Sasol swings to USD5.3-billion loss, expects to close LCCP deal in December

MOSCOW (MRC) -- Sasol reports a net loss for the full financial year ended 30 June of 91.3 billion South African rand (USD5.3 billion), compared with earnings of R6.1 billion in the prior year, saying the loss is due largely to an impairment of R111.6 billion and the plunge in oil and chemical prices in the last two financial quarters due to COVID-19. Base chemicals, primarily in the US, account for R72.6 billion of the R111.6-billion rand impairment, according to Chemweek.

The last of the seven units at the company’s troubled Lake Charles Chemicals Project (LCCP) has also suffered a further start-up delay, but Sasol says the negotiations process with potential partners for its base chemicals assets in the US, including LCCP, “has seen strong global interest and is now at an advanced stage” with a closing of the transaction “probable” by December. The company warned of the expected full-year financial loss in a trading statement earlier this month.

Full-year sales were down 6.5% year on year (YOY) to R190.4 billion, despite the company’s base chemicals and performance chemicals sales volumes rising 19% and 8% YOY, respectively, it says. There were “softer commodity chemical prices across most of our sales regions due to weaker global demand and increased global capacity,” it says. An 18% decrease in the rand per barrel price of Brent crude oil, coupled with softer global chemical and refining margins, negatively impacted Sasol’s realized gross margins, particularly during the second half of the year, it says.

The LCCP delivered improved EBITDA earnings in the second half of the financial year of approximately R100 million, compared with an EBITDA loss of R1.1 billion in the first six months of the year. After the LCCP’s ethoxylates (ETO) expansion achieved beneficial operation in January this year, the alcohol expansion and the alumina expansion, as well as the new Guerbet unit, achieved beneficial operation in June, Sasol says. All of the LCCP's specialty chemicals units are now online, with 86% of the complex’s total nameplate capacity operational, it says.

The last remaining unit to come online is the low-density polyethylene (LDPE) unit, damaged during a fire in January. The unit is now expected to achieve beneficial operation before the end of October. “Some challenges in restoring the unit” resulted in the date sliding back from its previous market guidance for a start-up at the end of September. Ethylene produced by the LCCP’s steam cracker during this period of delay that was destined for the LDPE unit is being sold to third parties, Sasol says. The ethane-fed cracker produced at an average rate of above 80% of nameplate capacity during the fourth quarter of the fiscal year, it says. “Projected earnings for the LCCP complex in this financial year will be impacted only by the loss in the margin of ethylene to LDPE,” it says. The LCCP’s current forecast cost estimate of USD12.8 billion is still on track, it adds.

The demobilization of the LCCP project is progressing according to plan, with the remainder of the work limited to the removal of scaffolding, according to Sasol. Site demobilization of construction equipment, infrastructure, and services will be completed after the last unit achieves beneficial operation, with the number of people on site now less than 400, it says.

As part of the potential partnering process for its US base chemicals assets, Sasol says the assets and liabilities relating to its US base chemicals portfolio have been classified as disposal groups held for sale, leading to the R72.6-billion impairment and “reducing the carrying value of the disposable asset down to its fair value less cost to sell.” Proceeds from the planned disposal, combined with self-help measures, “should make a meaningful and positive impact on Sasol’s financial prospects, principally as a result of the intended use of disposal proceeds to settle debt with payment obligations within the next 12–24 months,” it states. In its guidance it adds that it has applied a 50% partnering for its base chemicals portfolio adjustment within its US business in 2021. CPChem, ExxonMobil, Hanwha Solutions, Ineos, and LyondellBasell are all reported to have expressed interest in buying a stake in Sasol’s assets, according to previous reports.

It also confirms its recent entry into exclusive discussions with Air Liquide for the sale of 16 air separation units at Secunda is for a total transaction price of R8.5 billion. “A further announcement will be made when terms have been finalized with any transaction expected to be subject to customary conditions precedent,” it says.

Capital expenditure (capex) was reduced by approximately R6.0 billion for the year by deferring certain expenditures, with capex totaling R35 billion. This included R14 billion related to the LCCP project and was in line with Sasol’s internal targets, it says. The company says it exceeded its cash conservation target of USD1 billion for 2020, largely through cash fixed cost reductions, as well as capex and working capital optimization, and adds that it has “committed plans in place to deliver against our USD1 billion target for 2021.”

Sasol’s “liquidity headroom” was over USD2.5 billion, which it says is “well above our outlook to maintain liquidity in excess of USD1 billion." The company has also reiterated its plan to pursue a USD2-billion rights issue, saying it would take place in the second half of the 2021 financial year.

In its guidance for its full financial year 2021, Sasol says it expects an “overall solid operational performance,” with base chemicals overall sales volumes to be 3–5% higher than 2020. Excluding US polymers products, sales volumes are put at 1–2% higher than 2020. Performance chemicals overall sales volumes are forecast at 3–5% higher than in 2020. Excluding LCCP-produced products, sales volumes will be “flat or slightly below the prior year,” it says. Capex for 2021 is put at R21 billion.

As MRC reported earlier, Hanwha Group has lost to US-based chemical company Chevron Phillips in a bid to acquire a 50% stake in global chemical company Sasol’s ethane cracking center (ECC) located in Louisiana, for which the South Korean conglomerate offered more than USD3 billion.

We remind that Sasol's world-scale US ethane cracker with the capacity of 1.5 mln tonnes per year reached beneficial operation on 27 August 2019. SasolпїЅs new cracker, the heart of LCCP, is the third and most significant of the seven LCCP facilities to come online and will provide feedstock to our six new derivative units at the company"s Lake Charles multi-asset site.

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.

Sasol is an international integrated chemicals and energy company that leverages technologies and the expertise of our 31 270 people working in 32 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of high-value product stream, including liquid fuels, petrochemicals and low-carbon electricity.
MRC

MOSCOW (MRC) -- China’s Wanhua Chemical posted a 49.56% decrease in net profits in the first half of the year, as sales and prices both took a hit from the coronavirus pandemic, the company said.

Slump in oil prices also dampened demand and prices of its products.

Prices of pure methylene diphenyl diisocyanate (MDI), its major product, decreased to CNY15,800-CNY18,700 in the first half year from CNY23,700-CNY27,200 in the same period of 2019.

Prices of petrochemical products the company makes also recorded a double-digit drop.

For the second half year, the company said it would adjust its sales strategies more actively based on market conditions.

The company targets to bring on stream its 1m tonne/year cracker at Yantai later this year.

As MRC informed earlier, ADNOC Logistics and Services (ADNOC L&S), a subsidiary of the Abu Dhabi National Oil Company (ADNOC) had formed a shipping joint venture with Wanhua Chemical Group. The new company, AW Shipping Limited, is incorporated in Abu Dhabi Global Market (ADGM), a statement by ADNOC said.

As MRC informed earlier, in late July 2019, ADNOC said its Ruwais refinery west cracker was offline for maintenance.

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) -- China's top offshore producer CNOOC Ltd reported record-high oil and gas output of 257.9 million barrels of oil equivalent, or 1.42 million boe/d, in the first half of 2020, despite the COVID-19 pandemic dampening global energy demand, reported S&P Global with reference to the company's interim report as of late Aug. 19.

On an average daily basis, the volume was up 5.5% from 1.34 million boe/d in the same period of last year.
The increases in oil and gas output mainly came from domestic assets, including production from three new projects in Bohai which started up in H1.

Domestic production jumped 11.4% year on year to 173.9 million boe.

This was in line with the rising trend in China's upstream output. The country boosted its natural gas production by 10.3% on the year to 94.02 Bcm in H1, while its crude oil output also edged up 1.7% year on year to 712.11 million barrels, data from the National Bureau of Statistics shows.

CEO Xie Keqiang said in an online press conference Aug. 19 that output cuts overseas included high-cost oil sands assets in Canada and US shale projects.

CNOOC Ltd's crude output from overseas assets was down by 5.6% year on year to 66.1 million barrels due to high costs, the company said, with output in Canada seeing the steepest reduction, at 23.8% year on year, to 9.6 million barrels.

CNOOC Ltd owns a 100% working interest in the 45,000 b/d Long Lake oil sands project in Canada, and three other oil sands projects, as well as onshore shale oil and gas projects in the US - Eagle Ford, where it has a 27% interest, and Rokies where it holds 12%.

Its crude output in Europe also dropped to 10.4 million barrels from 12.6 million barrels in H1 due to maintenance on the Buzzard field in the North Sea, CFO Xie Weizhi said in the press conference.

Due to the worldwide energy demand slump, CNOOC Ltd in late April had reduced it oil and gas output target to 505 million-515 million boe, or about 1.39 million boe/d, compared with the originally planned 1.43 million boe/d.

Its H1 production almost hit its originally planned target.

Amid the crude price slide, CNOOC Ltd further slashed its all-in costs by 11.3% year on year to USD25.72/boe in January-June, the company said.

However, its net profit fell 65.7% to Yuan 10.38 billion (USD1.5 billion) due to a 31.8% decline in total revenue.

Crude benchmark Dated Brent slumped to a multi-year low of USD13.24/b on April 21 from USD66.09/b on January 2 this year, but has since recovered to around USD45/b.

The company raised capital expenditure by 5.6% on the year to Yuan 35.6 billion (USD5.15 billion) in H1.

The company boosted its development spending by 20.4% year on year to Yuan 21.7 billion, while cutting its exploration expenditure by 19.8% to Yuan 6.9 billion.

CNOOC Ltd earlier adjusted its full year 2020 capex target to Yuan 75 billion-85 billion (USD11.58 billion), down from actual spending of Yuan 79.6 billion in 2019.

As MRC informed previously, CNOOC will trim annual investment by 10% to 15% in 2020, while maintaining its goal of increasing domestic crude oil and natural gas production for the year, according to the company's statement in May, 2020.

We remind that in early May, 2018, China National Offshore Oil Corporation (CNOOC) and Shell Nanhai B.V. (Shell) announced the official start-up of the second ethylene cracker at their Nanhai petrochemicals complex in Huizhou, Guangdong Province, China.

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.

China National Offshore Oil Corporation (CNOOC), the largest offshore oil & gas producer in China. CNOOC businesses cover the main segments of oil & gas exploration and development, engineering & technical services, refining and marketing, natural gas and power generation, and financial services.
MRC

MOSCOW (MRC) -- Siemens Energy has signed a long-term preventive maintenance contract with the Egyptian Ethylene and Derivatives Company (ETHYDCO), for work at the latter’s industrial complex in Alexandria, said Dailynewsegypt.

The German company will undertake the work under a 10-year service contract covering three Siemens SGT-800 industrial gas turbines, which have been in operation since 2017. As part of the agreement, Siemens Energy’s Industrial Applications team will deliver the full spectrum of turnkey outage services, spare parts provision and repairs for the gas turbines.

The power plant currently produces 150 MW of electricity to power ETHYDCO’s petrochemical complex in Alexandria, which is the largest in Africa. The turbines are an essential component of the company’s production processes.

The collaboration between ETHYDCO and Siemens Energy will allow the latter’s technical teams to conduct all preventive checks, with unnecessary downtime minimised as a result. Ayman El-Shafei, Maintenance General Manager at ETHYDCO said, “As a key contributor to the petrochemical and downstream industries in Egypt, we focus on strengthening the all-round efficiency and safety standards of our plants."

He added, “Reducing unplanned downtime and increasing the operational workflow is critical towards achieving our production targets. The long-term preventive service agreement with Siemens Energy is aligned with our strategy." Siemens Energy’s preventive maintenance solution improves the reliability and availability of the gas turbines, by extending the duration between maintenance intervals.

The solutions will ensure that operational costs are lowered, with the preventive maintenance helping to deliver additional environmental benefits through reducing annual carbon dioxide emissions.

Ashraf Hamasa, Head of Siemens Energy in Egypt’s Service and Digital Business Unit, said, “This latest agreement with ETHYDCO is … symbolic of the benefits that Siemens Energy can provide, not just in terms of operational and availability improvements, but also in terms of environmental benefits, with reduced emissions."

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) -- Chevron Lummus Global (CLG) and Applied Research Associates, Inc. (ARA) announced the successful startup of euglena Co., Ltd. (euglena Co.)'s integrated Biofuels ISOCONVERSION unit in Yokohama, Japan, according to Hydrocarbonprocessing.

The 5 BPD, first-of-its-kind demonstration unit, employs the Biofuels ISOCONVERSION technology, jointly developed by CLG and ARA, to produce renewable jet fuel and renewable diesel out of an algae oil blend and waste vegetable oil. euglena Co. has successfully started up the demo-unit in 2020, and its renewable diesel products have met all specifications of a Japanese standard of diesel fuel “JIS K2204”. They have started supplying a renewable diesel to local bus services for passenger transportation in Japan. euglena Co. also plans to produce a renewable jet fuel that meets the ASTM D7566 Annex 6 specifications and supply it to commercial flights in Japan.

Biofuels ISOCONVERSION technology consists of hydrothermal conversion and hydroprocessing operations that convert waste fats, oils, and greases into jet fuel and diesel that are virtually indistinguishable from their petroleum counterparts. This will result in an over 80% reduction in lifecycle greenhouse gas emissions compared to petroleum, once it is commercialized. ReadiJet™ and ReadiDiesel™, produced from the Biofuels ISOCONVERSION technology, contain a uniform distribution of all hydrocarbon types observed in petroleum fuels, including aromatic, cycloparaffin, isoparaffin, and normal paraffin compounds, and are able to be directly blended with petroleum fuels.

ASTM International has approved the new production pathway for Sustainable Aviation Fuel (SAF) called “Catalytic Hydrothermolysis Jet,” or CHJ. euglena Co. intends to deliver CHJ for commercial flights in the coming years through the use of the Biofuels ISOCONVERSION technology.

“CLG is proud to be a part of the successful demonstration of the Biofuels ISOCONVERSION technology at euglena Co. and looks forward to implementing it at larger scale at several other locations around the world,” said Thad Sauvain, CLG’s Director of Global Sales and Licensing.

“We are excited to see euglena Co. take this meaningful step forward in its bold quest to become a leader in the production of low carbon intensity sustainable aviation fuel from algae and waste fats, oils, and greases,” said Chuck Red, ARA’s Vice President of Fuels Development.

As MRC wrote before, in early July, 2020, Haldia Petrochemicals (HPL), a flagship company of The Chatt­erjee Group (TCG), alo­ng with its international partner Rhone Capital has acquired US-based Lummus Technology at an enterprise value (EV) of USD2.725 billion (around Rs 20,590 crore) from McDermott International. In the joint acquisition, HPL’s share is at 57 per cent, the balance would be held by Rhone Capital. Under the new dispensation, Lummus Technology wou­ld function as a ‘standalone’ autonomous entity.

We remind that in late March 2020, India's private-sector Haldia Petrochemicals (HPL) shut its naphtha cracker after ports in the country declared force majeure to prevent the spread of the coronavirus.

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.
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