Pemex swings to USD6 bn profit in first quarter, debt dips

Pemex reported a USD6.17 B first-quarter net profit, reversing a nearly USD2 B loss in the year-ago period, driven by foreign exchange gains, growing output and higher crude prices, said Hydrocarbonprocessing.

Total financial debt at Pemex, one of the world's most indebted oil companies, edged down slightly to USD108.1 B from USD109 B at the end of 2021. Pemex attributed the improvement to strong Mexican government support and the company's own debt management operations.

President Andres Manuel Lopez Obrador has pumped billions of dollars into Petroleos Mexicanos, as the company is formally known, in an effort to prioritize its health and achieve energy self-sufficiency during his term. The Mexican oil giant said it had received 45.4 B pesos (USD2.3 B) from the government to repay debt during the first three months of the year, as well as 16 B pesos (USD804 MM) to build its Olmeca refinery expected to come online by the end of this year.

Reuters reported late last week that the Olmeca refinery, a top priority for Lopez Obrador, is running some USD5 B over budget. Pemex's revenue surged 59.6% in the first three months of 2022, boosted by a jump in sales and a recovery in oil prices. Crude oil prices jumped more than 36% from around USD56 per barrel to nearly USD89 per barrel during the first quarter, pushed up in large part by Russia's Feb. 24 invasion of Ukraine.

The Mexican peso gained 3.13% against the dollar during the January-March period. Crude oil and condensate production totaled 1.755 MMbpd, up 2.3% from last year's first quarter, according to the company's filing with the Mexican stock exchange, powered by 355,000 bpd in output from new priority fields.

Separate figures posted on its website show that Pemex has also significantly revised upward its previously reported fourth-quarter losses to around 194 B pesos from the 124 B pesos that it posted in February, a difference of more than USD3 B in additional red ink.

In April, Mexico's finance minister reiterated that the government was ready to make Pemex debt repayments whenever necessary, as higher oil prices have greatly improved cash flow.

As MRC informed previously, Mexico will reduce refining output at state oil company Pemex while it modernizes its oil refineries, according to President Andres Manuel Lopez Obrador's statement earlier this month.

We remind that n late January, 2022, Pemex signed a long-term crude supply contract with Royal Dutch Shell Plc as part of its acquisition of the Deer Park refinery in Texas. Pemex and Shell in May, 2021, announced the transaction, which is worth almost USD600 MM and will make the Mexican firm the sole owner of the refinery near Houston. The facility has capacity to process 340,000 bpd. Shell will supply about 200,000 bpd of foreign and US crude to the plant for at least 15 years.

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 2,487,450 tonnes in 2021, up by 13% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market totalled 1,494.280 tonnes, up by 21% year on year. Deliveries of homopolymer PP and PP block copolymers increased, whreas shipments of PP random copolymers decreased significantly.
mrchub.com

A few years after completing a USD717 MM expansion of its alpha olefins production facility in Geismar, Shell Chemical LP is eyeing another USD1.4 billion project at the site to continue ramping up production, according to Hydrocarbonprocessing.

Shell Chemical on Wednesday won approval from the state Board of Commerce and Industry for an Industrial Tax Exemption Program break for the USD1.4-B project, which the company says will create a “world scale” linear alpha olefin plant at the Geismar facility. Linear alpha olefins are used to make detergents, waxes, plastics and premium lubricants.

The Geismar expansion will be the sixth time Shell Chemical has deployed its “proprietary technology” at one of its sites to produce linear alpha olefins, according to the company’s application for the ITEP incentive.

Shell Chemical’s ITEP application says project work will include building reactors, heat exchangers and compressors, as well as boilers and turbines to generate steam and electricity. Shell will also build storage tanks, a 12,000-square-foot warehouse for equipment and materials, and a 14,000-square-foot building that will house a cafeteria and safety meeting space.

Shell Chemical will receive a roughly USD17 MM property tax break for the first year of the linear alpha olefins project while paying nearly USD4.3 MM in taxes.

As MRC wrote before, Shell faces writedowns on USD400 MM in Russian downstream assets, it said, having announced USD3 B worth of other projects previously. The oil major announced on Feb. 28 that it would quit its ventures in Russia with Gazprom and related entities including the flagship Sakhalin 2 LNG plant and the Nord Stream 2 pipeline project.

We remind that Shell Chemicals expects its new petrochemical complex in southwest Pennsylvania to come online by the end of 2022, Royal Dutch Shell CFO Jessica Uhl said February 3, during the company's Q4 2021 earnings call.

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

Nghi Son Refinery and Petrochemical (NSRP) continues to face production hiccups weeks after an unspecified technical issue, which hit the plant on 26 March and forced the producer to shut its polypropylene (PP) plant, according to CommoPlast.

According to sources close to the maker, the 370,000 tons/year PP unit remained offline in late April and might not be able to restore the normal run rate until mid-May 2022.

Nghi Son has not been able to operate smoothly since the beginning of the year. In February, the company slashed operating rates by 50% as a result of financial issues at the refinery and was only able to operate for several weeks before being shut down again.

As MRC reported earlier, NSRP shut its new PP plant in Vietnam for maintenance on 24 August, 2021, instead of the initially scheduled date of 17 August, for approximately three weeks. The company decided to postpone the maintenance shutdown at this plant by one week from the previous schedule due to the COVID-19 related lockdown. Thus, the new PP plant came back on-line in mid-September, 2021.

We remind that Vietnam’s Nghi Son oil refinery officially began commercial production from 14 November 2018, following months of tests. The USD9 billion refinery is 35.1% owned by Japan’s Idemitsu Kosan Co, 35.1% - by Kuwait Petroleum, 25.1% - by PetroVietnam and 4.7% - by Mitsui Chemicals Inc.

According to MRC's ScanPlast report, PP shipments to the Russian market totalled 1,494.280 tonnes in 2021, up by 21% year on year. Deliveries of homopolymer PP and PP block copolymers increased, whreas.shipments of PP random copolymers decreased significantly.
MRC

Lanxess officially opened a new EUR50m facility for engineering plastics at its site in Krefeld-Uerdingen, said the company.

The compounding plant will provide Durethan ployamide and Pocan polybutylene terephthalate, for use in the automotive and electronic industries, Lanxess said in a statement. Capacity details were not disclosed. The company added that it received support for the project from the North Rhine-Westphalia state government, but it did not provide details.

The state’s minister president, Hendrik Wust, who attended the opening, said the government has kept working to ensure continued energy supply for the state’s many chemical production sites amid uncertainty from the Ukraine war. “The effects of the Russian war on Ukraine on local companies must be cushioned, a production standstill due to a natural gas shortage or a permanent supply stop would have far-reaching consequences, especially for the energy-intensive chemical industry,” Wust said.

He added that Germany needed to reduce its dependence on Russian gas as quickly as possible and needed to support companies in the “upcoming transformation processes”. Krefeld-Uerdingen, where LANXESS employs 1,900 people, is the company's second-largest production site globally.

As per MRC, Lanxess said it was suspending its business activities in Russia due to the war in Ukraine. Thus, the company had “suspended business activities with Russian customers as far as contractually possible until further notice” and had suspended all investments in Russia. Its sales in Russia and Ukraine made up less than 1% of its global sales, it said.

Lanxess is a leading specialty chemicals company with about 19,200 employees in 25 countries. The company is currently represented at 74 production sites worldwide. The core business of Lanxess is the development, manufacturing and marketing of chemical intermediates, additives, specialty chemicals and plastics. Through Arlanxeo, the joint venture with Saudi Aramco, Lanxess is also a leading supplier of synthetic rubber.

mrchub.com

US oil refiners expect strong first-quarter earnings as margins to sell gasoline and diesel strengthened due to a steep dropoff in refining capacity and crude oil supplies tightened because of Russia's war with Ukraine, reported Reuters.

Refining capacity worldwide has dropped during the coronavirus pandemic, with several less profitable oil refineries closing in the last two years. However, worldwide fuel demand has rebounded to near pre-pandemic levels, boosting profits for facilities that are still operating.

Seven US independent refining companies are projected to post earnings-per-share of 61 cents, compared with a loss of USD1.32 in first quarter of 2021, according to IBES data from Refinitiv.

Profit margins for making both gasoline and distillates - diesel, jet fuel and heating oil - were already at their highest in several years coming into 2022, and have since risen, with the heating oil crack spread at nearly USD41 per barrel by the end of March, nearly USD20 more than average over the past five years.

US independent refiners including Marathon Petroleum Corp , Valero Energy Corp and Phillips 66 also benefited from a surge in natural gas prices in Europe which occurred due to the risk of European sanctions on Russian energy exports.

Valero kicks off refinery earnings on Tuesday; Phillips reports on Friday, with Marathon the following week.

Natural gas is needed to operate various units of oil refineries and the expense caused some European refineries to cut runs, particularly distillate-producing units. This contributed to a sharp fall in distillate inventories worldwide, putting a premium on production of diesel and jet fuel.

"Geopolitical dynamics should support US refiners on wide natural gas spreads, though some impacts may be less visible with first quarter earnings than in future quarters," said Jason Gabelman, refining analyst at Cowen.

As MRC wrote previously, San Antonio-based Valero Energy Corp, the second-largest US oil refiner, ran its 14 refineries at between 88% and 92% of their combined capacity of 3.2 million barrels per day (bpd) in the fourth quarter of 2021.

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 2,487,450 tonnes in 2021, up by 13% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market totalled 1,494.280 tonnes, up by 21% year on year. Deliveries of homopolymer PP and PP block copolymers increased, whreas, shipments of PP random copolymers decreased significantly.
MRC