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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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Sunday, 10 September 23
CHINA AUGUST COAL IMPORTS OF 44.3 MLN T HIT RECORD - REUTERS
China, the world’s top coal consumer, imported 44.3 million metric tons of the fuel last month, customs data showed, the highest amount in an ...
Tuesday, 22 August 23
CHINA'S COAL PRODUCTION LOGS STEADY GROWTH IN JANUARY-JULY: XINHUA
China’s output of raw coal went up 3.6 percent year on year in the first seven months of this year, official data showed.
The ...
Sunday, 13 August 23
THE COMMODITIES FEED: LNG SUPPLY RISKS LINGER - ING
Energy – OPEC sees deficit over remainder of 2023
Oil prices came under some pressure yesterday with ICE Brent settling a litt ...
Wednesday, 09 August 23
COAL TRADE TO RETURN TO 2019 LEVELS - BALTIC EXCHANGE
The International Energy Agency’s mid-year Coal Market Update for 2023 brings both positive and concerning news for the global coal industry. ...
Sunday, 23 July 23
ANALYSIS-INDIA'S COAL MINING BET STUMBLES AS WARY BANKS WEIGH RISING RISKS - REUTERS
India’s drive to ramp up coal output to meet growing energy demand is faltering due to banks’ reluctance to finance newly auctioned min ...
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- Binh Thuan Hamico - Vietnam
- Vizag Seaport Private Limited - India
- SMG Consultants - Indonesia
- Kobexindo Tractors - Indoneisa
- CNBM International Corporation - China
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Power Finance Corporation Ltd., India
- Semirara Mining Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- White Energy Company Limited
- CIMB Investment Bank - Malaysia
- Medco Energi Mining Internasional
- Aditya Birla Group - India
- Central Electricity Authority - India
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Borneo Indobara - Indonesia
- Standard Chartered Bank - UAE
- Jindal Steel & Power Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Bayan Resources Tbk. - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Africa Commodities Group - South Africa
- Grasim Industreis Ltd - India
- Energy Link Ltd, New Zealand
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Renaissance Capital - South Africa
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Georgia Ports Authority, United States
- Cement Manufacturers Association - India
- Parliament of New Zealand
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
- Star Paper Mills Limited - India
- Merrill Lynch Commodities Europe
- Indian Energy Exchange, India
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Karaikal Port Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- Price Waterhouse Coopers - Russia
- Indo Tambangraya Megah - Indonesia
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- Videocon Industries ltd - India
- Goldman Sachs - Singapore
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Posco Energy - South Korea
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Samtan Co., Ltd - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Energy - Thailand
- Makarim & Taira - Indonesia
- GAC Shipping (India) Pvt Ltd
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- ICICI Bank Limited - India
- Eastern Coal Council - USA
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- TNB Fuel Sdn Bhd - Malaysia
- Agrawal Coal Company - India
- Pendopo Energi Batubara - Indonesia
- Meenaskhi Energy Private Limited - India
- Ambuja Cements Ltd - India
- Petron Corporation, Philippines
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Manunggal Multi Energi - Indonesia
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Maharashtra Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Chamber of Mines of South Africa
- Thai Mozambique Logistica
- Tata Chemicals Ltd - India
- International Coal Ventures Pvt Ltd - India
- Planning Commission, India
- Ministry of Transport, Egypt
- Therma Luzon, Inc, Philippines
- IEA Clean Coal Centre - UK
- Karbindo Abesyapradhi - Indoneisa
- Coalindo Energy - Indonesia
- India Bulls Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- Krishnapatnam Port Company Ltd. - India
- London Commodity Brokers - England
- Kartika Selabumi Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Bahari Cakrawala Sebuku - Indonesia
- ASAPP Information Group - India
- SN Aboitiz Power Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Uttam Galva Steels Limited - India
- Electricity Authority, New Zealand
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Holcim Trading Pte Ltd - Singapore
- Globalindo Alam Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Australian Commodity Traders Exchange
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Gujarat Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Simpson Spence & Young - Indonesia
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- PTC India Limited - India
- Salva Resources Pvt Ltd - India
- Sical Logistics Limited - India
- MS Steel International - UAE
- GVK Power & Infra Limited - India
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- Altura Mining Limited, Indonesia
- Ministry of Finance - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Trasteel International SA, Italy
- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coal and Oil Company - UAE
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- GN Power Mariveles Coal Plant, Philippines
- Electricity Generating Authority of Thailand
- Dalmia Cement Bharat India
- Orica Mining Services - Indonesia
- Bukit Makmur.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Mercator Lines Limited - India
- Bukit Baiduri Energy - Indonesia
- Marubeni Corporation - India
- Kaltim Prima Coal - Indonesia
- Deloitte Consulting - India
- AsiaOL BioFuels Corp., Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- Thiess Contractors Indonesia
- The Treasury - Australian Government
- Kumho Petrochemical, South Korea
- PowerSource Philippines DevCo
- Kohat Cement Company Ltd. - Pakistan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Siam City Cement - Thailand
- Xindia Steels Limited - India
- Sakthi Sugars Limited - India
- Aboitiz Power Corporation - Philippines
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- Gujarat Mineral Development Corp Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Oil Corporation Limited
- Bulk Trading Sa - Switzerland
- Global Business Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Meralco Power Generation, Philippines
- New Zealand Coal & Carbon
- Ministry of Mines - Canada
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Kapuas Tunggal Persada - Indonesia
- Wood Mackenzie - Singapore
- Parry Sugars Refinery, India
- Directorate Of Revenue Intelligence - India
- Alfred C Toepfer International GmbH - Germany
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Vijayanagar Sugar Pvt Ltd - India
- Anglo American - United Kingdom
- LBH Netherlands Bv - Netherlands
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- Bhushan Steel Limited - India
- Madhucon Powers Ltd - India
- Lanco Infratech Ltd - India
- TeaM Sual Corporation - Philippines
- McConnell Dowell - Australia
- Tamil Nadu electricity Board
- The University of Queensland
- Central Java Power - Indonesia
- Economic Council, Georgia
- Metalloyd Limited - United Kingdom
- Romanian Commodities Exchange
- Interocean Group of Companies - India
- Ind-Barath Power Infra Limited - India
- Indogreen Group - Indonesia
- Energy Development Corp, Philippines
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