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