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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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Sunday, 26 January 20
SHIPPING NEEDS TO PREPARE FOR CORONAVIRUS RESTRICTIONS WARNS HILL DICKINSON
The shipping industry needs to be prepared for potential restrictions in order to prevent the further spread of the ‘Wuhan’ coronavirus ...
Friday, 24 January 20
LOW-SULPHUR FUEL OIL PRICES DROP USD 99 PER MT IN SINGAPORE - BIMCO
Singapore has seen one of the largest drops in the price of Very Low Sulphur Fuel Oil (VLSFO), which peaked on 7 January 2020 at USD 740 per metric ...
Friday, 24 January 20
CHINA'S BENCHMARK POWER COAL PRICE REMAINED FLAT DURING THE PAST WEEK - XINHUA
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of coal prices in north China’s major ports, stood at 553 yuan (about 80.1 U.S. dollars) ...
Thursday, 23 January 20
PANAMAX: ANOTHER DISAPPOINTING WEEK IN BOTH THE ATLANTIC AND THE PACIFIC BASIN - FEARNLEYS
Cape Size
From bad to worse for the biggest ships as prices for low-sulphur fuel oil remain high whilst freight rates deteriorate further. Aver ...
Thursday, 23 January 20
AFRICAN POWER PLATFORM PUBLISHES REPORTS ON POWER SECTOR FRAMEWORK FOR SELECTED AFRICAN COUNTRIES
Press Release: African Power Platform publishes Reports on Power Sector Framework for selected African Countries
With the repo ...
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- GVK Power & Infra Limited - India
- Tamil Nadu electricity Board
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- Posco Energy - South Korea
- Ind-Barath Power Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- London Commodity Brokers - England
- PTC India Limited - India
- Medco Energi Mining Internasional
- PowerSource Philippines DevCo
- Uttam Galva Steels Limited - India
- Timah Investasi Mineral - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Karaikal Port Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Grasim Industreis Ltd - India
- Pendopo Energi Batubara - Indonesia
- McConnell Dowell - Australia
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- TeaM Sual Corporation - Philippines
- Heidelberg Cement - Germany
- VISA Power Limited - India
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- Intertek Mineral Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
- Commonwealth Bank - Australia
- Kepco SPC Power Corporation, Philippines
- Thai Mozambique Logistica
- Indian Energy Exchange, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Goldman Sachs - Singapore
- Tata Chemicals Ltd - India
- Xindia Steels Limited - India
- Africa Commodities Group - South Africa
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Eastern Energy - Thailand
- Orica Mining Services - Indonesia
- Parliament of New Zealand
- Malabar Cements Ltd - India
- Larsen & Toubro Limited - India
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
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- Metalloyd Limited - United Kingdom
- Ambuja Cements Ltd - India
- Minerals Council of Australia
- Samtan Co., Ltd - South Korea
- Indian Oil Corporation Limited
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Energy Link Ltd, New Zealand
- Meralco Power Generation, Philippines
- Ministry of Finance - Indonesia
- Bhatia International Limited - India
- SMC Global Power, Philippines
- Price Waterhouse Coopers - Russia
- Vedanta Resources Plc - India
- Borneo Indobara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sical Logistics Limited - India
- Wilmar Investment Holdings
- Jindal Steel & Power Ltd - India
- Edison Trading Spa - Italy
- Karbindo Abesyapradhi - Indoneisa
- Aditya Birla Group - India
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- The State Trading Corporation of India Ltd
- AsiaOL BioFuels Corp., Philippines
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
- Makarim & Taira - Indonesia
- Bharathi Cement Corporation - India
- Kapuas Tunggal Persada - Indonesia
- IHS Mccloskey Coal Group - USA
- San Jose City I Power Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Barasentosa Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Dalmia Cement Bharat India
- Kartika Selabumi Mining - Indonesia
- Sojitz Corporation - Japan
- Indonesian Coal Mining Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Videocon Industries ltd - India
- Energy Development Corp, Philippines
- Thiess Contractors Indonesia
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Meenaskhi Energy Private Limited - India
- Vizag Seaport Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Indika Energy - Indonesia
- Trasteel International SA, Italy
- Gujarat Sidhee Cement - India
- Simpson Spence & Young - Indonesia
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Interocean Group of Companies - India
- ASAPP Information Group - India
- Latin American Coal - Colombia
- Petron Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Binh Thuan Hamico - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- MS Steel International - UAE
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Coastal Gujarat Power Limited - India
- Global Business Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Bulk Trading Sa - Switzerland
- Cement Manufacturers Association - India
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- Planning Commission, India
- Indogreen Group - Indonesia
- Semirara Mining Corp, Philippines
- Parry Sugars Refinery, India
- Billiton Holdings Pty Ltd - Australia
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Kumho Petrochemical, South Korea
- Salva Resources Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Alfred C Toepfer International GmbH - Germany
- Bukit Asam (Persero) Tbk - Indonesia
- Madhucon Powers Ltd - India
- Global Green Power PLC Corporation, Philippines
- Wood Mackenzie - Singapore
- International Coal Ventures Pvt Ltd - India
- Australian Commodity Traders Exchange
- Oldendorff Carriers - Singapore
- Electricity Generating Authority of Thailand
- Jaiprakash Power Ventures ltd
- The University of Queensland
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
- Bank of Tokyo Mitsubishi UFJ Ltd
- LBH Netherlands Bv - Netherlands
- Sindya Power Generating Company Private Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Central Java Power - Indonesia
- Manunggal Multi Energi - Indonesia
- Altura Mining Limited, Indonesia
- The Treasury - Australian Government
- Romanian Commodities Exchange
- New Zealand Coal & Carbon
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
- Lanco Infratech Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Globalindo Alam Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Coalindo Energy - Indonesia
- Australian Coal Association
- Siam City Cement PLC, Thailand
- Independent Power Producers Association of India
- Asmin Koalindo Tuhup - Indonesia
- Essar Steel Hazira Ltd - India
- Bukit Baiduri Energy - Indonesia
- Riau Bara Harum - Indonesia
- Sakthi Sugars Limited - India
- Orica Australia Pty. Ltd.
- Mercuria Energy - Indonesia
- Standard Chartered Bank - UAE
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Pipit Mutiara Jaya. PT, Indonesia
- CNBM International Corporation - China
- Agrawal Coal Company - India
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
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