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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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Saturday, 01 February 20
COAL IS NOT GOING ANYWHERE - MINING REVIEW
The coal sector is living under the constant threat of being blamed by environmentalists as being responsible for a world disaster called global wa ...
Saturday, 01 February 20
CIL PRODUCTION TO NOT EXCEED 640 MILLION TON IN FY20: OFFICIAL - PTI
Hit by disruptions due to a prolonged monsoon, mining major Coal India Ltd’s production in the current fiscal will not exceed 640 million ton ...
Saturday, 01 February 20
WHO PAYS FOR IMO 2020? - FREIGHT WAVES
The United Nations’ International Maritime Organization (IMO) implemented its low-sulfur fuel mandate on January 1, 2020. Full enforcement be ...
Friday, 31 January 20
EIA EXPECTS U.S. ELECTRICITY GENERATION FROM RENEWABLES TO SOON SURPASS NUCLEAR AND COAL
In the latest long-term projections, the U.S Energy Information Administration (EIA) projects electricity generation from renewable sources such as ...
Thursday, 30 January 20
PRIVATE SECTOR COMPANIES SEEK 'LEVEL PLAYING FIELD' FOR COAL BLOCK AUCTION - PTI
Private sector companies scouting opportunities for commercial coal mining in the country are seeking a “level playing field” to encour ...
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- Gujarat Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- Standard Chartered Bank - UAE
- Metalloyd Limited - United Kingdom
- Videocon Industries ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Kepco SPC Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- VISA Power Limited - India
- Sojitz Corporation - Japan
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Binh Thuan Hamico - Vietnam
- South Luzon Thermal Energy Corporation
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Agrawal Coal Company - India
- Goldman Sachs - Singapore
- Renaissance Capital - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- Ambuja Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Electricity Authority, New Zealand
- Independent Power Producers Association of India
- Heidelberg Cement - Germany
- Samtan Co., Ltd - South Korea
- Gujarat Mineral Development Corp Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Bharathi Cement Corporation - India
- Australian Coal Association
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Petrochimia International Co. Ltd.- Taiwan
- LBH Netherlands Bv - Netherlands
- Mercuria Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- IHS Mccloskey Coal Group - USA
- Global Business Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- European Bulk Services B.V. - Netherlands
- Kapuas Tunggal Persada - Indonesia
- Interocean Group of Companies - India
- Indian Oil Corporation Limited
- Bhushan Steel Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Iligan Light & Power Inc, Philippines
- Eastern Energy - Thailand
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- Coastal Gujarat Power Limited - India
- Manunggal Multi Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Orica Mining Services - Indonesia
- Jindal Steel & Power Ltd - India
- Global Green Power PLC Corporation, Philippines
- Lanco Infratech Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- GVK Power & Infra Limited - India
- Central Java Power - Indonesia
- Therma Luzon, Inc, Philippines
- Gujarat Sidhee Cement - India
- Bukit Makmur.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- Sical Logistics Limited - India
- Semirara Mining Corp, Philippines
- Australian Commodity Traders Exchange
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Anglo American - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Port Waratah Coal Services - Australia
- Indika Energy - Indonesia
- Minerals Council of Australia
- Xindia Steels Limited - India
- Bangladesh Power Developement Board
- Riau Bara Harum - Indonesia
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- Indian Energy Exchange, India
- Cement Manufacturers Association - India
- Sarangani Energy Corporation, Philippines
- Siam City Cement PLC, Thailand
- Edison Trading Spa - Italy
- Maharashtra Electricity Regulatory Commission - India
- White Energy Company Limited
- Rio Tinto Coal - Australia
- Banpu Public Company Limited - Thailand
- Makarim & Taira - Indonesia
- Madhucon Powers Ltd - India
- SMG Consultants - Indonesia
- Chettinad Cement Corporation Ltd - India
- PTC India Limited - India
- Mercator Lines Limited - India
- Energy Development Corp, Philippines
- MS Steel International - UAE
- CNBM International Corporation - China
- Borneo Indobara - Indonesia
- Coalindo Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- OPG Power Generation Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- TeaM Sual Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Salva Resources Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Bhatia International Limited - India
- Ministry of Mines - Canada
- Grasim Industreis Ltd - India
- The University of Queensland
- Malabar Cements Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Thiess Contractors Indonesia
- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Leighton Contractors Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- The State Trading Corporation of India Ltd
- McConnell Dowell - Australia
- Parry Sugars Refinery, India
- Georgia Ports Authority, United States
- Bayan Resources Tbk. - Indonesia
- ICICI Bank Limited - India
- Semirara Mining and Power Corporation, Philippines
- Trasteel International SA, Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- AsiaOL BioFuels Corp., Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- IEA Clean Coal Centre - UK
- Tata Chemicals Ltd - India
- Kartika Selabumi Mining - Indonesia
- Simpson Spence & Young - Indonesia
- Dalmia Cement Bharat India
- Uttam Galva Steels Limited - India
- Savvy Resources Ltd - HongKong
- Price Waterhouse Coopers - Russia
- Latin American Coal - Colombia
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coal and Oil Company - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Mjunction Services Limited - India
- Barasentosa Lestari - Indonesia
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Baramulti Group, Indonesia
- Merrill Lynch Commodities Europe
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- GMR Energy Limited - India
- India Bulls Power Limited - India
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- Mintek Dendrill Indonesia
- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- Oldendorff Carriers - Singapore
- Attock Cement Pakistan Limited
- Aboitiz Power Corporation - Philippines
- Electricity Generating Authority of Thailand
- Timah Investasi Mineral - Indoneisa
- Marubeni Corporation - India
- Petron Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Deloitte Consulting - India
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- Economic Council, Georgia
- Altura Mining Limited, Indonesia
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- Indogreen Group - Indonesia
- Bhoruka Overseas - Indonesia
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- Sakthi Sugars Limited - India
- Aditya Birla Group - India
- Karaikal Port Pvt Ltd - India
- Siam City Cement - Thailand
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
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