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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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Wednesday, 19 February 20
MINERS WELCOME INDONESIA'S NEW JOBS BILL THAT COULD SPUR COAL GROWTH - REUTERS
Miners have welcomed proposed changes to Indonesian mining rules under a new law aimed at boosting investment, though critics are concerned that th ...
Wednesday, 19 February 20
AS OCEAN TEMPERATURES RISE, SHIPOWNERS LOOK FOR WAYS TO COPE - WARTSILA
The world is heating up, and its oceans are no exception. According to the International Panel on Climate Change (IPCC), the oceans absorb the majo ...
Wednesday, 19 February 20
MARKET INSIGHT - INTERMODAL
The coronavirus outbreak is estimated to negatively affect global economy by at least EUR400bn this year, representing around the 0.4% of global GD ...
Tuesday, 18 February 20
WEEKLY MARKET ANALYSIS - ALLIED
Under such poorly performing market circumstances, many usually take the historical approach, in order to better understand and further analyze the ...
Tuesday, 18 February 20
ADARO SHIPPED 27 PERCENT OF ITS TOTAL COAL PRODUCTION IN 2019 TO INDIA AND CHINA
PT Adaro Energy Tbk (AE) produced 58.03 Mt of coal from PT Adaro Indonesia (AI), Balangan Coal Companies and Adaro Me ...
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- Riau Bara Harum - Indonesia
- Africa Commodities Group - South Africa
- Essar Steel Hazira Ltd - India
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- Directorate General of MIneral and Coal - Indonesia
- Mercator Lines Limited - India
- Indian Energy Exchange, India
- Borneo Indobara - Indonesia
- Bharathi Cement Corporation - India
- Energy Development Corp, Philippines
- Lanco Infratech Ltd - India
- New Zealand Coal & Carbon
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Agrawal Coal Company - India
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- Parry Sugars Refinery, India
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Parliament of New Zealand
- Xindia Steels Limited - India
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- Thiess Contractors Indonesia
- Bangladesh Power Developement Board
- Eastern Energy - Thailand
- Australian Coal Association
- Bhoruka Overseas - Indonesia
- Singapore Mercantile Exchange
- Tata Chemicals Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Georgia Ports Authority, United States
- Indika Energy - Indonesia
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Billiton Holdings Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Banpu Public Company Limited - Thailand
- Planning Commission, India
- TeaM Sual Corporation - Philippines
- Antam Resourcindo - Indonesia
- San Jose City I Power Corp, Philippines
- Bhushan Steel Limited - India
- European Bulk Services B.V. - Netherlands
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Electricity Authority, New Zealand
- Sical Logistics Limited - India
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- The University of Queensland
- Samtan Co., Ltd - South Korea
- ASAPP Information Group - India
- Mercuria Energy - Indonesia
- PTC India Limited - India
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Jaiprakash Power Ventures ltd
- Aboitiz Power Corporation - Philippines
- Bulk Trading Sa - Switzerland
- The State Trading Corporation of India Ltd
- Neyveli Lignite Corporation Ltd, - India
- Standard Chartered Bank - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- Ambuja Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Rashtriya Ispat Nigam Limited - India
- Altura Mining Limited, Indonesia
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Petron Corporation, Philippines
- Siam City Cement PLC, Thailand
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Attock Cement Pakistan Limited
- Vedanta Resources Plc - India
- Savvy Resources Ltd - HongKong
- Minerals Council of Australia
- Kepco SPC Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Uttam Galva Steels Limited - India
- CNBM International Corporation - China
- Heidelberg Cement - Germany
- Madhucon Powers Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- Merrill Lynch Commodities Europe
- Meralco Power Generation, Philippines
- India Bulls Power Limited - India
- Kideco Jaya Agung - Indonesia
- Salva Resources Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- Australian Commodity Traders Exchange
- Meenaskhi Energy Private Limited - India
- Indo Tambangraya Megah - Indonesia
- ICICI Bank Limited - India
- Baramulti Group, Indonesia
- Coastal Gujarat Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Asmin Koalindo Tuhup - Indonesia
- Romanian Commodities Exchange
- Goldman Sachs - Singapore
- Trasteel International SA, Italy
- The Treasury - Australian Government
- SMC Global Power, Philippines
- Thai Mozambique Logistica
- IEA Clean Coal Centre - UK
- IHS Mccloskey Coal Group - USA
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- Medco Energi Mining Internasional
- GVK Power & Infra Limited - India
- Eastern Coal Council - USA
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Cigading International Bulk Terminal - Indonesia
- Mjunction Services Limited - India
- Ministry of Transport, Egypt
- Timah Investasi Mineral - Indoneisa
- Aditya Birla Group - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Simpson Spence & Young - Indonesia
- Maheswari Brothers Coal Limited - India
- Bukit Baiduri Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- GMR Energy Limited - India
- Commonwealth Bank - Australia
- Grasim Industreis Ltd - India
- Chamber of Mines of South Africa
- Wood Mackenzie - Singapore
- PetroVietnam Power Coal Import and Supply Company
- TNB Fuel Sdn Bhd - Malaysia
- Sakthi Sugars Limited - India
- MS Steel International - UAE
- Vizag Seaport Private Limited - India
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Jindal Steel & Power Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- London Commodity Brokers - England
- South Luzon Thermal Energy Corporation
- Interocean Group of Companies - India
- Marubeni Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhatia International Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- Edison Trading Spa - Italy
- Chettinad Cement Corporation Ltd - India
- Ministry of Finance - Indonesia
- Sarangani Energy Corporation, Philippines
- Indonesian Coal Mining Association
- Semirara Mining Corp, Philippines
- Videocon Industries ltd - India
- Renaissance Capital - South Africa
- Sindya Power Generating Company Private Ltd
- Karaikal Port Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement - Thailand
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- Bukit Makmur.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Manunggal Multi Energi - Indonesia
- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Barasentosa Lestari - Indonesia
- Globalindo Alam Lestari - Indonesia
- Energy Link Ltd, New Zealand
- Dalmia Cement Bharat India
- Posco Energy - South Korea
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