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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, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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- Karaikal Port Pvt Ltd - India
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- Wood Mackenzie - Singapore
- Essar Steel Hazira Ltd - India
- Parry Sugars Refinery, India
- PetroVietnam Power Coal Import and Supply Company
- Global Coal Blending Company Limited - Australia
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- Manunggal Multi Energi - Indonesia
- OPG Power Generation Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
- Aditya Birla Group - India
- Planning Commission, India
- Asmin Koalindo Tuhup - Indonesia
- The Treasury - Australian Government
- Jindal Steel & Power Ltd - India
- Ind-Barath Power Infra Limited - India
- PNOC Exploration Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- Mercator Lines Limited - India
- Kartika Selabumi Mining - Indonesia
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- Kideco Jaya Agung - Indonesia
- Global Business Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Heidelberg Cement - Germany
- The State Trading Corporation of India Ltd
- Energy Link Ltd, New Zealand
- Iligan Light & Power Inc, Philippines
- Georgia Ports Authority, United States
- Central Electricity Authority - India
- GAC Shipping (India) Pvt Ltd
- New Zealand Coal & Carbon
- Merrill Lynch Commodities Europe
- Krishnapatnam Port Company Ltd. - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kaltim Prima Coal - Indonesia
- Thai Mozambique Logistica
- Siam City Cement PLC, Thailand
- Indian Energy Exchange, India
- Interocean Group of Companies - India
- Vedanta Resources Plc - India
- Borneo Indobara - Indonesia
- Metalloyd Limited - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Tamil Nadu electricity Board
- Malabar Cements Ltd - India
- MS Steel International - UAE
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- Power Finance Corporation Ltd., India
- Savvy Resources Ltd - HongKong
- Port Waratah Coal Services - Australia
- Samtan Co., Ltd - South Korea
- Sarangani Energy Corporation, Philippines
- Deloitte Consulting - India
- Africa Commodities Group - South Africa
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- Goldman Sachs - Singapore
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Electricity Generating Authority of Thailand
- Energy Development Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- The University of Queensland
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Standard Chartered Bank - UAE
- Meralco Power Generation, Philippines
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Bhatia International Limited - India
- Intertek Mineral Services - Indonesia
- Wilmar Investment Holdings
- Parliament of New Zealand
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
- Kobexindo Tractors - Indoneisa
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Tata Chemicals Ltd - India
- London Commodity Brokers - England
- Banpu Public Company Limited - Thailand
- Straits Asia Resources Limited - Singapore
- Videocon Industries ltd - India
- Therma Luzon, Inc, Philippines
- Rio Tinto Coal - Australia
- Simpson Spence & Young - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Minerals Council of Australia
- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
- Kapuas Tunggal Persada - Indonesia
- Ceylon Electricity Board - Sri Lanka
- GMR Energy Limited - India
- Semirara Mining Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Vizag Seaport Private Limited - India
- Sical Logistics Limited - India
- Independent Power Producers Association of India
- Orica Mining Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Alfred C Toepfer International GmbH - Germany
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Bhoruka Overseas - Indonesia
- Romanian Commodities Exchange
- Dalmia Cement Bharat India
- Ministry of Finance - Indonesia
- Altura Mining Limited, Indonesia
- Bulk Trading Sa - Switzerland
- Indo Tambangraya Megah - Indonesia
- Indian Oil Corporation Limited
- Chettinad Cement Corporation Ltd - India
- Thiess Contractors Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Renaissance Capital - South Africa
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Mjunction Services Limited - India
- Ministry of Mines - Canada
- European Bulk Services B.V. - Netherlands
- Central Java Power - Indonesia
- Meenaskhi Energy Private Limited - India
- Formosa Plastics Group - Taiwan
- Star Paper Mills Limited - India
- Commonwealth Bank - Australia
- Bayan Resources Tbk. - Indonesia
- Timah Investasi Mineral - Indoneisa
- TeaM Sual Corporation - Philippines
- Antam Resourcindo - Indonesia
- Coal and Oil Company - UAE
- Economic Council, Georgia
- India Bulls Power Limited - India
- Siam City Cement - Thailand
- ASAPP Information Group - India
- Cigading International Bulk Terminal - Indonesia
- Eastern Energy - Thailand
- Globalindo Alam Lestari - Indonesia
- Baramulti Group, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Sidhee Cement - India
- Bhushan Steel Limited - India
- Indika Energy - Indonesia
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Sree Jayajothi Cements Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Salva Resources Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Anglo American - United Kingdom
- McConnell Dowell - Australia
- Kepco SPC Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Madhucon Powers Ltd - India
- CIMB Investment Bank - Malaysia
- Orica Australia Pty. Ltd.
- Petron Corporation, Philippines
- Uttam Galva Steels Limited - India
- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- PTC India Limited - India
- Chamber of Mines of South Africa
- SMG Consultants - Indonesia
- Electricity Authority, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Rashtriya Ispat Nigam Limited - India
- Latin American Coal - Colombia
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Medco Energi Mining Internasional
- Price Waterhouse Coopers - Russia
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- Attock Cement Pakistan Limited
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- Kumho Petrochemical, South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Trasteel International SA, Italy
- Gujarat Mineral Development Corp Ltd - India
- Binh Thuan Hamico - Vietnam
- ICICI Bank Limited - India
- Indogreen Group - Indonesia
- Ministry of Transport, Egypt
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