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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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Tuesday, 21 January 20
THERMAL COAL PRICES SET FOR RECOVERY THIS YEAR AS OVERSUPPLY TIGHTENS - REUTERS
Thermal coal prices are expected to recover this year after losing around a third of their value last year as demand from some south-east Asian cou ...
Monday, 20 January 20
INDIA TO STOP SUBSTITUTABLE COAL IMPORT; CAN GO FOR AUCTION OF 100 FULLY EXPLORED NEW BLOCKS: JOSHI - PTI
The Cabinet recently approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend Mines and Minerals (Development and Regulation ) Act ...
Monday, 20 January 20
CHINA DECEMBER COAL OUTPUT UP 2.4 PERCENT ON YEAR - STATS BUREAU: REUTERS
China produced 331.74 million tonnes of coal in December, up 2.4 percent on the year, the National Bureau of Statistics said on Friday.
...
Monday, 20 January 20
CHINA IMPORTED 124.4 MLN TONNES OF COAL FROM INDONESIA IN 2019, UP 15.1 PERCENT YOY - BANCHERO COSTA
China's coal imports raced ahead in 2019, surprising many who had expected that in the months of 2019 to come the government would clamp down s ...
Saturday, 18 January 20
BIMCO: LOW-SULPHUR FUEL SALE JUMPS TO A 70% SHARE IN SINGAPORE, AS THE IMO 2020 SULPHUR CAP KICKS IN
The final quarter of 2019 marked a massive decline of HSFO sales, as the industry transitioned into compliance of the IMO 2020 Sulphur Cap (IMO2020 ...
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- Therma Luzon, Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Development Corp, Philippines
- Thiess Contractors Indonesia
- IHS Mccloskey Coal Group - USA
- The Treasury - Australian Government
- Baramulti Group, Indonesia
- Bayan Resources Tbk. - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Marubeni Corporation - India
- Price Waterhouse Coopers - Russia
- Rio Tinto Coal - Australia
- Economic Council, Georgia
- Videocon Industries ltd - India
- Mjunction Services Limited - India
- Tata Chemicals Ltd - India
- European Bulk Services B.V. - Netherlands
- Australian Commodity Traders Exchange
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Carbofer General Trading SA - India
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Aditya Birla Group - India
- Altura Mining Limited, Indonesia
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- New Zealand Coal & Carbon
- Parliament of New Zealand
- GAC Shipping (India) Pvt Ltd
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- Alfred C Toepfer International GmbH - Germany
- Petron Corporation, Philippines
- Mintek Dendrill Indonesia
- VISA Power Limited - India
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Mercator Lines Limited - India
- Merrill Lynch Commodities Europe
- Oldendorff Carriers - Singapore
- Heidelberg Cement - Germany
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Cement Manufacturers Association - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Anglo American - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- Posco Energy - South Korea
- Malabar Cements Ltd - India
- The State Trading Corporation of India Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining and Power Corporation, Philippines
- Minerals Council of Australia
- Indian Energy Exchange, India
- Larsen & Toubro Limited - India
- White Energy Company Limited
- Bukit Makmur.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Energy Link Ltd, New Zealand
- SMG Consultants - Indonesia
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Bharathi Cement Corporation - India
- SMC Global Power, Philippines
- Iligan Light & Power Inc, Philippines
- PTC India Limited - India
- Borneo Indobara - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhoruka Overseas - Indonesia
- Metalloyd Limited - United Kingdom
- South Luzon Thermal Energy Corporation
- Aboitiz Power Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- CNBM International Corporation - China
- Samtan Co., Ltd - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kideco Jaya Agung - Indonesia
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- Trasteel International SA, Italy
- GMR Energy Limited - India
- MS Steel International - UAE
- Goldman Sachs - Singapore
- Meralco Power Generation, Philippines
- Manunggal Multi Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- The University of Queensland
- Bulk Trading Sa - Switzerland
- Ministry of Finance - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- London Commodity Brokers - England
- PowerSource Philippines DevCo
- Salva Resources Pvt Ltd - India
- Singapore Mercantile Exchange
- Pendopo Energi Batubara - Indonesia
- Directorate Of Revenue Intelligence - India
- IEA Clean Coal Centre - UK
- Antam Resourcindo - Indonesia
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Coal and Oil Company - UAE
- GN Power Mariveles Coal Plant, Philippines
- Kumho Petrochemical, South Korea
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- GVK Power & Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Bangladesh Power Developement Board
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Sree Jayajothi Cements Limited - India
- Interocean Group of Companies - India
- Sakthi Sugars Limited - India
- Eastern Energy - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- Savvy Resources Ltd - HongKong
- Jindal Steel & Power Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- LBH Netherlands Bv - Netherlands
- Medco Energi Mining Internasional
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Indo Tambangraya Megah - Indonesia
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Leighton Contractors Pty Ltd - Australia
- Sinarmas Energy and Mining - Indonesia
- Chamber of Mines of South Africa
- Mercuria Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Electricity Authority, New Zealand
- Kepco SPC Power Corporation, Philippines
- Independent Power Producers Association of India
- Latin American Coal - Colombia
- ICICI Bank Limited - India
- Jaiprakash Power Ventures ltd
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- Romanian Commodities Exchange
- Krishnapatnam Port Company Ltd. - India
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Indonesian Coal Mining Association
- Barasentosa Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Parry Sugars Refinery, India
- OPG Power Generation Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Grasim Industreis Ltd - India
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indian Oil Corporation Limited
- Asmin Koalindo Tuhup - Indonesia
- Planning Commission, India
- Holcim Trading Pte Ltd - Singapore
- Toyota Tsusho Corporation, Japan
- Lanco Infratech Ltd - India
- Xindia Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Gujarat Mineral Development Corp Ltd - India
- Riau Bara Harum - Indonesia
- Edison Trading Spa - Italy
- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
- Thai Mozambique Logistica
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Orica Mining Services - Indonesia
- Ministry of Mines - Canada
- Gujarat Sidhee Cement - India
- Directorate General of MIneral and Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- Ambuja Cements Ltd - India
- Formosa Plastics Group - Taiwan
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