Shell wants to share more of its blockbuster profits

Shell is considering boosting shareholder returns on the back of bumper profits from soaring energy prices, while the extra cash will also help it shift more swiftly towards renewables and low-carbon energy, said Reuters.

Europe's largest oil and gas company, as well as rivals including BP, have seen profits surge this year following two years of declining revenues due to the pandemic. CEO Ben van Beurden and Shell's board have been deliberating for months over what to do with the unexpected profit bonanza that began with the recovery from the pandemic and which was then spurred on by Russia's invasion of Ukraine.

"We have to look after our shareholders because I think our shares are very significantly underpriced, and therefore giving back more to shareholders to help that part of the equation is going to be very important" van Beurden told Reuters on the sidelines of the Aurora Spring Forum. Shell, whose stock has gained 20% this year but remains roughly 20% below their pre-pandemic peak, promised in 2020 to hike dividends by 4% annually after trimming its payout by more than 60% because of the pandemic, its first cut since the 1940s.

The London-based company posted its highest quarterly profit of $9 billion in the first three months of 2022 when it raised its dividend by 4% to 25 cents per share but still half pre-pandemic levels. The profit jump led Britain and other governments to impose a windfall tax to help fund consumers facing big energy bills.

Van Beurden said the management was reviewing whether its current shareholder return policy of 20% to 30% of cash from operations "is the right amount given where we are currently." Shell returns cash to investors via buybacks or dividends, but Van Beurden did not say whether any new policy would include a higher dividend.

As per MRC, Shell said surging demand for oil products that had almost tripled refining profits in the second quarter would boost earnings by up to USD1.2 bn. In an update before second quarter results on July 28, Shell also said it would reverse up to USD4.5 B in writedowns on oil and gas assets after it raised its energy prices outlook following Russia's invasion of Ukraine. Earnings from oil and refined products trading were expected to be strong in the quarter but lower than the first quarter of 2022, Shell said.
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BP is aiming to start producing sustainable aviation fuel (SAF) in Australia by 2025 after converting its oil refinery near Perth to produce renewable fuels, a senior executive of the British company said, said Hydrocarbonprocessing.

The project is expected to cost "hundreds of millions" of dollars, BP's Asia Pacific vice president of low-carbon solutions, Lucy Nation, told Reuters. BP has not disclosed what volume it plans to produce, but Nation said output would depend on demand as the facility would be able to switch day-to-day between producing sustainable aviation fuel and biodiesel.

Its Kwinana plant is in Western Australia, a region dominated by the mining industry where there is heavy demand for diesel for trucks. "We're lucky at Kwinana in that we're able to reutilize some of the processing equipment, the utilities and we have tanks ready to go," Nation told a briefing on the sidelines of the Sydney Energy Forum, hosted by the Australian government and the International Energy Agency.

"So that helps us speed up and be somewhat less capital intensive. But it is still a very expensive investment," she said. Air travel accounts for about 2% of global carbon emissions. The industry is aiming to reach net-zero emissions by 2050, relying on SAF usage to rise from around 100 MM liters (26 MM gallons) a year in 2021 to at least 449 B liters a year within three decades, a massive challenge.

"It is really, really tough - not for the faint hearted," said Nation. Australia has no SAF production so far and has no mandates for the fuel, unlike the European Union, which last week approved plans to require suppliers to blend a minimum of 2% of SAF into their jet fuel from 2025, rising to 85% in 2050.

BP's plant on the west coast and an A$500 million plant being built by private firm Oceania Biofuels on the east coast will be the country's first two SAF plants. Oceania's plant will be able to produce more than 350 MM liters per year of sustainable aviation fuel and renewable diesel. Nation, Qantas Airways and Boeing Co officials said the government needs to impose mandates or provide subsidies, tax breaks or a carbon pricing mechanism to spur development of the industry, which they said would be crucial to make long-haul travel affordable for Australians as the world shifts to green fuels.

Qantas and Airbus said last month they would invest up to USD200 million to accelerate the development of a SAF industry in Australia.

As per MRC, British energy giant BP has agreed to sell its remaining 50% stake in the Sunrise oil sands project in northern Alberta, Canada, to Cenovus Energy. The deal’s total consideration includes a USD466.9m (CD600m) cash payment and a conditional payment with a USD466.9m (CD600m) maximum aggregate value that expires after a two-year period. As part of the deal, Cenovus will sell its 35% stake in the undeveloped Bay du Nord project offshore Newfoundland and Labrador, in Eastern Canada, to BP.
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The head of the International Energy Agency said the G7 proposal to impose a price cap on Russian oil should include refined products as well, said Reuters.

The Group of Seven rich nations are considering imposing a price cap on Russian oil in an effort to keep oil flowing and curb inflation, while still limiting revenue to Moscow for the war on Ukraine that it calls a "special military operation". "My hope is that the proposal, which is important to minimise the effect on the economies around the world, gets buy-in from several countries," IEA Executive Director Fatih Birol told Reuters in an interview on the sidelines of the Sydney Energy Forum.

"And if it is pursued, it is not only focused on crude oil, as refined products are also an important challenge for the economies and will be more of a challenge in the next months to come," he said. Prices of refined products, such as gasoline and diesel, have soared even more than crude oil in the wake of the loss of Russian supply, because of a global refinery capacity crunch following the closure of several plants around the world.

The G7 idea is to tie financial services, insurance and the shipping of oil cargoes to a price ceiling. A shipper or an importer could only get these services if they committed to a set maximum price for Russian oil. Birol said he did not know what level the price cap would be set at. The IEA chief was in Sydney to co-host a meeting of Indo-Pacific nations with the Australian government discussing supply chains, the transition to clean energy and energy security. Countries attending included the United States, India, Japan and Indonesia.

The Sydney Energy Forum was focused on what needs to be done to ease global dependence on China for solar technology and countries like the Democratic Republic of Congo and Russia for critical minerals essential for clean energy technologies such as batteries, electric vehicles and wind turbines. Birol said the IEA was working on a plan to coordinate critical mineral supplies among its member and associate member countries in case of a supply disruption, similar to the emergency petroleum stockpiles that have been used recently to beef up global oil supply.

"Critical minerals security will be an important issue for energy security in the future," Birol said. "It is the reason that IEA ministers asked the IEA to consider building a safety network and coordination among its members and associate members in terms of a major disruption in the availability of critical minerals." He did not give a timeline for finalising plans for the "safety network" and said it was too early to say what it would entail.

The IEA sees opportunities for Australia, India, Indonesia and the United States to build solar technology manufacturing capacity to ease the world's dependence on China, which the IEA says will have a 95% share of the market by 2025, based on current construction plans. "We cannot rely on one single country," Birol said, adding that China had a competitive advantage in manufacturing thanks to lower electricity prices. To overcome that competitive edge, he said countries like Australia and India would have to offer incentives to companies to set up solar technology manufacturing plants.

As per MRC, preliminary estimates for these data show that, as of May 2022, surplus capacity in non-OPEC countries decreased by 80% compared with 2021. The data show that, in 2021, 1.4 MMbpd of surplus production capacity was available in non-OPEC countries, about 60% of which was in Russia. As of May 2022, we estimate that all surplus production capacity in Russia was eliminated due to the sanctions implemented after Russia’s full-scale invasion of Ukraine. We determined that excess oil production capacity declined in other non-OPEC producing countries as well. We estimate that, as of May 2022, producers in non-OPEC countries had about 280,000 bpd of surplus production capacity.
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Nexus Circular and Braskem, the largest polyolefins producer in the Americas, as well as a market leader and pioneer producer of biopolymers on an industrial scale, announced that they have signed a detailed Memorandum of Understanding (MOU) to secure the production output from a new advanced recycling facility planned near Chicago, IL. , said Hydrocarbonprocessing.

The new facility will have an initial capacity to convert over 30,000 metric tons annually of used plastic into new materials, with the potential to rapidly expand the processing capacity to over 120,000 metric tons annually.
Nexus Circular is a commercial leader in advanced recycling that uses proprietary technology and a leading process design to convert landfill-bound films and other hard-to-recycle plastics into high-quality materials used to produce virgin-quality sustainable plastics. Since 2018, Nexus has been supplying consistent, on-spec commercial volumes of ISCC PLUS certified circular products. In January 2022, Braskem made a strategic investment in Nexus Circular.

By the terms of the MOU, Braskem gains exclusive rights to the production output from this new advanced recycling facility, which supports Braskem's strategic objective to sell 300 thousand metric tons of products with recycled content by 2025 and 1 million metric tons by 2030. Braskem America's CEO Mark Nikolich said, "With the new facility, we will leverage Nexus' proven, commercial advanced recycling technology to secure high-quality feedstock for the production of Braskem's certified circular PP resins. Braskem has dedicated substantial resources towards reducing plastic waste and is making significant progress towards a more sustainable portfolio of PP to support our clients' goals."

Eric Hartz, Nexus Circular's Co-founder, and President added, "Nexus is rapidly expanding our production footprint, beyond our current commercial plant, with leading companies. We are thrilled to have Braskem as a committed partner, in addition to being an investor, as we move decisively to address the outsized market demand for circular recycled products while helping to mitigate the plastic waste challenge."

Nexus' unique solution is end-to-end acquiring and converting used plastics into circular virgin-equivalent feedstock for meeting recycled plastics objectives. The Nexus process is energy efficient, delivers unprecedented product quality, and has diverted over 5.5 million lbs. of used plastics from landfills to date.

As per MRC, Braskem Idesa's new partner in a USD400 MM investment in an ethane import terminal in Mexico will be Advario, part of the storage and logistic infrastructure company Oiltanking, Braskem said on June 14. Construction is scheduled to begin in July and end in 2024. The venture is majority owned by Sao Paulo-based Braskem with Mexico's Idesa group as minority partner. Braskem and Idesa have been partners since winning in a consortium a tender for a long-term contract to buy ethane from Mexico?s Pemex about 12 years ago. The Puerto Mexico Chemical Terminal, as the ethane import terminal project will be called, will create 2,000 jobs during construction, the company has said.
Braskem is committed to contributing to the value chain for strengthening the circular economy.

The petrochemical company's almost 8,000 team members dedicate themselves every day to improving people's lives through sustainable chemicals and plastics solutions. Braskem has an innovative DNA and a comprehensive portfolio of plastic resins and chemical products for diverse segments, such as food packaging, construction, manufacturing, automotive, agribusiness, healthcare, and hygiene, among others. With 41 industrial units in Brazil, the United States, Mexico, and Germany, Braskem exports its products to clients in more than 71 countries.
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The Association of American Railroads (AAR) reported U.S. rail traffic for the week ending July 9, 2022, said AAR.

For this week, total U.S. weekly rail traffic was 437,600 carloads and intermodal units, down 3.1 percent compared with the same week last year. Total carloads for the week ending July 9 were 207,450 carloads, down 1.3 percent compared with the same week in 2021, while U.S. weekly intermodal volume was 230,150 containers and trailers, down 4.7 percent compared to 2021.

Four of the 10 carload commodity groups posted an increase compared with the same week in 2021. They included coal, up 1,633 carloads, to 60,105; farm products excl. grain, and food, up 1,056 carloads, to 15,705; and motor vehicles and parts, up 409 carloads, to 10,725. Commodity groups that posted decreases compared with the same week in 2021 included metallic ores and metals, down 4,422 carloads, to 18,019; chemicals, down 1,038 carloads, to 30,163; and petroleum and petroleum products, down 378 carloads, to 9,395.

For the first 27 weeks of 2022, U.S. railroads reported cumulative volume of 6,201,367 carloads, down 0.2 percent from the same point last year; and 7,108,876 intermodal units, down 6.1 percent from last year. Total combined U.S. traffic for the first 27 weeks of 2022 was 13,310,243 carloads and intermodal units, a decrease of 3.5 percent compared to last year.

North American rail volume for the week ending July 9, 2022, on 12 reporting U.S., Canadian and Mexican railroads totaled 302,763 carloads, up 1.9 percent compared with the same week last year, and 311,439 intermodal units, up 0.3 percent compared with last year. Total combined weekly rail traffic in North America was 614,202 carloads and intermodal units, up 1.1 percent. North American rail volume for the first 27 weeks of 2022 was 18,170,988 carloads and intermodal units, down 3.4 percent compared with 2021.

Canadian railroads reported 73,339 carloads for the week, up 14 percent, and 65,786 intermodal units, up 26.7 percent compared with the same week in 2021. For the first 27 weeks of 2022, Canadian railroads reported cumulative rail traffic volume of 3,863,292 carloads, containers and trailers, down 4.4 percent.

Mexican railroads reported 21,974 carloads for the week, down 2.6 percent compared with the same week last year, and 15,503 intermodal units, down 9.1 percent. Cumulative volume on Mexican railroads for the first 27 weeks of 2022 was 997,453 carloads and intermodal containers and trailers, up 1 percent from the same point last year.

We remind, The Association of American Railroads (AAR) today reported U.S. rail traffic for the week ending July 2, 2022, as well as volumes for June 2022. U.S. railroads originated 1,157,555 carloads in June 2022, down 1.5 percent, or 17,970 carloads, from June 2021. U.S. railroads also originated 1,323,119 containers and trailers in June 2022, down 4.6 percent, or 63,483 units, from the same month last year. Combined U.S. carload and intermodal originations in June 2022 were 2,480,674, down 3.2 percent, or 81,453 carloads and intermodal units from June 2021.
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