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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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Thursday, 07 May 20
CRUDE OIL TANKER EARNINGS DROP 68% IN NINE DAYS - BIMCO
Crude oil tanker earnings have come down sharply in recent weeks with Very Large Crude Carrier (VLCC) earnings from the Middle East Gulf to China d ...
Thursday, 07 May 20
UKRAINE PRODUCES 2.5 MLN TONNES OF COAL IN APRIL - UKRINFORM
Ukraine produced 2.5 million tonnes of coal in April 2020, which is 39% less than planned, according to the Coal Miners Union of Ukraine.
...
Thursday, 07 May 20
INDIA: GOVT TO DO AWAY WITH MANDATORY WASHING OF COAL FOR THERMAL POWER UNITS - BUSINESS STANDARD
The Centre is planning to do away with the mandatory requirement of washing of coal before it is transported to thermal power stations. The Ministr ...
Thursday, 07 May 20
CIL'S SUPPLY TO POWER SECTOR FALLS IN MARCH AMID SLUMP IN COAL DEMAND - PTI
The supply of coal to the power sector by state-owned CIL registered a decline of eight per cent to 42.30 million tonne in March in the wake of slu ...
Thursday, 07 May 20
COAL PRICE REFERENCE FALL SHARPLY IN MAY 2020 DUE TO CORONAVIRUS OUTBREAK
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
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- Bank of Tokyo Mitsubishi UFJ Ltd
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- Savvy Resources Ltd - HongKong
- GVK Power & Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Altura Mining Limited, Indonesia
- Larsen & Toubro Limited - India
- Sakthi Sugars Limited - India
- Sree Jayajothi Cements Limited - India
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- Economic Council, Georgia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Dalmia Cement Bharat India
- Oldendorff Carriers - Singapore
- Tamil Nadu electricity Board
- Sical Logistics Limited - India
- Orica Australia Pty. Ltd.
- Kaltim Prima Coal - Indonesia
- LBH Netherlands Bv - Netherlands
- Agrawal Coal Company - India
- Banpu Public Company Limited - Thailand
- AsiaOL BioFuels Corp., Philippines
- IHS Mccloskey Coal Group - USA
- Intertek Mineral Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Global Coal Blending Company Limited - Australia
- Toyota Tsusho Corporation, Japan
- Samtan Co., Ltd - South Korea
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- MS Steel International - UAE
- Ceylon Electricity Board - Sri Lanka
- Chamber of Mines of South Africa
- Malabar Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Wood Mackenzie - Singapore
- Sojitz Corporation - Japan
- Latin American Coal - Colombia
- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Indian Energy Exchange, India
- Cement Manufacturers Association - India
- Bhushan Steel Limited - India
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- Mercator Lines Limited - India
- Indogreen Group - Indonesia
- Grasim Industreis Ltd - India
- South Luzon Thermal Energy Corporation
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Indo Tambangraya Megah - Indonesia
- Central Java Power - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Anglo American - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Singapore Mercantile Exchange
- Price Waterhouse Coopers - Russia
- Rio Tinto Coal - Australia
- Gujarat Electricity Regulatory Commission - India
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- Essar Steel Hazira Ltd - India
- Videocon Industries ltd - India
- VISA Power Limited - India
- Uttam Galva Steels Limited - India
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- The State Trading Corporation of India Ltd
- Carbofer General Trading SA - India
- Salva Resources Pvt Ltd - India
- Tata Chemicals Ltd - India
- Semirara Mining Corp, Philippines
- Bharathi Cement Corporation - India
- Planning Commission, India
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- Orica Mining Services - Indonesia
- Kobexindo Tractors - Indoneisa
- GMR Energy Limited - India
- Jaiprakash Power Ventures ltd
- Bhatia International Limited - India
- Holcim Trading Pte Ltd - Singapore
- Renaissance Capital - South Africa
- Kepco SPC Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Electricity Generating Authority of Thailand
- San Jose City I Power Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Makarim & Taira - Indonesia
- Straits Asia Resources Limited - Singapore
- SMG Consultants - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- OPG Power Generation Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- International Coal Ventures Pvt Ltd - India
- Energy Development Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Meralco Power Generation, Philippines
- Formosa Plastics Group - Taiwan
- Interocean Group of Companies - India
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- The University of Queensland
- Merrill Lynch Commodities Europe
- Thai Mozambique Logistica
- Parry Sugars Refinery, India
- PNOC Exploration Corporation - Philippines
- Global Business Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Ministry of Finance - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Borneo Indobara - Indonesia
- Meenaskhi Energy Private Limited - India
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Iligan Light & Power Inc, Philippines
- Attock Cement Pakistan Limited
- Sarangani Energy Corporation, Philippines
- Port Waratah Coal Services - Australia
- Coastal Gujarat Power Limited - India
- ICICI Bank Limited - India
- Indika Energy - Indonesia
- Goldman Sachs - Singapore
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- SMC Global Power, Philippines
- Star Paper Mills Limited - India
- Trasteel International SA, Italy
- Kartika Selabumi Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- Marubeni Corporation - India
- Gujarat Sidhee Cement - India
- Petron Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Electricity Authority, New Zealand
- Maheswari Brothers Coal Limited - India
- White Energy Company Limited
- Antam Resourcindo - Indonesia
- Aditya Birla Group - India
- Wilmar Investment Holdings
- Coalindo Energy - Indonesia
- Posco Energy - South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Parliament of New Zealand
- Gujarat Mineral Development Corp Ltd - India
- The Treasury - Australian Government
- Timah Investasi Mineral - Indoneisa
- McConnell Dowell - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- Vizag Seaport Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Bulk Trading Sa - Switzerland
- Jindal Steel & Power Ltd - India
- Edison Trading Spa - Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Thiess Contractors Indonesia
- Directorate Of Revenue Intelligence - India
- Ind-Barath Power Infra Limited - India
- Siam City Cement PLC, Thailand
- Minerals Council of Australia
- Bukit Baiduri Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Mjunction Services Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Australian Commodity Traders Exchange
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- Coal and Oil Company - UAE
- Bayan Resources Tbk. - Indonesia
- Energy Link Ltd, New Zealand
- Standard Chartered Bank - UAE
- Krishnapatnam Port Company Ltd. - India
- Mercuria Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- Australian Coal Association
- Chettinad Cement Corporation Ltd - India
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Bangladesh Power Developement Board
- PTC India Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Baramulti Group, Indonesia
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