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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, 25 March 23
COAL INDIA HAS STRONG CASE TO INCREASE PRICES, TALKS ON: CMD AGRAWAL - BUSINESS STANDARD
Coal India (CIL) Chairman and Managing Director Pramod Agrawal said on Monday there is a “strong case” for increasing coal prices, and ...
Saturday, 25 March 23
ASIAN CRUDE PALM OIL WATCH 1Q23 - FITCH RATINGS
Malaysian benchmark crude palm oil (CPO) spot prices have averaged around USD915 per tonne (t) so far in 1Q23, sharply lower than the average of ar ...
Saturday, 25 March 23
INDONESIA’S COAL EXPORT INCREASED BY 21.0% YOY TO 388.4 MLN T IN 2022 - BANCHERO COSTA
After a slow start in the first quarter, global coal trade has really picked up pace last year, and is now fully back to pre-Covid levels. In the f ...
Saturday, 25 March 23
GLOBAL LNG-ASIA SPOT PRICES SLIP AS WEAK NORTHERN DEMAND REMAINS - REUTERS
Asian spot prices of liquefied natural gas (LNG) declined this week, falling to a 21-month low, as weak demand in the northeast Asia region continu ...
Wednesday, 22 March 23
OIL PRICE FALL SPECULATIVE, TO HIT $140 BY YEAR-END -ANDURAND: REUTERS
The recent fall in oil prices due to banking jitters is speculative and oil will hit $140 a barrel by the end of the year, hedge fund manager Pierr ...
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- LBH Netherlands Bv - Netherlands
- PNOC Exploration Corporation - Philippines
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Indika Energy - Indonesia
- Star Paper Mills Limited - India
- Tamil Nadu electricity Board
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Merrill Lynch Commodities Europe
- CIMB Investment Bank - Malaysia
- Carbofer General Trading SA - India
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Bhatia International Limited - India
- Bharathi Cement Corporation - India
- Agrawal Coal Company - India
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- India Bulls Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Mjunction Services Limited - India
- Essar Steel Hazira Ltd - India
- Riau Bara Harum - Indonesia
- Karaikal Port Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Wilmar Investment Holdings
- GMR Energy Limited - India
- Bayan Resources Tbk. - Indonesia
- London Commodity Brokers - England
- Bhoruka Overseas - Indonesia
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- Eastern Energy - Thailand
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Xindia Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Sindya Power Generating Company Private Ltd
- The Treasury - Australian Government
- MS Steel International - UAE
- Larsen & Toubro Limited - India
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Jindal Steel & Power Ltd - India
- Georgia Ports Authority, United States
- Vizag Seaport Private Limited - India
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Jaiprakash Power Ventures ltd
- Binh Thuan Hamico - Vietnam
- Baramulti Group, Indonesia
- Price Waterhouse Coopers - Russia
- Pipit Mutiara Jaya. PT, Indonesia
- ASAPP Information Group - India
- Thai Mozambique Logistica
- Anglo American - United Kingdom
- SMG Consultants - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indonesian Coal Mining Association
- Kapuas Tunggal Persada - Indonesia
- Global Coal Blending Company Limited - Australia
- Gujarat Mineral Development Corp Ltd - India
- Independent Power Producers Association of India
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Central Electricity Authority - India
- OPG Power Generation Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Makarim & Taira - Indonesia
- Bangladesh Power Developement Board
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- Indian Energy Exchange, India
- Leighton Contractors Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- PowerSource Philippines DevCo
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- Sree Jayajothi Cements Limited - India
- Thiess Contractors Indonesia
- Electricity Generating Authority of Thailand
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Orica Australia Pty. Ltd.
- Formosa Plastics Group - Taiwan
- Oldendorff Carriers - Singapore
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- SMC Global Power, Philippines
- Parliament of New Zealand
- Parry Sugars Refinery, India
- Salva Resources Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Sakthi Sugars Limited - India
- Dalmia Cement Bharat India
- Barasentosa Lestari - Indonesia
- Attock Cement Pakistan Limited
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- IHS Mccloskey Coal Group - USA
- Vijayanagar Sugar Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Metalloyd Limited - United Kingdom
- Heidelberg Cement - Germany
- McConnell Dowell - Australia
- Jorong Barutama Greston.PT - Indonesia
- Electricity Authority, New Zealand
- Kepco SPC Power Corporation, Philippines
- Sical Logistics Limited - India
- Ministry of Transport, Egypt
- Therma Luzon, Inc, Philippines
- CNBM International Corporation - China
- Savvy Resources Ltd - HongKong
- Latin American Coal - Colombia
- Asmin Koalindo Tuhup - Indonesia
- Edison Trading Spa - Italy
- Alfred C Toepfer International GmbH - Germany
- Indogreen Group - Indonesia
- Singapore Mercantile Exchange
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- IEA Clean Coal Centre - UK
- Planning Commission, India
- Africa Commodities Group - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Billiton Holdings Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Directorate Of Revenue Intelligence - India
- Indo Tambangraya Megah - Indonesia
- Bukit Makmur.PT - Indonesia
- Wood Mackenzie - Singapore
- Mintek Dendrill Indonesia
- PTC India Limited - India
- New Zealand Coal & Carbon
- Neyveli Lignite Corporation Ltd, - India
- Manunggal Multi Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- Aditya Birla Group - India
- Eastern Coal Council - USA
- Cement Manufacturers Association - India
- Borneo Indobara - Indonesia
- Meenaskhi Energy Private Limited - India
- Kobexindo Tractors - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
- Orica Mining Services - Indonesia
- Minerals Council of Australia
- Ministry of Mines - Canada
- Economic Council, Georgia
- Posco Energy - South Korea
- Aboitiz Power Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kideco Jaya Agung - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Bukit Baiduri Energy - Indonesia
- Altura Mining Limited, Indonesia
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- San Jose City I Power Corp, Philippines
- Coalindo Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- Standard Chartered Bank - UAE
- Gujarat Sidhee Cement - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coastal Gujarat Power Limited - India
- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
- Ind-Barath Power Infra Limited - India
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- Energy Link Ltd, New Zealand
- Romanian Commodities Exchange
- Krishnapatnam Port Company Ltd. - India
- Ministry of Finance - Indonesia
- Lanco Infratech Ltd - India
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