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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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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Savvy Resources Ltd - HongKong
- Manunggal Multi Energi - Indonesia
- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
- Neyveli Lignite Corporation Ltd, - India
- Kepco SPC Power Corporation, Philippines
- Thiess Contractors Indonesia
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- SN Aboitiz Power Inc, Philippines
- Romanian Commodities Exchange
- OPG Power Generation Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Xindia Steels Limited - India
- Anglo American - United Kingdom
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- Commonwealth Bank - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Metalloyd Limited - United Kingdom
- Power Finance Corporation Ltd., India
- GVK Power & Infra Limited - India
- New Zealand Coal & Carbon
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mercator Lines Limited - India
- Sarangani Energy Corporation, Philippines
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Transport, Egypt
- Maharashtra Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Minerals Council of Australia
- Interocean Group of Companies - India
- Tamil Nadu electricity Board
- Dalmia Cement Bharat India
- SMC Global Power, Philippines
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Parry Sugars Refinery, India
- Singapore Mercantile Exchange
- Rashtriya Ispat Nigam Limited - India
- Indonesian Coal Mining Association
- GN Power Mariveles Coal Plant, Philippines
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- Gujarat Sidhee Cement - India
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Pendopo Energi Batubara - Indonesia
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- Sojitz Corporation - Japan
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- CNBM International Corporation - China
- Salva Resources Pvt Ltd - India
- Georgia Ports Authority, United States
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Sindya Power Generating Company Private Ltd
- Mintek Dendrill Indonesia
- Essar Steel Hazira Ltd - India
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Carbofer General Trading SA - India
- CIMB Investment Bank - Malaysia
- White Energy Company Limited
- Bhushan Steel Limited - India
- Medco Energi Mining Internasional
- The Treasury - Australian Government
- Samtan Co., Ltd - South Korea
- Renaissance Capital - South Africa
- Global Business Power Corporation, Philippines
- Independent Power Producers Association of India
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- Eastern Coal Council - USA
- Riau Bara Harum - Indonesia
- Ambuja Cements Ltd - India
- Videocon Industries ltd - India
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- Global Coal Blending Company Limited - Australia
- Australian Coal Association
- Maheswari Brothers Coal Limited - India
- Edison Trading Spa - Italy
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- Mercuria Energy - Indonesia
- Lanco Infratech Ltd - India
- Cement Manufacturers Association - India
- Ind-Barath Power Infra Limited - India
- Ministry of Mines - Canada
- MS Steel International - UAE
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- Ministry of Finance - Indonesia
- Heidelberg Cement - Germany
- Meralco Power Generation, Philippines
- Intertek Mineral Services - Indonesia
- Eastern Energy - Thailand
- Grasim Industreis Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Karaikal Port Pvt Ltd - India
- Planning Commission, India
- Binh Thuan Hamico - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Wilmar Investment Holdings
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- LBH Netherlands Bv - Netherlands
- Malabar Cements Ltd - India
- Sical Logistics Limited - India
- Africa Commodities Group - South Africa
- Jorong Barutama Greston.PT - Indonesia
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Semirara Mining and Power Corporation, Philippines
- Deloitte Consulting - India
- IEA Clean Coal Centre - UK
- Krishnapatnam Port Company Ltd. - India
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Formosa Plastics Group - Taiwan
- Sakthi Sugars Limited - India
- Indian Energy Exchange, India
- Leighton Contractors Pty Ltd - Australia
- GMR Energy Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Orica Australia Pty. Ltd.
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement PLC, Thailand
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- Chamber of Mines of South Africa
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Port Waratah Coal Services - Australia
- Central Electricity Authority - India
- Kumho Petrochemical, South Korea
- VISA Power Limited - India
- Siam City Cement - Thailand
- Attock Cement Pakistan Limited
- Bukit Makmur.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- Electricity Authority, New Zealand
- Petron Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Bulk Trading Sa - Switzerland
- Billiton Holdings Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- SMG Consultants - Indonesia
- Makarim & Taira - Indonesia
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- Uttam Galva Steels Limited - India
- Larsen & Toubro Limited - India
- Wood Mackenzie - Singapore
- Parliament of New Zealand
- Mjunction Services Limited - India
- Oldendorff Carriers - Singapore
- PTC India Limited - India
- ASAPP Information Group - India
- Kalimantan Lumbung Energi - Indonesia
- GAC Shipping (India) Pvt Ltd
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Agrawal Coal Company - India
- India Bulls Power Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PowerSource Philippines DevCo
- Kideco Jaya Agung - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- IHS Mccloskey Coal Group - USA
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Iligan Light & Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Trasteel International SA, Italy
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- Meenaskhi Energy Private Limited - India
- The University of Queensland
- Sinarmas Energy and Mining - Indonesia
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