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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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Tuesday, 10 March 20
CHINA'S COAL-RICH PROVINCE ENSURES ENERGY SUPPLY AMID EPIDEMIC - XINHUA
China’s coal-rich province of Shanxi has seen more than 500 coal mines resume production in February, which ensured energy supply amid the ou ...
Monday, 09 March 20
OPEC+ 'NO DEAL' A BLOW TO THE MARKET - WOOD MACKENZIE
Speaking after today’s OPEC+ meeting broke up, Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie, said: “Today’s o ...
Monday, 09 March 20
KOREA EAST-WEST POWER INVITED BIDS FOR 150,000 MT OF MIN 4,400 - MAX 5,499 NAR COAL
COALspot.com: KOREA EAST-WEST POWER CO. LTD. of South Korea has issued an international tender for total 150,000 MT of LCV coal for May – Jun ...
Sunday, 08 March 20
SUPRAMAX: A 55,000DWT VESSEL FIXING DELIVERY FROM EAST KALIMANTAN FOR A TRIP TO VIETNAM AT $9,100 - BALTIC BRIEFING
SUPRAMAX/ULTRAMAX - A 56,000DWT VESSEL FIXED DELIVERY SOUTH CHINA TRIP VIA INDONESIA, REDELIVERY EAST COAST INDIA, IN THE $6,000S
SUPRAMAX/U ...
Friday, 06 March 20
CHINA RESUMES 83.4 PCT COAL PRODUCTION CAPACITY AMID EPIDEMIC - XINHUA
China has resumed 83.4 percent of its coal production capacity amid the fight against the novel coronavirus outbreak, the National Energy Administr ...
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- Savvy Resources Ltd - HongKong
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Asmin Koalindo Tuhup - Indonesia
- Planning Commission, India
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- Metalloyd Limited - United Kingdom
- Bulk Trading Sa - Switzerland
- Energy Development Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- White Energy Company Limited
- Coalindo Energy - Indonesia
- Mercuria Energy - Indonesia
- PowerSource Philippines DevCo
- Ministry of Finance - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Deloitte Consulting - India
- Kapuas Tunggal Persada - Indonesia
- Chettinad Cement Corporation Ltd - India
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Directorate Of Revenue Intelligence - India
- Central Electricity Authority - India
- Indonesian Coal Mining Association
- Kaltim Prima Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Karaikal Port Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Aditya Birla Group - India
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- Ceylon Electricity Board - Sri Lanka
- Altura Mining Limited, Indonesia
- Bayan Resources Tbk. - Indonesia
- Indika Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Madhucon Powers Ltd - India
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- Videocon Industries ltd - India
- Tamil Nadu electricity Board
- Kepco SPC Power Corporation, Philippines
- ASAPP Information Group - India
- Meenaskhi Energy Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Merrill Lynch Commodities Europe
- Indo Tambangraya Megah - Indonesia
- Kumho Petrochemical, South Korea
- Formosa Plastics Group - Taiwan
- Interocean Group of Companies - India
- Australian Coal Association
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- Orica Mining Services - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- London Commodity Brokers - England
- Salva Resources Pvt Ltd - India
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Romanian Commodities Exchange
- Jaiprakash Power Ventures ltd
- IEA Clean Coal Centre - UK
- Cement Manufacturers Association - India
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Ambuja Cements Ltd - India
- Singapore Mercantile Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- McConnell Dowell - Australia
- CNBM International Corporation - China
- Therma Luzon, Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- PTC India Limited - India
- Star Paper Mills Limited - India
- Bhatia International Limited - India
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Coastal Gujarat Power Limited - India
- Samtan Co., Ltd - South Korea
- GVK Power & Infra Limited - India
- Electricity Generating Authority of Thailand
- Krishnapatnam Port Company Ltd. - India
- The State Trading Corporation of India Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- The Treasury - Australian Government
- Lanco Infratech Ltd - India
- PNOC Exploration Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- Electricity Authority, New Zealand
- Africa Commodities Group - South Africa
- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Grasim Industreis Ltd - India
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Essar Steel Hazira Ltd - India
- MS Steel International - UAE
- Eastern Coal Council - USA
- Attock Cement Pakistan Limited
- VISA Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Chamber of Mines of South Africa
- Semirara Mining Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- International Coal Ventures Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Bharathi Cement Corporation - India
- Oldendorff Carriers - Singapore
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
- Coal and Oil Company - UAE
- SMC Global Power, Philippines
- Wilmar Investment Holdings
- New Zealand Coal & Carbon
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Binh Thuan Hamico - Vietnam
- Borneo Indobara - Indonesia
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- Globalindo Alam Lestari - Indonesia
- Power Finance Corporation Ltd., India
- Parry Sugars Refinery, India
- Baramulti Group, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Sical Logistics Limited - India
- Makarim & Taira - Indonesia
- Malabar Cements Ltd - India
- Edison Trading Spa - Italy
- Bhushan Steel Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- OPG Power Generation Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Ind-Barath Power Infra Limited - India
- Ministry of Mines - Canada
- Kohat Cement Company Ltd. - Pakistan
- Semirara Mining and Power Corporation, Philippines
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Posco Energy - South Korea
- The University of Queensland
- European Bulk Services B.V. - Netherlands
- Xindia Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Tata Chemicals Ltd - India
- GMR Energy Limited - India
- Georgia Ports Authority, United States
- Australian Commodity Traders Exchange
- Orica Australia Pty. Ltd.
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Energy Link Ltd, New Zealand
- TeaM Sual Corporation - Philippines
- Trasteel International SA, Italy
- Sinarmas Energy and Mining - Indonesia
- Bangladesh Power Developement Board
- India Bulls Power Limited - India
- Kideco Jaya Agung - Indonesia
- Commonwealth Bank - Australia
- Riau Bara Harum - Indonesia
- Indogreen Group - Indonesia
- Indian Energy Exchange, India
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Global Business Power Corporation, Philippines
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Larsen & Toubro Limited - India
- Ministry of Transport, Egypt
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Toyota Tsusho Corporation, Japan
- Aboitiz Power Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Minerals Council of Australia
- Maheswari Brothers Coal Limited - India
- Bukit Baiduri Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thiess Contractors Indonesia
- Vedanta Resources Plc - India
- Renaissance Capital - South Africa
- Thai Mozambique Logistica
- LBH Netherlands Bv - Netherlands
- Manunggal Multi Energi - Indonesia
- Agrawal Coal Company - India
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