Oil refiners shut plants as demand losses may never return
Oil refiners are permanently closing processing plants in Asia and North America and facilities in Europe could be next because of the uncertain prospects for a recovery in fuel demand after the coronavirus pandemic cut consumption. The pandemic initially cut global fuel demand 30% and refiners temporarily idled plants. But consumption has not returned to pre-pandemic levels and lower travel may be here to stay, leading to the possibility plants may shut permanently. Here are some of the companies/refineries involved: Australia has proposed offering incentives worth A$2.3 billion ($1.68 billion) over 10 years to keep the country’s four remaining oil refineries open and said it would invest in building fuel storage as part of a long-term fuel security plan. The four refiners – BP Plc, Exxon Mobil Corp, Viva Energy Group and Ampol Ltd – all welcomed the proposals but made no commitment to keep their plants open. Viva Energy said earlier this month that a full shutdown of its refinery in Victoria was on the cards given the dire long-term outlook for the industry. Eneos Holdings, Japan’s biggest oil refiner and formerly known as JXTG, said it plans to close the 115,000 barrel per day (bpd) Osaka refinery that it owns with PetroChina in October, amid falling demand for crude products in Japan. Royal Dutch Shell will permanently shut its 110,000-barrel-per-day Tabangao facility in Philippines’ Batangas province, one of only two oil refineries in the country. Marathon Petroleum, the largest U.S. refiner by volume, plans to permanently halt processing at refineries in Martinez, California, and Gallup, New Mexico. JBC Energy said it expected a strong push for consolidation in China’s refining sector potentially offsetting part of the strong capacity growth expected in the country. Refining NZ said in late June it was considering shutting New Zealand’s only oil refinery and turning it into a fuel import terminal, but first would reduce its operations to cut costs and break even into 2021. Gunvor Group said in June it was considering mothballing its 110,000 bpd refinery in Antwerp as COVID-19 hurt the plant’s economic viability. Energy consultancy Wood Mackenzie put plants in Netherlands, France, and Scotland on a list of potential closures.
Less crude, more hydrogen: Oil giants plan for the future
Indian Oil Corp., one of the biggest refiners in Asia, is taking the bus to reach what it considers the future of energy: hydrogen. The company that sells almost half the oil products in India will deploy 50 buses around the capital powered by a blend of hydrogen and compressed natural gas, Chairman Shrikant Madhav Vaidya said. The fleet will serve the public and could start rolling as soon as this year, potentially creating a new market for a producer trying to rebound from its first annual loss in at least 20 years. Hydrogen , long touted as the fuel of the future, had a bit of a coming-out party at this week’s S&P Global Platts Asia Pacific Petroleum Conference, as some of the world’s biggest refiners, drillers and traders extolled it as key to fighting climate change. The efforts are emblematic of an oil industry trying to reposition itself after the pandemic wiped out demand and as shareholders call for reduced greenhouse gas emissions. “Hydrogen seems to be the most disruptive and has the potential to grow 10 times between now and 2050,” said Giovanni Serio, global head of research at Vitol Group, the world’s biggest independent oil trader. “It could be the one to solve the problem of storing energy and also addressing later the demand from the transportation sector.” Nearly $11 trillion of investment in production, storage and transport infrastructure is needed for hydrogen to meet about a quarter of the world’s energy needs by 2050, according to BloombergNEF. The fuel’s unique advantages include high energy density, flexibility of production sources and a wide range of applications, Vaidya said. It also emits no greenhouse gases when produced with renewable energy, although most current production is done via polluting methods. “With India and Asia set to lead the global energy demand in the future, hydrogen does present a potential panacea,” Vaidya said.
HPCL to invest Rs. 600 billion in five years on infrastructure development
Hindustan Petroleum Corporation Ltd (HPCL) will invest over Rs. 600 billion for developing infrastructure during the next five years, Chairman Mukesh K Surana said at the company’s 68th annual general meeting on Wednesday. The investments will be made in HPCL’s refinery expansion and augmentation projects to increase the capacity of Mumbai Refinery to 9.5 million metric tonnes per annum (mmtpa) and Visakh Refinery to 15 mmtpa. “These projects will improve the complexity of the refineries and add to the overall Gross Refining Margins,” added Surana. For the current fiscal, HPCL will invest Rs. 120 billion in capital expenditure. The refiner said it has not revised its capex downward despite the COVID-19 impact on the company. Of the Rs. 120 billion, HPCL will spend Rs. 70 billion in refinery and Rs. 50 billion in marketing. The company would also be setting up 500 fuel retail outlets during FY 20-21. Last financial year, HPCL commissioned 1,194 new retail outlets and 245 new liquefied petroleum gas (LPG) distributorships taking the number of total retail outlets to 16,476 and the number of total LPG distributors to 6,110. HPCL is currently exporting petroleum products to 14 countries and through its HPCL Middle East FZCO, a wholly-owned subsidiary set up in Dubai, it is expanding its presence in the Middle East and African markets, Surana said. “We have tied up with State Trading Corporation of Bhutan Limited (STCBL) for setting up of retail outlets and supply of motor fuels in Bhutan. I am delighted to state that your Company commissioned its first retail outlet in Bhutan during 2019-20 under this partnership. The plans are to expand the overseas operation to 20 countries,” said Surana. The company is also building a liquefied natural gasification (LNG) terminal at Chhara, Gujarat as part of its strategy to expand in the clean energy vertical. “Expansion of business portfolio with a greater presence in the clean energy verticals of Natural Gas remains to be the focus area. HPCL along with its Joint Ventures has the authorization for City Gas Distribution in 20
BPCL may buyout Oman Oil stake in Bina refinery before its sale
Sale-bound Bharat Petroleum Corporation Ltd (BPCL) may buy out the entire stake of OQ, the erstwhile Oman Oil Company(OOC), in their Madhya Pradesh joint venture, the Bharat Oman Refineries Ltd (BORL). Government sources said that BORL became a subsidiary of BPCL in March this year and the next step now is to convert it into a 100 per cent subsidiary before government stake in the company is sold to a strategic partner. For this to happen, it is essential that BPCL buys out OQ’s stake in the refinery before its own sale process goes off the ground. This is important as BPCL’s valuation may be impacted if a joint venture remains in its fold even after new owners take control. BPCL and OQ were 50:26 joint venture partners in BORL till March when BPCL converted 13 per cent of its earlier investment made in compulsorily convertible debentures and share warrants of BORL or Bina refinery. This made BORL a subsidiary of BPCL as its stake in the refinery increased to 63 per cent from 50 per cent earlier. The investment in convertible debenture was equivalent to 24 per cent additional equity stake in BORL. Sources said, if BPCL converts the remaining 11 per cent of convertible debentures to equity, its holding in BORL will increase to 74 per cent given that OQ has not shown interest in increasing stake in BORL by putting in additional equity. This will leave 26 per cent equity with OQ that the company will negotiate to buy to complete 100 per cent acquisition of Bina Refinery.
Pandemic cuts marine refuel demand, driving consolidation among bunker suppliers: IBIA
Global demand for marine fuels is expected to fall by up to 17 per cent due to the impact of the coronavirus pandemic on world trade, setting the stage for more consolidation among bunker suppliers, an industry executive told a conference on Wednesday. Banks scaled back on their commodities trade finance after the coronavirus crisis led to defaults by some trading houses and exposed a series of frauds, leaving small and medium sized firms most exposed. Unni Einemo, director of the International Bunker Industry Association (IBIA), said firms were contending with low demand, low margins, ample supplies, increased counter-party risk, and constrained access to capital. “Because of that we might expect further consolidation through mergers and acquisitions or attrition,” Einemo told the virtual Platts APPEC 2020 conference, adding that some firms could be forced to quit the market. “Global bunker demand is expected to decrease significantly in 2020, even if it had held up quite well (in April and May),” Einemo said. IBIA’s members forecast a 7 per cent-17 per cent drop in bunker fuel demand globally in 2020, she said. Global marine fuel demand is estimated at about 300 million tonnes per annum, or about 5.2 million barrels per day (mbpd). In its latest report released on Tuesday, the International Energy Agency said “fuel oil demand, which includes marine bunker as well as power generation and industrial uses, is forecast to decline by only 0.4 mbpd, or 6.3 per cent in 2020,” the IEA said in its monthly report on Tuesday. By comparison, premium transport fuels which include jet fuel, diesel and gasoline, are forecast to have lost about 7.4 mbpd, or 11.6 per cent, of demand in 2020, according to the IEA. Most bunkering markets saw a big drop in June, with some seeing a “staggering” 30 per cent-40 per cent year-on-year contraction, although Singapore has to be among the least affected markets, said Einemo. Singapore, by far the world’s top bunkering hub, saw year-on-year growth in marine fuel sales every month this year with the exception of May and June which contracted by just 2 per cent each, official data showed. Singapore’s resilience has a lot to do with it “having the widest variety of fuels on offer (and) it has become a preferred port because buyers are confident they are going to get the quality and quantity they are buying,” said Einemo. But in other hubs like in the United Arab Emirates’ Fujairah, bunkering demand plummeted as the spreading coronavirus slowed shipping activity.