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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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Friday, 02 August 24
COAL MARKET DEVELOPMENTS: FALLING PRICES AMID RECORD-HIGH OUTPUT - WORLD BANK
Coal prices inched up in May (m/m) following an 8 percent decline in 2024Q1. The Australian and South African benchmarks have plummeted more ...
Friday, 26 July 24
FUELEU MARITME IS COMING. IS YOUR CHARTERPARTY READY? - GARD
With less than six months to implementation of FuelEU Maritime in EU and EEA trades, there has been little published advice regarding how to alloca ...
Thursday, 04 July 24
INDIA'S COAL PRODUCTION RISES 14% IN JUNE - PTI
The country’s coal production rose by 14.49% to 84.63 million tonne (MT) in June. The country’s coal output was 73.92 MT in June last f ...
Tuesday, 02 July 24
NTPC CAPTIVE COAL OUTPUT GROWS 15% IN Q1; DESPATCH RISES 17%
State-owned NTPC on Monday reported a 15 per cent year-on-year increase in the production of coal from captives mines to 9.862 metric million tonne ...
Friday, 28 June 24
KOSPO INVITED BIDS FOR 400,000 MT OF MINIMUM 4000 NCV COAL FOR FIVE YEARS
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for total 400,000 MT of Low Calorific Value Coal for 5 years starting from July 2024 until ...
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- Siam City Cement PLC, Thailand
- Savvy Resources Ltd - HongKong
- Australian Coal Association
- PetroVietnam Power Coal Import and Supply Company
- Kalimantan Lumbung Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- LBH Netherlands Bv - Netherlands
- Cement Manufacturers Association - India
- Global Business Power Corporation, Philippines
- Bhatia International Limited - India
- Ind-Barath Power Infra Limited - India
- GVK Power & Infra Limited - India
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Globalindo Alam Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Mjunction Services Limited - India
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Bukit Baiduri Energy - Indonesia
- Mercuria Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Standard Chartered Bank - UAE
- Jaiprakash Power Ventures ltd
- Sical Logistics Limited - India
- PTC India Limited - India
- The State Trading Corporation of India Ltd
- Makarim & Taira - Indonesia
- Attock Cement Pakistan Limited
- White Energy Company Limited
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Holcim Trading Pte Ltd - Singapore
- International Coal Ventures Pvt Ltd - India
- Indonesian Coal Mining Association
- IEA Clean Coal Centre - UK
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Marubeni Corporation - India
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- CNBM International Corporation - China
- Wood Mackenzie - Singapore
- Borneo Indobara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Pendopo Energi Batubara - Indonesia
- Global Green Power PLC Corporation, Philippines
- Interocean Group of Companies - India
- Gujarat Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Carbofer General Trading SA - India
- Mercator Lines Limited - India
- Goldman Sachs - Singapore
- Ministry of Transport, Egypt
- Trasteel International SA, Italy
- Kepco SPC Power Corporation, Philippines
- Economic Council, Georgia
- Semirara Mining and Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Central Java Power - Indonesia
- PNOC Exploration Corporation - Philippines
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Orica Australia Pty. Ltd.
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Electricity Authority, New Zealand
- Kumho Petrochemical, South Korea
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Sakthi Sugars Limited - India
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Aboitiz Power Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- Gujarat Mineral Development Corp Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Alfred C Toepfer International GmbH - Germany
- Kobexindo Tractors - Indoneisa
- Central Electricity Authority - India
- Grasim Industreis Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Vedanta Resources Plc - India
- Energy Development Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Kartika Selabumi Mining - Indonesia
- VISA Power Limited - India
- London Commodity Brokers - England
- Bulk Trading Sa - Switzerland
- Wilmar Investment Holdings
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Agrawal Coal Company - India
- Xindia Steels Limited - India
- Thai Mozambique Logistica
- Price Waterhouse Coopers - Russia
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Videocon Industries ltd - India
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Planning Commission, India
- Petron Corporation, Philippines
- MS Steel International - UAE
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- Deloitte Consulting - India
- GAC Shipping (India) Pvt Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Sree Jayajothi Cements Limited - India
- Metalloyd Limited - United Kingdom
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Mining Services - Indonesia
- Thiess Contractors Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SMC Global Power, Philippines
- The University of Queensland
- Africa Commodities Group - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Kideco Jaya Agung - Indonesia
- Karaikal Port Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Maharashtra Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Sarangani Energy Corporation, Philippines
- Antam Resourcindo - Indonesia
- Mintek Dendrill Indonesia
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Renaissance Capital - South Africa
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Indogreen Group - Indonesia
- Power Finance Corporation Ltd., India
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- ICICI Bank Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Indo Tambangraya Megah - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IHS Mccloskey Coal Group - USA
- New Zealand Coal & Carbon
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- Ambuja Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- Eastern Coal Council - USA
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Eastern Energy - Thailand
- Krishnapatnam Port Company Ltd. - India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Bukit Makmur.PT - Indonesia
- San Jose City I Power Corp, Philippines
- Bharathi Cement Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Merrill Lynch Commodities Europe
- Samtan Co., Ltd - South Korea
- Kaltim Prima Coal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- CIMB Investment Bank - Malaysia
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Star Paper Mills Limited - India
- Chamber of Mines of South Africa
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- Minerals Council of Australia
- Salva Resources Pvt Ltd - India
- Baramulti Group, Indonesia
- Uttam Galva Steels Limited - India
- Meralco Power Generation, Philippines
- Tata Chemicals Ltd - India
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Latin American Coal - Colombia
- Posco Energy - South Korea
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