Rosneft and BP agree to cooperate on carbon management and sustainability

MOSCOW (MRC) -- Rosneft Oil Company and BP have signed a Strategic Collaboration Agreement focused on supporting carbon management and sustainability activities of both companies, as per BP's press release

The agreement builds on years of partnership between the two companies and formalises key elements of their collaboration on sustainability and work to identify carbon reduction activities and low carbon opportunities.

Based on their longstanding partnership and taking into account the profound changes shaping the global energy transition to deliver more energy with less carbon, Rosneft and bp have agreed to ?cooperate in identifying and developing new low carbon solutions and programmes that will support their shared sustainability goals. The companies also intend to join efforts in aligning with developing ?industry methodologies and standards on carbon management, including methane reduction ?initiatives and energy efficiency applications.

“Rosneft and bp are united not only through the longstanding successful partnership in various areas but also in ?the intention to leverage this experience in future prospective projects outlined in this agreement,” said Igor Sechin, chief executive officer, Rosneft.

Rosneft and bp will also jointly evaluate new projects envisaging the use of renewables, opportunities for carbon capture, utilisation and storage (CCUS), as well as developments for hydrogen.

The companies intend to work together on opportunities for low carbon solutions in downstream ?businesses, including the development of advanced fuel as well as evaluate the potential for the development of natural forest sinks and trading of forest carbon-offsets credits. The companies will cooperate in sustainable development and social investment, including biodiversity.

“We’ve been partners with Rosneft for many years now and we learn a great deal from each other. That’s important, and I believe that this agreement can be an important catalyst for progress.” said Bernard Looney, chief executive officer, bp.

Commenting on the agreement signed, Rosneft chief executive officer Igor Sechin said: “Rosneft and ?bp are united not only through the longstanding successful partnership in various areas but also in the intention to leverage this experience in future prospective projects outlined in this agreement. Joint efforts of our two companies, as the world energy industry leaders, will not only strengthen our ?corporate aims in sustainable development, but will also provide a significant contribution to overcoming the challenges the industry and the society face in the climate action and the satisfaction of growing global economy demand for energy resources. This is necessary for balanced social and economic development and life quality improvement.”

bp chief executive officer Bernard Looney said: “We’ve been partners with Rosneft for many years ?now and we learn a great deal from each other. That’s important, and I believe that this agreement ?can be an important catalyst for progress. We both believe in the power of partnership and look forward to bringing together the best of Rosneft and bp to develop low carbon solutions and drive ?down emissions.”

As MRC reported earlier, in late January 2020, Russian oil producer Rosneft said that its German subsidiary Rosneft Deutschland GmbH had completed the deal to acquire a 3.57% stake in Germany’s Bayernoil Raffineriegesellschaft mbH from BP.

We remind that a fire at Ufaorgsintez (a subsidiary of ANK Bashneft, part of PJSC "NK Rosneft") did not lead to a shutdown of low density polyethylene (LDPE) and polypropylene (PP) production capacities. On 25 January, two containers with a methane-hydrogen fraction caught fire at the Ufa plant, and the blaze was extinguished in the morning of 26 January. The plant's customers said the fire was not critical for polymer production. PP production has been operating normally, whereas the LDPE production has temporarily reduced its capacity utilisation, thus, production of 158 grade polyethylene (PE) was suspended.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, exluding producers' inventories as of 1 January, 2020).

Rosneft became Russia's largest publicly traded oil company in March 2013 after the USD55 billion takeover of TNK-BP, which was Russia’s third-largest oil producer at the time.

BP is one of the world's largest oil and gas companies, serving millions of customers every day in around 80 countries, and employing around 85,000 people. BP’s business segments are Upstream (oil and gas exploration & production), and Downstream (refining & marketing). Through these activities, BP provides fuel for transportation; energy for heat and light; services for motorists; and petrochemicals products for plastics, textiles and food packaging. It has strong positions in many of the world's hydrocarbon basins and strong market positions in key economies.
MRC

Saudi Sipchem to restart PP and PE plant after maintenance

MOSCOW (MRC) -- Sahara International Chemical (Sipchem) intends to restart its polypropylene (PP) and low density polyethylene (LDPE) plant in Jubail this week after completing the maintenance works, reported CommoPlast.

The turnarounds were scheduled to begin on 1 February. 2021.

The weeklong turnaround took place at the 200,000 tons/year PP unit and the 200,000 tons/year LDPE unit.

As MRC informed earlier, Sipchem is planning to mothball the Polybutylene Terephthalate (PBT) plant, owned by its affiliate, Sipchem Chemical Co., and Ethylene Vinyl Acetate (EVA) Film plant that is owned by affiliate firm, Saudi Specialized Products Co. Steps to implement the decision are underway, Sipchem said in a statement to Tadawul, adding that the suspension of both plants will start on Jan. 1, 2021, until further notice. The company expects a positive financial impact starting from Q1 2021 results.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).
MRC

AkzoNobel no longer intends to acquire Tikkurila and continues to focus on Grow & Deliver strategy

MOSCOW (MRC) --AkzoNobel N.V. no longer intends to acquire Tikkurila following a higher competing offer from US paints and coatings producer PPG Industries, according to the company's press release on Monday.

Akzo Nobel submitted a binding proposal to acquire Tikkurila for EUR31.25 per share on January 28, 2021, having conducted customary due diligence to confirm potential synergies. The company no longer intends to pursue this acquisition, following a competing, higher, offer for Tikkurila. Despite a strong cultural fit - and more synergies than any other combination with Tikkurila - the intended transaction no longer meets AkzoNobel’s criteria for superior value creation.

Thierry Vanlancker, CEO of AkzoNobel, commented: “We have clear priorities and criteria for capital allocation, including investing for growth, paying dividends, conducting acquisitions, and carrying out share buybacks. The intended acquisition of Tikkurila can no longer compete with more attractive opportunities to create superior value for our shareholders and other stakeholders. Executing with discipline has been key to AkzoNobel’s transformation into a company with higher profitability and strong free cash flow. This is working well for us and part of who we are.”

AkzoNobel will continue delivering on its capital allocation priorities, including a disciplined approach to strategically aligned, value creating, acquisitions. The company continues its current €300 million share buyback program and maintains a target leverage ratio of 1-2x net debt/EBITDA.

We remind that Russia's output of chemical products rose in November 2020 by 9.5% year on year. At the same time, production of basic chemicals increased in the first eleven months of 2020 by 6.6% year on year, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-November 2020 output. November production of polymers in primary form rose to 896,000 tonnes from 852,000 tonnes in October. Overall output of polymers in primary form totalled 9,240,000 tonnes over the stated period, up by 17.1% year on year.
MRC

Lack of overhauls at U.S. refiners could stall industry recovery

MOSCOW (MRC) -- U.S. oil refiners are predicting a strong recovery in fuel demand in the second half of this year as vaccination rates increase and workers are expected to resume commuting and taking vacations, said Hydrocarbonprocessing.

U.S. plants are running at about 82% of capacity, according to U.S. government data, down about 10 percentage points from normal capacity at this time of year. Margins on average are positive on each barrel of oil processed, but refiners are losing money on output as crude prices rise faster than demand for fuel.

"Certainly by summer, we would expect that a good portion of the American public is able to get out and burn the fuels that we make,” Robert Herman, an executive vice president at fourth-largest U.S. refiner Phillips 66, told investors last week. His view of a second-half demand recovery was echoed recently by executives at Valero Energy Corp and LyondellBasell Industries.

Top U.S. oil refiners Marathon Petroleum Corp and Exxon Mobil Corp have signaled production could remain down more because of lower fuel demand than because of planned maintenance shutdowns in the early part of the year. Exxon said its turnaround costs would rise this quarter.

But Marathon forecast first-quarter spending of USD150 million on planned maintenance, less than half its year-ago period budget. Phillips 66 estimated USD200 million to USD230 million in turnaround costs this quarter, versus USD329 million a year ago. Lower costs could reflect reduced stress from lower output on equipment, or stretching out work and limiting overtime, said Matthew Blair, a refining analyst at Tudor, Pickering, Holt & Co.

“But turnarounds were low in 2020. It does seem like there will need to be a catch-up at some point,” said Blair. Early spring and fall traditionally are busy periods for U.S. refinery maintenance, as operators gear up for summer driving demand and switch to making more heating oil and winter gasoline blends. Regular overhauls also are needed to ensure safety.

Production will fall when maintenance begins, said Bob Yawger, director of futures for financial firm Mizuho Americas. He forecast fuel output falling another 6.5 percentage points from January’s 82.5% peak utilization. “No matter how you cut it, turnaround season is simply a matter of time,” Yawger said on Jan. 27. “How far the refinery run rate slides is the only question."

Refiners conducting spring maintenance would be building crude oil inventories and drawing down fuel stocks by now, “and that’s not happening,” he said this week.

As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).
MRC

OMV to split existing refining, petchems business; create chemicals, materials division

MOSCOW (MRC) -- OMV (Vienna, Austria) has announced plans to split and expand its integrated refining and petrochemicals business into two new divisions. A new chemicals and materials division will be established that will include OMV’s existing petchems business, while a new refining division will also be created, reported Chemweek.

The changes will take effect as of 1 April 2021, it says.

Alfred Stern, the CEO of Borealis, has been appointed by OMV’s supervisory board as executive board member for chemicals and materials, it says. Borealis is majority owned by OMV with a 75% stake.

The structural change “facilitates the forward integration in the chemicals sector that has been underway ever since OMV acquired a majority stake in Borealis,” it says. “With this change, OMV is consistently positioned across the entirety of its expanded value chain and can bundle all relevant responsibilities for petrochemicals and chemicals in a single board division.”

The new corporate structure “will significantly expedite the integration of Borealis into the OMV group and the expansion of the chemicals business,” says Mark Garrett, chairman of OMV’s supervisory board.

OMV also reported a 22% rise year on year (YOY) in its fourth-quarter petchem earnings to EUR43 million (USD51 million), driven mainly by lower customer discounts due to decreased price levels, it says. The company’s ethylene/propylene net margin increased slightly by 2% YOY to EUR369/metric ton, while benzene and butadiene spreads “experienced a sharp decline,” it says. “While the butadiene net margin weakened considerably, benzene net margin decreased to a lesser extent,” it notes. Petchem product sales volumes totaled 590,000 metric tons, flat YOY and up slightly on the third quarter.

The contribution from Borealis rose EUR112 million YOY to EUR162 million, due mainly to the full consolidation of the Borealis result following OMV's USD4.68-billion acquisition of an additional 39% stake in Borealis on 29 October 2020, taking its total share to 75%. Borealis also released its fourth quarter results today.

In an outlook for 2021 for its new chemicals and materials division, OMV says the European ethylene and propylene indicator margins are both expected to be similar to 2020 at EUR435/metric ton and EUR364/metric ton, respectively. The European polyethylene (PE) and polypropylene (PP) indicator margins in 2021 are both forecast to be above their 2020 levels of EUR350/metric ton and EUR413/metric ton, respectively.

PE sales volumes for Borealis are projected to be slightly above last year’s level of 1.76 million metric tons, while PP sales volumes are expected to be in line with 2020 at 2.12 million metric tons. Planned organic capital expenditure for its chemicals and materials division in 2021 is expected to total around EUR900 million.

For the full-year 2020, petchem earnings fell 7% YOY to EUR224 million, due mainly to lower petchem margins, OMV says. The average ethylene/propylene net margin for the year was €400/metric ton, down 8% YOY. OMV calculates the net margin based on West European contract prices with naphtha as feedstock. Total petchem volumes sold totaled 2.36 million metric tons, slightly higher than in 2019.

As MRC informed earlier, OMV (Vienna, Austria) says it is investing EUR40 million (USD48 million) to expand and modernize a steam cracker and associated units at its refining and petrochemicals complex at Burghausen, Germany. The upgrade will increase the site’s ethylene and propylene production capacity by 50,000 metric tons/year. Following a planned turnaround of the refinery, the revamped cracker and petchem units are expected to start operations in the third quarter of 2022. Initial groundwork is already underway ahead of the upgrade.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, exluding producers' inventories as of 1 January, 2020).
MRC