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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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Tuesday, 14 November 23
CHINA'S BELT AND ROAD INITIATIVE TURNS AWAY FROM COAL - WOOD MACKENZIE
Ambitious, contentious and big spending, China’s Belt and Road Initiative (BRI) is 10 years old. In that time, China has splashed more than U ...
Friday, 10 November 23
THE COMMODITIES FEED: OIL UNDER PRESSURE - ING
Energy – Brent plummets
The oil market came under significant pressure yesterday. ICE Brent settled 4.19% lower on the day and ...
Friday, 10 November 23
COAL USE AT U.S. POWER PLANTS CONTINUES DOWNWARD SPIRAL; FULL IMPACT ON MINES TO BE FELT IN 2024 - IEEFA
This year, the use of coal by the U.S.’s power producers has been so anemic that the fuel has not achieved a 20% market share in any month so ...
Friday, 10 November 23
INDIA: NATIONAL COAL INDEX RISES 3.83 POINTS IN SEPTEMBER AMID HIGHER DEMAND - LIVEMINT
The National Coal Index (NCI) rose 3.83 points to 143.91 in September amid growing demand for coal.
The union coal ministry on Tuesd ...
Thursday, 09 November 23
WE'RE PRODUCING TOO MUCH COAL, OIL AND GAS, REPORT SAYS - WSJ
World leaders pledged in 2015 to reduce emissions in a combined effort to limit climate change.
Now they are stepping up production ...
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- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Straits Asia Resources Limited - Singapore
- Indo Tambangraya Megah - Indonesia
- Thai Mozambique Logistica
- IHS Mccloskey Coal Group - USA
- Price Waterhouse Coopers - Russia
- Sojitz Corporation - Japan
- Mjunction Services Limited - India
- PTC India Limited - India
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Indian Oil Corporation Limited
- Goldman Sachs - Singapore
- Maheswari Brothers Coal Limited - India
- Bukit Baiduri Energy - Indonesia
- GMR Energy Limited - India
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Mines - Canada
- Siam City Cement - Thailand
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- Bayan Resources Tbk. - Indonesia
- Semirara Mining Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Electricity Generating Authority of Thailand
- Vizag Seaport Private Limited - India
- Indian Energy Exchange, India
- PetroVietnam Power Coal Import and Supply Company
- Banpu Public Company Limited - Thailand
- PowerSource Philippines DevCo
- Petron Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Georgia Ports Authority, United States
- Parliament of New Zealand
- Africa Commodities Group - South Africa
- Tata Chemicals Ltd - India
- Pendopo Energi Batubara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Carbofer General Trading SA - India
- Simpson Spence & Young - Indonesia
- Bukit Makmur.PT - Indonesia
- Central Java Power - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Star Paper Mills Limited - India
- Coastal Gujarat Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Coalindo Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Wilmar Investment Holdings
- Alfred C Toepfer International GmbH - Germany
- Riau Bara Harum - Indonesia
- Bulk Trading Sa - Switzerland
- Chamber of Mines of South Africa
- Romanian Commodities Exchange
- Barasentosa Lestari - Indonesia
- Mercuria Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Miang Besar Coal Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Essar Steel Hazira Ltd - India
- McConnell Dowell - Australia
- Sindya Power Generating Company Private Ltd
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Jaiprakash Power Ventures ltd
- Indonesian Coal Mining Association
- Meenaskhi Energy Private Limited - India
- Kartika Selabumi Mining - Indonesia
- Mercator Lines Limited - India
- Therma Luzon, Inc, Philippines
- Posco Energy - South Korea
- Minerals Council of Australia
- Attock Cement Pakistan Limited
- Global Business Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Trasteel International SA, Italy
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- VISA Power Limited - India
- Aboitiz Power Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Merrill Lynch Commodities Europe
- Sree Jayajothi Cements Limited - India
- Makarim & Taira - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Planning Commission, India
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- Edison Trading Spa - Italy
- TeaM Sual Corporation - Philippines
- Medco Energi Mining Internasional
- Parry Sugars Refinery, India
- Orica Australia Pty. Ltd.
- Baramulti Group, Indonesia
- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Renaissance Capital - South Africa
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Kobexindo Tractors - Indoneisa
- Wood Mackenzie - Singapore
- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- Electricity Authority, New Zealand
- Anglo American - United Kingdom
- Australian Commodity Traders Exchange
- Energy Development Corp, Philippines
- Metalloyd Limited - United Kingdom
- Indika Energy - Indonesia
- Uttam Galva Steels Limited - India
- India Bulls Power Limited - India
- Lanco Infratech Ltd - India
- Heidelberg Cement - Germany
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Sinarmas Energy and Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Aditya Birla Group - India
- Xindia Steels Limited - India
- Standard Chartered Bank - UAE
- Samtan Co., Ltd - South Korea
- Sakthi Sugars Limited - India
- Bhushan Steel Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bharathi Cement Corporation - India
- Rio Tinto Coal - Australia
- ASAPP Information Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- Latin American Coal - Colombia
- Ind-Barath Power Infra Limited - India
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Larsen & Toubro Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- The Treasury - Australian Government
- IEA Clean Coal Centre - UK
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- Bhatia International Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Oldendorff Carriers - Singapore
- European Bulk Services B.V. - Netherlands
- Gujarat Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- MS Steel International - UAE
- Ministry of Transport, Egypt
- Bhoruka Overseas - Indonesia
- Independent Power Producers Association of India
- Kumho Petrochemical, South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Energy - Thailand
- Orica Mining Services - Indonesia
- San Jose City I Power Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Interocean Group of Companies - India
- Marubeni Corporation - India
- Directorate Of Revenue Intelligence - India
- Agrawal Coal Company - India
- Gujarat Sidhee Cement - India
- CIMB Investment Bank - Malaysia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- Antam Resourcindo - Indonesia
- The University of Queensland
- Australian Coal Association
- Savvy Resources Ltd - HongKong
- Central Electricity Authority - India
- Indogreen Group - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Intertek Mineral Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Holcim Trading Pte Ltd - Singapore
- Salva Resources Pvt Ltd - India
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Ministry of Finance - Indonesia
- Globalindo Alam Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Singapore Mercantile Exchange
- Global Coal Blending Company Limited - Australia
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