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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, 07 May 20
CRUDE OIL TANKER EARNINGS DROP 68% IN NINE DAYS - BIMCO
Crude oil tanker earnings have come down sharply in recent weeks with Very Large Crude Carrier (VLCC) earnings from the Middle East Gulf to China d ...
Thursday, 07 May 20
UKRAINE PRODUCES 2.5 MLN TONNES OF COAL IN APRIL - UKRINFORM
Ukraine produced 2.5 million tonnes of coal in April 2020, which is 39% less than planned, according to the Coal Miners Union of Ukraine.
...
Thursday, 07 May 20
INDIA: GOVT TO DO AWAY WITH MANDATORY WASHING OF COAL FOR THERMAL POWER UNITS - BUSINESS STANDARD
The Centre is planning to do away with the mandatory requirement of washing of coal before it is transported to thermal power stations. The Ministr ...
Thursday, 07 May 20
CIL'S SUPPLY TO POWER SECTOR FALLS IN MARCH AMID SLUMP IN COAL DEMAND - PTI
The supply of coal to the power sector by state-owned CIL registered a decline of eight per cent to 42.30 million tonne in March in the wake of slu ...
Thursday, 07 May 20
COAL PRICE REFERENCE FALL SHARPLY IN MAY 2020 DUE TO CORONAVIRUS OUTBREAK
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
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- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Xindia Steels Limited - India
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Bhushan Steel Limited - India
- Global Coal Blending Company Limited - Australia
- The Treasury - Australian Government
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Orica Australia Pty. Ltd.
- New Zealand Coal & Carbon
- GMR Energy Limited - India
- Kaltim Prima Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Vedanta Resources Plc - India
- Ministry of Finance - Indonesia
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- Port Waratah Coal Services - Australia
- Ambuja Cements Ltd - India
- Baramulti Group, Indonesia
- Aditya Birla Group - India
- McConnell Dowell - Australia
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- Georgia Ports Authority, United States
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- Pendopo Energi Batubara - Indonesia
- Altura Mining Limited, Indonesia
- Edison Trading Spa - Italy
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indika Energy - Indonesia
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Posco Energy - South Korea
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- CNBM International Corporation - China
- Australian Coal Association
- Parry Sugars Refinery, India
- Samtan Co., Ltd - South Korea
- Jindal Steel & Power Ltd - India
- Global Green Power PLC Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- Renaissance Capital - South Africa
- Directorate Of Revenue Intelligence - India
- Wood Mackenzie - Singapore
- Rashtriya Ispat Nigam Limited - India
- Salva Resources Pvt Ltd - India
- Energy Development Corp, Philippines
- India Bulls Power Limited - India
- Power Finance Corporation Ltd., India
- VISA Power Limited - India
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indonesian Coal Mining Association
- Miang Besar Coal Terminal - Indonesia
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- LBH Netherlands Bv - Netherlands
- Energy Link Ltd, New Zealand
- Star Paper Mills Limited - India
- Bhatia International Limited - India
- White Energy Company Limited
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Ind-Barath Power Infra Limited - India
- Electricity Authority, New Zealand
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- Central Java Power - Indonesia
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- Formosa Plastics Group - Taiwan
- Agrawal Coal Company - India
- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- Aboitiz Power Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Savvy Resources Ltd - HongKong
- Bulk Trading Sa - Switzerland
- Deloitte Consulting - India
- Kobexindo Tractors - Indoneisa
- Heidelberg Cement - Germany
- Vizag Seaport Private Limited - India
- Price Waterhouse Coopers - Russia
- San Jose City I Power Corp, Philippines
- Borneo Indobara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Eastern Coal Council - USA
- Holcim Trading Pte Ltd - Singapore
- Thai Mozambique Logistica
- Karbindo Abesyapradhi - Indoneisa
- Eastern Energy - Thailand
- Riau Bara Harum - Indonesia
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- Latin American Coal - Colombia
- Therma Luzon, Inc, Philippines
- Lanco Infratech Ltd - India
- Bangladesh Power Developement Board
- OPG Power Generation Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
- Electricity Generating Authority of Thailand
- European Bulk Services B.V. - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- Commonwealth Bank - Australia
- Kalimantan Lumbung Energi - Indonesia
- Manunggal Multi Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Standard Chartered Bank - UAE
- Global Business Power Corporation, Philippines
- Bharathi Cement Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Pipit Mutiara Jaya. PT, Indonesia
- TeaM Sual Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- Sakthi Sugars Limited - India
- CIMB Investment Bank - Malaysia
- Dalmia Cement Bharat India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tata Chemicals Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- IEA Clean Coal Centre - UK
- Makarim & Taira - Indonesia
- Madhucon Powers Ltd - India
- Cement Manufacturers Association - India
- Meralco Power Generation, Philippines
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Bayan Resources Tbk. - Indonesia
- Parliament of New Zealand
- Kumho Petrochemical, South Korea
- Bukit Baiduri Energy - Indonesia
- Semirara Mining Corp, Philippines
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Anglo American - United Kingdom
- Rio Tinto Coal - Australia
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Independent Power Producers Association of India
- Essar Steel Hazira Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Tamil Nadu electricity Board
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Thiess Contractors Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- Mjunction Services Limited - India
- PTC India Limited - India
- Planning Commission, India
- Sojitz Corporation - Japan
- Kohat Cement Company Ltd. - Pakistan
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
- Medco Energi Mining Internasional
- AsiaOL BioFuels Corp., Philippines
- SMG Consultants - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- MS Steel International - UAE
- Mintek Dendrill Indonesia
- Economic Council, Georgia
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Timah Investasi Mineral - Indoneisa
- Trasteel International SA, Italy
- Singapore Mercantile Exchange
- Uttam Galva Steels Limited - India
- Australian Commodity Traders Exchange
- Sinarmas Energy and Mining - Indonesia
- GVK Power & Infra Limited - India
- Africa Commodities Group - South Africa
- ICICI Bank Limited - India
- London Commodity Brokers - England
- Neyveli Lignite Corporation Ltd, - India
- Coalindo Energy - Indonesia
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