Q4 upturns offer some relief after poor year for majors; large downstream restructures planned; Lubrizol announce $1bn investment plan; positive results for Ashland; Sinopec gain Singapore go-ahead; UK companies active in Asia; Saab is saved.
In a very busy corporate start to the calendar year, quarterly figures emerged from the lubes industry, with signs of returning confidence amongst producers but with tough organisational challenges.
The majors showed a general pattern of strong Q4 results against Q3 2009, but overall poor quarterly and annual returns against 2008. Upstream largely provided some positive balance to poor downstream performances - blamed on reduced demand and the challenging recessionary year.
Shell was possibly the worst hit, with full year earnings of $9.8bn, from $31.4bn in the previous year. Shell Chief Executive Peter Voser is looking for $1bn in cost cutting, mainly from downstream for 2010. Despite showing a sharp year-on-year Q4 improvement, BP also declared a 45% reduction in profits for the year at $14bn, stating their intention to focus on cost reduction in 2010. And while Exxon Chairman Rex Tillerson was positive about the company's delivery of "strong business results" which "built on our long-term focus", the figures themselves showed a 23% drop in Q4 earnings against 2008 at $6,050m, and a full year some 56% lower at $19.4bn.
Shell was not the only one indicating a major restructure in the coming year. Chevron also revealed plans for global changes to its downstream activities, involving a "leaner organisation with fewer positions" according to company spokesman Lloyd Avram. The news came as Chevron announced $3.1bn in Q4 net income, some $1.8bn (37%) down on the same time last year.
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Lubrizol are looking ahead with a more upbeat ten year plan. The phased strategy will involve more than $1bn in investment, with more than $200m being used to develop a wholly-owned manufacturing site in the Shuhai Gaolan Port Economic Zone in Southern China, with building planned to start at the end of the year. Other money will be used to upgrade and enhance existing worldwide Lubrizol infrastructure.
Valvoline owners, Ashland, also reported encouraging figures for their first fiscal quarter thanks to a combination of improved demand, higher margins and significant cost cutting. Its $86m earnings were set against a $119m lost in the same period last year, although the latter was a result of a number of one-off costs. Otherwise depressed sales were buoyed by a 22% increase from the consumer division.
Elsewhere in Asia, China's Petroleum and Chemical Corporation (Sinopec) received the go-ahead from the Chinese regulator NDRC to build a new lubricants plant in Singapore. Sinopec aimed to increase its 169m tons of crude production by 15m tons in 2009. British energy and private equity company Brascan Capital Ltd has agreed an exclusive distribution deal with Petro China for additives including M30, used in high clean methanol gasoline. The five year agreement is worth €5bn ($7bn).
London-based Hydrodec Energy received good news from Japan with officials approving its waste management technology to treat PCB- contaminated transformer oils. The news is a major step towards Hydrodec building and operating a transformer oil refinery with its Japanese partner Kobelco Eco Solutions. And in India, speciality chemicals producer Deepak Nitrite announced that it would commence global marketing of fuel additives with expected sales of $16-21m.
The on-off-on Saab saga, as reported in last month's OATS Bulletin, was finally resolved when GM agreed the sale of the Swedish brand to Dutch sportscar maker Spyker, despite GM simultaneously starting a wind-down process. The deal is expected to be sealed in February with the wind-down being halted. Spyker CEO, Victor Muller, promises a "bright and exciting future" for the Saab brand. The wind-down was blamed for the withdrawal of a syndicate headed by Formula One supremo Bernie Ecclestone.
On the African continent, Kenyan oil marketing company Kenkobil increased its shareholding in Zambian blending firm Lublend to 25.5% after purchasing 10.5% from Chevron, further strengthening its presence in the country. Meanwhile South African refiner Engen appointed Chemical & Marketing (C&M) as it's official lubricants distributor in Malawi - is first marketing foray into the country.
In Europe, a joint venture between Baltic Oil Terminals and Exoy Holdings seems to be yielding early results after just one month, with Exoy selling 170,000 tonnes of distillates and lubes, 20,000 above target, with a further 80,000 pre-ordered for January.