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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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Thursday, 23 January 20
COAL-BASED ELECTRICITY GENERATION SURGES 95% IN 2019 - PROFIT PAKISTAN TODAY
Coal-based power generation jumped 94.5 percent to 2,030 Gigawatt hours (GWh) in the year to November 2019, taking its share in the country’s ...
Wednesday, 22 January 20
INDIA: COAL PRODUCTION FROM CAPTIVE MINES RAISES 24% OUTPUT IN APRIL TO DECEMBER - FINANCIAL EXPRESS
Coal production from captive mines in the first nine months of the ongoing financial year was up 24% year-on-year (y-o-y) at 40.93 million tonne (M ...
Wednesday, 22 January 20
SHIPPING MARKET INSIGHT - INTERMODAL
It seems that we are finally seeing whitish smoke as far as the trade feud between the US and China is concerned, while following this much anticip ...
Tuesday, 21 January 20
IRON ORE - 5 THINGS TO WATCH IN 2020 - WOOD MACKENZIE
Wood Mackenzie identifies five trends that will impact the iron ore industry.
Slower demand growth (especially in China) and a decen ...
Tuesday, 21 January 20
ASIA'S APPETITE FOR COAL GROWS, WITH CHINA THE KEY DECIDER - NIKKEI
Although renewable power generation is expected to rise significantly in Asia, India’s vast electricity needs will still underpin global dema ...
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- ASAPP Information Group - India
- Manunggal Multi Energi - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Mercuria Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Tata Chemicals Ltd - India
- MS Steel International - UAE
- New Zealand Coal & Carbon
- White Energy Company Limited
- Petrochimia International Co. Ltd.- Taiwan
- Sindya Power Generating Company Private Ltd
- GAC Shipping (India) Pvt Ltd
- IHS Mccloskey Coal Group - USA
- GVK Power & Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Antam Resourcindo - Indonesia
- Globalindo Alam Lestari - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Holcim Trading Pte Ltd - Singapore
- Sinarmas Energy and Mining - Indonesia
- Aditya Birla Group - India
- Merrill Lynch Commodities Europe
- Georgia Ports Authority, United States
- Indo Tambangraya Megah - Indonesia
- CNBM International Corporation - China
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- San Jose City I Power Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Banpu Public Company Limited - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- Anglo American - United Kingdom
- Sarangani Energy Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- McConnell Dowell - Australia
- Posco Energy - South Korea
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Latin American Coal - Colombia
- Indonesian Coal Mining Association
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Oldendorff Carriers - Singapore
- Intertek Mineral Services - Indonesia
- Bukit Makmur.PT - Indonesia
- Malabar Cements Ltd - India
- IEA Clean Coal Centre - UK
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- Essar Steel Hazira Ltd - India
- Altura Mining Limited, Indonesia
- Singapore Mercantile Exchange
- PNOC Exploration Corporation - Philippines
- India Bulls Power Limited - India
- Independent Power Producers Association of India
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
- European Bulk Services B.V. - Netherlands
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Heidelberg Cement - Germany
- Siam City Cement PLC, Thailand
- The University of Queensland
- South Luzon Thermal Energy Corporation
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Eastern Coal Council - USA
- Coal and Oil Company - UAE
- SMC Global Power, Philippines
- Kideco Jaya Agung - Indonesia
- Samtan Co., Ltd - South Korea
- Minerals Council of Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Alfred C Toepfer International GmbH - Germany
- Lanco Infratech Ltd - India
- Dalmia Cement Bharat India
- ICICI Bank Limited - India
- CIMB Investment Bank - Malaysia
- Iligan Light & Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Pendopo Energi Batubara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Coalindo Energy - Indonesia
- Parry Sugars Refinery, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Standard Chartered Bank - UAE
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Maheswari Brothers Coal Limited - India
- The State Trading Corporation of India Ltd
- SMG Consultants - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Planning Commission, India
- Grasim Industreis Ltd - India
- Barasentosa Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Indian Energy Exchange, India
- Sree Jayajothi Cements Limited - India
- Bhoruka Overseas - Indonesia
- Indika Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Wilmar Investment Holdings
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Energy Link Ltd, New Zealand
- Thai Mozambique Logistica
- Edison Trading Spa - Italy
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- Directorate Of Revenue Intelligence - India
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Commonwealth Bank - Australia
- Krishnapatnam Port Company Ltd. - India
- Gujarat Sidhee Cement - India
- Billiton Holdings Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Economic Council, Georgia
- Siam City Cement - Thailand
- Madhucon Powers Ltd - India
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
- Goldman Sachs - Singapore
- Kobexindo Tractors - Indoneisa
- Binh Thuan Hamico - Vietnam
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Xindia Steels Limited - India
- Deloitte Consulting - India
- Kepco SPC Power Corporation, Philippines
- Indogreen Group - Indonesia
- OPG Power Generation Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- Tamil Nadu electricity Board
- Ind-Barath Power Infra Limited - India
- Global Coal Blending Company Limited - Australia
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- Carbofer General Trading SA - India
- Ministry of Mines - Canada
- Mjunction Services Limited - India
- Larsen & Toubro Limited - India
- SN Aboitiz Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Sojitz Corporation - Japan
- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Romanian Commodities Exchange
- Baramulti Group, Indonesia
- GMR Energy Limited - India
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sical Logistics Limited - India
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Port Waratah Coal Services - Australia
- Meralco Power Generation, Philippines
- Cement Manufacturers Association - India
- Star Paper Mills Limited - India
- Semirara Mining Corp, Philippines
- Ambuja Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- PTC India Limited - India
- Rio Tinto Coal - Australia
- VISA Power Limited - India
- Borneo Indobara - Indonesia
- Eastern Energy - Thailand
- Kumho Petrochemical, South Korea
- Sakthi Sugars Limited - India
- Bayan Resources Tbk. - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bhushan Steel Limited - India
- Rashtriya Ispat Nigam Limited - India
- Formosa Plastics Group - Taiwan
- Attock Cement Pakistan Limited
- Bulk Trading Sa - Switzerland
- Wood Mackenzie - Singapore
- Uttam Galva Steels Limited - India
- Videocon Industries ltd - India
- Vedanta Resources Plc - India
- Mintek Dendrill Indonesia
- Chamber of Mines of South Africa
- Bangladesh Power Developement Board
- Mercator Lines Limited - India
- Australian Coal Association
- Thiess Contractors Indonesia
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Straits Asia Resources Limited - Singapore
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