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Wednesday, 06 May 20
COST CHALLENGES IN A US$20/BBL WORLD - WOOD MACKENZIE
 A new approach is needed to ensure supply sector resilience
How will US$20/bbl affect the oil and gas supply chain?
It’s going to get tough, very tough.
The service sector is already on the ropes but will be first port of call when operators look to save money. IOCs and NOCs need to recognise they’ll want a functioning, reliable service sector when things pick up, as they will. I talked it all through with Andy Tidey, Head of our Performance Improvement team.
Covid-19 has already disrupted the supply chain. The ability of service companies to manufacture and deliver equipment and supply personnel to industry sites is seriously compromised by restrictions on travel and movement of people.
Last downturn, the service sector did its bit in getting costs down. The Majors reduced unit development costs by 55% between 2014 and 2019; our Upstream Cost Survey shows that almost half was rate cuts by suppliers.
It’s taken its toll on service sector finances. Margins for five leading service companies fell by an average of 65% between 2014 and 2019. EBITDA margins (earnings before interest, tax, depreciation and amortisation) for the wider sector have shrunk close to zero.
IOCs will look to cut more to get their own finances on an even keel and reassure shareholders. Cash flow breakevens for the Majors averaged US$55/bbl pre-crisis. BP said this week it aims to reduce underlying breakeven to below US$35/bbl in 2021, and others are heading in the same direction. The primary lever is to cut investment – discretionary spend by IOCs will all but dry up in 2020.
Operators are signalling cuts of up to 50% to expenditure in the US Lower 48. Only a handful of the 53 conventional pre-FID projects we expected to get sanctioned in 2020 will get the green light. These cuts make up a big chunk of the 20% to 25% reduction in spend the Majors have announced.
What drives NOC decisions isn’t quite so straightforward. Their stakeholder is the government, and the NOC may be central to their national economy – big employer, investor and a source of revenue through dividends and taxation. US$20/bbl oil isn’t just a problem for the NOC, it’s a national problem. We estimate that, pre-crisis, Angola needed US$75/bbl to fund its 2020 budget, Saudi Arabia US$85/bbl and Nigeria US$131/bbl – prices of a long-gone era.
Overall cuts in spend by NOCs so far are more muted, averaging 10% to 15%. Chinese NOCs are prioritising domestic investment to maintain production and employment. In the Middle East, ADNOC and Qatar Petroleum will likely proceed with big new gas projects where the scale and economics will win investment from the big IOCs. There have been concerns about market tightness in certain segments in the Middle East.
Many others face an investment drought. Ten higher cost projects at pre-sanction stage in Nigeria, Mexico, Libya and Angola won’t get the support they need from IOC partners. Combined spend will be pushed out indefinitely into the future along with 0.4 million boe/d of new production.
NOCs have to perform a tricky balancing act. To keep investment moving, costs need to come down. The service sector is the easy target; but the service companies are sizeable employers, too. They may be bound into the domestic economy through local obligation requirements and, in certain cases, may even be government-owned.
So, where do NOCs go from here? The adversarial approach between operator and suppliers is counterproductive and could end badly – for both sides. What’s needed is a change in relationship, built on openness, transparency and trust. We are starting to see alliances and partnerships emerging between mid-sized operators and service companies. That could be the template for a win-win – more competitive prices for the operator, and acceptable returns for the supplier. It’s a model NOCs need to consider if they are to foster and preserve a strong supply chain through the coming challenges.
NOCs need to take a strategic view of how they address the cost challenge of US$20/bbl oil. As operator and “national champion”, many NOCs can shape the service sector, in ways not open to the IOCs. There are opportunities to change the commercial model with individual suppliers and bring in practices from other sectors, such as true open-book pricing. Many NOCs could also act as an aggregator of plans, providing the service sector with an aggregated demand profile.
Simon Flowers
Chairman, Chief Analyst and author of The Edge
Source: Wood Mackenzie
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Wednesday, 27 May 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.94 PCT - XINHUA
China Taiyuan coal transaction price index stood at 125.03 points Monday, up 0.94 percent week on week.
The index, released by China ...
Monday, 25 May 20
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
Non-OPEC oil supply continued to increase by 2.0 mb/d in 2019, driven by US shale production, which rose by 1.7 mb/d, amounting to 84% of total non ...
Sunday, 24 May 20
A 63,000 FIXED DELIVERY VIETNAM TRIP VIA INDONESIA REDELIVERY KOSICHANG AT $8,500 - BALTIC BRIEFING
Capesize
After a week of bounce momentum the market appears to have stalled out once again. The Capesize 5TC has more than doubled since last F ...
Saturday, 23 May 20
COLOMBIA COAL OUTPUT DOWN 7.2% IN Q1 ON LOW PRICES, CORONAVIRUS LOCKDOWN - REUTERS
Coal production in Colombia, the world’s fifth-largest coal exporter, fell 7.2% in the first quarter because of low prices and coronavirus qu ...
Saturday, 23 May 20
EWP INVITES BIDS FOR 840,000 METRIC TONS OF MIN 5700 NAR COAL
COALspot.com: South Korea’s Korea East-West Power Co. Ltd (EWP) has Issued an International Tender for total Max 840,000 Metric Tons of min 5 ...
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- Latin American Coal - Colombia
- Bukit Makmur.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- Bhoruka Overseas - Indonesia
- Standard Chartered Bank - UAE
- MS Steel International - UAE
- Borneo Indobara - Indonesia
- GAC Shipping (India) Pvt Ltd
- SN Aboitiz Power Inc, Philippines
- Xindia Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GN Power Mariveles Coal Plant, Philippines
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Interocean Group of Companies - India
- Mercuria Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- Romanian Commodities Exchange
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- Thiess Contractors Indonesia
- Coastal Gujarat Power Limited - India
- Tamil Nadu electricity Board
- TNB Fuel Sdn Bhd - Malaysia
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Eastern Coal Council - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- Indogreen Group - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bangladesh Power Developement Board
- Formosa Plastics Group - Taiwan
- Agrawal Coal Company - India
- Eastern Energy - Thailand
- Semirara Mining Corp, Philippines
- ICICI Bank Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Barasentosa Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Coalindo Energy - Indonesia
- SMG Consultants - Indonesia
- Samtan Co., Ltd - South Korea
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- Energy Development Corp, Philippines
- Power Finance Corporation Ltd., India
- Global Business Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Mines - Canada
- Videocon Industries ltd - India
- Independent Power Producers Association of India
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Thai Mozambique Logistica
- Toyota Tsusho Corporation, Japan
- Attock Cement Pakistan Limited
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- Vedanta Resources Plc - India
- Neyveli Lignite Corporation Ltd, - India
- Marubeni Corporation - India
- Goldman Sachs - Singapore
- VISA Power Limited - India
- Karaikal Port Pvt Ltd - India
- Africa Commodities Group - South Africa
- Orica Australia Pty. Ltd.
- San Jose City I Power Corp, Philippines
- Madhucon Powers Ltd - India
- Merrill Lynch Commodities Europe
- Globalindo Alam Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Coal and Oil Company - UAE
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- Port Waratah Coal Services - Australia
- TeaM Sual Corporation - Philippines
- Ministry of Transport, Egypt
- Uttam Galva Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- The University of Queensland
- Electricity Authority, New Zealand
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Essar Steel Hazira Ltd - India
- Bukit Baiduri Energy - Indonesia
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- IHS Mccloskey Coal Group - USA
- Mintek Dendrill Indonesia
- Deloitte Consulting - India
- Aditya Birla Group - India
- IEA Clean Coal Centre - UK
- Larsen & Toubro Limited - India
- Jaiprakash Power Ventures ltd
- Sical Logistics Limited - India
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- Trasteel International SA, Italy
- Edison Trading Spa - Italy
- Antam Resourcindo - Indonesia
- Baramulti Group, Indonesia
- Posco Energy - South Korea
- Intertek Mineral Services - Indonesia
- Bharathi Cement Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Wood Mackenzie - Singapore
- Parry Sugars Refinery, India
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Renaissance Capital - South Africa
- Sree Jayajothi Cements Limited - India
- Straits Asia Resources Limited - Singapore
- Planning Commission, India
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Meralco Power Generation, Philippines
- Petron Corporation, Philippines
- Georgia Ports Authority, United States
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Banpu Public Company Limited - Thailand
- Parliament of New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Finance - Indonesia
- Carbofer General Trading SA - India
- Petrochimia International Co. Ltd.- Taiwan
- Kapuas Tunggal Persada - Indonesia
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- European Bulk Services B.V. - Netherlands
- Oldendorff Carriers - Singapore
- Australian Coal Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sarangani Energy Corporation, Philippines
- Sojitz Corporation - Japan
- Jindal Steel & Power Ltd - India
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Tata Chemicals Ltd - India
- Sakthi Sugars Limited - India
- Mjunction Services Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Simpson Spence & Young - Indonesia
- Chamber of Mines of South Africa
- India Bulls Power Limited - India
- Australian Commodity Traders Exchange
- Energy Link Ltd, New Zealand
- Cement Manufacturers Association - India
- Indian Oil Corporation Limited
- The Treasury - Australian Government
- Central Java Power - Indonesia
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Dalmia Cement Bharat India
- Ambuja Cements Ltd - India
- Lanco Infratech Ltd - India
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- Ind-Barath Power Infra Limited - India
- Altura Mining Limited, Indonesia
- Kobexindo Tractors - Indoneisa
- Indonesian Coal Mining Association
- Leighton Contractors Pty Ltd - Australia
- The State Trading Corporation of India Ltd
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Orica Mining Services - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Asmin Koalindo Tuhup - Indonesia
- Minerals Council of Australia
- Price Waterhouse Coopers - Russia
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- Alfred C Toepfer International GmbH - Germany
- Vizag Seaport Private Limited - India
- Star Paper Mills Limited - India
- Singapore Mercantile Exchange
- Therma Luzon, Inc, Philippines
- South Luzon Thermal Energy Corporation
- Heidelberg Cement - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Offshore Bulk Terminal Pte Ltd, Singapore
- Medco Energi Mining Internasional
- Holcim Trading Pte Ltd - Singapore
- GVK Power & Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Iligan Light & Power Inc, Philippines
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