Saudi Aramco conserves capex as profits crash

MOSCOW (MRC) -- Saudi Aramco, the world's biggest oil company, is reducing its capital expenditure spend for 2020 due to the market conditions brought about by the COVID-19 pandemic, yet the company expects global oil demand to recover to 95 million b/d by the end of the year, reported S&P Global with reference to Aramco President and CEO Amin H Nasser's statement in the company's second-quarter results call.

Capital expenditure was USD6.2 billion in Q2 and USD13.6 billion for the first half of 2020. Aramco said it is continuing a capex optimization and efficiency program, which will see it at the lower end of the USD25 billion to USD30 billion range for 2020.

However, the company is "optimistic" on the market largely recovering to pre-coronavirus levels by the end of the year, Nasser said.

Additionally, Aramco is continuing to expand its gas business, to meet future global and domestic energy demand, it said. In line with this strategy, the Fadhili Gas Plant reached its full production capacity of 2.5 Bcf/day during the second quarter.

The oil giant saw its profits crash by 73% in Q2 to Riyal 24.62 billion ($6.6 billion), compared with Riyal 92.59 billion (USD24.7 billion) for the same quarter of 2019, as it continues to battle the ongoing market crash amid the slump in demand due to the COVID-19 pandemic.

The results reflect the impact of lower crude oil prices, due to the ongoing global market crash, which is mainly caused by a huge drop in demand triggered by the pandemic, the oil giant said in a statement.

Moreover, its revenues for Q2 were 57% down year on year, and 45% lower than in Q1, when the full force of the market slump had not been fully realized. During the quarter, Aramco's hydrocarbons production averaged 12.7 million b/d of oil equivalent. By contrast, production of crude oil and condensate averaged 13.2 million boe/d last year.

"Strong headwinds from reduced demand and lower oil prices are reflected in our second-quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivaled financial and operational strength," Nasser said in the statement. "This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter."

Aramco - which listed a small percentage of its shares Dec. 11 on Saudi Arabia's Tadawul domestic stock exchange - scored the world's biggest initial public offering of USD29.4 billion, beating the previous record held by Chinese e-commerce giant Alibaba, which raised USD25 billion in 2014.

Following the results announcement Aug. 9, Saudi Aramco shares were trading at Riyal 32.90 on Tadawul. By contrast, its IPO price in December was Riyal 32 (USD8.53), giving the company a valuation of USD1.7 trillion in December.

As part of its pitch to investors during the share sale, Aramco pledged to issue a USD75 billion dividend annually for five years. In keeping with this promise, the company declared a dividend of USD18.75 billion for the first quarter.

However, free cash flow was USD6.1 billion in the second quarter and USD21.1 billion for the first half of 2020, respectively, compared with USD20.6 billion and $38.0 billion for the same periods in 2019.

On the call, Nasser said that it is still the company's intention to pay the dividend, however this will be subject to board approval. He pointed to the fact that Aramco has an undrawn revolving credit facility, which could be used to plug the shortfall.

Aramco on June 17 said it completed the share acquisition of a 70% stake in Saudi Basic Industries Corp (SABIC) from the Public Investment Fund, Saudi Arabia's sovereign wealth fund, for a total purchase price of Riyal 259.125 billion.

SABIC said on Aug. 6 it saw average petrochemical prices in the second quarter plunge by 27% year-on-year as it posted a third consecutive quarterly loss. Average petrochemical prices were 27% lower in the second quarter from the year-earlier period and down 18% from the first quarter.

The acquisition of the SABIC stake is part of Aramco's strategy to extend its downstream footprint by growing its integrated refining and petrochemicals capacity to add value across the hydrocarbon chain.

In 2019 Aramco and SABIC recorded petrochemicals production volume of nearly 90 million mt combined. Petrochemicals has been identified as Aramco's highest area of growth for the next two decades, Nasser said.

As MRC wrote previously, PT Pertamina will develop its Cilacap refinery in Central Java “independently”, the state energy company said, dropping a plan to boost capacity through a joint venture with Saudi Aramco.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

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.
MRC

MOSCOW (MRC) -- The Expoplast trade show in Montreal, originally scheduled for Oct. 7-8, 2020, has been cancelled, and a week-long virtual event will be held instead, in late November and early December, said Canplastrics.

The next Expoplast in-person show is now scheduled for Nov. 9-10, 2022, at the Palais des congres de Montreal. Expoplast is part of the ADM Expo Montreal, a series of co-located shows at the Palais des congres de Montreal. The other shows include PackEx Montreal, ATX, Design & Manufacturing, and Powder & Bulk Solids. All of these shows have been cancelled as well.

"The event organizers of Expoplast, part of ADM Expo Montreal, have announced that after close consultation with our industry partners, it’s in the best interest of our exhibitors, attendees, and the surrounding community to cancel the 2020 in-person event, and shift to a digital format, Virtual Engineering Week taking place this winter,” said Tam Nguyen, PR specialist with show organizer Informa Markets.

Virtual Engineering Week will take place Nov. 30 – Dec. 4, 2020. “It was created to foster meaningful and productive engagement within the full design, engineering, and manufacturing communities,” Nguyen continued. “This week-long virtual event will showcase exhibitors from all six of Informa Markets’ engineering events, and feature a full line-up of digital activities, including keynotes, education sessions, product showcases, and networking opportunities."

More information about participating in the virtual event will be announced shortly, she added.

As MRC informed earlier, Russia's output of chemical products rose by 4.4% year on year in May 2020 . Thus, production of basic chemicals increased year on year by 5.4% in the first five months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-May. Production of benzene was 110,000 tonnes in May 2020, which equalled the figure a month earlier. Overall output of this product reached 615,000 tonnes over the stated period, up by 1.7% year on year.
MRC

MOSCOW (MRC) -- International Recycling Group (IRG), a privately-held start-up company that’s planning to build a large plastics recycling plant in Erie, Pa., has announced an initial round of USD9 million in investments from Erie Insurance and plastics packaging supplier The Plastek Group, said Canplastics.

In an Aug. 19 statement, IRG said the USD100-million facility in Erie will be the first of its kind – “a mega-sized, all-plastics SuperPRF (plastics recovery facility)” – and that Erie Insurance’s Erie Insurance Opportunity Zone investment will support plant development, including engineering design, site selection, and contract work.

Separately, Erie-based Plastek has purchased an equity stake in IRG’s parent company, GreenSteel LLC. IRG says it has designed a concept for a mega-scale plant that uses smart machines to separate and sort residential, commercial, and industrial plastics from homes and businesses;, and that this will allow the facility to process a wide range of resin types and forms, and dramatically reducing the amount of material that enters landfill.

The company reports that because recycling currently relies mostly on hand sorting and delivering waste plastics to the bag or bin, the plastics are too often combined with other types of non-recyclable material. This causes problems for waste haulers and impedes municipal efforts to recover more re-usable plastics.

"In our view, the future of post-use plastics collection and sortation will involve large-scale facilities that have a sustainable non-landfill solution for the non-marketable material,” IRG said. “Plastics processors will need to be able to handle all plastics – not just containers – so that more plastic is diverted from the trash and driven to recycling."

IRG’s non-marketable material will be repurposed into its proprietary iron reducing agent for use in steel manufacturing. Over 50 manufacturing jobs are expected to be created by 2022, the expected plant start-up date. Future expansion may increase employment ultimately to over 150. The company is currently considering several available sites with close-proximity to highway and rail lines.

When completed, the plant will be the largest and most technologically sophisticated plastics recycling plant in the world, IRG said, automatically sorting over 275,000 tons of mixed-waste plastic material per year in phase one. It will be supporting Erie’s, and the region’s, plastics manufacturers with recycled material to incorporate into their products.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Crude oil futures were lower in mid-morning trade in Asia on Aug.19 after American Petroleum Institute data released late Aug.18 showed a surprisingly large build in gasoline inventories even as US commercial crude supplies fell for a consecutive fourth week, said S&P Global.

At 10:32 am Singapore time (0232 GMT), the ICE Brent October crude futures were down 27 cents/b (0.59%) from the Aug.18 settle at $45.19/b, while NYMEX September light sweet crude contract was down by 18 cents/b (0.42%) at USD42.71/b.

"API reported a big build in gasoline inventories, which has somewhat taken the edge off the bullish market sentiment," Stephen Innes, chief global markets strategist at AxiCorp, said in a note Aug.19. "Summertime builds are never received well, but particularly towards the end of this summer as there is some concern the virus could rage again during colder winter months in the northern hemisphere and further crimp gasoline demand," he added.

Meanwhile, US commercial crude inventories were reported to have declined by 4.26 million barrels for the week ending Aug.14, slightly higher than the 3.8 million barrels drawdown estimated on Aug.17.

Notably, it will be the fourth consecutive week of drawdown for US commercial crude inventories if the official weekly US inventory report due for release by the Energy Information Administration later in the day confirms the API industry report on Aug.18.

Meanwhile, the continued spread of COVID-19 worldwide remains the key drag on the short-term demand outlook. Global COVID-19 infections exceeded 22 million case counts while total deaths reached 779,443, latest data from John Hopkins University showed.

A resurgence of infections in major European economies also reignited concerns that global economic recovery will continue to slow as countries tightened pandemic containment restrictions. The number of new cases in Germany reached four-month highs on Aug.17, while Spain registers 16,000 new infections in three days, according to media reports.

Elsewhere, members of the OPEC+ alliance will be meeting to discuss about compliance and compensation cuts through September for members who failed to abide by their output quotas from May to July in the Joint Ministerial Monitoring Committee meeting.

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.

And 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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- US crude oil stockpiles fell in the second week of August even as net imports jumped sharply, while fuel demand dipped as well, reported Reuters with reference to the US Energy Information Administration's statement.

Crude inventories fell by 1.6 million barrels in the week to Aug. 14 to 512.5 million barrels, less than analysts’ expectations in a Reuters poll for a 2.7 million-barrel drop.

Net US crude imports rose by 1.1 million barrels per day to 3.6 MMbpd, the EIA said.

Fuel demand dropped by more than 2 MMbpd to 17.2 MMbpd in terms of product supplied. Overall fuel demand is down 14% from the year-ago period over the last four weeks.

As the summer driving season comes to a close, overall fuel demand tends to decline.

Prices rose briefly following the report. U.S. crude futures were down 26 cents, or 0.6%, to USD42.63 a barrel by 11:01 a.m. ET (1501 GMT), while Brent dropped 37 cents to USD45.09 a barrel.

Refinery crude runs fell by 171,000 bpd in the last week, EIA said, while refinery utilization rates fell by 0.1 percentage point.

US gasoline stocks fell by 3.3 million barrels to 243.8 million barrels, the EIA said, compared with analysts’ expectations for a 1.1 million-barrel drop.

Distillate stockpiles, which include diesel and heating oil, rose by 152,000 barrels, versus expectations for a 557,000-barrel drop. Overall distillate stockpiles sit at 177.8 million barrels, just off a 38-year-high set last month.

“It is concerning that distillate inventories continue to remain at very high levels as refiners blend excess jet fuel supplies into diesel,” said Andrew Lipow, president at Lipow Oil Associates in Houston.

As MRC wrote previously, US crude oil inventories moved sharply lower during the week ended July 24 as exports and refinery demand climbed to multi-month highs, US Energy Information Administration data showed July 29.. Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels last week, EIA data showed. While the draw pushed stockpiles to 14-week lows, they remained more than 17% above the five-year average for this time of year. The inventory draw was concentrated on the US Gulf Coast, where stocks fell 10.46 million barrels to 295.51 million barrels, and on the US West Coast, where stocks fell 1.7 million barrels to 52.75 million barrels, the lowest since mid-March.

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.

And 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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC