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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, 23 May 23
INDIA: COAL OUTPUT UP 8.9%, SUPPLY RISES 11.7% IN APRIL - FINANCIAL EXPRESS
India’s coal production jumped 8.85% to 73.14 million tonne (MT) in April 2023 and the total coal despatch during the month went up 11.66% to ...
Tuesday, 23 May 23
CHINA COAL OUTPUT UP 4.5 PCT IN APRIL - XINHUA
China’s raw coal output posted stable expansion in April, official data showed.
The country produced 380 million tonnes of raw ...
Saturday, 20 May 23
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
In 2022, non-OPEC supply is estimated to have increased by 1.9 mb/d y-o-y. Out of this, US liquids production increased by 1.2 mb/d, mainly on the ...
Saturday, 20 May 23
GLOBAL COAL TRADE HAS REALLY PICKED UP PACE IN RECENT MONTHS, NOW FULLY BACK TO PRE-COVID LEVELS - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels. In Jan-Apr 2023, total global seaborne coa ...
Saturday, 20 May 23
MARKET INSIGHT - INTERMODAL
India is one of the world's largest coal producers and one of the world's largest importers of coal. The country uses coal mainly for power ...
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- Vedanta Resources Plc - India
- Therma Luzon, Inc, Philippines
- Rio Tinto Coal - Australia
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- Pendopo Energi Batubara - Indonesia
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Deloitte Consulting - India
- Rashtriya Ispat Nigam Limited - India
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- Merrill Lynch Commodities Europe
- Energy Link Ltd, New Zealand
- San Jose City I Power Corp, Philippines
- Latin American Coal - Colombia
- ICICI Bank Limited - India
- Bulk Trading Sa - Switzerland
- OPG Power Generation Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Goldman Sachs - Singapore
- Banpu Public Company Limited - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Intertek Mineral Services - Indonesia
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Interocean Group of Companies - India
- Kumho Petrochemical, South Korea
- Bharathi Cement Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- Ceylon Electricity Board - Sri Lanka
- Indo Tambangraya Megah - Indonesia
- SMG Consultants - Indonesia
- Mercuria Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Eastern Energy - Thailand
- Global Business Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Kepco SPC Power Corporation, Philippines
- Parliament of New Zealand
- Siam City Cement PLC, Thailand
- CNBM International Corporation - China
- Tamil Nadu electricity Board
- South Luzon Thermal Energy Corporation
- Commonwealth Bank - Australia
- Semirara Mining and Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Binh Thuan Hamico - Vietnam
- Bangladesh Power Developement Board
- The State Trading Corporation of India Ltd
- GVK Power & Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- TeaM Sual Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Posco Energy - South Korea
- London Commodity Brokers - England
- MS Steel International - UAE
- Bhoruka Overseas - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Renaissance Capital - South Africa
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Romanian Commodities Exchange
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- Simpson Spence & Young - Indonesia
- Kideco Jaya Agung - Indonesia
- Savvy Resources Ltd - HongKong
- Economic Council, Georgia
- Global Green Power PLC Corporation, Philippines
- Grasim Industreis Ltd - India
- Ministry of Finance - Indonesia
- Eastern Coal Council - USA
- Riau Bara Harum - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Minerals Council of Australia
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Indogreen Group - Indonesia
- Price Waterhouse Coopers - Russia
- Manunggal Multi Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Siam City Cement - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Samtan Co., Ltd - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Carbofer General Trading SA - India
- New Zealand Coal & Carbon
- Sindya Power Generating Company Private Ltd
- Larsen & Toubro Limited - India
- Star Paper Mills Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Central Electricity Authority - India
- GMR Energy Limited - India
- Thiess Contractors Indonesia
- The Treasury - Australian Government
- Jaiprakash Power Ventures ltd
- TNB Fuel Sdn Bhd - Malaysia
- Orica Australia Pty. Ltd.
- IHS Mccloskey Coal Group - USA
- Kartika Selabumi Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Development Corp, Philippines
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- Sical Logistics Limited - India
- Leighton Contractors Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- Meralco Power Generation, Philippines
- Directorate Of Revenue Intelligence - India
- GAC Shipping (India) Pvt Ltd
- Mercator Lines Limited - India
- Madhucon Powers Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- McConnell Dowell - Australia
- Georgia Ports Authority, United States
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- Central Java Power - Indonesia
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Vizag Seaport Private Limited - India
- ASAPP Information Group - India
- GN Power Mariveles Coal Plant, Philippines
- Baramulti Group, Indonesia
- Bukit Makmur.PT - Indonesia
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- Semirara Mining Corp, Philippines
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Formosa Plastics Group - Taiwan
- Australian Coal Association
- Planning Commission, India
- Pipit Mutiara Jaya. PT, Indonesia
- Sojitz Corporation - Japan
- Xindia Steels Limited - India
- Altura Mining Limited, Indonesia
- Metalloyd Limited - United Kingdom
- PetroVietnam Power Coal Import and Supply Company
- Directorate General of MIneral and Coal - Indonesia
- SMC Global Power, Philippines
- Wood Mackenzie - Singapore
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- Chamber of Mines of South Africa
- Coalindo Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Authority, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Transport, Egypt
- VISA Power Limited - India
- India Bulls Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Wilmar Investment Holdings
- Heidelberg Cement - Germany
- SN Aboitiz Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Meenaskhi Energy Private Limited - India
- Kobexindo Tractors - Indoneisa
- Petron Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- White Energy Company Limited
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Borneo Indobara - Indonesia
- Global Coal Blending Company Limited - Australia
- Coal and Oil Company - UAE
- Mintek Dendrill Indonesia
- Iligan Light & Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Straits Asia Resources Limited - Singapore
- Antam Resourcindo - Indonesia
- Cement Manufacturers Association - India
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Holcim Trading Pte Ltd - Singapore
- Karaikal Port Pvt Ltd - India
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- Singapore Mercantile Exchange
- Sree Jayajothi Cements Limited - India
- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
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