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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, 05 February 20
CORONAVIRUS AND THE SHIPPING INDUSTRY - WATSON, FARLEY & WILLIAMS
The continued spread of Coronavirus and governmental measures to minimise the impact is likely to affect the shipping industry and supply chain.
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Wednesday, 05 February 20
INDONESIA'S COAL PRICE REFERENCE UP 1.46% IN FEBRUARY
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised up the benchmark price of Indonesian thermal co ...
Wednesday, 05 February 20
MARKET INSIGHT - INTERMODAL
The oil and gas industry benefitted from a strong and solid ground in the previous year. We witnessed a slow but steady increase in bunker’s ...
Wednesday, 05 February 20
RUSSIA EXPORTED 28.6 MLN TONNES OF LNG IN 2019 - REFINITIV
A lot of attention has been paid recently on the surge in LNG exports from the United States. However, another country which is seeing truly expone ...
Tuesday, 04 February 20
CAPE: THE AVERAGE EARNINGS PER DAY FELL BENEATH THE USD 4,000, A LEVEL CONSIDERABLY BELOW EVEN THE MOST CONSERVATIVE OPEX LEVELS - ALLIED
The recent slump in the dry bulk freight market may well have been expected to some degree, but despite this the shock was still overwhelming when ...
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- Siam City Cement - Thailand
- Goldman Sachs - Singapore
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- Africa Commodities Group - South Africa
- Sarangani Energy Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Manunggal Multi Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- TeaM Sual Corporation - Philippines
- Orica Australia Pty. Ltd.
- Kapuas Tunggal Persada - Indonesia
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Kaltim Prima Coal - Indonesia
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Australian Coal Association
- Kalimantan Lumbung Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Riau Bara Harum - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indian Energy Exchange, India
- Planning Commission, India
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
- Madhucon Powers Ltd - India
- Baramulti Group, Indonesia
- New Zealand Coal & Carbon
- Standard Chartered Bank - UAE
- Bangladesh Power Developement Board
- Cigading International Bulk Terminal - Indonesia
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Intertek Mineral Services - Indonesia
- Parliament of New Zealand
- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Deloitte Consulting - India
- Kartika Selabumi Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Iligan Light & Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Mercuria Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- The University of Queensland
- Renaissance Capital - South Africa
- Billiton Holdings Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Lanco Infratech Ltd - India
- Bukit Makmur.PT - Indonesia
- Alfred C Toepfer International GmbH - Germany
- GMR Energy Limited - India
- Chamber of Mines of South Africa
- Parry Sugars Refinery, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Energy Link Ltd, New Zealand
- Ministry of Mines - Canada
- Timah Investasi Mineral - Indoneisa
- Kobexindo Tractors - Indoneisa
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coastal Gujarat Power Limited - India
- Banpu Public Company Limited - Thailand
- Global Business Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- The State Trading Corporation of India Ltd
- Anglo American - United Kingdom
- Star Paper Mills Limited - India
- Independent Power Producers Association of India
- GAC Shipping (India) Pvt Ltd
- IEA Clean Coal Centre - UK
- Commonwealth Bank - Australia
- Central Electricity Authority - India
- IHS Mccloskey Coal Group - USA
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Mjunction Services Limited - India
- Indogreen Group - Indonesia
- Coal and Oil Company - UAE
- Pendopo Energi Batubara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- Wood Mackenzie - Singapore
- MS Steel International - UAE
- Borneo Indobara - Indonesia
- Bayan Resources Tbk. - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Coal Council - USA
- Marubeni Corporation - India
- Uttam Galva Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Posco Energy - South Korea
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- SMG Consultants - Indonesia
- Sical Logistics Limited - India
- Semirara Mining Corp, Philippines
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Minerals Council of Australia
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Orica Mining Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Kumho Petrochemical, South Korea
- ICICI Bank Limited - India
- Eastern Energy - Thailand
- Ministry of Transport, Egypt
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Bhoruka Overseas - Indonesia
- Kideco Jaya Agung - Indonesia
- Meralco Power Generation, Philippines
- Heidelberg Cement - Germany
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- Bharathi Cement Corporation - India
- San Jose City I Power Corp, Philippines
- Tamil Nadu electricity Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Mineral Development Corp Ltd - India
- CNBM International Corporation - China
- Holcim Trading Pte Ltd - Singapore
- Mintek Dendrill Indonesia
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Jaiprakash Power Ventures ltd
- Binh Thuan Hamico - Vietnam
- Interocean Group of Companies - India
- Sakthi Sugars Limited - India
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- The Treasury - Australian Government
- Bulk Trading Sa - Switzerland
- Ceylon Electricity Board - Sri Lanka
- European Bulk Services B.V. - Netherlands
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Makarim & Taira - Indonesia
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- Vedanta Resources Plc - India
- Xindia Steels Limited - India
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
- Agrawal Coal Company - India
- Formosa Plastics Group - Taiwan
- Straits Asia Resources Limited - Singapore
- McConnell Dowell - Australia
- Rashtriya Ispat Nigam Limited - India
- ASAPP Information Group - India
- Kepco SPC Power Corporation, Philippines
- White Energy Company Limited
- Power Finance Corporation Ltd., India
- Latin American Coal - Colombia
- SN Aboitiz Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Metalloyd Limited - United Kingdom
- PNOC Exploration Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- PTC India Limited - India
- Antam Resourcindo - Indonesia
- Bukit Baiduri Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- Samtan Co., Ltd - South Korea
- Price Waterhouse Coopers - Russia
- Indonesian Coal Mining Association
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Bhatia International Limited - India
- Barasentosa Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Singapore Mercantile Exchange
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