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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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Wednesday, 19 February 20
MINERS WELCOME INDONESIA'S NEW JOBS BILL THAT COULD SPUR COAL GROWTH - REUTERS
Miners have welcomed proposed changes to Indonesian mining rules under a new law aimed at boosting investment, though critics are concerned that th ...
Wednesday, 19 February 20
AS OCEAN TEMPERATURES RISE, SHIPOWNERS LOOK FOR WAYS TO COPE - WARTSILA
The world is heating up, and its oceans are no exception. According to the International Panel on Climate Change (IPCC), the oceans absorb the majo ...
Wednesday, 19 February 20
MARKET INSIGHT - INTERMODAL
The coronavirus outbreak is estimated to negatively affect global economy by at least EUR400bn this year, representing around the 0.4% of global GD ...
Tuesday, 18 February 20
WEEKLY MARKET ANALYSIS - ALLIED
Under such poorly performing market circumstances, many usually take the historical approach, in order to better understand and further analyze the ...
Tuesday, 18 February 20
ADARO SHIPPED 27 PERCENT OF ITS TOTAL COAL PRODUCTION IN 2019 TO INDIA AND CHINA
PT Adaro Energy Tbk (AE) produced 58.03 Mt of coal from PT Adaro Indonesia (AI), Balangan Coal Companies and Adaro Me ...
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Sidhee Cement - India
- Global Coal Blending Company Limited - Australia
- Alfred C Toepfer International GmbH - Germany
- Power Finance Corporation Ltd., India
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining and Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Intertek Mineral Services - Indonesia
- Orica Australia Pty. Ltd.
- Sindya Power Generating Company Private Ltd
- Carbofer General Trading SA - India
- Manunggal Multi Energi - Indonesia
- The Treasury - Australian Government
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Aditya Birla Group - India
- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- San Jose City I Power Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- TeaM Sual Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Kalimantan Lumbung Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Economic Council, Georgia
- Makarim & Taira - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- Formosa Plastics Group - Taiwan
- Electricity Authority, New Zealand
- Altura Mining Limited, Indonesia
- Wilmar Investment Holdings
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- Indo Tambangraya Megah - Indonesia
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- PowerSource Philippines DevCo
- Directorate Of Revenue Intelligence - India
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Australian Coal Association
- Goldman Sachs - Singapore
- Bhoruka Overseas - Indonesia
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- Gujarat Mineral Development Corp Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Salva Resources Pvt Ltd - India
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- Bhatia International Limited - India
- Globalindo Alam Lestari - Indonesia
- Tamil Nadu electricity Board
- Star Paper Mills Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- SN Aboitiz Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Iligan Light & Power Inc, Philippines
- Lanco Infratech Ltd - India
- Georgia Ports Authority, United States
- Maharashtra Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Deloitte Consulting - India
- OPG Power Generation Pvt Ltd - India
- Borneo Indobara - Indonesia
- Africa Commodities Group - South Africa
- SMC Global Power, Philippines
- Holcim Trading Pte Ltd - Singapore
- Attock Cement Pakistan Limited
- Bharathi Cement Corporation - India
- Kapuas Tunggal Persada - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Bhushan Steel Limited - India
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- Interocean Group of Companies - India
- Bangladesh Power Developement Board
- VISA Power Limited - India
- Indian Oil Corporation Limited
- Therma Luzon, Inc, Philippines
- SMG Consultants - Indonesia
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- Barasentosa Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Agrawal Coal Company - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Port Waratah Coal Services - Australia
- Sakthi Sugars Limited - India
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Ministry of Finance - Indonesia
- Aboitiz Power Corporation - Philippines
- Australian Commodity Traders Exchange
- Mercuria Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- CIMB Investment Bank - Malaysia
- Edison Trading Spa - Italy
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- Kumho Petrochemical, South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Marubeni Corporation - India
- Rio Tinto Coal - Australia
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- New Zealand Coal & Carbon
- Timah Investasi Mineral - Indoneisa
- Jaiprakash Power Ventures ltd
- Bulk Trading Sa - Switzerland
- Maheswari Brothers Coal Limited - India
- Metalloyd Limited - United Kingdom
- Simpson Spence & Young - Indonesia
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Indika Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- Larsen & Toubro Limited - India
- Toyota Tsusho Corporation, Japan
- Siam City Cement PLC, Thailand
- Cement Manufacturers Association - India
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- PTC India Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Renaissance Capital - South Africa
- White Energy Company Limited
- Central Electricity Authority - India
- Essar Steel Hazira Ltd - India
- Electricity Generating Authority of Thailand
- Energy Development Corp, Philippines
- Coastal Gujarat Power Limited - India
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CNBM International Corporation - China
- India Bulls Power Limited - India
- Minerals Council of Australia
- Savvy Resources Ltd - HongKong
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Vedanta Resources Plc - India
- McConnell Dowell - Australia
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Kartika Selabumi Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Meralco Power Generation, Philippines
- Sree Jayajothi Cements Limited - India
- Banpu Public Company Limited - Thailand
- Global Business Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Madhucon Powers Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Oldendorff Carriers - Singapore
- Parry Sugars Refinery, India
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- GMR Energy Limited - India
- Dalmia Cement Bharat India
- Jorong Barutama Greston.PT - Indonesia
- The University of Queensland
- Heidelberg Cement - Germany
- Latin American Coal - Colombia
- GAC Shipping (India) Pvt Ltd
- Indonesian Coal Mining Association
- GVK Power & Infra Limited - India
- Coalindo Energy - Indonesia
- Malabar Cements Ltd - India
- Videocon Industries ltd - India
- Ministry of Mines - Canada
- Global Green Power PLC Corporation, Philippines
- Thai Mozambique Logistica
- Central Java Power - Indonesia
- Bukit Baiduri Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- ICICI Bank Limited - India
- Singapore Mercantile Exchange
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- The State Trading Corporation of India Ltd
- Romanian Commodities Exchange
- Ambuja Cements Ltd - India
- Energy Link Ltd, New Zealand
- Wood Mackenzie - Singapore
- London Commodity Brokers - England
- Rashtriya Ispat Nigam Limited - India
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