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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, 01 April 20
TRADERS SCRAMBLE TO SELL CHEAP CRUDE CARGOES AS GLUT GROWS - REUTERS
Oil traders across the globe are offering cargoes far in advance as rapidly vanishing demand drives key physical crude prices to multi-decade lows, ...
Wednesday, 01 April 20
MARKET INSIGHT - INTERMODAL
There is an old, allegedly Chinese, saying suggesting that living in “interesting” times usually refers to times of trouble. The latest ...
Tuesday, 31 March 20
FREIGHT MARKET: DRY BULKERS - SPOT MARKET 23-29 MARCH 2020
Capesize
The rebound in freight rates resumed this past week, with rates man-aging to post further gains by week’s end. The BCI is in negat ...
Tuesday, 31 March 20
DRY BULK: Q1 HAS BEEN THE WORST QUARTER NOTED FOR MORE THAN 3 YEARS NOW - ALLIED RESEARCH
At this point, the Covid-19 pandemic seems to be monopolizing all market (as well as all other) discussions across the world and any market insight ...
Tuesday, 31 March 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX DOWN 0.43 PCT - XINHUA
China Taiyuan coal transaction price index stood at 132.17 points Monday, down 0.43 percent week on week.
The index, released by Chi ...
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- Wood Mackenzie - Singapore
- Semirara Mining Corp, Philippines
- McConnell Dowell - Australia
- VISA Power Limited - India
- European Bulk Services B.V. - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- Indika Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Indonesian Coal Mining Association
- Holcim Trading Pte Ltd - Singapore
- India Bulls Power Limited - India
- Manunggal Multi Energi - Indonesia
- Mercator Lines Limited - India
- The Treasury - Australian Government
- Baramulti Group, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Sical Logistics Limited - India
- Salva Resources Pvt Ltd - India
- Eastern Coal Council - USA
- Anglo American - United Kingdom
- Savvy Resources Ltd - HongKong
- GAC Shipping (India) Pvt Ltd
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- White Energy Company Limited
- Cigading International Bulk Terminal - Indonesia
- Borneo Indobara - Indonesia
- Attock Cement Pakistan Limited
- Semirara Mining and Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Bhoruka Overseas - Indonesia
- Miang Besar Coal Terminal - Indonesia
- CIMB Investment Bank - Malaysia
- Kartika Selabumi Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Port Waratah Coal Services - Australia
- Binh Thuan Hamico - Vietnam
- ICICI Bank Limited - India
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- ASAPP Information Group - India
- Singapore Mercantile Exchange
- Kideco Jaya Agung - Indonesia
- Kumho Petrochemical, South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Straits Asia Resources Limited - Singapore
- Xindia Steels Limited - India
- Barasentosa Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Edison Trading Spa - Italy
- LBH Netherlands Bv - Netherlands
- Metalloyd Limited - United Kingdom
- Deloitte Consulting - India
- Bukit Baiduri Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Tata Chemicals Ltd - India
- Kaltim Prima Coal - Indonesia
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- Ambuja Cements Ltd - India
- Central Java Power - Indonesia
- Videocon Industries ltd - India
- Commonwealth Bank - Australia
- GN Power Mariveles Coal Plant, Philippines
- Ind-Barath Power Infra Limited - India
- Bharathi Cement Corporation - India
- Indian Energy Exchange, India
- Posco Energy - South Korea
- PTC India Limited - India
- Oldendorff Carriers - Singapore
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Gujarat Sidhee Cement - India
- Marubeni Corporation - India
- Coastal Gujarat Power Limited - India
- Ministry of Transport, Egypt
- Sakthi Sugars Limited - India
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- Gujarat Mineral Development Corp Ltd - India
- Bangladesh Power Developement Board
- Australian Coal Association
- Uttam Galva Steels Limited - India
- The University of Queensland
- Bahari Cakrawala Sebuku - Indonesia
- Rio Tinto Coal - Australia
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- Merrill Lynch Commodities Europe
- Leighton Contractors Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- Karaikal Port Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Africa Commodities Group - South Africa
- Mjunction Services Limited - India
- Central Electricity Authority - India
- Vedanta Resources Plc - India
- Iligan Light & Power Inc, Philippines
- Intertek Mineral Services - Indonesia
- Dalmia Cement Bharat India
- SN Aboitiz Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Australian Commodity Traders Exchange
- TeaM Sual Corporation - Philippines
- Latin American Coal - Colombia
- Electricity Authority, New Zealand
- Petron Corporation, Philippines
- London Commodity Brokers - England
- Lanco Infratech Ltd - India
- Mintek Dendrill Indonesia
- Kobexindo Tractors - Indoneisa
- Sarangani Energy Corporation, Philippines
- Power Finance Corporation Ltd., India
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- San Jose City I Power Corp, Philippines
- IEA Clean Coal Centre - UK
- Bayan Resources Tbk. - Indonesia
- New Zealand Coal & Carbon
- Maheswari Brothers Coal Limited - India
- Jaiprakash Power Ventures ltd
- Trasteel International SA, Italy
- TNB Fuel Sdn Bhd - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- PowerSource Philippines DevCo
- Directorate General of MIneral and Coal - Indonesia
- The State Trading Corporation of India Ltd
- Karbindo Abesyapradhi - Indoneisa
- Cement Manufacturers Association - India
- Electricity Generating Authority of Thailand
- Heidelberg Cement - Germany
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Agrawal Coal Company - India
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- International Coal Ventures Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- Star Paper Mills Limited - India
- Madhucon Powers Ltd - India
- Meenaskhi Energy Private Limited - India
- Parliament of New Zealand
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- PNOC Exploration Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Riau Bara Harum - Indonesia
- Wilmar Investment Holdings
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Indogreen Group - Indonesia
- Planning Commission, India
- Simpson Spence & Young - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thai Mozambique Logistica
- Pendopo Energi Batubara - Indonesia
- Bhushan Steel Limited - India
- Ministry of Finance - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Parry Sugars Refinery, India
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- Maharashtra Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Aditya Birla Group - India
- Gujarat Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Minerals Council of Australia
- Tamil Nadu electricity Board
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- Orica Mining Services - Indonesia
- Carbofer General Trading SA - India
- CNBM International Corporation - China
- Ceylon Electricity Board - Sri Lanka
- Essar Steel Hazira Ltd - India
- Global Business Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- GVK Power & Infra Limited - India
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
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