Vietnam Binh Son refinery delays maintenance, expects 88% profit fall this year

Vietnam's Binh Son Refining and Petrochemical will delay the maintenance at its refinery until next year, and said it expects profits to drop 88% this year due to rising costs, including higher taxes, said Reuters.

Binh Son said the maintenance delay would allow the company to "maximize its production, revenue and profit" this year. The 130,000-barrel-per-day refinery was originally scheduled to undergo major maintenance from June 22 to August 11 in 2023. The maintenance will now take place early next year, the company said in a statement.

Binh Son's net profit is forecast to fall this year to USD73.38 MM from USD625 MM last year, the company said. It is subject to corporate income tax of 10% this year, compared with 5% last year.

Binh Son is facing more competition in the local market as import tariffs on gasoline will be cut to 5% this year from 8%, it said. The company is also concerned it will not be able to buy enough crude oil for its operations this year due to tight supplies. "Global inflation remains at high levels, putting upward pressure on inflation in Vietnam, which relies heavily on imported materials," the company said. "This will push operation costs higher."

Vietnam's total crude oil imports in the first quarter rose 55% from a year earlier to 2.7 million tons. Binh Son, 92% owned by state oil company PetroVietnam, is also considering moving its shares to Vietnam's main bourse, Hochiminh Stock Exchange, this year. Its shares have been trading on the unlisted public company market, or UPCoM, since 2018.

We remind, Long Son Petrochemicals, a unit of Thailand's SCG Chemicals, will start commercial production at its petrochemical complex in southern Vietnam by mid-2023. The USD5-billion facility in Ba Ria Vung Tau province will produce 1.4 MMtpy of plastic resins, it said in an emailed statement. Its annual output will include 500,000 tpy of high-density polyethylene, 500,000 tpy of linear low density polyethylene and 400,000 tpy of polypropylene, it said.

mrchub.com

Several Asian refiners are likely to maximize gasoline output from May and reduce gasoil output, cashing in on higher profits for the motor fuel ahead of the peak summer driving season, industry sources and analysts say, said Hydrocarbonprocessing.

The adjustments come after margins for gasoil and jet fuel slumped on rising supplies as China boosted exports, while the arbitrage window to Europe has been shut since early 2023 due to ample supplies on the continent.

Meanwhile, gasoline profits have rebounded as traders build supplies ahead of a seasonal travel demand boost from April through September. By adjusting production, the oversupplied gasoil market in Asia could tighten again and support prices.

At Taiwan's Formosa Petrochemical Corp, one of Asia's largest oil products exporters, the company plans to cut gasoil output from some units, such as the delayed coking unit, and ramp up gasoline production from its residue fluid catalytic cracker (RFCC), spokesman KY Lin told Reuters.

"Our gasoil production volumes will be down around 5%, with gasoline production yield up 2-3% for May compared with the original production plan," said Lin. Refiners who can switch have been slowly making adjustments in the past few weeks, said a person working for a southeast Asia refinery who declined to be named due to company policy.

If the cracks continue to converge, there is a possibility of a production switch, a source at an Indian refinery said. Complex refinery margins in Singapore, the bellwether for Asian refining margins, have more than halved to USD3.17 a barrel - the lowest since October 2022 - from an average of USD7.56 in March.

The extent to which Asian refiners can change production yields between light distillates - gasoline and naphtha - and middle distillates - gasoil and jet fuel - is limited on feedstock and catalyst reasons, estimated at between 3% and 5% on average, according to industry sources.

Still, refiners are eyeing strong demand from the United States, the world's top petrol guzzler, which is short on gasoline and blendstocks, traders said. Even though U.S. refineries have ramped up output after first-quarter maintenance, imports are still required, one Singapore-based blendstock broker said.

We remind, The rise in gasoline output is typically accompanied by more naphtha, which can be used as a blendstock for petrol or for the production of ethylene and propylene, used for plastics. Refiners considering ramping up their FCC runs would need to assess the overall uplift margins, as higher unit runs will produce more propylene, in addition to gasoline. Gasoline output, on the other hand, rebounded to above 4 million bpd in January.

mrchub.com

Spanish oil company Cepsa teamed up with vegetable oil processor Apical Group’s Bio-Oils unit to build a second-generation biofuels plant in southern Spain, a USD1.11-bn project, said Hydrocarbonprocessing.

The plant, set to start operating in 2026, will be Southern Europe’s largest, the Spanish company said on Friday. It will have a capacity of 500,000 tons of renewable diesel and sustainable aviation fuel (SAF) per year using organic waste, such as used cooking oils. Biofuels are seen as key to decarbonize transportation in sectors hard to electrify, like aviation.

Building and operating the facility, which will be in the southern Spanish region of Andalusia, will create around 2,000 direct and indirect jobs and save 1.5 million tons of CO2 emissions per year, Cepsa said.

The project will help the oil company achieve its goal of producing 2.5 million tons of biofuels by the end of the decade.

We remind, Cepsa plans to nearly double its investments over the next three years to a total of 3.6 B euros (USD3.82 B), with more than half of that amount going to sustainable energy and mobility. It also posted a full-year net profit at current cost of supplies (CCS) of 790 MM euros for 2022, up sharply from the 310 MM euros reported in 2021. The planned investment increase of 93% for 2023-25 is from the previous three years, Cepsa said.

mrchub.com

Jefferies has downgraded its rating on LyondellBasell from “Buy” to “Hold” on rising US recession risk, as well as the US shale thesis being “played out”, said Fintel.

“With OPEC’s production cut and US natural gas testing around USD2/MMBtu, the US shale advantage thesis has played out," Jefferies analyst Laurence Alexander said in a research note. "A US recession in H2 2023-2024, in contrast, still presents significant risk to sentiment as it will likely trigger another round of destocking and margin erosion.”

While near-term trends are encouraging – specifically strong refining margins, stable propylene spreads and polyethylene (PE) benefitting from competitor force majeures, capacity expansion delays and higher oil prices, which support US olefins margins, demand risks are rising, he pointed out. “We expect the key risks in H2 2023-2024 to be increasing pressure on US consumers as the US economy slides into recession,” Alexander said.

“We expect the recession to last 4-6 quarters, with the first step-up in the unemployment rate likely triggering another round of inventory destocking in retail channels,” he added. The analyst estimates that each 1% cut to global GDP represents a USD250-300m headwind to LyondellBasell’s earnings before interest, tax, depreciation and amortisation (EBITDA) due to compressing spreads.

In a more severe recession, naphtha usually dislocates from oil prices, most likely creating another USD650-750m headwind to EBITDA, he pointed out. In this situation with markedly lower naphtha feedstock prices benefitting its competitors, LyondellBasell’s US cost advantage based on natural gas would erode.

We remind, LyondellBasell NV said it was exploring strategic options for its U.S. Gulf Coast-based ethylene oxide & derivatives (EO&D) business. The company said it was analyzing the potential to retrofit the Houston refinery to build up its Circular and Low Carbon Solutions (CLCS) business.

mrchub.com

Covestro’s Q1 earnings before interest, tax, depreciation and amortisation (EBITDA) will be much higher than previous guidance and analysts’ consensus, the Germany-based polymer major said.

While demand remained weak in Q1, “we took the right measures on the cost side”, chief financial officer (CFO) Thomas Toepfer said.

“As a result, the first three months of 2023 have been significantly better than expected at the beginning of the year,” he said.

Covestro's preliminary Q1 EBITDA amounts to EUR286m - compared with the company's previous guidance of EUR100-150m and analysts’ consensus of EUR158m.

However, preliminary Q1 sales of EUR3.74bn are lower than consensus expectations of EUR3.94bn. Covestro is still preparing the Q1 results report, which is due to be released on 28 April. Toepfer will leave the company as of 31 August 2023 to join European aircraft manufacturer Airbus as CFO.

We remind, Covestro successfully started up a new world-scale facility for the production of chlorine in Tarragona, Spain. It is the first world-scale production plant for chlorine based upon the highly innovative and energy efficient ODC (oxygen depolarized cathode) technology invented by Covestro and its partners.

mrchub.com