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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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Friday, 24 April 20
CHINA COAL PRODUCER YANZHOU COAL POSTS 9.6 PCT RISE IN 2019 NET PROFIT - XINHUA
China’s major coal producer Yanzhou Coal Mining Co., Ltd. said Thursday that its net profit saw a 9.6 percent rise in 2019.
Th ...
Tuesday, 21 April 20
INDONESIA ACCOUNTS FOR 19% OF JAPAN'S TOTAL COAL IMPORTS - BANCHERO COSTA
Coal trade in Asia is proving remarkably resilient this year, despite the global economic impact from COVID-19.
We have seen China&r ...
Tuesday, 21 April 20
COVID-19: CHARTERPARTY MATTERS FOR SHIPOWNERS - SKULD
KNOWLEDGE TO ELEVATE
Whilst the plight of cruise ships, stranded off shore with sick passengers and crew, may be dominating media headlines, t ...
Monday, 20 April 20
SUPRAMAX: A 52,000DWT SHIP FIXING AN INDONESIA COAL RUN TO CHINA AT $4400 - BALTIC BRIEFING
Capesize
This week was the strongest period seen for the Capesize market in several months. All routes globally succumbed to improved sentiment ...
Friday, 17 April 20
PANDEMIC TO BRING ASIA'S 2020 GROWTH TO HALT FOR 1ST TIME IN 60 YEARS - IMF: REUTERS
Asia’s economic growth this year will grind to a halt for the first time in 60 years, as the coronavirus crisis takes an “unprecedented ...
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- Tamil Nadu electricity Board
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- GVK Power & Infra Limited - India
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Aditya Birla Group - India
- Indian Energy Exchange, India
- Jaiprakash Power Ventures ltd
- Grasim Industreis Ltd - India
- SMC Global Power, Philippines
- Uttam Galva Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Transport, Egypt
- Carbofer General Trading SA - India
- Electricity Authority, New Zealand
- Madhucon Powers Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Central Java Power - Indonesia
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Meralco Power Generation, Philippines
- Parry Sugars Refinery, India
- Indo Tambangraya Megah - Indonesia
- Semirara Mining Corp, Philippines
- GMR Energy Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Coal and Oil Company - UAE
- Ind-Barath Power Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Deloitte Consulting - India
- Marubeni Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Edison Trading Spa - Italy
- Therma Luzon, Inc, Philippines
- PowerSource Philippines DevCo
- Timah Investasi Mineral - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Eastern Energy - Thailand
- Kideco Jaya Agung - Indonesia
- GAC Shipping (India) Pvt Ltd
- Antam Resourcindo - Indonesia
- Port Waratah Coal Services - Australia
- South Luzon Thermal Energy Corporation
- TeaM Sual Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- Chamber of Mines of South Africa
- Xindia Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Australian Coal Association
- Eastern Coal Council - USA
- Independent Power Producers Association of India
- Straits Asia Resources Limited - Singapore
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- Singapore Mercantile Exchange
- OPG Power Generation Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Mineral Development Corp Ltd - India
- Lanco Infratech Ltd - India
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Georgia Ports Authority, United States
- Kalimantan Lumbung Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bangladesh Power Developement Board
- Central Electricity Authority - India
- Indogreen Group - Indonesia
- McConnell Dowell - Australia
- Sree Jayajothi Cements Limited - India
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Global Green Power PLC Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Bhatia International Limited - India
- Dalmia Cement Bharat India
- VISA Power Limited - India
- New Zealand Coal & Carbon
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- IHS Mccloskey Coal Group - USA
- Vizag Seaport Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Banpu Public Company Limited - Thailand
- Siam City Cement PLC, Thailand
- Economic Council, Georgia
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Simpson Spence & Young - Indonesia
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Iligan Light & Power Inc, Philippines
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- ICICI Bank Limited - India
- Kumho Petrochemical, South Korea
- Samtan Co., Ltd - South Korea
- Globalindo Alam Lestari - Indonesia
- Bharathi Cement Corporation - India
- CIMB Investment Bank - Malaysia
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- Sakthi Sugars Limited - India
- Tata Chemicals Ltd - India
- Sinarmas Energy and Mining - Indonesia
- European Bulk Services B.V. - Netherlands
- Goldman Sachs - Singapore
- Indika Energy - Indonesia
- Bhushan Steel Limited - India
- Gujarat Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Orica Australia Pty. Ltd.
- Star Paper Mills Limited - India
- Bukit Makmur.PT - Indonesia
- Essar Steel Hazira Ltd - India
- Trasteel International SA, Italy
- Oldendorff Carriers - Singapore
- Renaissance Capital - South Africa
- Coastal Gujarat Power Limited - India
- Altura Mining Limited, Indonesia
- London Commodity Brokers - England
- Wilmar Investment Holdings
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Jindal Steel & Power Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Intertek Mineral Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Thai Mozambique Logistica
- Meenaskhi Energy Private Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- Manunggal Multi Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Planning Commission, India
- Semirara Mining and Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Latin American Coal - Colombia
- Posco Energy - South Korea
- Makarim & Taira - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Mines - Canada
- Kaltim Prima Coal - Indonesia
- Medco Energi Mining Internasional
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Heidelberg Cement - Germany
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Siam City Cement - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Kapuas Tunggal Persada - Indonesia
- Minerals Council of Australia
- Videocon Industries ltd - India
- Agrawal Coal Company - India
- PNOC Exploration Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Binh Thuan Hamico - Vietnam
- Power Finance Corporation Ltd., India
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- White Energy Company Limited
- Bahari Cakrawala Sebuku - Indonesia
- Orica Mining Services - Indonesia
- Global Business Power Corporation, Philippines
- Energy Development Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- Africa Commodities Group - South Africa
- Karaikal Port Pvt Ltd - India
- CNBM International Corporation - China
- Jorong Barutama Greston.PT - Indonesia
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