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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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Friday, 02 February 24
DRY BULK MARKET: THE DOWNWARD REVISION IN THE GROWTH OF CAPESIZE TONNE DAYS IN JANUARY WITH THE BCI DROPPING - MARIA BERTZELETOU
In the last week of January, the dry freight market sustained weakness in the Capesize segment, while the number of ballasters in the Southeast (SE ...
Friday, 02 February 24
COAL INDIA ACHIEVES NEARLY 80% OF ITS FY24 PRODUCTION TARGET IN TEN MONTHS - CNBCTV18
For the month of January, the company’s production grew by 9.1% from the same period last year to 78.4 Million Tonnes (MT), from 71.9 MT last ...
Thursday, 01 February 24
CHINA'S WIND, SOLAR CAPACITY TO OVERTAKE COAL IN 2024 - INDUSTRY BODY, REUTERS REPORTED
China’s installed wind and solar capacity is expected to overtake coal for the first time this year, according to industry forecasts.
&nb ...
Thursday, 01 February 24
ANTI-DEDUCTION CLAUSES: CAN A CHARTERER WITHHOLD HIRE WITHOUT AN OWNER'S CONSENT? - SKULD
KNOWLEDGE TO ELEVATE
Summary
In The Anna Dorothea, the Court found that where a charterparty provides that no deduction from hire may be m ...
Thursday, 01 February 24
INDIA REBUILDS COAL STOCKS TO ENSURE ELECTRIC RELIABILITY - REUTERS
India’s electricity supply is much more comfortable at the start of 2024 than in either 2023 or 2022 as coal production has ramped up and the ...
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- LBH Netherlands Bv - Netherlands
- Ministry of Mines - Canada
- Central Electricity Authority - India
- Singapore Mercantile Exchange
- SN Aboitiz Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- Rio Tinto Coal - Australia
- SMG Consultants - Indonesia
- Iligan Light & Power Inc, Philippines
- Romanian Commodities Exchange
- Simpson Spence & Young - Indonesia
- Alfred C Toepfer International GmbH - Germany
- AsiaOL BioFuels Corp., Philippines
- Indonesian Coal Mining Association
- Bukit Asam (Persero) Tbk - Indonesia
- Interocean Group of Companies - India
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- PowerSource Philippines DevCo
- Larsen & Toubro Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Orica Mining Services - Indonesia
- Indian Energy Exchange, India
- Krishnapatnam Port Company Ltd. - India
- TeaM Sual Corporation - Philippines
- Riau Bara Harum - Indonesia
- Commonwealth Bank - Australia
- GAC Shipping (India) Pvt Ltd
- Jaiprakash Power Ventures ltd
- Karaikal Port Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Bhoruka Overseas - Indonesia
- CIMB Investment Bank - Malaysia
- Bayan Resources Tbk. - Indonesia
- SMC Global Power, Philippines
- Bhatia International Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Coastal Gujarat Power Limited - India
- VISA Power Limited - India
- Renaissance Capital - South Africa
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Wood Mackenzie - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- The Treasury - Australian Government
- Coal and Oil Company - UAE
- Maheswari Brothers Coal Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bangladesh Power Developement Board
- Indo Tambangraya Megah - Indonesia
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Ambuja Cements Ltd - India
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- Central Java Power - Indonesia
- Heidelberg Cement - Germany
- Coalindo Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Ceylon Electricity Board - Sri Lanka
- Borneo Indobara - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bukit Baiduri Energy - Indonesia
- Essar Steel Hazira Ltd - India
- McConnell Dowell - Australia
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- Eastern Coal Council - USA
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- TNB Fuel Sdn Bhd - Malaysia
- Altura Mining Limited, Indonesia
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
- Antam Resourcindo - Indonesia
- Anglo American - United Kingdom
- Sakthi Sugars Limited - India
- Videocon Industries ltd - India
- Sree Jayajothi Cements Limited - India
- The State Trading Corporation of India Ltd
- Kumho Petrochemical, South Korea
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Cigading International Bulk Terminal - Indonesia
- Trasteel International SA, Italy
- IEA Clean Coal Centre - UK
- Minerals Council of Australia
- Barasentosa Lestari - Indonesia
- Mercuria Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- IHS Mccloskey Coal Group - USA
- Power Finance Corporation Ltd., India
- Cement Manufacturers Association - India
- Indian Oil Corporation Limited
- Intertek Mineral Services - Indonesia
- Attock Cement Pakistan Limited
- Marubeni Corporation - India
- Gujarat Sidhee Cement - India
- Australian Commodity Traders Exchange
- Kartika Selabumi Mining - Indonesia
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- Economic Council, Georgia
- Billiton Holdings Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- South Luzon Thermal Energy Corporation
- Aditya Birla Group - India
- Pendopo Energi Batubara - Indonesia
- Merrill Lynch Commodities Europe
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- Mercator Lines Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Planning Commission, India
- Globalindo Alam Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Siam City Cement - Thailand
- Parry Sugars Refinery, India
- Gujarat Mineral Development Corp Ltd - India
- Samtan Co., Ltd - South Korea
- Parliament of New Zealand
- Kapuas Tunggal Persada - Indonesia
- Carbofer General Trading SA - India
- Jindal Steel & Power Ltd - India
- Sindya Power Generating Company Private Ltd
- Vedanta Resources Plc - India
- Agrawal Coal Company - India
- Posco Energy - South Korea
- Straits Asia Resources Limited - Singapore
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Africa Commodities Group - South Africa
- Semirara Mining Corp, Philippines
- Meralco Power Generation, Philippines
- Georgia Ports Authority, United States
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Malabar Cements Ltd - India
- Formosa Plastics Group - Taiwan
- Chettinad Cement Corporation Ltd - India
- Kepco SPC Power Corporation, Philippines
- ASAPP Information Group - India
- Mjunction Services Limited - India
- Bulk Trading Sa - Switzerland
- Indogreen Group - Indonesia
- Vizag Seaport Private Limited - India
- MS Steel International - UAE
- Leighton Contractors Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Latin American Coal - Colombia
- Energy Development Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Authority, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- PTC India Limited - India
- The University of Queensland
- Madhucon Powers Ltd - India
- OPG Power Generation Pvt Ltd - India
- Eastern Energy - Thailand
- Standard Chartered Bank - UAE
- Dalmia Cement Bharat India
- Binh Thuan Hamico - Vietnam
- Tata Chemicals Ltd - India
- Petron Corporation, Philippines
- Baramulti Group, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Salva Resources Pvt Ltd - India
- India Bulls Power Limited - India
- European Bulk Services B.V. - Netherlands
- Wilmar Investment Holdings
- PNOC Exploration Corporation - Philippines
- Medco Energi Mining Internasional
- Tamil Nadu electricity Board
- White Energy Company Limited
- Petrochimia International Co. Ltd.- Taiwan
- Edison Trading Spa - Italy
- Independent Power Producers Association of India
- London Commodity Brokers - England
- Grasim Industreis Ltd - India
- Sarangani Energy Corporation, Philippines
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- CNBM International Corporation - China
- Australian Coal Association
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- Uttam Galva Steels Limited - India
- Sojitz Corporation - Japan
- Gujarat Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Energy Link Ltd, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
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