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Middle East petrochemical consolidations pick up pace

  • Spanish Market: Chemicals, Crude oil, Fertilizers, LPG, Metals, Oil products, Petrochemicals
  • 12/06/20

Consolidation among major petrochemical producers in the Middle East is picking up pace as state-owned companies look to manage costs in a challenging global market.

Qatar's state-owned energy firm QP announced yesterday it will integrate petrochemical marketer Muntajat into its operations.

Muntajat is a major marketer of polyethylene (PE) and petrochemical products such as methanol, MTBE and linear alkylbenzene (LAB).

The move is part of efforts to strengthen Qatar's global competitive position in the downstream sector, QP said. It comes only two months after QP absorbed its LAB-producing SEEF joint venture into its operations.

Capex cuts

The integration moves come as other Middle East and global energy firms adjust to receding margins and high costs, against a difficult backdrop of the Covid-19 pandemic and a global economic downturn.

Saudi Arabia's state-controlled petrochemical giant Sabic last month declared a loss of 950mn riyals ($253mn) in the first quarter of this year, compared with a profit of SR3.41bn ($909mn) in the first quarter of 2019. The loss was the partly the result of a fall in the average prices of its products.

Sabic is planning to cut its capital expenditure (capex), in line with moves by other energy and petrochemical producers.

ExxonMobil has lowered its 2020 capex budget by 30pc, with the bulk of the reduction going to its Permian onshore shale operations in the US. BP's spending cuts for this year include a reduction of around $1bn on short-cycle onshore investment and deferrals of exploration activity. Shell, Total and Chevron have also announced sharp reductions in their 2020 capex budgets.

And even the world's biggest oil producer, state-controlled Saudi Aramco, is scaling back its 2020 capex plans in response to lower prices, with spending in the coming years "under review".

The market downturn has led to petrochemical projects around the world being delayed and spending decisions deferred as companies scrutinise costs.

Canadian midstream operator Pembina Pipeline in March deferred construction of an integrated propane dehydrogenation (PDH) plant and polypropylene (PP) facility as part of a plan to cut capital spending.

Thai petrochemical producer PTT Global Chemical last month pushed back making a final investment decision (FID) on its planned ethylene plant in Ohio, as Covid-19 cuts demand and prices.

Maximising spending

The corporate consolidations provide an opportunity for companies to restructure and maximise their operating spend in a turbulent market.

The Muntajat-QP integration follows a wave of similar tie-ups between state-owned oil companies and their petrochemical affiliates in the Mideast Gulf.

Oman last year integrated state-owned oil company OOC, refiner Orpic and seven other domestic energy firms.

The new entity, OQ, comprises OOC, Orpic, OOC's upstream arm OOCEP, Oman Gas (OGC), Duqm Refinery and Petrochemicals Industries (DRPIC), Salalah Methanol (SMC), Oman Trading International (OTI), oxo intermediates and derivatives producer Oxea, and Salalah Liquified Petroleum Gas.

Petrochemical consolidation is also a major theme in Saudi Arabia.

Sipchem, a Saudi producer of methanol, polymers and acetic acid, last year merged its operations with fellow Jubail-based Sahara Petrochemicals, a supplier of PP.

Saudi Aramco is also in the process of acquiring a majority stake in Sabic, as part of a wider drive to expand its downstream operations.


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04/11/24

US railroad-labor contract talks heat up

US railroad-labor contract talks heat up

Washington, 4 November (Argus) — Negotiations to amend US rail labor contracts are becoming increasingly complicated as railroads split on negotiating tactics, potentially stalling operations at some carriers. The multiple negotiating pathways are reigniting fears of 2022, when some unions agreed to new contracts and others were on the verge of striking before President Joe Biden ordered them back to work . Shippers feared freight delays if strikes occurred. This round, two railroads are independently negotiating with unions. Most of the Class I railroads have traditionally used the National Carriers' Conference Committee to jointly negotiate contracts with the nation's largest labor unions. Eastern railroad CSX has already reached agreements with labor unions representing 17 job categories, which combined represent nearly 60pc of its unionized workforce. "This is the right approach for CSX," chief executive Joe Hinrichs said last month. Getting the national agreements on wages and benefits done will then let CSX work with employees on efficiency, safety and other issues, he said. Western carrier Union Pacific is taking a similar path. "We look forward to negotiating a deal that improves operating efficiency, helps provide the service we sold to our customers" and enables the railroad to thrive, it said. Some talks may be tough. The Brotherhood of Locomotive Engineers and Trainmen (BLET) and Union Pacific are in court over their most recent agreement. But BLET is meeting with Union Pacific chief executive Jim Vena next week, and with CSX officials the following week. Traditional group negotiation is also proceeding. BNSF, Norfolk Southern and the US arm of Canadian National last week initiated talks under the National Carriers' Conference Committee to amend existing contracts with 12 unions. Under the Railway Labor Act, rail labor contracts do not expire, a regulation designed to keep freight moving. But if railroads and unions again go months without reaching agreements, freight movements will again be at risk. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Canada advances oil and gas GHG cap


04/11/24
04/11/24

Canada advances oil and gas GHG cap

Houston, 4 November (Argus) — Canada is proposing to use a cap-and-trade system to reduce greenhouse gas (GHG) emissions from its oil and gas sector, a long-promised but politically contentious move. The proposed program aims to reduce emissions from the sector by 35pc, compared to 2019 levels, by 2030-32, according to a draft rule published by Environment and Climate Change Canada (ECCC) on Monday. It would cover upstream production activities, both onshore and offshore, including for oil, natural gas and liquified natural gas. After an initial four-year phase-in over 2026-29, entities would then need to meet their emissions obligations over the first 2030-2032 compliance period. While all operators must report emissions, only those producing more than 365,000 b/yr of oil equivalent, equal roughly to 99pc of upstream emissions, would be covered by the trading program. Covered entities would receive free allowance allocations, which would decline in line with their emissions cap. Companies could also buy allowances on the secondary market if needed, use carbon offsets or contribute funds to a decarbonization program. The first three-year compliance period of 2030-31, would be set at 27pc below emissions reported for 2026, which ECCC said would be equivalent to the 35pc target. The federal program will not link with the California-Quebec joint carbon market, known as the Western Climate Initiative, regulators said. ECCC officials stressed that the resulting program would cap emissions, not production, for Canadian oil producers, pushing back at a common criticism from opponents. The federal move will keep the industry accountable to its own promise of net-zero by 2050 and result in a greener and more competitive industry, said Canada Natural Resources Minister Jonathan Wilkinson. "As the world moves to reduce emissions generated by the production and combustion of fossil fuels, oil and gas extracted with the lowest production of emissions will have value in the world," Wilkinson said. But Alberta premier Danielle Smith claimed on Monday that the proposed program violates Canada's constitution. Provinces have exclusive authority over non-renewable natural resource development and the proposal ignores ongoing projects in the province, such as the Pathways Alliance, she said. Canadian Natural Resources, Cenovus, ConocoPhillips Canada, Imperial, MEG Energy and Suncor Energy are involved in the project. The program is a cap on production and will cost the province "anywhere from C$3bn-$7bn ($2.1-5bn)/yr" in absent royalty payments because of a loss of 1mn b/d in production, Smith said, promising future legal challenges against the federal government. "The only way to achieve these unrealistic targets is to shut in our production, I know it, they know it. We are calling them out on it, and they have to stop it," she said. Canada, a major net exporter of oil, has committed to reducing emissions by 40-45pc, compared to 2005 levels, by 2030 and net-zero by 2050. But emissions from the country's oil and gas sector remain an obstacle to meeting those goals. The sector accounts for 31pc, or 217mn metric tonnes, of the country's emissions in 2022 , according to the most recent federal data. Emissions from this sector increased by 83pc from 1990 to 2022. Over the past year Canada's federal government has focused on competitive climate change-related policies, from rolling out investment tax credits for decarbonization technologies to enforcement of the government's new Clean Fuel Regulations. But the road for the Liberal Party-led government to meet the climate goals remains a rocky one ahead of a federal election that must take place no later than October 2025. In September, the Conservative Party, led by Pierre Poilievre, attempted a no confidence measure on prime minister Justin Trudeau's government, fed by discontent around the federal carbon tax. While the motion failed, it highlights the balancing act for the Liberal Party ahead of the election. Trudeau has resisted calls from within his party to cede the field as his popularity waned, to the benefit of Poilievre. ECCC plans to request public comment on the proposal through 8 January 2025 and estimates it will finalize the regulations next year. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US light vehicle sales hit 6-month high in Oct


04/11/24
04/11/24

US light vehicle sales hit 6-month high in Oct

Houston, 4 November (Argus) — Domestic sales of light vehicles climbed in October, rising to a seasonally adjusted rate of 16mn on the back of greater truck purchases. Sales of light vehicles — trucks and cars — increased from a seasonally adjusted annual rate of 15.8mn in September, the Bureau of Economic Analysis reported today. Last month's rate was the highest since 16.1mn in April and greater than the 15.3mn unit rate in October 2023. US consumers, boosted by solid hiring and salary gains, stepped up purchases as borrowing costs have started to come down in the wake of the Federal Reserve's half point cut in its target rate in September, the first cut since Covid-19 struck in early 2020. With inflation nearing the central bank's 2pc target, the Fed has signaled another 200 basis points of rate cuts are likely into 2026. Sales of light truck sales increased by 1.6pc to just under a 13mn unit rate in October, while sales of cars rose by 2.2pc to a 3.1mn unit rate in the same timeframe. Domestic auto production rose to a seasonally adjusted rate of 123,900 in September from 121,500 in August. That compared with 143,400 in September 2023. Auto assemblies are reported with a one-month lag to sales. By Alex Nicoll Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexico GDP outlook dims in October survey


04/11/24
04/11/24

Mexico GDP outlook dims in October survey

Mexico City, 4 November (Argus) — Private-sector analysts have again lowered their projections for Mexico's gross domestic product (GDP) growth this year, with minimal changes in inflation expectations, the central bank said. For a seventh consecutive month, median GDP growth forecasts for 2024 have dropped in the central bank's monthly survey of private sector analysts. In the latest survey conducted in late October, analysts revised the full-year 2024 growth estimate to 1.4pc, down from 1.46pc the previous month. The 2025 forecast also dipped slightly, to 1.17pc from 1.2pc. The latest revisions are relatively minor compared to the slides recorded in preceding surveys, suggesting negativity in the outlook for Mexico's economy may be moderating. This aligns with the national statistics agency Inegi's preliminary report of 1.5pc annualized GDP growth in the third quarter, surpassing the 1.3pc consensus forecast by Mexican bank Banorte. Inflation projections for the end of 2024 inched down to an annualized 4.44pc from 4.45pc, while 2025 estimate held unchanged at 3.8pc. September saw a second consecutive month of declining inflation, with the CPI falling to 4.58pc in September from 4.99pc in August. The survey maintained the year-end forecast for the central bank's target interest rate at 10pc, down from the current 10.5pc. This implies analysts expect two 25-basis-point cuts to the target rate, most likely at the next meetings on 14 November and 19 December. The 2025 target rate forecast held steady at 8pc, with analysts anticipating continued rate reductions into next year. The outlook for the peso remains subdued, following political shifts in June's elections that reduced opposition to the ruling Morena party. The median year-end exchange rate forecast weakened to Ps19.8 to the US dollar from Ps19.66/$1 in the previous survey. The peso was trading weaker at Ps20.4/$1 on Monday, reflecting temporary uncertainty tied to the US election. Analysts remain wary of Mexico's political environment, especially after Morena and its allies pushed through controversial constitutional reforms in recent months. In the survey, 55pc of analysts cited governance issues as the primary obstacle to growth, with 19pc pointing to political uncertainty, 16pc to security concerns and 13pc to deficiencies in the rule of law. By James Young Mexican central bank monthly survey Column header left October September Headline inflation (%) 2024 4.45 4.44 2025 3.80 3.80 GDP growth (%) 2024 1.40 1.46 2025 1.17 1.20 MXN/USD exchange rate* 2024 19.80 19.66 2025 20.00 19.81 Banxico reference rate (%) 2024 10.00 10.00 2025 8.00 8.00 Survey results are median estimates of private sector analysts surveyed by Banco de Mexico from 17-30 October. *Exchange rates are forecast for the end of respective year. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Oil use still flat to 2030 in TotalEnergies scenarios


04/11/24
04/11/24

Oil use still flat to 2030 in TotalEnergies scenarios

Edinburgh, 4 November (Argus) — TotalEnergies continues to see oil demand plateauing until 2030, and then to decrease slower than natural field decline even in a scenario limiting global warming below 2°C. In its annual energy outlook released today, TotalEnergies updated two different scenarios for energy demand to 2050. The 'Momentum' scenario assumes countries with 2050 net zero targets reach their goals and China hits its 2060 target, with low carbon energy meeting half of developing countries' needs. It has temperature rising by 2.2-2.3°C by 2100, compared with 2.1-2.2°C in the same timeframe last year. The Paris climate agreement seeks to limit global warming to "well below" 2°C above the pre-industrial average and preferably to 1.5°C. "In this scenario, fossil fuels still cover half of the growth in energy demand in the Global South, due to insufficient low-carbon investment," TotalEnergies said. The 'Rupture' scenario assumes global co-operation supports net-zero development in India and developing countries, with energy demand growth met by low-carbon energies and efficiency gains. It has temperature rising by 1.7-1.8°C in 2100, unchanged from last year. "Beyond 2040, all decarbonisation levers are applied globally, in particular the deployment of new energies and carbon capture, use and storage (CCUS)," TotalEnergies said. TotalEnergies still sees oil demand plateauing until 2030 in Momentum and Rupture, reaching around 70mn b/d in the former and 44mn b/d in the latter in 2050. This compares with 63mn b/d in the Momentum scenario and 41mn b/d in the Rupture scenario by 2050 in last year's report. Around 25pc of oil demand stems from the petrochemical sector in 2025 in the Rupture scenario, according to the firm. Oil demand starts decreasing around 2035 in Momentum, but slower than the 4-5pc natural decline of existing fields, requiring new developments. It decreases faster in Rupture — by 3.9pc per year over 2030-50 — but still more slowly than natural decline, the firm said. In the Rupture scenario, the aviation and shipping sector need sustainable liquid fuel supply to rise four-fold compared with today. But a higher EV penetration rate in this scenario reduces biofuels requirements for road transportation, freeing up more supply for aviation and shipping, according to the firm. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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