Fitch confirms Bashneft rating at BBB level, outlook stable

MOSCOW (MRC) -- The international rating agency Fitch has confirmed the long-term issuer default ratings (IDR) of Bashneft, part of Rosneft, in national and foreign currencies at the BBB level with a stable outlook, said Finam with reference to the agency's press release.

"Bashneft's ratings are given considering the very high level of integration between Bashneft and its parent company Rosneft, Bashneft's autonomous credit profile and our assessment of Rosneft's creditworthiness," explains Fitch's rating action.

The agency predicts an improvement in Bashneft's credit metrics and a decrease in the net leverage to funds from operating activities (FFO) ratio below 1.5x. In addition, Fitch expects the company's EBITDA to nearly triple in 2021 as oil prices rise and refining and sales performance improves. By 2024, the agency predicts this figure to be at the level of Rb115 billion.

At the same time, Fitch said Bashneft's oil production is more sensitive to OPEC + restrictions than most of Rosneft's other assets.

"We expect Bashneft to benefit significantly from the future relaxation of OPEC + oil production restrictions," said the agency.

As MRC reported earlier, Bashneft ended 2020 with a loss of Rb11.1 billion under IFRS against a profit of Rb76.59 billion a year earlier. The company linked the loss to a decrease in world oil prices and demand for crude oil on the back of a worsening economic situation around the world due to the pandemic.

Bashneft (a subsidiary of Rosneft) has oil reserves and a resource base in the Volga-Ural province, Timan-Pechora and Western Siberia. More than 180 fields are in commercial operation of the company. Production of hydrocarbons is over 21 million tons of oil per year.
MRC

MOSCOW (MRC) -- KBR has been awarded a technology licensing contract by Hyundai Engineering and Tecnicas Reunidas for PKN ORLEN’s Petrochemical Development Program in Plock, Poland, according to Hydrocarbonprocessing.

Under the terms of the contract, KBR will provide technology license, basic engineering design, and proprietary equipment for its leading ethylene technology, Selective Cracking Optimum Recovery (SCORE), for PKN ORLEN’s Olefins Complex III Project. This is Europe’s largest petrochemical project in 20 years.

“KBR is privileged to be selected as the ethylene technology licensor for this ambitious project and contribute to PKN ORLEN’s growth and sustainability objectives,” said Doug Kelly, KBR President, Technology. “SCORE continues to lead the industry in delivering the highest yields and operational flexibility, while minimizing the carbon footprint.”

As MRC reported earlier, in July 2021, PKN Orlen signed a final contract with Hyundai Engineering and Tecnicas Reunidas for the engineering and construction of the main units for PKN Orlen's previously announced Olefins Complex III project at Plock, Poland.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,176,860 tonnes in the first half of 2021, up by 5% year on year. Shipments of exclusively low density polyethylene (LDPE) decreased. At the same time, PP shipments to the Russian market were 727,160 tonnes in the first six months of 2021, up by 31% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased. Supply of statistical copolymers of propylene (PP random copolymers) subsided.

PKN Orlen is a leading player on the fuels and energy markets, and the largest company in Central and Eastern Europe, listed in prestigious global rankings such as Fortune Global 500, Platts TOP250 and Thompson Reuters TOP100. The ORLEN Group operates in 6 home markets – Poland, the Czech Republic, Germany, Lithuania, Slovakia and Canada.

KBR has been a leader in olefins technology development, plant design for over 50 years. The company has licensed more than 100 grassroot ethylene plants utilizing our cost-effective and energy-efficient cracking technologies to produce ethylene, propylene and other valuable byproducts from a variety of feedstocks.
MRC

MOSCOW (MRC) -- The international president of the United Steelworkers (USW) union, Thomas Conway, called for refinery and chemical plant workers to include decarbonization as part of contract proposals to be made to US oil companies in January, reported Reuters.

In remarks to the USW national oil bargaining policy conference, Conway said decarbonization projects should be viewed as necessary capital investment programs.

“Here sits the capital investment program that we need to keep our refineries up and running and keep the pressure off of them from the communities that would otherwise shut them down,” Conway said.

Officials from local unions representing 30,000 refinery and chemical plant workers are meeting online this week to develop proposals to be used in talks in January with Marathon Petroleum Corp, which is representing the nation’s oil companies for the first time.

Marathon, the nation’s largest refiner, was chosen to replace Shell Oil Co, the US arm of Royal Dutch Shell, which was the lead negotiator for the oil companies from the late 1990s through 2019. Shell has reduced the number of the refineries it operates in the United States and by the end of this year will operate only one plant.

The 2022 contract talks will come after national refining capacity fell 4.5% in the COVID-19 pandemic.

As MRC wrote before, in May 2021, Shell announced the sales of its Anacortes, Washington, US refinery as well as the controlling interest in the joint venture Deer Park, Texas, refinery. The company also sold its chemical refinery in Mobile, Alabama.

We remind that Royal Dutch Shell plans to reduce its refining and chemicals portfolio by more than half, it said in July 2020 without giving a precise timeframe. The move is part of the Anglo-Dutch company's plan to shrink its oil and gas business and expand its renewables and power division to reduce greenhouse gas emissions sharply by 2050.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,176,860 tonnes in the first half of 2021, up by 5% year on year. Shipments of exclusively low density polyethylene (LDPE) decreased. At the same time, PP shipments to the Russian market were 727,160 tonnes in the first six months of 2021, up by 31% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased. Supply of statistical copolymers of propylene (PP random copolymers) subsided.
MRC

MOSCOW (MRC) -- Saudi Aramco's Motiva Enterprises subsidiary has withdrawn documents seeking tax breaks for a new ethane-fed cracker and downstream derivative units adjacent to its refinery in Port Arthur, Texas, indicating the projects have been put on hold, reported S&P Global with reference to sources familiar with company operations.

The latest inactive agreement and project list published in mid-June by the Texas Comptroller's Office showed Motiva had withdrawn applications for tax breaks from school districts for a USD4.7 billion steam cracker to make ethylene, a USD1.7 billion aromatics unit that would manufacture benzene and paraxylene, and a USD2.72 billion project to build multiple polyethylene (PE) units.

The original applications for tax breaks from school districts submitted in November 2018 for the cracker and aromatics unit said that if the company approved the projects, cracker construction would begin in Q1 2020 with completion in Q4 2024, and construction on the aromatics unit would begin in Q2 2020, followed by completion in Q4 2022. A later update on the aromatics unit said that if approved, construction on the aromatics unit would begin in Q4 2020 and wrap up in Q4 2024.

Documents submitted in August 2019 seeking tax breaks for the PE units also said that if the company approved, construction would start in Q4 2020 and wrap up in Q4 2024.

Construction has not begun on any of the projects.

Motiva did not comment on the withdrawals of documents seeking tax breaks, saying only that the company does not comment on "market rumors or speculation." Saudi Aramco declined comment.

However, sources familiar with company operations said Motiva put the cracker project on hold in 2019 and reassigned staff dedicated to its planning to other projects after the company bought Flint Hills Resources' 634,000 mt/year mixed-feed cracker in Port Arthur.

The downstream PE units and aromatics facility remained as possibilities, but became less important as oil prices plunged amid the height of COVID-19 shutdowns in 2020, market sources said.

"They could have made this announcement a year ago," a source said.

In addition, Saudi Aramco in 2020 finalized its USD69 billion acquisition of a 70% stake in global petrochemical producer Saudi Basic Industries Corporation, or SABIC. That move substantially increased Saudi Aramco's petrochemical footprint, sources noted.

In April 2021, SABIC said it would take over sales and marketing of about 5.4 million mt/year of Saudi Aramco's chemicals and resin products, centering SABIC's commercial focus on petrochemicals while Aramco's trading arm focuses on fuel products.

As MRC wrote previously, in early March, 2021, Motiva Chemicals was resuming operations at its mixed-feed cracker in Port Arthur, USA. The process of restart of this cracker with the capacity of 635,000 mt/year of ethylene and 340,000 mt/year of propylene began on 27 February, 2021, and was expected to finish in the first week of March 2021. The cracker wa shut along with the refinery at the same site on 14 February, 2021, because of the deep freeze.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,176,860 tonnes in the first half of 2021, up by 5% year on year. Shipments of exclusively low density polyethylene (LDPE) decreased. At the same time, PP shipments to the Russian market were 727,160 tonnes in the first six months of 2021, up by 31% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased. Supply of statistical copolymers of propylene (PP random copolymers) subsided.
MRC

MOSCOW (MRC) -- Crude oil stockpiles fell modestly last week, while gasoline inventories dipped to their lowest level since November, reported Reuters with reference to the US Energy Information Administration's statement.

Crude inventories fell by 447,000 barrels in the week to Aug. 6 to 438.8 million barrels, compared with analysts' expectations in a Reuters poll for a 1.3 million-barrel drop. Overall crude inventories have been on the decline for several weeks due to increased demand.

Fuel consumption, as measured by product supplied, fell in the most recent week, led by declines in gasoline and jet fuel supplied.

The weekly figures are volatile, however, and over the last four weeks produced supplied sits at 20.6 million barrels per day (bpd), roughly in line with 2019 levels. Analysts said if fuel demand starts to decline as a result of the Delta variant of the coronavirus, it would be negative for energy prices.

"We did see a fairly decent setback in overall product demand. That's the point in today's report that could cause the most concern considering the backdrop of the Delta variant and overall uncertainty," said Tony Headrick, energy market analyst at CHS Hedging.

Oil prices were lower on the day, though roughly in line with the market's level prior to the news. As of 10:45 a.m. EDT (1445 GMT), US crude fell 51 cents to USD67.78 a barrel while Brent dropped 56 cents to USD70.06 a barrel.

Refinery crude runs rose by 277,000 bpd in the last week, while refinery utilization rates rose by 0.5 percentage point.

US gasoline stocks fell by 1.4 million barrels to 227.5 million barrels, compared with expectations for a 1.7 million-barrel drop.?

Distillate stockpiles, which include diesel and heating oil, rose by 1.8 million barrels, versus expectations for a 472,000-barrel drop.

Net US crude imports fell last week by 796,000 bpd.

As MRC informed previously, US crude oil production is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, the US Energy Information Administration (EIA) said in a monthly report, a smaller decline than its previous forecast for a drop of 210,000 bpd.

We remind that BP raised Aug. 3 its 2025 oil price assumption by USD5/b to USD60/b to reflect an expected supply constraint, while promising a recovery in its own production volumes following a maintenance-related slump in the second quarter.

We also remind that BP and Lukoil want to quit their Iraqi energy projects due to the current investment environment, the country's oil minister said earlier this month, as OPEC's second biggest producer faces an exodus of international oil companies that want to exit unattractive contracts. Lukoil wants to sell its stake in West Qurna 2 to Chinese companies.
MRC