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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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Monday, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
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- IHS Mccloskey Coal Group - USA
- PetroVietnam Power Coal Import and Supply Company
- Australian Coal Association
- Indika Energy - Indonesia
- Jaiprakash Power Ventures ltd
- GN Power Mariveles Coal Plant, Philippines
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- Marubeni Corporation - India
- Goldman Sachs - Singapore
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Semirara Mining Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- GVK Power & Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
- Eastern Energy - Thailand
- Aboitiz Power Corporation - Philippines
- Indogreen Group - Indonesia
- Rio Tinto Coal - Australia
- Bayan Resources Tbk. - Indonesia
- Coastal Gujarat Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- Interocean Group of Companies - India
- Semirara Mining and Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Baramulti Group, Indonesia
- Videocon Industries ltd - India
- Chettinad Cement Corporation Ltd - India
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Latin American Coal - Colombia
- IEA Clean Coal Centre - UK
- Kideco Jaya Agung - Indonesia
- Kapuas Tunggal Persada - Indonesia
- MS Steel International - UAE
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Mintek Dendrill Indonesia
- Orica Mining Services - Indonesia
- Chamber of Mines of South Africa
- International Coal Ventures Pvt Ltd - India
- Agrawal Coal Company - India
- Bukit Asam (Persero) Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Commonwealth Bank - Australia
- New Zealand Coal & Carbon
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Bhushan Steel Limited - India
- Deloitte Consulting - India
- Star Paper Mills Limited - India
- Ambuja Cements Ltd - India
- CNBM International Corporation - China
- Makarim & Taira - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Madhucon Powers Ltd - India
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
- The State Trading Corporation of India Ltd
- Grasim Industreis Ltd - India
- Sakthi Sugars Limited - India
- Intertek Mineral Services - Indonesia
- Coalindo Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- San Jose City I Power Corp, Philippines
- Medco Energi Mining Internasional
- Kepco SPC Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- Heidelberg Cement - Germany
- Borneo Indobara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- SMG Consultants - Indonesia
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Port Waratah Coal Services - Australia
- AsiaOL BioFuels Corp., Philippines
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- Parliament of New Zealand
- The University of Queensland
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Larsen & Toubro Limited - India
- Wilmar Investment Holdings
- Bukit Baiduri Energy - Indonesia
- Bhatia International Limited - India
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- India Bulls Power Limited - India
- Maheswari Brothers Coal Limited - India
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Standard Chartered Bank - UAE
- Banpu Public Company Limited - Thailand
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Economic Council, Georgia
- Price Waterhouse Coopers - Russia
- Sical Logistics Limited - India
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Binh Thuan Hamico - Vietnam
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- Central Electricity Authority - India
- Carbofer General Trading SA - India
- Simpson Spence & Young - Indonesia
- Attock Cement Pakistan Limited
- PTC India Limited - India
- OPG Power Generation Pvt Ltd - India
- Thai Mozambique Logistica
- Energy Link Ltd, New Zealand
- Ind-Barath Power Infra Limited - India
- Antam Resourcindo - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Power Finance Corporation Ltd., India
- CIMB Investment Bank - Malaysia
- Planning Commission, India
- ICICI Bank Limited - India
- Essar Steel Hazira Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- GMR Energy Limited - India
- Global Green Power PLC Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Energy Development Corp, Philippines
- McConnell Dowell - Australia
- Asmin Koalindo Tuhup - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indian Energy Exchange, India
- Wood Mackenzie - Singapore
- Central Java Power - Indonesia
- Ministry of Mines - Canada
- Parry Sugars Refinery, India
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- European Bulk Services B.V. - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- Ministry of Finance - Indonesia
- Leighton Contractors Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Manunggal Multi Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Aditya Birla Group - India
- Kumho Petrochemical, South Korea
- Eastern Coal Council - USA
- VISA Power Limited - India
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- PNOC Exploration Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Bahari Cakrawala Sebuku - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Straits Asia Resources Limited - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Thiess Contractors Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Global Business Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- South Luzon Thermal Energy Corporation
- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- Vedanta Resources Plc - India
- Sarangani Energy Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- TeaM Sual Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Commodity Traders Exchange
- Holcim Trading Pte Ltd - Singapore
- Minerals Council of Australia
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