Petrochemical production loss may impact earnings

Oil declined around 8 percent during May reversing the gains seen in the previous month. Natural gas gained 24 percent continuing the gains seen in the previous month. All petrochemical products, except polystyrene, declined during the month, contrary to the previous month’s trend. In terms of stock performance, all stocks declined with the exception of SIIG and Petrochem, which closed flat. Those figures were indicated in a new report issued by NCB Capital.
The report illustrated that operations at some facilities of SABIC, SAFCO, Saudi Kayan, Sipchem and APPC were halted due to planned and unplanned shutdowns.
The resultant production loss is likely to impact their 2Q12 earnings.
Affiliates of Sahara and Tasnee signed financing agreements with Saudi Arabian based banks to fund their ongoing project.
Saudi Kayan initiated a preliminary engineering study to build a high-density polyethylene and ultra-high molecular weight polyethylene plant in the Kingdom.
It also aims to start operations at its 300,000 mtpa LDPE plant in 3Q12. Sipchem plans to commence operations at its ethyl acetate/butyl acetate plant in 2Q13. APPC joined with Bayegan Group to construct a propane dehydrogenation and polypropylene facility in Turkey.
According to the report, SABIC is likely to extend the shutdown at its 700,000 mtpa MEG plant to the end of May or June 2012 due to some mechanical issues.
“The plant was closed in early April 2012 for a 10-day long scheduled maintenance. SABIC’s subsidiary SHARQ is likely to close its 450,000 mtpa MEG plant for 25 days in the second half of May 2012,” the report said.
Turnaround work commenced at SAFCO’s ammonia plant (1.1mn mtpa) on April 7, 2012, for a period of 30-40 days.
Saudi Kayan’s facilities producing HDPE (400,000 mtpa), polypropylene (350,000 mtpa) and ethylene glycol (650,000 mtpa) resumed operations on May 10, 2012. These plants were closed on May 9, 2012, due to technical failure in a steam-producing unit.
The company expects this shutdown to have a limited impact given its short duration.
On April 25, 2012, Saudi Kayan announced that it awarded a contract to Jacob Engineering to start a preliminary engineering study to build a high-density polyethylene and ultra-high molecular weight polyethylene plant in Jubail. This facility would have an annual production capacity of 35,000 mt. In addition, Saudi Kayan plans to start operations at its 300,000 mtpa LDPE plant in 3Q12.
Sipchem conducted a one-month maintenance at its IAC plant (400,000 mtpa) in April 2012. Sipchem’s ethyl acetate/butyl acetate plant (100,000 mtpa) is expected to start operations in 2Q13.
This facility is part of Sipchem’s Phase 3 expansion plan. On May 5, 2012, Sipchem signed a financing agreement of SR 164.8 million with SIDF to fund the ethyl acetate/butyl acetate plant.
On May 8, 2012, Sahara and Tasnee announced that their affiliates signed a Shariah-compliant financing agreement of SR 5.1 billion with a group of Kingdom-based banks. The proceeds would be used to finance the acrylic acid and its derivative projects that are expected to commence operations in 1Q13. Other partners in these projects are US-based firm Dow Chemicals and Germany-based Evonik Industries. The tenure of the financing agreement is 16 years, and it would be repaid on a semi-annual payments.
On April 30, 2012, Sahara’s 50 percent owned affiliate Sahara and Maaden Petrochemical Co. signed a commitment letter of SR 1.9 billion with three Saudi-based banks to fund its ethylene dichloride and caustic soda projects. This facility is expected to start operations in 1Q13. The tenure of agreement is 15 years, and it would be repaid on a semi-annual basis.
APPC initiated a scheduled three-week maintenance at its propylene and polypropylene facilities on May 1, 2012. The facilities are likely to resume operations on May 22, 2012. The resultant production loss could likely impact APPC’s 2Q12 results negatively.