Oil and gas EPC majors shift to cleaner energy

MOSCOW (MRC) -- Major oil and gas engineering, procurement, and construction (EPC) companies are increasingly shifting their strategies toward cleaner energy segments, according to Hydrocarbonprocessing.

With a bleak investment outlook for the sector in the wake of COVID-19, now is seen as good a time as any for major oil and gas companies to make strategic shifts in energy transition, according to analysis by GlobalData.

Major oil and gas EPCs, which have traditionally relied on projects within the oil and gas value chain and have had relatively little exposure to renewables, are now looking to renewables and other clean energy sectors for future growth.

EPC companies are adopting diverse strategies to position themselves for the energy transition. Aker and TechnipFMC, for example, have restructured their businesses to create dedicated units for low-carbon projects. Petrofac aims to achieve net zero in Scope 1 and Scope 2 emissions by 2030. Despite these varying approaches, the most common target segments among major oil and gas EPC companies are offshore wind and carbon capture and storage (CCS).

“COVID-19 brought a major oil and gas demand shock, delayed projects and raised additional questions about the potential for future oil demand growth. Oil and gas investment is likely to flatline at best over the coming years, and companies will need to look to the growth markets of new energy sectors to support their businesses,” said Will Scargill, GlobalData managing oil and gas analyst.

“The targeting of offshore wind and carbon capture is a common theme among companies from the oil and gas sector looking to adapt for the energy transition due to the potential for knowledge synergies. Oil and gas EPCs looking to target new segments will also hope to benefit from existing partnerships with clients making a similar transition. However, their growth plans will face a challenge from incumbent players in the renewables space,” Scargill added.

As MRC informed earlier, the coronavirus pandemic underscored BP's efforts to "reimagine energy" by taking a leading role in the push to cleaner, low-carbon fuels, said CEO Bernard Looney in July, 2020. Rising levels uncertainty over the future demand for oil, oil price volatility, a growing attractiveness of stable returns from some renewables, and an increased awareness of "the fragility of the world we live in" mean BP is taking the right path to pursue lower-carbon fuels, Looney said.

We remind that in July, 2020, the Turkish Competition Council gave permission to SOCAR and BP to establish a joint venture that will operate in the petrochemical sector. Earlier it was reported that SOCAR and BP applied to the relevant institutions in Turkey to establish a joint petrochemical company, which will be called Mercury complex, in April 2020. Recall that on December 20, 2018 SOCAR and BP signed contractual principles for evaluation of plans for creation a world-class petrochemical complex in Turkey and establishment of a joint venture to manage it.

Construction of the complex was planned to begin during the current year in order to put the enterprise into operation in 2023-2025. However, due to low oil prices and to the COVID-19 pandemic, the project implementation has been postponed until 2021. The Mercury complex will be built near the Petkim petrochemical complex and the STAR refinery in Aliaga region. The enterprise will produce 1.25 million tons of purified terephthalic acid (PTA), 840 thousand tons of paraxylene (PX), 340 thousand tons of benzene.

PTA is the main raw material in the production of polyester from which beverage and food containers, packaging materials, photo and film and other consumer and industrial goods are derived.

According to ICIS-MRC Price report, consumption of PET chips by Russian converters decreased in October, which is generally in line with the current season. Market participants reported weak demand in the Russian PET chips market at the end of last month and expect its further decline in early November. The revival of the domestic PET market is expected in the second half of November, before the New Year holidays.
MRC

MOSCOW (MRC) -- Celanese has completed the sale of its 45% equity investment in Japanese engineering plastics company Polyplastics to Daicel Corp for USD1.575bn in cash, the US chemicals company said.

Daicel now owns all of Polyplastics, which makes liquid crystal polymers, polyphenylene sulphide (PPS), as well as polyoxymethylene (POM) copolymer, known as polyacetal. With the sale, announced in July, Celanese has monetised a “historically passive investment” and expects to deploy the proceeds into higher value-generating opportunities, it said.

As noted in the July 20, 2020, announcement, Celanese has been investing in and rapidly growing its own Engineered Materials base business globally over the last 10 years, independent of Polyplastics, with a footprint in Asia significantly greater now than when the Company entered the region more than 50 years ago through Polyplastics. The sale of Polyplastics is an intentional departure from a legacy relationship to a more contemporary approach to independently drive future growth, advance application development with customers, and pursue high-return expansion opportunities for the benefit of Celanese and its customers.

"Celanese is well-positioned to continue its growth trajectory as we increase investment in new product development to serve customer demand in growth segments and key geographies,” said Tom Kelly, Senior Vice President, Engineered Materials, Celanese. “We will continue to invest in product expansion to serve the growing demand in applications such as 5G, advanced mobility, medical/pharma, and sustainable materials. Celanese also plans to expand its manufacturing capacity and advance its T&I capabilities in Asia to meet rapidly growing demand in the region."

As MRC informed earlier, 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. 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.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Based in Dallas, Celanese employs approximately 7,700 employees worldwide and had 2019 net sales of USD6.3 billion.
MRC

MOSCOW (MRC) -- Huntsman Corporation announced that it has entered into a definitive agreement to sell its India based Do-It-Yourself (DIY) consumer adhesives business, part of the Advanced Materials division, to Pidilite Industries Ltd. in an all-cash transaction valued at up to USD285 million, excluding customary working capital and other adjustments, as per the company's press release.

The transaction value represents a 2019 adjusted EBITDA multiple of approximately 15 times. Under the terms of the agreement Huntsman will receive approximately USD257 million in cash at closing and up to approximately USD28 million of additional cash under an earn out within 18 months if the business achieves sales revenue in-line with 2019. The transaction is expected to close within the coming week.

Peter Huntsman, Chairman, President and CEO commented: "We have taken this business and built it from almost nothing to be a market leader in India. To take it to the next level of size and value, we simply do not have the footprint in India to do so. Pidilite is a respected leader in consumer adhesives within India and is in a better position to invest in and more aggressively grow this consumer DIY business over the coming years. We anticipate within the coming months that we will be able to deploy the proceeds from this asset and replace the lost EBITDA with other growth assets that fit even better within our core Advanced Materials specialty business."

As MRC reported earlier, Nanjing Jinling Huntsman, a joint venture between Huntsman and Sinopec Jinling, planned to shut its propylene oxide plant in Nanjing (Nanjing, Jiangsu Province, China) on November 1 for scheduled maintenance. This plant with a capacity of 240,000 tonnes/year of propylene oxide will be closed until approximately 25 November.

According to MRC's ScanPlast report, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Huntsman Corporation is a publicly traded global manufacturer and marketer of differentiated and specialty chemicals with 2019 revenues of approximately USD7 billion. The company's chemical products number in the thousands and are sold worldwide to manufacturers serving a broad and diverse range of consumer and industrial end markets. The company operates more than 70 manufacturing, R&D and operations facilities in approximately 30 countries and employ approximately 9,000 associates within our four distinct business divisions.
MRC

MOSCOW (MRC) -- DSM's net profit fell in the third quarter amid significant negative foreign exchange effects, the Dutch life sciences and chemicals producer said.

Adjusted EBITDA from continuing operations at its materials business fell by 31% year on year in the third quarter. "Trading conditions during Q3 were in line with expectations as communicated in August with the Q2 results," the company said. "Materials, whilst still impacted by COVID-19, showed an improving volume trend relative to the prior quarter, especially in September," it said. Trading conditions during Q3 were in line with expectations as communicated in August with the Q2 results. Nutrition performed well, despite a significant negative foreign exchange effect of minus 6%. Materials, whilst still impacted by COVID-19, showed an improving volume trend relative to the prior quarter, especially in September.

DSM has suspended its overall earnings outlook for 2020 because of the uncertainties surrounding the coronavirus pandemic. DSM suspended its overall earnings outlook for the full year 2020 earlier this year owing to COVID-19 related uncertainties in Materials. For Nutrition, DSM indicated it expected to deliver at least a mid-single digit increase in Adjusted EBITDA for 2020, which is unchanged.

As MRC informed earlier, Royal DSM (Netherlands) announced an agreement to sell its resin and functional materials business units and related businesses DSM Resins & Functional Materials (RFM) to Covestro AG (Germany) for EUR1.6 billion.

As MRC informed earlier, Russia"s output of products from polymers grew in September 2020 by 6.6% year on year.
However, this figure increased by 0.9% year on year in the first nine months of 2020. According to the Russian Federal State Statistics Service, September production of unreinforced and non-combined films dropped to 117,600 tonnes from 126,300 tonnes a month earlier. Output of films products grew in January-September 2020 by 8.2% year on year to 980,700 tonnes.
MRC

MOSCOW (MRC) -- Shell Catalysts & Technologies is launching the Shell Blue Hydrogen Process, which integrates proven technologies to increase significantly the affordability of greenfield projects for “blue” hydrogen production from natural gas along with carbon capture, utilization and storage (CCUS), said Hydrocarbonprocessing.

Affordable blue hydrogen enables the decarbonization of hard-to-abate heavy industries while creating value for refiners and resource holders. Shell’s new process can reduce the levelized cost of hydrogen by 22% compared with the best the market has to offer today.

Without low-carbon hydrogen, the net-zero goals announced by governments and companies will be difficult to achieve. Currently, hydrogen production is nearly all “grey” (from hydrocarbons without CCUS). If hydrogen is to contribute to carbon neutrality, it must be produced on a much larger scale and with far lower emission levels.

Blue hydrogen production can be relatively easily scaled up to meet demand. With carbon dioxide (CO2) costing USD25–35/t, blue hydrogen becomes competitive against grey, even with its higher capital costs. And green hydrogen, produced from the renewable-energy powered electrolysis of water, may still be more than double the price of blue hydrogen by 2030[i] and not achieve cost parity until about 2045.

This analysis is based on conventional steam methane reforming (SMR) and auto-thermal reforming (ATR) technologies. The availability of the Shell Blue Hydrogen Process, which integrates proprietary Shell gas partial oxidation (SGP) technology with ADIP ULTRA solvent technology, further improves blue hydrogen economics.

A key advantage of SGP technology over ATR is that the partial oxidation reaction does not require steam. Instead, high-pressure steam is generated, which satisfies the steam demands of the process and some other power consumers. There is also no need for feed gas pretreatment, which simples the process line-up. And SGP gives refiners greater feed flexibility, as it is more robust against feed contaminants and can thus accommodate a large range of natural gas qualities.

Compared with ATR, SGP technology gives a 22% lower levelized cost of hydrogen from: 17% lower capital expenditure (higher operating pressure giving smaller hydrogen compressor and CO2 capture and compressor units); and 34% lower operating expenditure (excluding the natural gas feedstock price) from reduced compression duties and more steam generation.

When compared with SMR, SGP technology leads to even greater hydrogen production cost savings from both the capital and operating expenditure perspectives.

As MRC informed before, Royal Dutch Shell plc. said earlier this month that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant’s costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

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