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