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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, 07 February 20
CIL LOOKING TO TAP NON-POWER SECTORS FOR INCREMENTAL COAL, PTI REPORTED
The miner is looking to ramp up production to meet its targets for the current fiscal at a time when the economic slowdown is impacting demand for ...
Friday, 07 February 20
VIRUS - HIT CHINA MAY NEED MORE IMPORTS OF COAL. NOW COMES THE TRICKY PART - SHIPPING IT THERE: REUTERS
China’s domestic coal mines are struggling to ramp up production in the face of the ongoing coronavirus epidemic. That’s a situation th ...
Friday, 07 February 20
CORONAVIRUS IMPACTING THE GLOBAL SHIPPING INDUSTRY - BIMCO
The outbreak of the novel Coronavirus has dented market sentiment and spooked markets around the globe. When China sneezes, we all catch the flu. T ...
Thursday, 06 February 20
CAPE: WEAK SUPPLY/DEMAND RATIO THE STREETS REMAIN BLOODY FOR THE BIG SHIPS - FEARNLEYS
Cape: With still a weak supply/demand ratio the streets remain bloody for the big ships, and actual spot earnings are close to zero on main short-h ...
Thursday, 06 February 20
CHINESE DEMAND KEY UNCERTAINTY FOR SEABORNE COAL MARKET IN 2020 - THE BRICS POST
Coal trader Noble Resources head of research Rodrigo Echeverri Cardozo had penciled in a 3 Mt drop in Chinese import demand for 2020, but it could ...
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- Ministry of Finance - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Barasentosa Lestari - Indonesia
- Minerals Council of Australia
- Jindal Steel & Power Ltd - India
- Manunggal Multi Energi - Indonesia
- Altura Mining Limited, Indonesia
- Indogreen Group - Indonesia
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- PNOC Exploration Corporation - Philippines
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- Port Waratah Coal Services - Australia
- Meralco Power Generation, Philippines
- Edison Trading Spa - Italy
- Ind-Barath Power Infra Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
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- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- Vijayanagar Sugar Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Romanian Commodities Exchange
- Semirara Mining and Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Cement Manufacturers Association - India
- Wood Mackenzie - Singapore
- Australian Coal Association
- Indonesian Coal Mining Association
- Mercuria Energy - Indonesia
- Merrill Lynch Commodities Europe
- Renaissance Capital - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- Australian Commodity Traders Exchange
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Gujarat Electricity Regulatory Commission - India
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- Commonwealth Bank - Australia
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- Bhatia International Limited - India
- Star Paper Mills Limited - India
- Petron Corporation, Philippines
- Medco Energi Mining Internasional
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- The University of Queensland
- Ceylon Electricity Board - Sri Lanka
- Independent Power Producers Association of India
- White Energy Company Limited
- Miang Besar Coal Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- European Bulk Services B.V. - Netherlands
- New Zealand Coal & Carbon
- GAC Shipping (India) Pvt Ltd
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- Aditya Birla Group - India
- Tamil Nadu electricity Board
- CIMB Investment Bank - Malaysia
- Baramulti Group, Indonesia
- Coastal Gujarat Power Limited - India
- Posco Energy - South Korea
- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- The State Trading Corporation of India Ltd
- Electricity Authority, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- Kobexindo Tractors - Indoneisa
- Indian Oil Corporation Limited
- Banpu Public Company Limited - Thailand
- Georgia Ports Authority, United States
- PTC India Limited - India
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- SMC Global Power, Philippines
- Bukit Makmur.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Tata Chemicals Ltd - India
- Kepco SPC Power Corporation, Philippines
- Xindia Steels Limited - India
- International Coal Ventures Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- MS Steel International - UAE
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- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
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- Singapore Mercantile Exchange
- Planning Commission, India
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- Sical Logistics Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Attock Cement Pakistan Limited
- Therma Luzon, Inc, Philippines
- Antam Resourcindo - Indonesia
- SMG Consultants - Indonesia
- Orica Mining Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Standard Chartered Bank - UAE
- LBH Netherlands Bv - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Aboitiz Power Corporation - Philippines
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- Timah Investasi Mineral - Indoneisa
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Metalloyd Limited - United Kingdom
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
- Grasim Industreis Ltd - India
- Mintek Dendrill Indonesia
- Economic Council, Georgia
- Sakthi Sugars Limited - India
- Holcim Trading Pte Ltd - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Deloitte Consulting - India
- VISA Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Power Finance Corporation Ltd., India
- Eastern Energy - Thailand
- Billiton Holdings Pty Ltd - Australia
- Sinarmas Energy and Mining - Indonesia
- Oldendorff Carriers - Singapore
- Straits Asia Resources Limited - Singapore
- Marubeni Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Mjunction Services Limited - India
- Borneo Indobara - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bhushan Steel Limited - India
- London Commodity Brokers - England
- Indo Tambangraya Megah - Indonesia
- Thiess Contractors Indonesia
- Semirara Mining Corp, Philippines
- CNBM International Corporation - China
- PowerSource Philippines DevCo
- IHS Mccloskey Coal Group - USA
- Intertek Mineral Services - Indonesia
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- Bharathi Cement Corporation - India
- South Luzon Thermal Energy Corporation
- Vedanta Resources Plc - India
- Rio Tinto Coal - Australia
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- SN Aboitiz Power Inc, Philippines
- Heidelberg Cement - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- Vizag Seaport Private Limited - India
- Wilmar Investment Holdings
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- Gujarat Sidhee Cement - India
- Coalindo Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Africa Commodities Group - South Africa
- Thai Mozambique Logistica
- Global Green Power PLC Corporation, Philippines
- Uttam Galva Steels Limited - India
- Ministry of Transport, Egypt
- Parliament of New Zealand
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- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Bhoruka Overseas - Indonesia
- Parry Sugars Refinery, India
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- Kohat Cement Company Ltd. - Pakistan
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- Coal and Oil Company - UAE
- Malabar Cements Ltd - India
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- Makarim & Taira - Indonesia
- Sarangani Energy Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Lanco Infratech Ltd - India
- Directorate Of Revenue Intelligence - India
- Global Business Power Corporation, Philippines
- India Bulls Power Limited - India
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