Article: Exxon exec sees huge potential for LNG exports, petrochemicals

Exxon Mobil President Stephen Pryor has recently gone on record saying that America’s opportunity to extract and export natural gas is substantial enough to warrant a serious shift in focus.  Pryor states that the product could provide serious benefit to US companies and the national economy and Exxon’s Lynne Lachenmyer has argued that natural gas will surpass coal as a global energy source within 30 years.  Exxon is awaiting US Government approval to expand it’s LNG portfolio.

Exxon Mobil Corp. executives continue to rave about the future of natural gas, and that’s great news for mineral owners in the Barnett Shale.

My colleague, Malia Spencer, from our sister publication the Pittsburgh Business Times saw Stephen Pryor, president of Irving-based Exxon’s chemical company, speak at the Shale Insight 2013 event in Pennsylvania.

Pryor emphasized the importance of liquefied natural gas exports saying there’s high demand for it in overseas markets. Exxon plans to spend $10 billion to convert a natural gas import terminal near Port Arthur to an export terminal, if the U.S. Department of Energy approves.

“Since most of the (LNG) demand growth is outside the U.S., this present an outstanding opportunity to boost America’s exports,” Pryor said. “If U.S. producers and the nation as a whole will make the most of shale resources, investments in petrochemicals and LNG must be allowed to move ahead.”

He also talked about the petrochemical industry and how it’s achieved a major price advantage over foreign countries mainly because of affordable natural gas brought about by shale plays.

The main driver is ethylene, a by-product of ethane, which is found in wet natural gas shale plays. Other countries are using oil as the feedstock, which is more expensive.

The chemical industry accounts for 30 percent of natural gas demand in the country.

Exxon is expanding its cracker facility in Baytown. The facility cracks the ethane molecule to produce ethylene.

More than 125 new chemical projects have been announced around the country totaling $84 billion, said Pryor, citing the American Chemistry Council.

“This is good news for U.S. natural gas producers,” he said. “Petrochemical investment creates demand for ethane and other NGLs (natural gas liquids).”

Just a few weeks ago, Lynne Lachenmyer, a senior vice president at Exxon, said natural gas will surpass coal as a worldwide energy source in 30 years. Demand will go up 65 percent.

By Nicholas Sakelaris of the Dallas Business Journal

The full article is visible via the link below – Pankaj Oswal

http://www.bizjournals.com/dallas/blog/2013/09/exxon-exec-sees-huge-potential-for-lng.html?page=all

Article: RIL, IOC lead race for 31% Haldia Petrochemicals stake

The Hindustan Times is reporting on a heavyweight contest between Mukesh Ambani’s Reliance Industries Ltd and Indian Oil Corporation to secure a 31% stake in Haldia Petrochemicals Ltd held by the West Bengal Government.  RIL and IOC are widely considered to be the frontrunners in securing the deal.  Haldia specialises in ethylene and propylene; and its likely sale has drawn interest from a broad range of industry players.

A clash of titans is on the cards over the acquisition of the West Bengal government’s 31% stake in the ailing Haldia Petrochemicals Ltd (HPL). Mukesh Ambani’s Reliance Industries Ltd (RIL) and Indian Oil Corporation (IOC) are the frontrunners to buy the stake offered by the West Bengal government.

Sources said the stake is valued at between Rs. 2,000 crore and Rs. 2,700 crore and final price bids are expected in October

“We should be able to announce the winners in two to three weeks,” a senior government official told HT. “A final decision on HPL’s stake sale will, however, be taken by the group of ministers (from the West Bengal government) on HPL .”

Besides, RIL, India’s largest private sector company, and IOC, the country’s biggest commercial enterprise, ONGC, GAIL, Jindal Steel and Power, Essar Group and NRI billionaire Anil Agarwal’s Cairn India have also evinced interest in the company.

The West Bengal government holds a 39.9% stake in HPL through West Bengal Industrial Development Corporation (WBIDC), all of which was earlier put on the block.

new chapter

However, HPL’s co-promoter the Purnendu Chatterjee-led The Chatterjee Group (TCG) has staked a legal claim on a 9.18% slice of the state’s shareholding. So, the remaining 31% was offered to the bidders with the understanding that the decision on the balance disputed stake will be made after the Supreme Court’s decision.

Deloitte is the transactional advisor for HPL divestment.

TCG, which has a 41% stake in HPL, will get a month’s time to match the price of the highest bidder as it has the right of first refusal, the sources said.

The balance shares are held by Tata Motors, Tata Power and a few banks and financial institutions.

It may be recalled that TCG was ousted from the management of HPL by the West Bengal government following disputes related to management control in the mid-2000s. As the TCG group could not invest fresh funds required to run the company, the state government took over management control of HPL from TCG.

While Essar has formally announced that it is out of the HPL race, sources within ONGC and GAIL said the two companies may opt out as their proposal for a joint bid was turned down by the West Bengal government following objections from bidders like RIL. For Cairn and JSPL, sources said “it could be more of testing waters for these two companies.”

The fight over acquiring this stake in HPL may prove to be an interesting one as integrating HPL with their existing operations of refining and petrochemicals offer great synergies to both IOC and RIL. In addition, IOC also has an added advantage as it already holds an 8.89% stake in the petrochemical company.

HPL has been facing sell off and legal issues for a long time now and the lack of working capital in the company has resulted in huge accumulated issues, pegged at about Rs. 1,980 crores.

In 2012-13, HPL incurred a net loss of Rs. 907 crore on a turnover of Rs. 9,600 crore. Over 50% of its peak networth has already been eroded as of March 31, with debt topping Rs. 3,500 crore.

By Anupama Airy

The full article is visible via the link below – Pankaj Oswal

http://www.hindustantimes.com/business-news/CorporateNews/RIL-IOC-lead-race-for-31-Haldia-Petrochemicals-stake/Article1-1123481.aspx

Article: NWE butane still not attracting petrochemical demand despite falling prices

In a sign sure to alarm butane producers, petchem buyers in Northwest Europe have gone cold on butane in favor of naphtha and propane.  If these supplementary chemicals continue to be favoured by traders, at current price bands, it could force business leaders to re-examine business models.  Butane suppliers will be hoping to contain this trend to this part of the world.

Northwest European butane prices remain too high to attract petrochemical buying despite their recent slide, sources said Thursday.

“At this stage we can’t afford these butane levels,” said a trader.

Delivered prices of butane coasters, which are usually 1,000-3,000 mt in size, came off from levels around parity with naphtha to around 96% of naphtha prices Thursday.

“The price was 100% last week,” said another source, adding that prices were coming under pressure because gasoline blenders were away from the market.

Recent demand for blending butane into gasoline gave boost to prices over the previous two weeks and turned petrochemical users away from the market.

“As a petchem user we haven’t bought for more than two weeks,” said a trader.

As sentiment turned at the start of the week and prices started coming off, petrochemical buyers were said to be reassessing their buying but for now were continuing to crack propane and naphtha.

“Propane is very weak and it is much better to carry on cracking propane than butane,” said a source.

Propane coaster prices were assessed around 81% of naphtha by Platts on Wednesday, feeling the pressure of steady flow of exports from the ConocoPhillips terminal at Tees, northeast England. “The situation in Tees is changing quite fast with huge increase in loading rate,” said a source.

The terminal was restarting after maintenance faster than expected, said a trader, adding that as a result there were abundant offers at low prices.

At those levels, petchem users remain more interested in propane than butane, a trader said, adding that demand may subsequently start pushing propane prices higher against naphtha.

By Elza Turner

Edited by Jonathan Dart

The full article is visible via the link below – Pankaj Oswal

http://www.platts.com/latest-news/petrochemicals/london/nwe-butane-still-not-attracting-petrochemical-26269210

Article: Petronas Close to Selling Shale Gas Stake to Indian Oil for $1.1 Billion

The Wall Street Journal is reporting that credible sources have said that Petronas are close to completing a $1.1 billion deal with the Indian Government-owned Indian Oil Corp.  The deal would see Indian Oil own 10% of the shale gas assets gained through Petronas’ acquisition of  Progress Energy Resources Corp. Indian Oil will not have access to ‘1.9 trillion cubic feet of proved and probable gas reserves in British Columbia’.  This represents a strong push by Indian Oil towards diversifying its production portfolio.

Malaysia’s Petroliam Nasional Bhd, or Petronas, is close to selling 10% of the shale gas assets from its recently acquired Progress Energy Resources Corp. to state-owned refiner Indian Oil Corp. for around $1.1 billion, people familiar with the matter said Tuesday.

Petronas bought Canada’s Progress, a company focused on natural gas assets in British Columbia, in a $5 billion-plus transaction last year. Soon after, it sold a 10% stake in its planned liquefied natural gas facility and shale gas project to Japan Petroleum Exploration Co. Petronas is planning to build a liquefied natural gas terminal off Canada’s Pacific Coast, aimed at exporting natural gas to Asian markets.

The deal could buck a trend for Indian oil companies. Indian oil giants have had limited success in buying overseas oil and gas assets, in some cases losing out to Chinese rivals that offer a range of financing and infrastructure deals with their purchases, especially in developing markets.

With access to Progress, Indian Oil will be getting into an asset that has more than 1.9 trillion cubic feet of proved and probable gas reserves in British Columbia. Indian Oil’s plan to take 10% will also include an offtake agreement for the Indian energy company, one of the people said, giving the Indian company a set amount of Progress’ output in exchange for its investment.

It was unclear whether the Indian company was going to invest in the LNG facility as well. Petronas has said it was prepared to invest $20 billion in a pipeline and LNG project in British Columbia in a bid to make North America into a global export hub for natural gas. Such export terminals are targeted at feeding Asia’s growing demand for energy sources like natural gas. Petronas plans to make a final investment decision on the LNG project by late 2014 and start commercial operations by the end of 2018.

An Indian Oil spokesman didn’t immediately comment on the 10% sale of the shale gas assets. A senior official, who declined to be named, said that talks are ongoing but have yet to take shape. A Petronas spokesman declined to comment.

Petronas is one of a number of energy giants vying to develop Canada’s gas export industry. Others with projects in western Canada include Royal Dutch Shell, which has partnered with Japan’s Mitsubishi Corp. Korea Gas Corp. and PetroChina Co. Energy firms Chevron Corp. and Apache Corp. have another rival LNG joint venture in the region.

China is already deeply embedded in Canada’s shale industry, through a string of deals like Cnooc Ltd.’s $15.1 billion acquisition of Nexen Inc. and PetroChina’s joint venture with oil and gas producer Encana Corp.

By Cynthia Koons, Jason Ng and Kenan Machedo.

The full article is visible via the link below – Pankaj Oswal

http://online.wsj.com/article/SB10001424127887324549004579066683214296284.html

Article: Rupee’s dive hits Indian petrochemicals demand, limits trade

Indian domestic petrochemical demand is reeling following recent sharp devaluations of the rupee.  Indian buyers are having a tough time meeting increased import costs – and this is having a global effect, particularly for sellers from the Middle East, who often trade excess produce to India.  Polymer buyers are being especially cautious at this time in the hope that the rupee regains its strength.

India’s petrochemical markets have been reeling from a rapid fall in the the rupee, with the impact greatest on the polymer sector, as buyers in the country shy away and sellers struggle to transfer the increased import cost to domestic sales prices.

 Petrochemical prices on a CFR South Asia basis have lagged increases in CFR China and Northeast Asia prices, but have led the way down when the other regional CFR prices headed south, according to Platts data.

India’s rupee resumed its downward trend against the dollar on Friday, following gains on August 29.

The rupee has lost 3.5% of its value in the past week to trade around 66.69 to the dollar August 30 afternoon Indian time, although it was up from a record closing low of 68.80 on August 28.

indian rupee us dollar

Of the various petrochemical products, demand for polymers was hit hardest as the country’s polymer converters were struggling with the high import costs.

This in turn hit Middle East polymer producers as they typically export their surplus to India — one of their main markets — where buyers were now backing off on the weaker rupee.

These Middle East producers were forced to source for outlets elsewhere. For instance, some polymer trading houses in Dubai have been directing their cargoes to buyers in Africa instead of India.

“I have not exported even a kilogram of cargo to India for the past three months as even regular customers do not want to import now,” a Dubai-based trader said.

“Economies in Africa are doing much better and this probably reflects in their currencies that have not been impacted by the strengthening of dollar.”

Meanwhile, Indian polymer converters have been lamenting about the falling rupee, and have switched their focus from the import market to the domestic market for feedstock.

“It is difficult for importers. If positions are open, they will have big risks,” a trader said.

By Anton Ferkov, Fumiko Dobashi, Chen Huixin, Wong Wen Yin, Michelle Kim, and Shashank Shekhar

The full article is visible via the link below – Pankaj Oswal

http://www.platts.com/news-feature/2013/petrochemicals/indian-rupee/index