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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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Wednesday, 08 January 20
WHAT IS BIMCO THINKING ABOUT 2020? - BIMCO
Every year, BIMCO considers what is in store for the shipping industry and for BIMCO in the coming years, while also reflecting on the year gone by ...
Wednesday, 08 January 20
VINACOMIN SETS TO SELL 49 MILLION TONNES OF COAL IN 2020 - VIETNAM NET
The Vietnam National Coal-Mineral Industries Holding Corporation Limited (Vinacomin) has set to sell 49 million tonnes of coal in 2020, a year-on-y ...
Wednesday, 08 January 20
CHINA'S COAL-RICH PROVINCE CUTS 18.95 MLN TONNES OF CAPACITY IN 2019 - XINHUA
North China’s Shanxi Province reduced its coal production capacity by 18.95 million tonnes by closing 18 coal mines in 2019.
A ...
Wednesday, 08 January 20
JANUARY INDONESIAN COAL PRICE REFERENCE SLIPS US$ 0.37 MOM
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
Tuesday, 07 January 20
CLEANER AIR IN 2020: 0.5% SULPHUR CAP FOR SHIPS ENTERS INTO FORCE WORLDWIDE - EUROPEAN COMMISSION
From 1 January 2020, the maximum sulphur content of marine fuels is reduced to 0.5% (down from 3.5%) globally – reducing air pollution and pr ...
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- White Energy Company Limited
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- New Zealand Coal & Carbon
- Semirara Mining and Power Corporation, Philippines
- Mjunction Services Limited - India
- Baramulti Group, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Savvy Resources Ltd - HongKong
- Coal and Oil Company - UAE
- Agrawal Coal Company - India
- CNBM International Corporation - China
- Sical Logistics Limited - India
- PTC India Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Aditya Birla Group - India
- Electricity Authority, New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Dalmia Cement Bharat India
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Intertek Mineral Services - Indonesia
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- SMG Consultants - Indonesia
- Kideco Jaya Agung - Indonesia
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- Altura Mining Limited, Indonesia
- Bhatia International Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Thai Mozambique Logistica
- Coalindo Energy - Indonesia
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Malabar Cements Ltd - India
- Global Business Power Corporation, Philippines
- India Bulls Power Limited - India
- Port Waratah Coal Services - Australia
- Edison Trading Spa - Italy
- VISA Power Limited - India
- GAC Shipping (India) Pvt Ltd
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Energy Development Corp, Philippines
- ICICI Bank Limited - India
- Independent Power Producers Association of India
- Chamber of Mines of South Africa
- Aboitiz Power Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ambuja Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- IEA Clean Coal Centre - UK
- Goldman Sachs - Singapore
- Metalloyd Limited - United Kingdom
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Sojitz Corporation - Japan
- Formosa Plastics Group - Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Price Waterhouse Coopers - Russia
- Directorate Of Revenue Intelligence - India
- Bukit Makmur.PT - Indonesia
- Iligan Light & Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Romanian Commodities Exchange
- San Jose City I Power Corp, Philippines
- Siam City Cement PLC, Thailand
- London Commodity Brokers - England
- European Bulk Services B.V. - Netherlands
- Sree Jayajothi Cements Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Samtan Co., Ltd - South Korea
- Petron Corporation, Philippines
- Tata Chemicals Ltd - India
- Uttam Galva Steels Limited - India
- Makarim & Taira - Indonesia
- Ind-Barath Power Infra Limited - India
- Orica Mining Services - Indonesia
- Central Electricity Authority - India
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Interocean Group of Companies - India
- Bhoruka Overseas - Indonesia
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Latin American Coal - Colombia
- Meenaskhi Energy Private Limited - India
- Larsen & Toubro Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Essar Steel Hazira Ltd - India
- Kobexindo Tractors - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- Borneo Indobara - Indonesia
- Wood Mackenzie - Singapore
- Australian Commodity Traders Exchange
- Indian Energy Exchange, India
- Singapore Mercantile Exchange
- Carbofer General Trading SA - India
- Mintek Dendrill Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Rio Tinto Coal - Australia
- Madhucon Powers Ltd - India
- Meralco Power Generation, Philippines
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- ASAPP Information Group - India
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- Maharashtra Electricity Regulatory Commission - India
- Deloitte Consulting - India
- Bayan Resources Tbk. - Indonesia
- Georgia Ports Authority, United States
- PNOC Exploration Corporation - Philippines
- Orica Australia Pty. Ltd.
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- Indika Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
- Thiess Contractors Indonesia
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- Africa Commodities Group - South Africa
- Kalimantan Lumbung Energi - Indonesia
- Indonesian Coal Mining Association
- Central Java Power - Indonesia
- Cement Manufacturers Association - India
- Renaissance Capital - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhushan Steel Limited - India
- McConnell Dowell - Australia
- GN Power Mariveles Coal Plant, Philippines
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Eastern Energy - Thailand
- The University of Queensland
- Marubeni Corporation - India
- Banpu Public Company Limited - Thailand
- Mercator Lines Limited - India
- Vedanta Resources Plc - India
- Ceylon Electricity Board - Sri Lanka
- Global Green Power PLC Corporation, Philippines
- Commonwealth Bank - Australia
- Power Finance Corporation Ltd., India
- Minerals Council of Australia
- Vizag Seaport Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Grasim Industreis Ltd - India
- Wilmar Investment Holdings
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Bangladesh Power Developement Board
- TeaM Sual Corporation - Philippines
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement - Thailand
- Ministry of Transport, Egypt
- Australian Coal Association
- Indo Tambangraya Megah - Indonesia
- Globalindo Alam Lestari - Indonesia
- Gujarat Sidhee Cement - India
- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Holcim Trading Pte Ltd - Singapore
- Planning Commission, India
- Lanco Infratech Ltd - India
- Coastal Gujarat Power Limited - India
- Salva Resources Pvt Ltd - India
- Parry Sugars Refinery, India
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- PowerSource Philippines DevCo
- Bulk Trading Sa - Switzerland
- Rashtriya Ispat Nigam Limited - India
- The Treasury - Australian Government
- Semirara Mining Corp, Philippines
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Anglo American - United Kingdom
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Medco Energi Mining Internasional
- Bukit Baiduri Energy - Indonesia
- Mercuria Energy - Indonesia
- Attock Cement Pakistan Limited
- Sakthi Sugars Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
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