, analysts say. Press reports in India say the deal is frozen.

Ambani told shareholders that the fiscal year ended 31 March was the most challenging for the global refining and petrochemical industries. “Even in this uncertain and volatile environment, our O2C business outperformed the sector and delivered an EBITDA of 553.94 billion Indian rupees (USD7.3 billion),” he said.

Ambani said that in 2020, business and consumer activity had come to a halt leading to unprecedented demand destruction and dislocation of margins. The company reports that all its manufacturing facilities have nevertheless continued to operate at more than 90% capacity utilization.

The company says that during India's lockdown, it grew its petchem and fuel exports by more than 2.5 times in just two weeks. In April 2020, the O2C business accounted for almost 50% of India's petrochemical and fuel exports, it says.

Ambani said that the company had commissioned India's first butyl rubber (BR) plant, which places its among the world's top-10 makers of the product. Reliance partnered with Sibur (Moscow, Russia) in a joint venture, Reliance Sibur Elastomers, to build the BR unit at Reliance’s integrated petchem site at Jamnagar, India, part of the O2C business.

The company says that its O2C business has “competitive feedstock streams that are the building blocks for specialty and new value chains of acetyls, acrylates, phenols, and polyurethanes.” Ambani told shareholders that Reliance had been approached by international companies for partnerships in its petchem business, including to utilize these basic petrochemicals.

“These potential partnerships will help us build competitive manufacturing capacity at our existing sites to serve the deficit Indian market that still depends on large-scale imports of chemicals," Ambani said. "With this we will have an integrated and competitive O2C portfolio, which is valuable to global companies as it provides access to the large and growing Indian market."

Ambani said it is imperative that the energy industry adopts a clean, circular, sustainable, and planet-friendly model that delivers green and affordable energy. This can be achieved by making carbon dioxide (CO2) a recyclable resource, rather than treating it as an emitted waste. “While Reliance will remain a user of crude oil and natural gas, we are committed to embracing new technologies to convert our CO2 into useful products and chemicals.”

The company says it has “made substantial progress on photosynthetic biological pathways to convert its CO2 emissions at the Jamnagar site into high-value proteins, nutraceuticals, advanced materials, and fuels.”

Reliance plans to develop next-generation carbon capture and storage technologies. It is evaluating novel catalytic and electrochemical transformations to use CO2 as a valuable feedstock. Reliance says it also has proprietary technology to convert transportation fuels into valuable petchem and material building blocks. The company intends to substitute transportation fuels with clean electricity and hydrogen.

Ambani said that the company would combine its capabilities in digital, power electronics, advanced materials, and electrochemistry to build full stack electrolyzer and fuel cell solutions in India. It will build an optimal mix of reliable, clean, and affordable energy with hydrogen, wind, solar, fuel cells, and battery, he said. Reliance has committed to achieve net zero carbon emissions by 2035.

Ambani has set a 15-year vision to build Reliance as one of the world's leading new energy and new materials companies. The model envisages a large coalition of global financial investors, reputed technology partners, and startups working on futuristic solutions, he said.

“The new energy business based on the principle of carbon recycle and circular economy is a multi-trillion opportunity for India and the world,” Ambani said.

As MRC wrote previously, last August, Saudi Aramco entered into a non-binding initial agreement to buy 20% stake in Reliance Industries’ oil to chemicals divisions with an enterprise value of USD75 billion. The oil to chemicals division included RIL’s Jamnagar refining complex, petrochemicals and fuels marketing businesses.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.

Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.
MRC

Phillips 66 private cellular network brings record speed improvements to refinery

MOSCOW (MRC) -- Accenture and AT&T are working with Phillips 66 to develop industrial cellular wireless connectivity, with the development of a private cellular network solution. The solution will lay the foundation for potential future 5G use cases, including support for Industrial Internet of Things (IIoT) and low latency applications, as per Hydrocarbonprocessing.

Phillips 66 invited Accenture to address cellular performance gaps with its existing public cellular network near one of its refineries in Belle Chasse, Louisiana. The private cellular network — a local cellular network that includes cell sites and core network servers that support the connectivity of a specific organization’s requirements — was selected as a proof of concept to demonstrate the ability to handle increased mobile connectivity needs from the ongoing Phillips 66 digital transformation initiatives.

The proof of concept private network was designed from the ground up to address Phillips 66’s industrial digital requirements. AT&T was selected as the telecommunications provider to develop the necessary engineering for a dedicated cellular network solution, using multi-access edge compute across licensed spectrum.

“Mobile applications are central to our day-to-day business activities - we use them for safety inspection forms for oil distillation units, capacity tracking and more - so connectivity is critical to keeping our operations running,” said Zhanna Golodryga, senior vice president, chief digital and administrative officer at Phillips 66. “The results of the proof of concept are promising. This private cellular network can address existing coverage gaps today and potentially lays the foundation for pervasive connectivity to enable upcoming use cases based on IIoT and 5G.”

During the proof of concept, teams were able to bring dedicated private cellular infrastructure onsite and record speed improvements at the refinery. In addition, the cellular reference signals showed the potential for improvement in signal strength at selected process units. At Phillips 66, a number of technical hurdles continue to be worked out and sustainable engineering solutions are being developed, before the cellular option can be made available for scale deployments while meeting the operational requirements at the refineries.

"Reliable connectivity is accelerating business transformation and enabling companies to innovate faster than ever before,” said Chris Penrose, SVP of Advanced Solutions, AT&T. “Our multi-access edge compute solution will help give Phillips 66 the control, performance and security they need from their private network today, while also giving them the flexibility to expand to their other locations in the future.”

Mary Beth Gracy, Accenture’s client account lead for Phillips 66, said: ”The proof of concept of this private network will enable Phillips 66 to selectively deploy connectivity and enable future digital opportunities across the refineries. We will also work with Phillips 66 to bring ecosystem partners to their private cellular network to give a complete end-to-end view of what is happening across the refineries and its supply chain, so that they can continue to innovate.”

As MRC informed earlier, US-based Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Evonik starts up new plant in Germany

MOSCOW (MRC) -- Evonik has started up production at a new silicone facility at Geesthacht near Hamburg, said the company.

The new multi-purpose silicones plant is now fully operational after completing final commissioning tests and obtaining regulatory approvals. It produces silicones and silyl-terminated polymers (SMP’s) for use in parquet adhesive flooring, liquid membranes for roofing or electronical potting, among other applications.

The plant strengthens Evonik’s focus on silicone and nanotechnology specialty chemical products, the company said. Details about costs or capacities in terms of tonnes or pounds per year were not disclosed.

As MRC informed before, Dow and Evonik have recently entered into an exclusive technology partnership. Together, they plan to bring a unique method for directly synthesizing propylene glycol (PG) from propylene and hydrogen peroxide to market maturity.

We remind that Dow plans to install a new furnace in its steam cracker at Fort Saskatchewan, Alberta, Canada, increasing its ethylene capacity, currently 1.42 million metric tons/year (MMt/y), by 130,000 metric tons/year. Dow will split the cost of the project and the incremental volume equally with an unnamed regional customer, according to CEO Jim Fitterling, who announced the news during the company's fourth-quarter earnings call. Start-up is slated for the first half of 2021.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.

Evonik is one of the world leaders in specialty chemicals. The focus on more specialty businesses, customer-oriented innovative prowess and a trustful and performance-oriented corporate culture form the heart of Evonik’s corporate strategy. They are the lever for profitable growth and a sustained increase in the value of the company. Evonik benefits specifically from its customer proximity and leading market positions. Evonik is active in over 100 countries around the world with more than 36,000 employees.

MRC

OPEC+ may be able to ramp up oil production in 2021

MOSCOW (MRC) -- Faster oil market rebalancing could present OPEC and other producers with an opportunity to ramp production in 2021, the International Energy Agency said in its latest monthly report, as it revised up its demand expectations for 2020 and signalled ongoing supply weakness in US shale, reported S&P Global.

The IEA predicts oil demand will grow 3 million b/d more than supply in 2021, as it released its first estimates for next year in its June 16 outlook, which would mean shifting some of the huge stock overhang that has built up.

The Paris-based agency gave some glimmers of optimism around demand, seeing growth of 5.7 million b/d next year and revising up its expectations by almost 500,000 b/d for 2020, predicting a decline of 8.1 million b/d. But even with the bounce back that still puts demand at 97.4 million b/d, its nearly 2.4 million b/d below 2019.

The IEA's improved tone stems in part from improved mobility trends more broadly, particularly in demand powerhouses China and India and noting an easing of lockdown measures in many countries in the second half of the year is likely to provide a boost.

"While the oil market remains fragile, the recent modest recovery in prices suggests that the first half of 2020 is ending on a more optimistic note," the IEA said in its introduction. "New data show that demand destruction in the early part of the year was slightly less than expected, although still unprecedented," the IEA added.

The biggest drag on oil demand is set to be from the aviation sector that will last well into 2022. Jet/kerosene demand will drop by 3 million b/d in 2020, before rebounding by just 1 million b/d in 2021, leaving it short of pre-crisis levels, the IEA states.

The agency warned that "going into 2021, jet fuel demand will depend heavily on the containment of the virus, which is unlikely to be completely achieved until a vaccine is found and widely administered," which could take up to 18 months.

The IEA noted that global oil supply plunged by 11.8 million b/d in May, driven by a record OPEC+ cut and economic shut-ins in the US, Canada and elsewhere. OPEC and its allies have extended its deep production cut of close to 10 million b/d through July, while continued oil price weakness has also weighed on supply.

Saudi Arabia led May's decline in global oil production to 88.8 million b/d, the IEA noted, with the Kingdom removing 3.7 million b/d. The IEA also found Russia cut by 1.95 million b/d and the UAE reined in 1.5 million b/d. The US shut in an estimated 1.5 million b/d.

Global oil output will remain above that of demand still in 2020, dropping by 7.2 million b/d in 2020, the IEA estimates. In 2021, oil output is set to limp back to life with a 1.7 million b/d recovery, "assuming OPEC+ cuts ease, Norway, Brazil and Guyana deliver solid gains and Libya manages to sustain a rebound."

The IEA's prediction contains many caveats given OPEC+'s ongoing market management strategy as had many about-turns, while Libya's civil strife means it remains a potential 1 million b/d wildcard.

The agency is also downbeat on the speed of any revival in US output, predicting supply tumbling 900,000 b/d this year and dropping 300,000 b/d in 2021 unless prices recover to a level that injects fresh life into the shale patch.

As MRC wrote before, 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 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

Clariant, Celanese, Orbia fined almost USD300 million for participation in EU ethylene-purchasing cartel

MOSCOW (MRC) -- Clariant, Celanese, and Orbia have been fined a total of EUR260 million (USD296 million) by the European Commission for breaching EU competition rules by participating in a cartel related to ethylene purchases in Europe, said Chemweek.

Westlake, which also participated in the cartel, received full immunity by revealing the breach, avoiding an aggregate fine of about EUR190 million, the Commission says.

The four companies “took part in a cartel concerning purchases on the ethylene merchant market. They colluded to buy ethylene for the lowest possible price. All four companies acknowledged their involvement in the cartel and agreed to settle the case,” the Commission says. The cartel’s activity covered the territories of Belgium, France, Germany, and the Netherlands, it says.

Clariant has been fined EUR155.8 million, Celanese EUR82.3 million, and Orbia EUR22.3 million. All three benefited from fine reductions for their cooperation with the investigation, according to the Commission. Clariant’s total fine factors in a "reduction under leniency notice" of 30%, and Orbia received a 45% leniency reduction with Celanese receiving a 20% leniency reduction. The companies also received a further 10% reduction in their imposed fines in view of their “acknowledgement of the participation in the cartel and of the liability in this respect,” the Commission says. “The reductions reflect the timing of their cooperation and the extent to which the evidence they provided helped the commission to prove the existence of the cartel in which they were involved,” it adds.

The Commission says its investigation showed that from December 2011 to March 2017 during the process of establishing the monthly contract price for ethylene, the four purchasers coordinated their price-negotiation strategy in relation to ethylene sellers to influence the industry price reference to their advantage. Unlike in most cartels where companies conspire to increase their sales prices, the four companies colluded to lower the value of ethylene, to the detriment of the product’s sellers, says the Commission. The companies coordinated their price-negotiation strategies before and during the bilateral monthly contract price-settlement negotiations with ethylene sellers to push the price down to their advantage and also exchanged price-related information, it says.

The Commission's investigation began in June 2016 with an application submitted by Westlake under the Commission’s 2006 leniency notice, followed by applications for reduction of fines by the other parties, it says. “This cartel aimed at manipulating the prices [that] the companies paid for their ethylene purchases,” says Commission executive vice president Margrethe Vestager. “The four companies in the cartel have colluded and exchanged information on purchasing prices, which is illegal. The Commission does not tolerate any form of cartels. EU antitrust rules not only prohibit cartels related to coordination of selling prices, but also cartels related to coordination of purchasing prices. This protects the competitive process for inputs,” she says.

As the cartel related to collusion on purchase prices, the Commission used the value of purchases rather than the value of sales in the EU to set the level of fine. It says it also “took account of the duration of the infringement, the individual weight of the companies in the infringement, their overall size, and the fact that Clariant had previously been sanctioned for a similar infringement."

The Commission has extended by three months the due date for payment of the fines to a total of six months from the date of the investigation’s decision, saying it has taken into consideration the impact of the COVID-19 outbreak on all sectors, and potential short-term liquidity issues of companies. Fines imposed on companies found in breach of EU antitrust rules are paid into the general EU budget.

Clariant says the Commission’s investigation found one of its former employees had infringed on competition law and that it had been found liable for this conduct and fined. “Clariant deeply regrets the incident and is disappointed that its strong culture of compliance, based on a clear code of conduct and an antitrust compliance program including a multitude of tailored antitrust trainings, was not upheld,” it says. The company has assisted the relevant authorities throughout the investigation and “fully cooperated with the European Commission, a fact that has been recognized and reduced the fine. Clariant will continue to promote the highest ethical standards and ensure compliance in the future,” it says.

Clariant says it made “a provision for the investigation in 2019.” Earlier this year the company said it had set aside USd236.5 million to cover costs from the investigation. Westlake has also issued a statement, saying the cartel's practices were uncovered as a result of Westlake’s internal compliance program. "Westlake voluntarily disclosed these practices to the European Commission and fully cooperated with the related investigation," it says. "Based on the company’s voluntary notification and cooperation, the European Commission granted Westlake immunity from government fines."

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC