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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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Wednesday, 27 May 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.94 PCT - XINHUA
China Taiyuan coal transaction price index stood at 125.03 points Monday, up 0.94 percent week on week.
The index, released by China ...
Monday, 25 May 20
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
Non-OPEC oil supply continued to increase by 2.0 mb/d in 2019, driven by US shale production, which rose by 1.7 mb/d, amounting to 84% of total non ...
Sunday, 24 May 20
A 63,000 FIXED DELIVERY VIETNAM TRIP VIA INDONESIA REDELIVERY KOSICHANG AT $8,500 - BALTIC BRIEFING
Capesize
After a week of bounce momentum the market appears to have stalled out once again. The Capesize 5TC has more than doubled since last F ...
Saturday, 23 May 20
COLOMBIA COAL OUTPUT DOWN 7.2% IN Q1 ON LOW PRICES, CORONAVIRUS LOCKDOWN - REUTERS
Coal production in Colombia, the world’s fifth-largest coal exporter, fell 7.2% in the first quarter because of low prices and coronavirus qu ...
Saturday, 23 May 20
EWP INVITES BIDS FOR 840,000 METRIC TONS OF MIN 5700 NAR COAL
COALspot.com: South Korea’s Korea East-West Power Co. Ltd (EWP) has Issued an International Tender for total Max 840,000 Metric Tons of min 5 ...
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- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Independent Power Producers Association of India
- Coal and Oil Company - UAE
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- LBH Netherlands Bv - Netherlands
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Sical Logistics Limited - India
- Rio Tinto Coal - Australia
- CNBM International Corporation - China
- Indogreen Group - Indonesia
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- Siam City Cement PLC, Thailand
- Commonwealth Bank - Australia
- Vizag Seaport Private Limited - India
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Holcim Trading Pte Ltd - Singapore
- Medco Energi Mining Internasional
- Kobexindo Tractors - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- VISA Power Limited - India
- Bulk Trading Sa - Switzerland
- Metalloyd Limited - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Interocean Group of Companies - India
- Krishnapatnam Port Company Ltd. - India
- OPG Power Generation Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Energy Link Ltd, New Zealand
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- Kaltim Prima Coal - Indonesia
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
- Jorong Barutama Greston.PT - Indonesia
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Uttam Galva Steels Limited - India
- Merrill Lynch Commodities Europe
- Ind-Barath Power Infra Limited - India
- Bangladesh Power Developement Board
- Deloitte Consulting - India
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Xindia Steels Limited - India
- Semirara Mining Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- PTC India Limited - India
- Chamber of Mines of South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Australian Commodity Traders Exchange
- Eastern Coal Council - USA
- Indian Energy Exchange, India
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- IHS Mccloskey Coal Group - USA
- Marubeni Corporation - India
- CIMB Investment Bank - Malaysia
- PowerSource Philippines DevCo
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- TNB Fuel Sdn Bhd - Malaysia
- Makarim & Taira - Indonesia
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- IEA Clean Coal Centre - UK
- Sindya Power Generating Company Private Ltd
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Wilmar Investment Holdings
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining and Power Corporation, Philippines
- India Bulls Power Limited - India
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Oldendorff Carriers - Singapore
- Karaikal Port Pvt Ltd - India
- Thai Mozambique Logistica
- Gujarat Sidhee Cement - India
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- PetroVietnam Power Coal Import and Supply Company
- Aditya Birla Group - India
- Economic Council, Georgia
- ICICI Bank Limited - India
- Port Waratah Coal Services - Australia
- Kohat Cement Company Ltd. - Pakistan
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- Carbofer General Trading SA - India
- White Energy Company Limited
- Iligan Light & Power Inc, Philippines
- Posco Energy - South Korea
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- Indika Energy - Indonesia
- Eastern Energy - Thailand
- San Jose City I Power Corp, Philippines
- Videocon Industries ltd - India
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- Miang Besar Coal Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Minerals Council of Australia
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Indian Oil Corporation Limited
- Kideco Jaya Agung - Indonesia
- South Luzon Thermal Energy Corporation
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Cement Manufacturers Association - India
- GVK Power & Infra Limited - India
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Simpson Spence & Young - Indonesia
- Kepco SPC Power Corporation, Philippines
- Mjunction Services Limited - India
- ASAPP Information Group - India
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Mines - Canada
- SMC Global Power, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Borneo Indobara - Indonesia
- Heidelberg Cement - Germany
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- New Zealand Coal & Carbon
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Neyveli Lignite Corporation Ltd, - India
- Standard Chartered Bank - UAE
- Bhoruka Overseas - Indonesia
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Global Business Power Corporation, Philippines
- The Treasury - Australian Government
- Petron Corporation, Philippines
- Australian Coal Association
- Global Green Power PLC Corporation, Philippines
- Latin American Coal - Colombia
- SN Aboitiz Power Inc, Philippines
- Coalindo Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Larsen & Toubro Limited - India
- Singapore Mercantile Exchange
- Orica Mining Services - Indonesia
- Therma Luzon, Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Anglo American - United Kingdom
- International Coal Ventures Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Baramulti Group, Indonesia
- Formosa Plastics Group - Taiwan
- Renaissance Capital - South Africa
- Chettinad Cement Corporation Ltd - India
- Central Java Power - Indonesia
- Planning Commission, India
- SMG Consultants - Indonesia
- Rashtriya Ispat Nigam Limited - India
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Mercator Lines Limited - India
- TeaM Sual Corporation - Philippines
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- London Commodity Brokers - England
- Barasentosa Lestari - Indonesia
- MS Steel International - UAE
- Timah Investasi Mineral - Indoneisa
- The University of Queensland
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Energy Development Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- Lanco Infratech Ltd - India
- Mercuria Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Samtan Co., Ltd - South Korea
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