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Wednesday, 12 February 20
REFINING SET FOR A CHALLENGING 2020 - WOOD MACKENZIE
 Downstream isn’t the glamorous end of the oil business. And in Big Oil, it’s typically dwarfed by upstream. Yet having been forced to restructure and focus on costs early this century, downstream’s cash flow has underpinned a third of the Majors’ shareholder returns over the last five years.
But a laser-like focus on costs and efficiency can only take you so far. If the external environment turns against you, downstream is as vulnerable as any part of the business. The Majors’ downstream results for Q4 2019 were among the poorest since 2015. Petrochemicals is part of that story, with earnings suffering from over-investment.
Now we’re also seeing refining margins come under increasing pressure, slipping to five-year lows in the last few weeks of 2019 and the first of 2020. Alan Gelder, VP Refining, identifies two main factors.
Firstly, new regulation on marine fuels was expected to boost refining margins this year – but that hasn’t played out as expected yet. The International Maritime Organization (IMO) regulations require all vessels to reduce the level of sulphur in their engine emissions from 3.5% to 0.5% or less from 1 January.
Essentially, IMO should trigger a shift out of low-value product (High Sulphur Fuel Oil, or HSFO) into higher value Very Low Sulphur Fuel Oil (VLSFO). Refinery capacity to make VLSFO is limited, so marine gasoil, which is closely linked to the price of diesel, would top up any shortfall. This shift to high-value products was expected to drive up refining margins in 2020.
It’s only half happened. The price of VLSFO surged in Q4 and HSFO duly collapsed. The surprise was that there’s been much more VLSFO available than expected. Traders had taken advantage of low-price feedstock in late summer 2019 and built up volumes of VLSFO in storage. When the demand came in, they were ready and cashed in, big time. A single tanker loaded with 2 million barrels of VLSFO could make over US$10/bbl on the spread and pull in US$20 million-plus in cash profit.
Producers with the right crude have also fared well. Santos revealed that it had sold a single cargo of heavy sweet crude, ideal feedstock for VLSFO, at an unheard-of US$30/bbl premium to Brent. Nice work if you can get it.
What didn’t really materialise was higher demand for marine gasoil – it’s just not been needed in the volumes anticipated. Weaker marine demand for gasoil has been compounded by soft demand from heating – a much bigger market – because of warm winter weather in the northern hemisphere and lacklustre economic growth. That’s led to a glut of gasoil in inventory which is depressing refining margins.
Second, global oil demand growth forecasts are falling back sharply – potentially a more fundamental problem. The biggest factor is the coronavirus, so we have reduced our demand forecasts in China by almost 0.6 million b/d for Q1 2020. We now expect China demand to fall year-on-year by 125,000 b/d for the quarter, the worst rate since 2009. Global demand will fall by 250,000 b/d, also the worst in over a decade.
So what’s next for refining?
The VLSFO surplus should be a short-term phenomenon. There’s not enough refining capacity to supply all bunker demand with VLSFO. That gap will have to be met by additional gasoil once the surplus VLSFO in inventory is soaked up, by H2 2020 at the latest.
The prospects for oil demand are more worrying and harder to call. At this stage, we have restricted our adjustments to Q1 and left the rest of the year largely unchanged. If the virus can be contained successfully in the coming weeks, demand could bounce back strongly – much as was the case with SARS in 2003.
Refining margins so far in Q1 suggest it will take a while before refining profitability recovers. Meantime, refiners will do what they must to keep costs down and maximise cash flows, including cutting refinery runs to limit the build-up in inventory. It’s about toughing it out, waiting and hoping for demand – China in particular – to perk up again.
Source: Wood Mackenzie
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Friday, 02 August 24
COAL MARKET DEVELOPMENTS: FALLING PRICES AMID RECORD-HIGH OUTPUT - WORLD BANK
Coal prices inched up in May (m/m) following an 8 percent decline in 2024Q1. The Australian and South African benchmarks have plummeted more ...
Friday, 26 July 24
FUELEU MARITME IS COMING. IS YOUR CHARTERPARTY READY? - GARD
With less than six months to implementation of FuelEU Maritime in EU and EEA trades, there has been little published advice regarding how to alloca ...
Thursday, 04 July 24
INDIA'S COAL PRODUCTION RISES 14% IN JUNE - PTI
The country’s coal production rose by 14.49% to 84.63 million tonne (MT) in June. The country’s coal output was 73.92 MT in June last f ...
Tuesday, 02 July 24
NTPC CAPTIVE COAL OUTPUT GROWS 15% IN Q1; DESPATCH RISES 17%
State-owned NTPC on Monday reported a 15 per cent year-on-year increase in the production of coal from captives mines to 9.862 metric million tonne ...
Friday, 28 June 24
KOSPO INVITED BIDS FOR 400,000 MT OF MINIMUM 4000 NCV COAL FOR FIVE YEARS
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for total 400,000 MT of Low Calorific Value Coal for 5 years starting from July 2024 until ...
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- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- International Coal Ventures Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- IHS Mccloskey Coal Group - USA
- Barasentosa Lestari - Indonesia
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Africa Commodities Group - South Africa
- Energy Development Corp, Philippines
- SMC Global Power, Philippines
- CNBM International Corporation - China
- Mercuria Energy - Indonesia
- Attock Cement Pakistan Limited
- Singapore Mercantile Exchange
- Iligan Light & Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Orica Australia Pty. Ltd.
- Eastern Energy - Thailand
- Coal and Oil Company - UAE
- Sojitz Corporation - Japan
- Wilmar Investment Holdings
- Heidelberg Cement - Germany
- Gujarat Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Oldendorff Carriers - Singapore
- Star Paper Mills Limited - India
- IEA Clean Coal Centre - UK
- Central Electricity Authority - India
- Riau Bara Harum - Indonesia
- Kumho Petrochemical, South Korea
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Antam Resourcindo - Indonesia
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- Straits Asia Resources Limited - Singapore
- Latin American Coal - Colombia
- Electricity Generating Authority of Thailand
- Wood Mackenzie - Singapore
- Chettinad Cement Corporation Ltd - India
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Sakthi Sugars Limited - India
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- Global Green Power PLC Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Samtan Co., Ltd - South Korea
- Dalmia Cement Bharat India
- Directorate General of MIneral and Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Eastern Coal Council - USA
- VISA Power Limited - India
- Xindia Steels Limited - India
- PowerSource Philippines DevCo
- The Treasury - Australian Government
- Indika Energy - Indonesia
- Malabar Cements Ltd - India
- Grasim Industreis Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- TeaM Sual Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Makarim & Taira - Indonesia
- Salva Resources Pvt Ltd - India
- Rio Tinto Coal - Australia
- Maharashtra Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- CIMB Investment Bank - Malaysia
- White Energy Company Limited
- Power Finance Corporation Ltd., India
- SN Aboitiz Power Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- Energy Link Ltd, New Zealand
- Intertek Mineral Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Bukit Makmur.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Marubeni Corporation - India
- ASAPP Information Group - India
- Kartika Selabumi Mining - Indonesia
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- Bulk Trading Sa - Switzerland
- Bharathi Cement Corporation - India
- Medco Energi Mining Internasional
- Maheswari Brothers Coal Limited - India
- Standard Chartered Bank - UAE
- OPG Power Generation Pvt Ltd - India
- Georgia Ports Authority, United States
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- McConnell Dowell - Australia
- Sinarmas Energy and Mining - Indonesia
- Essar Steel Hazira Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bangladesh Power Developement Board
- Commonwealth Bank - Australia
- GMR Energy Limited - India
- GVK Power & Infra Limited - India
- Merrill Lynch Commodities Europe
- India Bulls Power Limited - India
- Indogreen Group - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Electricity Authority, New Zealand
- Formosa Plastics Group - Taiwan
- Siam City Cement PLC, Thailand
- Price Waterhouse Coopers - Russia
- Banpu Public Company Limited - Thailand
- Jindal Steel & Power Ltd - India
- Coalindo Energy - Indonesia
- Orica Mining Services - Indonesia
- Goldman Sachs - Singapore
- Bhatia International Limited - India
- Meralco Power Generation, Philippines
- Edison Trading Spa - Italy
- Indian Energy Exchange, India
- Minerals Council of Australia
- Sical Logistics Limited - India
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Lanco Infratech Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Borneo Indobara - Indonesia
- Uttam Galva Steels Limited - India
- Savvy Resources Ltd - HongKong
- Australian Commodity Traders Exchange
- Thiess Contractors Indonesia
- Kaltim Prima Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Ambuja Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- Port Waratah Coal Services - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Bhoruka Overseas - Indonesia
- Sindya Power Generating Company Private Ltd
- Madhucon Powers Ltd - India
- Tamil Nadu electricity Board
- Agrawal Coal Company - India
- Renaissance Capital - South Africa
- Siam City Cement - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Binh Thuan Hamico - Vietnam
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Altura Mining Limited, Indonesia
- PTC India Limited - India
- Aboitiz Power Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Meenaskhi Energy Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sarangani Energy Corporation, Philippines
- Trasteel International SA, Italy
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- Bhushan Steel Limited - India
- Ministry of Transport, Egypt
- London Commodity Brokers - England
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Sidhee Cement - India
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- Ministry of Finance - Indonesia
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Mjunction Services Limited - India
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- Central Java Power - Indonesia
- Directorate Of Revenue Intelligence - India
- Posco Energy - South Korea
- Ind-Barath Power Infra Limited - India
- Toyota Tsusho Corporation, Japan
- MS Steel International - UAE
- Anglo American - United Kingdom
- Ministry of Mines - Canada
- The State Trading Corporation of India Ltd
- New Zealand Coal & Carbon
- The University of Queensland
- Global Business Power Corporation, Philippines
- Australian Coal Association
- Sree Jayajothi Cements Limited - India
- Videocon Industries ltd - India
- Parry Sugars Refinery, India
- Karaikal Port Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
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