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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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Tuesday, 21 January 20
THERMAL COAL PRICES SET FOR RECOVERY THIS YEAR AS OVERSUPPLY TIGHTENS - REUTERS
Thermal coal prices are expected to recover this year after losing around a third of their value last year as demand from some south-east Asian cou ...
Monday, 20 January 20
INDIA TO STOP SUBSTITUTABLE COAL IMPORT; CAN GO FOR AUCTION OF 100 FULLY EXPLORED NEW BLOCKS: JOSHI - PTI
The Cabinet recently approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend Mines and Minerals (Development and Regulation ) Act ...
Monday, 20 January 20
CHINA DECEMBER COAL OUTPUT UP 2.4 PERCENT ON YEAR - STATS BUREAU: REUTERS
China produced 331.74 million tonnes of coal in December, up 2.4 percent on the year, the National Bureau of Statistics said on Friday.
...
Monday, 20 January 20
CHINA IMPORTED 124.4 MLN TONNES OF COAL FROM INDONESIA IN 2019, UP 15.1 PERCENT YOY - BANCHERO COSTA
China's coal imports raced ahead in 2019, surprising many who had expected that in the months of 2019 to come the government would clamp down s ...
Saturday, 18 January 20
BIMCO: LOW-SULPHUR FUEL SALE JUMPS TO A 70% SHARE IN SINGAPORE, AS THE IMO 2020 SULPHUR CAP KICKS IN
The final quarter of 2019 marked a massive decline of HSFO sales, as the industry transitioned into compliance of the IMO 2020 Sulphur Cap (IMO2020 ...
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- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- Sarangani Energy Corporation, Philippines
- Grasim Industreis Ltd - India
- Global Business Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Simpson Spence & Young - Indonesia
- Ceylon Electricity Board - Sri Lanka
- VISA Power Limited - India
- Eastern Energy - Thailand
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- New Zealand Coal & Carbon
- Kumho Petrochemical, South Korea
- White Energy Company Limited
- IEA Clean Coal Centre - UK
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Formosa Plastics Group - Taiwan
- TeaM Sual Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Globalindo Alam Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indika Energy - Indonesia
- Indonesian Coal Mining Association
- Maheswari Brothers Coal Limited - India
- Ambuja Cements Ltd - India
- Tamil Nadu electricity Board
- Xindia Steels Limited - India
- India Bulls Power Limited - India
- IHS Mccloskey Coal Group - USA
- Therma Luzon, Inc, Philippines
- The State Trading Corporation of India Ltd
- Meenaskhi Energy Private Limited - India
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Vijayanagar Sugar Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Directorate Of Revenue Intelligence - India
- Energy Development Corp, Philippines
- Commonwealth Bank - Australia
- Wood Mackenzie - Singapore
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- GMR Energy Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Agrawal Coal Company - India
- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- Carbofer General Trading SA - India
- Asmin Koalindo Tuhup - Indonesia
- ICICI Bank Limited - India
- Meralco Power Generation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mjunction Services Limited - India
- Kideco Jaya Agung - Indonesia
- Makarim & Taira - Indonesia
- Posco Energy - South Korea
- Metalloyd Limited - United Kingdom
- Price Waterhouse Coopers - Russia
- Madhucon Powers Ltd - India
- Kaltim Prima Coal - Indonesia
- Ministry of Mines - Canada
- Straits Asia Resources Limited - Singapore
- Rio Tinto Coal - Australia
- Directorate General of MIneral and Coal - Indonesia
- Bangladesh Power Developement Board
- Sinarmas Energy and Mining - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jindal Steel & Power Ltd - India
- London Commodity Brokers - England
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Mercuria Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Aboitiz Power Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Coalindo Energy - Indonesia
- Anglo American - United Kingdom
- Jorong Barutama Greston.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Barasentosa Lestari - Indonesia
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
- Riau Bara Harum - Indonesia
- Goldman Sachs - Singapore
- Global Green Power PLC Corporation, Philippines
- Orica Australia Pty. Ltd.
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- Romanian Commodities Exchange
- Deloitte Consulting - India
- Latin American Coal - Colombia
- Parliament of New Zealand
- Thiess Contractors Indonesia
- Indo Tambangraya Megah - Indonesia
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Minerals Council of Australia
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Bhatia International Limited - India
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- PowerSource Philippines DevCo
- Cement Manufacturers Association - India
- Altura Mining Limited, Indonesia
- OPG Power Generation Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Interocean Group of Companies - India
- GVK Power & Infra Limited - India
- Planning Commission, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Siam City Cement PLC, Thailand
- Renaissance Capital - South Africa
- Edison Trading Spa - Italy
- Star Paper Mills Limited - India
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Larsen & Toubro Limited - India
- Port Waratah Coal Services - Australia
- Heidelberg Cement - Germany
- Antam Resourcindo - Indonesia
- Mintek Dendrill Indonesia
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Australian Coal Association
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Trasteel International SA, Italy
- Medco Energi Mining Internasional
- Pendopo Energi Batubara - Indonesia
- Petron Corporation, Philippines
- PTC India Limited - India
- GAC Shipping (India) Pvt Ltd
- Maharashtra Electricity Regulatory Commission - India
- Bharathi Cement Corporation - India
- Manunggal Multi Energi - Indonesia
- Singapore Mercantile Exchange
- Coal and Oil Company - UAE
- Chettinad Cement Corporation Ltd - India
- Videocon Industries ltd - India
- Essar Steel Hazira Ltd - India
- Sree Jayajothi Cements Limited - India
- Bhushan Steel Limited - India
- Australian Commodity Traders Exchange
- ASAPP Information Group - India
- Holcim Trading Pte Ltd - Singapore
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- International Coal Ventures Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Georgia Ports Authority, United States
- Leighton Contractors Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Sindya Power Generating Company Private Ltd
- Ministry of Finance - Indonesia
- SMC Global Power, Philippines
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Alfred C Toepfer International GmbH - Germany
- Central Electricity Authority - India
- CIMB Investment Bank - Malaysia
- Electricity Generating Authority of Thailand
- McConnell Dowell - Australia
- Vedanta Resources Plc - India
- Wilmar Investment Holdings
- Lanco Infratech Ltd - India
- Kobexindo Tractors - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement - Thailand
- Gujarat Sidhee Cement - India
- Eastern Coal Council - USA
- Bulk Trading Sa - Switzerland
- Semirara Mining Corp, Philippines
- Indian Oil Corporation Limited
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Orica Mining Services - Indonesia
- Salva Resources Pvt Ltd - India
- Aditya Birla Group - India
- Jaiprakash Power Ventures ltd
- PNOC Exploration Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Parry Sugars Refinery, India
- SN Aboitiz Power Inc, Philippines
- Marubeni Corporation - India
- Ministry of Transport, Egypt
- Indian Energy Exchange, India
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