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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, 08 January 20
WHAT IS BIMCO THINKING ABOUT 2020? - BIMCO
Every year, BIMCO considers what is in store for the shipping industry and for BIMCO in the coming years, while also reflecting on the year gone by ...
Wednesday, 08 January 20
VINACOMIN SETS TO SELL 49 MILLION TONNES OF COAL IN 2020 - VIETNAM NET
The Vietnam National Coal-Mineral Industries Holding Corporation Limited (Vinacomin) has set to sell 49 million tonnes of coal in 2020, a year-on-y ...
Wednesday, 08 January 20
CHINA'S COAL-RICH PROVINCE CUTS 18.95 MLN TONNES OF CAPACITY IN 2019 - XINHUA
North China’s Shanxi Province reduced its coal production capacity by 18.95 million tonnes by closing 18 coal mines in 2019.
A ...
Wednesday, 08 January 20
JANUARY INDONESIAN COAL PRICE REFERENCE SLIPS US$ 0.37 MOM
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
Tuesday, 07 January 20
CLEANER AIR IN 2020: 0.5% SULPHUR CAP FOR SHIPS ENTERS INTO FORCE WORLDWIDE - EUROPEAN COMMISSION
From 1 January 2020, the maximum sulphur content of marine fuels is reduced to 0.5% (down from 3.5%) globally – reducing air pollution and pr ...
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- Kartika Selabumi Mining - Indonesia
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- McConnell Dowell - Australia
- Ind-Barath Power Infra Limited - India
- Heidelberg Cement - Germany
- Maheswari Brothers Coal Limited - India
- Orica Mining Services - Indonesia
- Riau Bara Harum - Indonesia
- The Treasury - Australian Government
- Coastal Gujarat Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Holcim Trading Pte Ltd - Singapore
- Posco Energy - South Korea
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- Anglo American - United Kingdom
- Borneo Indobara - Indonesia
- European Bulk Services B.V. - Netherlands
- Edison Trading Spa - Italy
- Planning Commission, India
- PNOC Exploration Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- GN Power Mariveles Coal Plant, Philippines
- Vedanta Resources Plc - India
- Coalindo Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Parry Sugars Refinery, India
- Interocean Group of Companies - India
- Sindya Power Generating Company Private Ltd
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- IEA Clean Coal Centre - UK
- Gujarat Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Mintek Dendrill Indonesia
- Power Finance Corporation Ltd., India
- Global Green Power PLC Corporation, Philippines
- The State Trading Corporation of India Ltd
- Energy Development Corp, Philippines
- Ambuja Cements Ltd - India
- Jaiprakash Power Ventures ltd
- Mjunction Services Limited - India
- Ministry of Finance - Indonesia
- Grasim Industreis Ltd - India
- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Parliament of New Zealand
- Trasteel International SA, Italy
- Independent Power Producers Association of India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- The University of Queensland
- Wood Mackenzie - Singapore
- AsiaOL BioFuels Corp., Philippines
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Madhucon Powers Ltd - India
- Malabar Cements Ltd - India
- Sakthi Sugars Limited - India
- Chamber of Mines of South Africa
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Electricity Generating Authority of Thailand
- Thiess Contractors Indonesia
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- Australian Coal Association
- Bahari Cakrawala Sebuku - Indonesia
- Mercator Lines Limited - India
- Agrawal Coal Company - India
- Leighton Contractors Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Oldendorff Carriers - Singapore
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Jorong Barutama Greston.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- PowerSource Philippines DevCo
- Bulk Trading Sa - Switzerland
- Vizag Seaport Private Limited - India
- Price Waterhouse Coopers - Russia
- Baramulti Group, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Iligan Light & Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- Toyota Tsusho Corporation, Japan
- VISA Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Uttam Galva Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Tata Chemicals Ltd - India
- Star Paper Mills Limited - India
- Larsen & Toubro Limited - India
- Africa Commodities Group - South Africa
- SMG Consultants - Indonesia
- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
- Petrochimia International Co. Ltd.- Taiwan
- CIMB Investment Bank - Malaysia
- LBH Netherlands Bv - Netherlands
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- Deloitte Consulting - India
- Cement Manufacturers Association - India
- GVK Power & Infra Limited - India
- Georgia Ports Authority, United States
- Siam City Cement PLC, Thailand
- Bukit Makmur.PT - Indonesia
- Makarim & Taira - Indonesia
- Carbofer General Trading SA - India
- Latin American Coal - Colombia
- Altura Mining Limited, Indonesia
- Banpu Public Company Limited - Thailand
- GMR Energy Limited - India
- San Jose City I Power Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- CNBM International Corporation - China
- Tamil Nadu electricity Board
- ASAPP Information Group - India
- Central Java Power - Indonesia
- GAC Shipping (India) Pvt Ltd
- Manunggal Multi Energi - Indonesia
- Kumho Petrochemical, South Korea
- Wilmar Investment Holdings
- Ministry of Mines - Canada
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Sical Logistics Limited - India
- Formosa Plastics Group - Taiwan
- Australian Commodity Traders Exchange
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- Videocon Industries ltd - India
- Rio Tinto Coal - Australia
- Petron Corporation, Philippines
- Eastern Coal Council - USA
- Pendopo Energi Batubara - Indonesia
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Attock Cement Pakistan Limited
- India Bulls Power Limited - India
- PTC India Limited - India
- Indian Oil Corporation Limited
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Siam City Cement - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Medco Energi Mining Internasional
- Goldman Sachs - Singapore
- Aditya Birla Group - India
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Romanian Commodities Exchange
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Electricity Authority, New Zealand
- Savvy Resources Ltd - HongKong
- Sree Jayajothi Cements Limited - India
- Metalloyd Limited - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Link Ltd, New Zealand
- Kideco Jaya Agung - Indonesia
- Directorate Of Revenue Intelligence - India
- Coal and Oil Company - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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