Page 16 - Euroil Week 20 2020

EurOil PROJECTS & COMPANIES EurOil
Ineos refining JV requests UK state support
UK
Ineos’ joint venture with PetroChina has asked for an emergency loan.
A refining joint venture between UK petro- chemicals group Ineos and China’s state-owned PetroChina has asked for an emergency loan in light of the collapse in fuel demand caused by the coronavirus (COVID-19) crisis, the UK’s Sky News reported on May 12, citing sources.
Sources said Petroineos, which operates a 200,000 barrel per day (bpd) refinery in Grangemouth, Scotland, had been talks for weeks with the Scottish and UK government on a potential loan package. It has indicated that it needs up to GBP500mn ($605mn) in state sup- port, Sky News sources said, cautioning that a formal request could be for a substantially smaller sum. Its structure could also differ from a conventional commercial loan package, they said.
The Grangemouth oil refinery is among a number of UK refineries to have wound down operations in recent months in response to
COVID-19 travel restrictions. It shut down two of its three processing trains in late March, according to Reuters.
Ineos is owned owned by Sir Jim Ratcliffe, one of the UK’s richest men with an estimated net worth of £18bn ($21.8bn). The businessman moved to Monaco last year, with the UK’s Sun- day Times reporting that the reason was to save GBP4bn in tax.
Other non-resident billionaires such as Sir Richard Branson have also drawn criticism for requesting government loans to support their businesses. Branson warned that his Vir- gin Atlantic airline would collapse without this support.
Petroineos owns a second 220,000 bpd refin- ery in France, with the two plants producing a combined 18mn tonnes per year (tpy) of petro- leum products. ™
Petrofac axes more costs
UK
Petrofac lost a major UAE contract earlier this year.
UK services provider Petrofac has taken further steps to cut costs and protect its balance sheet.
The company announced in April it would cut capital expenditure this year by 40%, while also reducing its personnel by 20% and lowering salaries. These actions were expected to free up to $100mn from overhead and project support costs in 2020, rising to $200mn in 2021.
In a trading update on May 15, the firm said it now anticipated bringing down these costs by at least $125mn in 2020, with the saving in 2021 remaining at $200mn. It is aiming to save a fur- ther $145mn this year from the cut to capex and the suspension of dividends.
“In this unprecedented period, we are work- ing tirelessly to safeguard the interests of all our stakeholders. We have implemented stringent health measures to protect our people, cli- ents and suppliers,” Petrofac’s chairman Rene Medori said. “We are working hard to mitigate the disruption caused by COVID-19 on project progress and lower oil prices on our bidding pipeline. And we have taken swift and decision action to significantly reduce costs, retain our competitiveness and preserve the strength of our balance sheet.”
Coronavirus (COVID-19) has led to sig- nificant disruptions at Petrofac’s engineering and construction division. While projects are still moving forward, there has been delays in
construction activity that cannot be made up for in 2020, the firm said.
Petrofac has also taken a hit from clients reviewing their investment plans in response to the oil price collapse.
“Whilst our bidding pipeline remains healthy and we are well-positioned on several opportu- nities this year, we are now prudently antici- pating that the majority of 2020 tenders will be delayed until 2021,” the company said.
On the upside, contract extensions in the engineering and production services (EPS) segment remain strong, with Petrofac having secured $500mn in new orders so far this year. These included renewals worth more than $100mn from an international oil company (IOC), as well as additional extensions from BP.
However, Petrofac suffered a major blow last month when the UAE’s ADNOC cancelled awards valued at $1.65bn for services at the Dalma sour gas project. Petrofac had secured the contracts through its joint venture with Malay- sia’s SapuraKencana, and its share was $1.5bn.
Petrofac said it was difficult to say how COVID-19 and low oil prices would affect its business moving forward. But it said its order book was “healthy,” and that $1.2bn in liquid- ity and its cuts to spending would help steer it through the downturn. ™
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w w w . N E W S B A S E . c o m Week 20 21•May•2020