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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, 16 April 20
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Saturday, 11 April 20
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KNOWLEDGE TO ELEVATE
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KOEN POWER PLANTS INVITED BIDS FOR 1.5 -1.62 MMT OF STEAM COAL
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Friday, 10 April 20
INDIA'S BULKS SUPPLY CHAIN TAKES A HIT DURING LOCKDOWN - WOOD MACKENZIE
India is under a three-week lockdown from 25 March to contain the spread of the coronavirus outbreak. Businesses are shut, and the supply chain is ...
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Showing 1016 to 1020 news of total 6871 |
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- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- Carbofer General Trading SA - India
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Attock Cement Pakistan Limited
- San Jose City I Power Corp, Philippines
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Ministry of Mines - Canada
- Larsen & Toubro Limited - India
- Gujarat Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Latin American Coal - Colombia
- Billiton Holdings Pty Ltd - Australia
- Parliament of New Zealand
- International Coal Ventures Pvt Ltd - India
- The University of Queensland
- Rio Tinto Coal - Australia
- Maheswari Brothers Coal Limited - India
- Meralco Power Generation, Philippines
- Mintek Dendrill Indonesia
- Australian Commodity Traders Exchange
- Medco Energi Mining Internasional
- Power Finance Corporation Ltd., India
- Kobexindo Tractors - Indoneisa
- IHS Mccloskey Coal Group - USA
- Riau Bara Harum - Indonesia
- Salva Resources Pvt Ltd - India
- Anglo American - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Sakthi Sugars Limited - India
- Global Green Power PLC Corporation, Philippines
- The State Trading Corporation of India Ltd
- Petron Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- ICICI Bank Limited - India
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Madhucon Powers Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Bukit Asam (Persero) Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bhushan Steel Limited - India
- LBH Netherlands Bv - Netherlands
- Marubeni Corporation - India
- Indika Energy - Indonesia
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- SMG Consultants - Indonesia
- Sical Logistics Limited - India
- MS Steel International - UAE
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Tamil Nadu electricity Board
- Krishnapatnam Port Company Ltd. - India
- Ministry of Transport, Egypt
- Chamber of Mines of South Africa
- Deloitte Consulting - India
- Bhatia International Limited - India
- Sojitz Corporation - Japan
- Electricity Generating Authority of Thailand
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Rashtriya Ispat Nigam Limited - India
- Mercuria Energy - Indonesia
- India Bulls Power Limited - India
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- Globalindo Alam Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Lanco Infratech Ltd - India
- Pendopo Energi Batubara - Indonesia
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Semirara Mining Corp, Philippines
- Posco Energy - South Korea
- Gujarat Mineral Development Corp Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Africa Commodities Group - South Africa
- Straits Asia Resources Limited - Singapore
- Sindya Power Generating Company Private Ltd
- Parry Sugars Refinery, India
- Indogreen Group - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Altura Mining Limited, Indonesia
- European Bulk Services B.V. - Netherlands
- Ambuja Cements Ltd - India
- Edison Trading Spa - Italy
- Bahari Cakrawala Sebuku - Indonesia
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Orica Australia Pty. Ltd.
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Economic Council, Georgia
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- London Commodity Brokers - England
- South Luzon Thermal Energy Corporation
- Dalmia Cement Bharat India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Aditya Birla Group - India
- Cigading International Bulk Terminal - Indonesia
- PTC India Limited - India
- Agrawal Coal Company - India
- Therma Luzon, Inc, Philippines
- Bangladesh Power Developement Board
- Intertek Mineral Services - Indonesia
- PNOC Exploration Corporation - Philippines
- Siam City Cement PLC, Thailand
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
- Eastern Energy - Thailand
- Indonesian Coal Mining Association
- GN Power Mariveles Coal Plant, Philippines
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Metalloyd Limited - United Kingdom
- Bukit Makmur.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Australian Coal Association
- Electricity Authority, New Zealand
- Bayan Resources Tbk. - Indonesia
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Singapore Mercantile Exchange
- Kartika Selabumi Mining - Indonesia
- Bharathi Cement Corporation - India
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Tata Chemicals Ltd - India
- Timah Investasi Mineral - Indoneisa
- The Treasury - Australian Government
- Georgia Ports Authority, United States
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Xindia Steels Limited - India
- Minerals Council of Australia
- Cement Manufacturers Association - India
- Wilmar Investment Holdings
- Commonwealth Bank - Australia
- Heidelberg Cement - Germany
- Karbindo Abesyapradhi - Indoneisa
- CNBM International Corporation - China
- Central Electricity Authority - India
- Kepco SPC Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Meenaskhi Energy Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- Coastal Gujarat Power Limited - India
- ASAPP Information Group - India
- IEA Clean Coal Centre - UK
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- McConnell Dowell - Australia
- Romanian Commodities Exchange
- Planning Commission, India
- Standard Chartered Bank - UAE
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Jorong Barutama Greston.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Sree Jayajothi Cements Limited - India
- Indian Oil Corporation Limited
- Thiess Contractors Indonesia
- Goldman Sachs - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Business Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- Petrochimia International Co. Ltd.- Taiwan
- Oldendorff Carriers - Singapore
- Aboitiz Power Corporation - Philippines
- Vedanta Resources Plc - India
- Interocean Group of Companies - India
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- Banpu Public Company Limited - Thailand
- Thai Mozambique Logistica
- White Energy Company Limited
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- Chettinad Cement Corporation Ltd - India
- Wood Mackenzie - Singapore
- Vizag Seaport Private Limited - India
- GMR Energy Limited - India
- PowerSource Philippines DevCo
- Kaltim Prima Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Indian Energy Exchange, India
- Directorate Of Revenue Intelligence - India
- Grasim Industreis Ltd - India
- Gujarat Sidhee Cement - India
- Binh Thuan Hamico - Vietnam
- Savvy Resources Ltd - HongKong
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