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Wednesday, 06 May 20
COST CHALLENGES IN A US$20/BBL WORLD - WOOD MACKENZIE
 A new approach is needed to ensure supply sector resilience
How will US$20/bbl affect the oil and gas supply chain?
It’s going to get tough, very tough.
The service sector is already on the ropes but will be first port of call when operators look to save money. IOCs and NOCs need to recognise they’ll want a functioning, reliable service sector when things pick up, as they will. I talked it all through with Andy Tidey, Head of our Performance Improvement team.
Covid-19 has already disrupted the supply chain. The ability of service companies to manufacture and deliver equipment and supply personnel to industry sites is seriously compromised by restrictions on travel and movement of people.
Last downturn, the service sector did its bit in getting costs down. The Majors reduced unit development costs by 55% between 2014 and 2019; our Upstream Cost Survey shows that almost half was rate cuts by suppliers.
It’s taken its toll on service sector finances. Margins for five leading service companies fell by an average of 65% between 2014 and 2019. EBITDA margins (earnings before interest, tax, depreciation and amortisation) for the wider sector have shrunk close to zero.
IOCs will look to cut more to get their own finances on an even keel and reassure shareholders. Cash flow breakevens for the Majors averaged US$55/bbl pre-crisis. BP said this week it aims to reduce underlying breakeven to below US$35/bbl in 2021, and others are heading in the same direction. The primary lever is to cut investment – discretionary spend by IOCs will all but dry up in 2020.
Operators are signalling cuts of up to 50% to expenditure in the US Lower 48. Only a handful of the 53 conventional pre-FID projects we expected to get sanctioned in 2020 will get the green light. These cuts make up a big chunk of the 20% to 25% reduction in spend the Majors have announced.
What drives NOC decisions isn’t quite so straightforward. Their stakeholder is the government, and the NOC may be central to their national economy – big employer, investor and a source of revenue through dividends and taxation. US$20/bbl oil isn’t just a problem for the NOC, it’s a national problem. We estimate that, pre-crisis, Angola needed US$75/bbl to fund its 2020 budget, Saudi Arabia US$85/bbl and Nigeria US$131/bbl – prices of a long-gone era.
Overall cuts in spend by NOCs so far are more muted, averaging 10% to 15%. Chinese NOCs are prioritising domestic investment to maintain production and employment. In the Middle East, ADNOC and Qatar Petroleum will likely proceed with big new gas projects where the scale and economics will win investment from the big IOCs. There have been concerns about market tightness in certain segments in the Middle East.
Many others face an investment drought. Ten higher cost projects at pre-sanction stage in Nigeria, Mexico, Libya and Angola won’t get the support they need from IOC partners. Combined spend will be pushed out indefinitely into the future along with 0.4 million boe/d of new production.
NOCs have to perform a tricky balancing act. To keep investment moving, costs need to come down. The service sector is the easy target; but the service companies are sizeable employers, too. They may be bound into the domestic economy through local obligation requirements and, in certain cases, may even be government-owned.
So, where do NOCs go from here? The adversarial approach between operator and suppliers is counterproductive and could end badly – for both sides. What’s needed is a change in relationship, built on openness, transparency and trust. We are starting to see alliances and partnerships emerging between mid-sized operators and service companies. That could be the template for a win-win – more competitive prices for the operator, and acceptable returns for the supplier. It’s a model NOCs need to consider if they are to foster and preserve a strong supply chain through the coming challenges.
NOCs need to take a strategic view of how they address the cost challenge of US$20/bbl oil. As operator and “national champion”, many NOCs can shape the service sector, in ways not open to the IOCs. There are opportunities to change the commercial model with individual suppliers and bring in practices from other sectors, such as true open-book pricing. Many NOCs could also act as an aggregator of plans, providing the service sector with an aggregated demand profile.
Simon Flowers
Chairman, Chief Analyst and author of The Edge
Source: Wood Mackenzie
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Thursday, 04 June 20
CHINA'S BENCHMARK POWER COAL PRICE EDGES UP - XINHUA
China’s benchmark power coal price rose slightly during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Thursday, 04 June 20
DON'T FORGET THE REAL PURPOSE OF RISK ASSESSMENTS - GARD
KNOWLEDGE TO ELEVATE
When doing a risk assessment, we often overcomplicate it and forget its real purpose.
Rather than ensuring that crew ...
Wednesday, 03 June 20
MARKET INSIGHT - INTERMODAL
Once again shipping is about to venture into uncharted waters and before the challenges of the past decade are forgotten, shipowners will have to o ...
Tuesday, 02 June 20
KOSPO LOOKING FOR 80000 MT OF 4200 NCV COAL FOR JULY
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO) has issued an International tender for 80,000 Metric Tons (MT) 4200 NCV coal for 12 - 21, July ...
Tuesday, 02 June 20
INDONESIAN COAL MINER BUMI RESOURCES Q1 OUTPUT UP 5% - REUTERS
Indonesia’s largest coal miner Bumi Resources posted a 5% increase in first-quarter output at 20.8 million tonnes, the company said in a stat ...
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- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Africa Commodities Group - South Africa
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Singapore Mercantile Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- Georgia Ports Authority, United States
- Sarangani Energy Corporation, Philippines
- Wilmar Investment Holdings
- Posco Energy - South Korea
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- The State Trading Corporation of India Ltd
- Essar Steel Hazira Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Indika Energy - Indonesia
- Tata Chemicals Ltd - India
- Larsen & Toubro Limited - India
- Uttam Galva Steels Limited - India
- Meralco Power Generation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Sakthi Sugars Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Baramulti Group, Indonesia
- Kideco Jaya Agung - Indonesia
- Siam City Cement - Thailand
- Rashtriya Ispat Nigam Limited - India
- Eastern Energy - Thailand
- Indo Tambangraya Megah - Indonesia
- Maheswari Brothers Coal Limited - India
- Krishnapatnam Port Company Ltd. - India
- Agrawal Coal Company - India
- Australian Coal Association
- Romanian Commodities Exchange
- Leighton Contractors Pty Ltd - Australia
- Eastern Coal Council - USA
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Antam Resourcindo - Indonesia
- PTC India Limited - India
- TeaM Sual Corporation - Philippines
- Sojitz Corporation - Japan
- Meenaskhi Energy Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bhoruka Overseas - Indonesia
- Pendopo Energi Batubara - Indonesia
- Videocon Industries ltd - India
- Toyota Tsusho Corporation, Japan
- Central Java Power - Indonesia
- Indogreen Group - Indonesia
- Gujarat Sidhee Cement - India
- India Bulls Power Limited - India
- Edison Trading Spa - Italy
- Carbofer General Trading SA - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Mines - Canada
- Ceylon Electricity Board - Sri Lanka
- LBH Netherlands Bv - Netherlands
- Global Coal Blending Company Limited - Australia
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- The Treasury - Australian Government
- Independent Power Producers Association of India
- IHS Mccloskey Coal Group - USA
- Global Business Power Corporation, Philippines
- Thai Mozambique Logistica
- New Zealand Coal & Carbon
- Kepco SPC Power Corporation, Philippines
- SMG Consultants - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Savvy Resources Ltd - HongKong
- Petron Corporation, Philippines
- Coal and Oil Company - UAE
- Sree Jayajothi Cements Limited - India
- Merrill Lynch Commodities Europe
- Malabar Cements Ltd - India
- Xindia Steels Limited - India
- MS Steel International - UAE
- Siam City Cement PLC, Thailand
- Chamber of Mines of South Africa
- Bukit Makmur.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Latin American Coal - Colombia
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- Kobexindo Tractors - Indoneisa
- Marubeni Corporation - India
- Interocean Group of Companies - India
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bangladesh Power Developement Board
- TNB Fuel Sdn Bhd - Malaysia
- Altura Mining Limited, Indonesia
- CIMB Investment Bank - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Dalmia Cement Bharat India
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Deloitte Consulting - India
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Trasteel International SA, Italy
- Kumho Petrochemical, South Korea
- SMC Global Power, Philippines
- Minerals Council of Australia
- Global Green Power PLC Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Medco Energi Mining Internasional
- Madhucon Powers Ltd - India
- Orica Australia Pty. Ltd.
- Binh Thuan Hamico - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- Ministry of Finance - Indonesia
- Salva Resources Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- CNBM International Corporation - China
- Bukit Baiduri Energy - Indonesia
- Indian Energy Exchange, India
- The University of Queensland
- VISA Power Limited - India
- Coastal Gujarat Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Manunggal Multi Energi - Indonesia
- Heidelberg Cement - Germany
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Cement Manufacturers Association - India
- Cigading International Bulk Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- Sinarmas Energy and Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Central Electricity Authority - India
- Indian Oil Corporation Limited
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Mercator Lines Limited - India
- Planning Commission, India
- Timah Investasi Mineral - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- Thiess Contractors Indonesia
- Economic Council, Georgia
- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- Bharathi Cement Corporation - India
- GVK Power & Infra Limited - India
- Jindal Steel & Power Ltd - India
- Iligan Light & Power Inc, Philippines
- Riau Bara Harum - Indonesia
- McConnell Dowell - Australia
- Grasim Industreis Ltd - India
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- Electricity Authority, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Vizag Seaport Private Limited - India
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- Parliament of New Zealand
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Rio Tinto Coal - Australia
- Gujarat Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Coalindo Energy - Indonesia
- Australian Commodity Traders Exchange
- Attock Cement Pakistan Limited
- Oldendorff Carriers - Singapore
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- Aditya Birla Group - India
- Kohat Cement Company Ltd. - Pakistan
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