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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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Monday, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
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- Kaltim Prima Coal - Indonesia
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- Essar Steel Hazira Ltd - India
- IHS Mccloskey Coal Group - USA
- Minerals Council of Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Australian Commodity Traders Exchange
- Indian Oil Corporation Limited
- Therma Luzon, Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Iligan Light & Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- White Energy Company Limited
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Coal and Oil Company - UAE
- Renaissance Capital - South Africa
- Sinarmas Energy and Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SMG Consultants - Indonesia
- Aditya Birla Group - India
- McConnell Dowell - Australia
- Jaiprakash Power Ventures ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Transport, Egypt
- Jindal Steel & Power Ltd - India
- Binh Thuan Hamico - Vietnam
- SMC Global Power, Philippines
- Alfred C Toepfer International GmbH - Germany
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- ASAPP Information Group - India
- Bhatia International Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Riau Bara Harum - Indonesia
- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- Malabar Cements Ltd - India
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- Mercuria Energy - Indonesia
- Indian Energy Exchange, India
- Mintek Dendrill Indonesia
- Central Electricity Authority - India
- Sojitz Corporation - Japan
- Straits Asia Resources Limited - Singapore
- Indogreen Group - Indonesia
- Carbofer General Trading SA - India
- Independent Power Producers Association of India
- Petron Corporation, Philippines
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- PTC India Limited - India
- Kapuas Tunggal Persada - Indonesia
- Indo Tambangraya Megah - Indonesia
- Economic Council, Georgia
- Neyveli Lignite Corporation Ltd, - India
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- Orica Australia Pty. Ltd.
- Billiton Holdings Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- Cement Manufacturers Association - India
- Kepco SPC Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- CIMB Investment Bank - Malaysia
- Directorate Of Revenue Intelligence - India
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
- Sakthi Sugars Limited - India
- Bulk Trading Sa - Switzerland
- PNOC Exploration Corporation - Philippines
- Dalmia Cement Bharat India
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- Georgia Ports Authority, United States
- Cigading International Bulk Terminal - Indonesia
- Latin American Coal - Colombia
- VISA Power Limited - India
- Oldendorff Carriers - Singapore
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- Anglo American - United Kingdom
- Eastern Coal Council - USA
- Semirara Mining Corp, Philippines
- Coalindo Energy - Indonesia
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Edison Trading Spa - Italy
- Maharashtra Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Vedanta Resources Plc - India
- Simpson Spence & Young - Indonesia
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- The Treasury - Australian Government
- Metalloyd Limited - United Kingdom
- Australian Coal Association
- Merrill Lynch Commodities Europe
- CNBM International Corporation - China
- Interocean Group of Companies - India
- Chamber of Mines of South Africa
- Barasentosa Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- The University of Queensland
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Global Coal Blending Company Limited - Australia
- Parry Sugars Refinery, India
- Bukit Baiduri Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Rio Tinto Coal - Australia
- Madhucon Powers Ltd - India
- Banpu Public Company Limited - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kumho Petrochemical, South Korea
- Vijayanagar Sugar Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- TeaM Sual Corporation - Philippines
- Tata Chemicals Ltd - India
- Vizag Seaport Private Limited - India
- Sindya Power Generating Company Private Ltd
- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Parliament of New Zealand
- Ministry of Mines - Canada
- PowerSource Philippines DevCo
- Siam City Cement PLC, Thailand
- GMR Energy Limited - India
- Holcim Trading Pte Ltd - Singapore
- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- Sree Jayajothi Cements Limited - India
- Posco Energy - South Korea
- OPG Power Generation Pvt Ltd - India
- Singapore Mercantile Exchange
- Indika Energy - Indonesia
- Antam Resourcindo - Indonesia
- Gujarat Sidhee Cement - India
- MS Steel International - UAE
- Wilmar Investment Holdings
- Uttam Galva Steels Limited - India
- Eastern Energy - Thailand
- Electricity Generating Authority of Thailand
- Ambuja Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Agrawal Coal Company - India
- Salva Resources Pvt Ltd - India
- Planning Commission, India
- Timah Investasi Mineral - Indoneisa
- Standard Chartered Bank - UAE
- PetroVietnam Power Coal Import and Supply Company
- Coastal Gujarat Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- London Commodity Brokers - England
- European Bulk Services B.V. - Netherlands
- Borneo Indobara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Samtan Co., Ltd - South Korea
- Karbindo Abesyapradhi - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Toyota Tsusho Corporation, Japan
- Mjunction Services Limited - India
- Grasim Industreis Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Manunggal Multi Energi - Indonesia
- Trasteel International SA, Italy
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement - Thailand
- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Heidelberg Cement - Germany
- Medco Energi Mining Internasional
- Global Business Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- ICICI Bank Limited - India
- Indonesian Coal Mining Association
- Rashtriya Ispat Nigam Limited - India
- Bayan Resources Tbk. - Indonesia
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