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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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Saturday, 01 February 20
COAL IS NOT GOING ANYWHERE - MINING REVIEW
The coal sector is living under the constant threat of being blamed by environmentalists as being responsible for a world disaster called global wa ...
Saturday, 01 February 20
CIL PRODUCTION TO NOT EXCEED 640 MILLION TON IN FY20: OFFICIAL - PTI
Hit by disruptions due to a prolonged monsoon, mining major Coal India Ltd’s production in the current fiscal will not exceed 640 million ton ...
Saturday, 01 February 20
WHO PAYS FOR IMO 2020? - FREIGHT WAVES
The United Nations’ International Maritime Organization (IMO) implemented its low-sulfur fuel mandate on January 1, 2020. Full enforcement be ...
Friday, 31 January 20
EIA EXPECTS U.S. ELECTRICITY GENERATION FROM RENEWABLES TO SOON SURPASS NUCLEAR AND COAL
In the latest long-term projections, the U.S Energy Information Administration (EIA) projects electricity generation from renewable sources such as ...
Thursday, 30 January 20
PRIVATE SECTOR COMPANIES SEEK 'LEVEL PLAYING FIELD' FOR COAL BLOCK AUCTION - PTI
Private sector companies scouting opportunities for commercial coal mining in the country are seeking a “level playing field” to encour ...
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- Jorong Barutama Greston.PT - Indonesia
- Energy Link Ltd, New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Chamber of Mines of South Africa
- Neyveli Lignite Corporation Ltd, - India
- Larsen & Toubro Limited - India
- Makarim & Taira - Indonesia
- Tata Chemicals Ltd - India
- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Gujarat Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Dalmia Cement Bharat India
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Central Java Power - Indonesia
- Merrill Lynch Commodities Europe
- Barasentosa Lestari - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Energy Development Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Rio Tinto Coal - Australia
- PetroVietnam Power Coal Import and Supply Company
- Global Coal Blending Company Limited - Australia
- Pendopo Energi Batubara - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Baramulti Group, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Coal and Oil Company - UAE
- Videocon Industries ltd - India
- Indian Oil Corporation Limited
- Chettinad Cement Corporation Ltd - India
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Edison Trading Spa - Italy
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Wood Mackenzie - Singapore
- Miang Besar Coal Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
- Eastern Energy - Thailand
- Minerals Council of Australia
- Bulk Trading Sa - Switzerland
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- AsiaOL BioFuels Corp., Philippines
- Banpu Public Company Limited - Thailand
- Interocean Group of Companies - India
- European Bulk Services B.V. - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Globalindo Alam Lestari - Indonesia
- Petron Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Ind-Barath Power Infra Limited - India
- GVK Power & Infra Limited - India
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Xindia Steels Limited - India
- Essar Steel Hazira Ltd - India
- Georgia Ports Authority, United States
- IHS Mccloskey Coal Group - USA
- India Bulls Power Limited - India
- VISA Power Limited - India
- Star Paper Mills Limited - India
- McConnell Dowell - Australia
- Mercuria Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Iligan Light & Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- Australian Coal Association
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- Price Waterhouse Coopers - Russia
- Medco Energi Mining Internasional
- Goldman Sachs - Singapore
- Jindal Steel & Power Ltd - India
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- Sojitz Corporation - Japan
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- Savvy Resources Ltd - HongKong
- Ministry of Transport, Egypt
- MS Steel International - UAE
- London Commodity Brokers - England
- Straits Asia Resources Limited - Singapore
- Bangladesh Power Developement Board
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- South Luzon Thermal Energy Corporation
- Bharathi Cement Corporation - India
- Bayan Resources Tbk. - Indonesia
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- Sarangani Energy Corporation, Philippines
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- Indika Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ceylon Electricity Board - Sri Lanka
- LBH Netherlands Bv - Netherlands
- Sical Logistics Limited - India
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- GMR Energy Limited - India
- Ministry of Mines - Canada
- The Treasury - Australian Government
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- Latin American Coal - Colombia
- Romanian Commodities Exchange
- Kohat Cement Company Ltd. - Pakistan
- Directorate Of Revenue Intelligence - India
- Parry Sugars Refinery, India
- Maharashtra Electricity Regulatory Commission - India
- Deloitte Consulting - India
- The University of Queensland
- The State Trading Corporation of India Ltd
- Sinarmas Energy and Mining - Indonesia
- Bhoruka Overseas - Indonesia
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Independent Power Producers Association of India
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- SN Aboitiz Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Heidelberg Cement - Germany
- Alfred C Toepfer International GmbH - Germany
- Malabar Cements Ltd - India
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- PTC India Limited - India
- Vedanta Resources Plc - India
- White Energy Company Limited
- Sree Jayajothi Cements Limited - India
- SMC Global Power, Philippines
- Kepco SPC Power Corporation, Philippines
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Australian Commodity Traders Exchange
- Lanco Infratech Ltd - India
- Ministry of Finance - Indonesia
- San Jose City I Power Corp, Philippines
- ICICI Bank Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Metalloyd Limited - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- Electricity Authority, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Riau Bara Harum - Indonesia
- Borneo Indobara - Indonesia
- Intertek Mineral Services - Indonesia
- Coastal Gujarat Power Limited - India
- Kaltim Prima Coal - Indonesia
- Altura Mining Limited, Indonesia
- Kideco Jaya Agung - Indonesia
- Bhatia International Limited - India
- Parliament of New Zealand
- ASAPP Information Group - India
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- GN Power Mariveles Coal Plant, Philippines
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- Kobexindo Tractors - Indoneisa
- Agrawal Coal Company - India
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- Rashtriya Ispat Nigam Limited - India
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Uttam Galva Steels Limited - India
- Global Business Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Eastern Coal Council - USA
- Grasim Industreis Ltd - India
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhushan Steel Limited - India
- Semirara Mining and Power Corporation, Philippines
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