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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, 13 February 24
WHAT IS THE OUTLOOK FOR THE NATURAL GAS SPOT PRICE IN 2024 AND 2025? EIA
We expect the U.S. benchmark Henry Hub natural gas spot price to average higher in 2024 and 2025 than in 2023, but to remain lower than $3.00 per m ...
Monday, 12 February 24
US THERMAL COAL EXPORTS HIT 5-YEAR HIGHS AND TOP $5 BLN IN 2023 - REUTERS
United States exporters of thermal coal earned more than $5 billion in 2023 as they shipped out more than 32.5 million metric tons of the high-poll ...
Tuesday, 06 February 24
NEW E-FUELS PROJECT TO MAKE INTERNATIONAL SHIPPING CLIMATE-NEUTRAL - RINA
Transport and trade on the ocean blue must be made much greener. This is the goal of the new €17 million European GAMMA project, where compani ...
Tuesday, 06 February 24
INDIA SEES ANNUAL COAL OUTPUT UP 10.9% IN 2024/25 - REUTERS
India expects domestic coal output to increase by 10.9% to 1.13 billion metric tons in the fiscal year ending March 2025, a senior government offic ...
Tuesday, 06 February 24
INDIA'S COAL PRODUCTION INCREASES BY 10.3% TO 99.73 MILLION TONNE IN JANUARY - PTI
The country’s coal output rose 10.3 per cent to 99.73 Million Tonne (MT) in January, over the same month in the previous fiscal.
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- Indogreen Group - Indonesia
- Coal and Oil Company - UAE
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- GVK Power & Infra Limited - India
- Ambuja Cements Ltd - India
- Manunggal Multi Energi - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Bukit Makmur.PT - Indonesia
- Larsen & Toubro Limited - India
- TeaM Sual Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Kideco Jaya Agung - Indonesia
- Bharathi Cement Corporation - India
- Global Green Power PLC Corporation, Philippines
- Bhatia International Limited - India
- Australian Coal Association
- CNBM International Corporation - China
- Makarim & Taira - Indonesia
- Orica Australia Pty. Ltd.
- Goldman Sachs - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Eastern Coal Council - USA
- Karbindo Abesyapradhi - Indoneisa
- Romanian Commodities Exchange
- Meenaskhi Energy Private Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Antam Resourcindo - Indonesia
- Edison Trading Spa - Italy
- Posco Energy - South Korea
- Mintek Dendrill Indonesia
- Power Finance Corporation Ltd., India
- GAC Shipping (India) Pvt Ltd
- Port Waratah Coal Services - Australia
- Bhushan Steel Limited - India
- Maheswari Brothers Coal Limited - India
- Energy Link Ltd, New Zealand
- PNOC Exploration Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Samtan Co., Ltd - South Korea
- Indian Oil Corporation Limited
- Toyota Tsusho Corporation, Japan
- Kumho Petrochemical, South Korea
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Bangladesh Power Developement Board
- Carbofer General Trading SA - India
- The University of Queensland
- Kohat Cement Company Ltd. - Pakistan
- Chamber of Mines of South Africa
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- London Commodity Brokers - England
- GN Power Mariveles Coal Plant, Philippines
- Bhoruka Overseas - Indonesia
- New Zealand Coal & Carbon
- Bukit Baiduri Energy - Indonesia
- Electricity Authority, New Zealand
- Star Paper Mills Limited - India
- PTC India Limited - India
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- CIMB Investment Bank - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- San Jose City I Power Corp, Philippines
- Tata Chemicals Ltd - India
- Ind-Barath Power Infra Limited - India
- GMR Energy Limited - India
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indonesian Coal Mining Association
- Minerals Council of Australia
- Indo Tambangraya Megah - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Banpu Public Company Limited - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Price Waterhouse Coopers - Russia
- Petron Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Lanco Infratech Ltd - India
- Orica Mining Services - Indonesia
- Commonwealth Bank - Australia
- Savvy Resources Ltd - HongKong
- Jindal Steel & Power Ltd - India
- VISA Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Independent Power Producers Association of India
- Simpson Spence & Young - Indonesia
- Interocean Group of Companies - India
- Sical Logistics Limited - India
- Mercator Lines Limited - India
- Ministry of Mines - Canada
- SMC Global Power, Philippines
- Marubeni Corporation - India
- Mjunction Services Limited - India
- Global Coal Blending Company Limited - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Directorate Of Revenue Intelligence - India
- Africa Commodities Group - South Africa
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
- Parry Sugars Refinery, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Iligan Light & Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Xindia Steels Limited - India
- Tamil Nadu electricity Board
- Sakthi Sugars Limited - India
- Barasentosa Lestari - Indonesia
- MS Steel International - UAE
- Borneo Indobara - Indonesia
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Pendopo Energi Batubara - Indonesia
- Sindya Power Generating Company Private Ltd
- Grasim Industreis Ltd - India
- ICICI Bank Limited - India
- Attock Cement Pakistan Limited
- Globalindo Alam Lestari - Indonesia
- Aditya Birla Group - India
- Therma Luzon, Inc, Philippines
- Formosa Plastics Group - Taiwan
- Coastal Gujarat Power Limited - India
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- Global Business Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Standard Chartered Bank - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Java Power - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Maharashtra Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Krishnapatnam Port Company Ltd. - India
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Singapore Mercantile Exchange
- Rio Tinto Coal - Australia
- Baramulti Group, Indonesia
- European Bulk Services B.V. - Netherlands
- Eastern Energy - Thailand
- White Energy Company Limited
- Aboitiz Power Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Ministry of Transport, Egypt
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Pipit Mutiara Jaya. PT, Indonesia
- Metalloyd Limited - United Kingdom
- Madhucon Powers Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Dalmia Cement Bharat India
- McConnell Dowell - Australia
- Vizag Seaport Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Latin American Coal - Colombia
- IEA Clean Coal Centre - UK
- Straits Asia Resources Limited - Singapore
- Karaikal Port Pvt Ltd - India
- Parliament of New Zealand
- Videocon Industries ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- SN Aboitiz Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Leighton Contractors Pty Ltd - Australia
- Wilmar Investment Holdings
- Anglo American - United Kingdom
- Energy Development Corp, Philippines
- Trasteel International SA, Italy
- Semirara Mining Corp, Philippines
- Electricity Generating Authority of Thailand
- Salva Resources Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Australian Commodity Traders Exchange
- Coalindo Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kaltim Prima Coal - Indonesia
- SMG Consultants - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Planning Commission, India
- Thiess Contractors Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
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