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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, 06 March 20
COLOMBIAN COAL OUTPUT FELL 2% IN 2019 - REUTERS
Coal production in Colombia, the fifth-largest coal exporter in the world, fell 2% to 82.2 million tonnes in 2019 after output at one of the princi ...
Friday, 06 March 20
SOLID BACKING FOR LNG AS A MARINE FUEL - BALTIC EXCHANGE
When it comes to choosing the best fuel on the near horizon to help the international shipping industry shrink its carbon intensity by 2050, DNV GL ...
Friday, 06 March 20
INDONESIA COAL PRICE REFERENCE UP AGAIN THIS MONTH
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised up the benchmark price of Indonesian thermal co ...
Thursday, 05 March 20
PANAMAX: SHIP-OWNERS HAVE MOSTLY BEEN GETTING HIGHER RATES THAN THE LAST DONE - FEARNLEYS
Cape
There is still limited amount of positive news around, with the effects of Corona virus hurting world economy. However, overall average in ...
Thursday, 05 March 20
COAL IMPORTS DOWN IN MAJOR ASIAN MARKETS, AND CORONAVIRUS NOT THE DRIVING FORCE - CLYDE RUSSELL
Asia’s seaborne coal markets stumbled in February and it appears the coronavirus outbreak in China may dodge most of the blame, with the weak ...
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- Simpson Spence & Young - Indonesia
- European Bulk Services B.V. - Netherlands
- Trasteel International SA, Italy
- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
- Latin American Coal - Colombia
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Star Paper Mills Limited - India
- Sojitz Corporation - Japan
- Karbindo Abesyapradhi - Indoneisa
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- Wilmar Investment Holdings
- Mjunction Services Limited - India
- LBH Netherlands Bv - Netherlands
- Baramulti Group, Indonesia
- Metalloyd Limited - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- Aditya Birla Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Baiduri Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- International Coal Ventures Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Banpu Public Company Limited - Thailand
- GMR Energy Limited - India
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- London Commodity Brokers - England
- Gujarat Sidhee Cement - India
- Global Business Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Minerals Council of Australia
- Ministry of Mines - Canada
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Romanian Commodities Exchange
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- PTC India Limited - India
- Malabar Cements Ltd - India
- Medco Energi Mining Internasional
- Global Green Power PLC Corporation, Philippines
- Chamber of Mines of South Africa
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- Sree Jayajothi Cements Limited - India
- Riau Bara Harum - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Altura Mining Limited, Indonesia
- Global Coal Blending Company Limited - Australia
- Coal and Oil Company - UAE
- Electricity Generating Authority of Thailand
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- Indian Energy Exchange, India
- Tata Chemicals Ltd - India
- Central Electricity Authority - India
- ASAPP Information Group - India
- The Treasury - Australian Government
- Dalmia Cement Bharat India
- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- Bhatia International Limited - India
- Anglo American - United Kingdom
- Savvy Resources Ltd - HongKong
- Energy Link Ltd, New Zealand
- Meralco Power Generation, Philippines
- Central Java Power - Indonesia
- Indogreen Group - Indonesia
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Goldman Sachs - Singapore
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- Indian Oil Corporation Limited
- Ministry of Transport, Egypt
- Grasim Industreis Ltd - India
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Bangladesh Power Developement Board
- TeaM Sual Corporation - Philippines
- Energy Development Corp, Philippines
- Barasentosa Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Vizag Seaport Private Limited - India
- Pendopo Energi Batubara - Indonesia
- New Zealand Coal & Carbon
- Jorong Barutama Greston.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- PNOC Exploration Corporation - Philippines
- Siam City Cement PLC, Thailand
- Heidelberg Cement - Germany
- Sakthi Sugars Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Renaissance Capital - South Africa
- Australian Commodity Traders Exchange
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Lanco Infratech Ltd - India
- Kepco SPC Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Timah Investasi Mineral - Indoneisa
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Sindya Power Generating Company Private Ltd
- PetroVietnam Power Coal Import and Supply Company
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Manunggal Multi Energi - Indonesia
- Power Finance Corporation Ltd., India
- Indo Tambangraya Megah - Indonesia
- IHS Mccloskey Coal Group - USA
- Deloitte Consulting - India
- Alfred C Toepfer International GmbH - Germany
- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- Orica Australia Pty. Ltd.
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- Oldendorff Carriers - Singapore
- Mercuria Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Bulk Trading Sa - Switzerland
- India Bulls Power Limited - India
- Semirara Mining Corp, Philippines
- Planning Commission, India
- Africa Commodities Group - South Africa
- Formosa Plastics Group - Taiwan
- Jindal Steel & Power Ltd - India
- Parry Sugars Refinery, India
- Carbofer General Trading SA - India
- San Jose City I Power Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Bayan Resources Tbk. - Indonesia
- Marubeni Corporation - India
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Mintek Dendrill Indonesia
- Bukit Makmur.PT - Indonesia
- GVK Power & Infra Limited - India
- Economic Council, Georgia
- Thai Mozambique Logistica
- Posco Energy - South Korea
- Agrawal Coal Company - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sinarmas Energy and Mining - Indonesia
- Orica Mining Services - Indonesia
- Singapore Mercantile Exchange
- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
- Uttam Galva Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Attock Cement Pakistan Limited
- Siam City Cement - Thailand
- Aboitiz Power Corporation - Philippines
- Eastern Energy - Thailand
- Commonwealth Bank - Australia
- Ambuja Cements Ltd - India
- Jaiprakash Power Ventures ltd
- Miang Besar Coal Terminal - Indonesia
- VISA Power Limited - India
- Toyota Tsusho Corporation, Japan
- Karaikal Port Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Holcim Trading Pte Ltd - Singapore
- Sarangani Energy Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Antam Resourcindo - Indonesia
- Ind-Barath Power Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- Sical Logistics Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Globalindo Alam Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Tamil Nadu electricity Board
- Kumho Petrochemical, South Korea
- Kartika Selabumi Mining - Indonesia
- Borneo Indobara - Indonesia
- Merrill Lynch Commodities Europe
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- White Energy Company Limited
- GN Power Mariveles Coal Plant, Philippines
- Coalindo Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Krishnapatnam Port Company Ltd. - India
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- PowerSource Philippines DevCo
- Kapuas Tunggal Persada - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bank of Tokyo Mitsubishi UFJ Ltd
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