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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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Thursday, 23 January 20
COAL-BASED ELECTRICITY GENERATION SURGES 95% IN 2019 - PROFIT PAKISTAN TODAY
Coal-based power generation jumped 94.5 percent to 2,030 Gigawatt hours (GWh) in the year to November 2019, taking its share in the country’s ...
Wednesday, 22 January 20
INDIA: COAL PRODUCTION FROM CAPTIVE MINES RAISES 24% OUTPUT IN APRIL TO DECEMBER - FINANCIAL EXPRESS
Coal production from captive mines in the first nine months of the ongoing financial year was up 24% year-on-year (y-o-y) at 40.93 million tonne (M ...
Wednesday, 22 January 20
SHIPPING MARKET INSIGHT - INTERMODAL
It seems that we are finally seeing whitish smoke as far as the trade feud between the US and China is concerned, while following this much anticip ...
Tuesday, 21 January 20
IRON ORE - 5 THINGS TO WATCH IN 2020 - WOOD MACKENZIE
Wood Mackenzie identifies five trends that will impact the iron ore industry.
Slower demand growth (especially in China) and a decen ...
Tuesday, 21 January 20
ASIA'S APPETITE FOR COAL GROWS, WITH CHINA THE KEY DECIDER - NIKKEI
Although renewable power generation is expected to rise significantly in Asia, India’s vast electricity needs will still underpin global dema ...
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- MS Steel International - UAE
- Energy Link Ltd, New Zealand
- The Treasury - Australian Government
- Kobexindo Tractors - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Merrill Lynch Commodities Europe
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Ministry of Finance - Indonesia
- Chamber of Mines of South Africa
- Sindya Power Generating Company Private Ltd
- Eastern Coal Council - USA
- Straits Asia Resources Limited - Singapore
- Siam City Cement PLC, Thailand
- Karaikal Port Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Sakthi Sugars Limited - India
- Bhatia International Limited - India
- Mjunction Services Limited - India
- Medco Energi Mining Internasional
- Attock Cement Pakistan Limited
- Lanco Infratech Ltd - India
- Gujarat Sidhee Cement - India
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Coal and Oil Company - UAE
- Wood Mackenzie - Singapore
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- GMR Energy Limited - India
- Makarim & Taira - Indonesia
- San Jose City I Power Corp, Philippines
- GVK Power & Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- Chettinad Cement Corporation Ltd - India
- Bhushan Steel Limited - India
- PTC India Limited - India
- Malabar Cements Ltd - India
- Economic Council, Georgia
- Trasteel International SA, Italy
- Jaiprakash Power Ventures ltd
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Renaissance Capital - South Africa
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Ind-Barath Power Infra Limited - India
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- The State Trading Corporation of India Ltd
- Intertek Mineral Services - Indonesia
- India Bulls Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- Kaltim Prima Coal - Indonesia
- London Commodity Brokers - England
- Orica Mining Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Samtan Co., Ltd - South Korea
- PNOC Exploration Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Standard Chartered Bank - UAE
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Mercator Lines Limited - India
- White Energy Company Limited
- ICICI Bank Limited - India
- Sarangani Energy Corporation, Philippines
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- Jindal Steel & Power Ltd - India
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bayan Resources Tbk. - Indonesia
- Agrawal Coal Company - India
- Electricity Authority, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercuria Energy - Indonesia
- Global Business Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Metalloyd Limited - United Kingdom
- IEA Clean Coal Centre - UK
- Posco Energy - South Korea
- Electricity Generating Authority of Thailand
- Indian Oil Corporation Limited
- Siam City Cement - Thailand
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- TeaM Sual Corporation - Philippines
- Planning Commission, India
- Antam Resourcindo - Indonesia
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Riau Bara Harum - Indonesia
- South Luzon Thermal Energy Corporation
- Grasim Industreis Ltd - India
- Heidelberg Cement - Germany
- European Bulk Services B.V. - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- PetroVietnam Power Coal Import and Supply Company
- CIMB Investment Bank - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Binh Thuan Hamico - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Ambuja Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Interocean Group of Companies - India
- Sree Jayajothi Cements Limited - India
- Sinarmas Energy and Mining - Indonesia
- Sical Logistics Limited - India
- Kepco SPC Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Bangladesh Power Developement Board
- Uttam Galva Steels Limited - India
- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- Goldman Sachs - Singapore
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Banpu Public Company Limited - Thailand
- Kartika Selabumi Mining - Indonesia
- Ministry of Transport, Egypt
- Tamil Nadu electricity Board
- Aboitiz Power Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Australian Coal Association
- Port Waratah Coal Services - Australia
- Rashtriya Ispat Nigam Limited - India
- AsiaOL BioFuels Corp., Philippines
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Energy Development Corp, Philippines
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Orica Australia Pty. Ltd.
- Tata Chemicals Ltd - India
- The University of Queensland
- Indo Tambangraya Megah - Indonesia
- Parliament of New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Ceylon Electricity Board - Sri Lanka
- Vizag Seaport Private Limited - India
- Central Electricity Authority - India
- SMG Consultants - Indonesia
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Semirara Mining Corp, Philippines
- Price Waterhouse Coopers - Russia
- Alfred C Toepfer International GmbH - Germany
- Eastern Energy - Thailand
- Salva Resources Pvt Ltd - India
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- CNBM International Corporation - China
- GAC Shipping (India) Pvt Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Sojitz Corporation - Japan
- Bukit Makmur.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Savvy Resources Ltd - HongKong
- Aditya Birla Group - India
- Iligan Light & Power Inc, Philippines
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- OPG Power Generation Pvt Ltd - India
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