Posted by Ricky Kiat > 2017-12-13 20:41 | Report Abuse

david, u are great .

Posted by pitbull > 2017-12-13 22:22 | Report Abuse

Good...thanks

Posted by Mohd Fahmi Bin Jaes > 2017-12-13 22:24 | Report Abuse

Amazing

Posted by probability > 2017-12-14 00:57 | Report Abuse

The below article is one of the strongest argument why HY (a Complex refinery) future refining margin is bright:

https://www.platts.com/IM.Platts.Content/InsightAnalysis/IndustrySolutionPapers/SR-IMO-2020-Global-sulfur-cap-102016.pdf

IMPACT ON REFINING SECTOR

The more sulfur-constrained world of 2020 will have huge implications for the global refining sector, undermining margins for simple refineries that turn a significant share of their crude run into HSFO, but potentially boosting margins for complex refineries able to take advantage of it.

According to the UK Petroleum Industry Association (UKPIA), a change to 0.50% mass sulfur marine fuels “would have a massive impact on refinery configuration and operations,” and would require some combination of the following four main approaches, each with its own drawbacks.

1) Substantial investment in upgrading fuel oil residues to gasoil grades (i.e. building secondary units such as crackers, visbreakers and cokers). But as many refiners are global companies they will only make such investments in locations with good returns (leaving the prospect of patchy availability).

2) Reduction of residue production through changes to a sweeter crude slate. The downside here is of course that such crude grades trade at higher differential, reducing refining margins, and will be in even more demand, and thus more expensive, in 2020.

3) Residue destruction, stopping the production of fuel oil. This also requires huge investment.

4) Desulfurization of residual fuel oil and blend with low sulfur gasoils. Similarly this requires huge investment. According to the IEA, these units are more expensive than upgrading units, and presently there is little demand for fuel oil desulfurisation units, with global capacity estimated to be less than 0.1 mb/d.” (Source: Medium-Term Oil Market Report, February 2016)

Posted by probability > 2017-12-14 01:00 | Report Abuse

To have a good fundamental knowledge before investing, as first step, one is advised to glance through the following notes:

https://www.energyinst.org/_uploads/documents/session-4-refining-notes...

Reading Page 1 - 7 is enough.

Then you would have good idea to differentiate the effects of Crude and the different yield of products by Refiners based on their plant set-up (complexity).

This way you would be truly able to compare HY (Complex refiner-deep conversion) vs Petronm (Simple refiner-hydroskimming).

Posted by probability > 2017-12-14 01:01 | Report Abuse

Refining capacity might fall short of demand after 2020 -Varo CEO

https://www.reuters.com/article/refineries-oil/refining-capacity-might-fall-short-of-demand-after-2020-varo-ceo-idUSL8N1MU4J9

LONDON, Oct 19 (Reuters) - Global oil refining capacity might not meet demand for oil products after 2020 as consumption continues to grow, boosting profit margins, Roger Brown, chief executive of European refiner Varo Energy, said on Thursday.

Refining margins are expected to remain strong in the long term due to strong demand for gasoline and diesel as well as a switch to higher-grade bunker fuels after 2020, Brown said at the Oil & Money conference.

“We see very good long-term refining margins at the moment.”

Refining capacity set to come on line in the coming years, including large plants in Kuwait, China and India, might not be enough to meet growing demand, he said.

“At the pace demand is growing… You’ve got to see supply and demand in refining between 2020 and 2025 remaining balanced and maybe a little short,” Brown said.

Varo Energy, a joint venture between the world’s top oil trader Vitol and private equity giant Carlyle Group, operates two refineries in Europe. (Reporting by Ron Bousso; editing by Jason Neely)

Posted by probability > 2017-12-14 01:02 | Report Abuse

IMO 2020 Part 3: Refiners’ Perspective

November 16, 2017

https://stillwaterassociates.com/imo-2020-part-3-refiners-perspective/

(1) Refineries currently producing HSFO will be the most threatened by this rule.

(2) Refineries that currently produce minimal HSFO due to vacuum resid processing (e.g. coking, hydrocracking) will likely see IMO 2020 as an opportunity rather than a threat.

(3) Time is the enemy of refineries currently producing HSFO. Unless refinery modifications to reduce HSFO production are already well underway, those modifications will not be onstream until well after 2020.

(4) Key price differentials for refiners will likely change markedly in 2020, producing significant changes in processing strategy for many refiners:

(i) Distillate prices will increase markedly relative to high sulfur residual fuel products. Distillate prices (particularly in coastal markets) may also increase relative to gasoline. This will create product mix optimization opportunities for refiners and bunker blenders/suppliers. Intermediate streams that historically might have been processed on catalytic cracking or hydrocracking units may alternatively be routed to IMO-compliant fuel oil blending.

(ii) Vacuum residue yield and sulfur content will cause crude price differentials to widen between grades (e.g. high resid content sour crudes versus low resid content sweet crudes). This will create crude slate optimization opportunities for almost all refineries.

(5) Expectation of a wide price differential between IMO 2020-compliant fuel and traditional HSFO will create an incentive for shipowners to install onboard scrubbers and for refiners to install (or expand) resid upgrading facilities. Investment decisions by either of these industry sectors, driven by a wide price differential expectation, will directionally reduce the magnitude of the above market price changes.

Posted by probability > 2017-12-14 01:02 | Report Abuse

Preparing for a Sea Change in Global Refining

JUNE 14, 2017

https://www.bcg.com/publications/2017/downstream-oil-gas-petrochemicals-energy-environment-preparing-for-sea-change-in-global-refining.aspx

A shift in HSFO pricing from its higher value to its lower value could have a significant knock-on effect on the price differential between light and heavy refined products. Specifically, we expect a spike in the differential. Which refineries are profitable and emerge as leaders will depend on their capabilities and product mix.

"Complex refineries with hydrocracking and residue desulfurization units that enable maximizing LSFO and distillates production will be able to navigate the disruption. Asia and the Middle East are home to such refiners."

- HENGYUAN REFINERY PERFECTLY FITS IN HERE!

Additionally, refiners with coker units, such as those on the US Gulf Coast, will fare well, as will refiners with access to crude with very low sulfur.

Posted by mrtai021 > 2017-12-14 01:03 | Report Abuse

Good info probability. Thanks

Posted by probability > 2017-12-14 01:04 | Report Abuse

2020 IMO global bunker fuel regulations: A challenge too far for European refiners?

https://www.cornhilleconomics.com/single-post/2017/01/17/2020-IMO-global-bunker-fuel-regulations-A-challenge-too-far-for-European-refiners

The IMO global maritime sulphur limits regulations are likely to have an adverse effect on European refiners unable to make the necessary investments in refinery upgrading triggering further refinery shut downs.

Posted by probability > 2017-12-14 01:04 | Report Abuse

MEPC 71: 2020 deadline reaffirmed as IMO agrees to promote consistent implementation:

11/07/2017

https://ibia.net/mepc-71-2020-deadline-reaffirmed-as-imo-agrees-to-promote-consistent-implementation/

Any suggestion that there may be any form of delay to the 1 January 2020 implementation of the 0.50% sulphur limit in 2020 was ruled out at the 71st session of the Marine Environment Protection Committee last week, as a majority of member states rejected a proposal to collect data to allow the International Maritime Organization to take stock of the availability situation ahead of 2020.

Posted by probability > 2017-12-14 01:06 | Report Abuse

MARPOL implications on refining and shipping markets
December 2017

https://www.mckinseyenergyinsights.com/insights/marpol-implications-on-refining-and-shipping-markets/

Market impact will be significant

Shifting a large portion of bunker demand from high-sulfur resid to a combination of marine gasoil and low-sulfur resid will affect markets in a number of ways. The higher demand for gasoil will largely have to be met by higher crude runs, putting upward price pressure on global crude prices, distillate premiums to other fuels, and refining margins in general. Also, the loss of demand for high-sulfur fuel resid will cause its price to fall, further adding to the widening spread between traditional high-sulfur resid bunker and marine gasoil. Finally, the price differential between high-sulfur and low-sulfur resid is expected to increase significantly.


This should also tighten distillate markets relative to gasoline, adding to the cost of marine gasoil. Currently, markets are fairly balanced between diesel and gasoline, and demand growth for gasoline is generally higher than for diesel. This is keeping the relative prices of diesel and gasoline fairly comparable. History shows that in years when diesel demand accelerates relative to gasoline, diesel prices shift to premiums over gasoline of USD6 to 20/bbl (depending on season).

Posted by HENGYUAN @RM21 CONFIRM COMING > 2017-12-14 01:18 | Report Abuse

Probability, these are technical things for engineering...Can explain in layman to us? If I understand correctly, those European refinery doing low quality refinery no longer fit? While Asian with good quality of crude oil refinery?

Posted by probability > 2017-12-14 01:28 | Report Abuse

European refiners:

- are mainly 'Simple Refiners', they produce about 30% of Fuel Oil (HSFO) as their products.

-Simple refiners are not installed with Crackers which cracks the Fuel Oil to convert it to Diesel like the Complex Refiners where almost all of them are converted to Diesel.


Because of the above....unless they invest on Scrubbers or Crackers, their refinery will be forced to close down, as their Fuel Oil would not meet the specification dictated after 2020 unlike Diesel for Ships engine consumption.


Will try to explain in more simple manner some other time...

Posted by probability > 2017-12-14 01:32 | Report Abuse

Asian's especially those crude from Malaysia are the least sour (very little sulfur) as such their products can still meet the specification with minimal investment like Scrubbers...

Asian's also have more modern complex refineries where they dont produce Fuel Oil (almost nil)...and instead produce Diesel which will be highly in demand as a replacement of this Fuel Oil for the ships engine.

Posted by probability > 2017-12-14 01:36 | Report Abuse

Diesel which is produced by the cracking process from Fuel Oil has less sulfur and meets the sulfur limits imposed by IMO 2020 on Fuel used for ships after 2020.

Posted by HENGYUAN @RM21 CONFIRM COMING > 2017-12-14 01:44 | Report Abuse

Thanks probabilities, get a clearer pic now. Many thanks.

Posted by HENGYUAN @RM21 CONFIRM COMING > 2017-12-14 01:45 | Report Abuse

Oh.thanks probability now I understand more.

Posted by probability > 2017-12-14 11:44 |

Post removed.Why?

Posted by probability > 2017-12-14 14:35 | Report Abuse

Crude Oil = Spaghetti , i.e a mixture of long noodles, medium, and short noodles

Long noodles = Fuel Oil
Medium length noodles = Diesel
Short noodles = Petrol

What does Simple Refinery does?

They just distill and segregate according to their lengths. If the crude (Spaghetti) has 30% Long noodles...after segregation you only get 30% yield of long noodles.

Now, what can a Compex refinery do with a Cracker?

They basically break (crack!) and split this long noodles to shorter ones and produce more Medium Length noodles (Diesel) and Short length noodles (Petrol) leaving almost none Long noodles.

So that Cracker has the flexibility to change the noodle length unlike Simple refiners who are at the mercy of the Crude (Spaghetti) they feed to their Distillation plant.

Posted by probability > 2017-12-15 16:44 | Report Abuse

one need not wait till 2020 to see the effects on margins rise....

Many Simple Refiner like PetronM will take proactive steps to invest on upgrading via Crackers or Scrubber installation...like they intend early 2018.

This will inevitable stop their current operation, i,e production of all petrol, diesel and their fuel oil....this will be taking place worldwide especially more in Europe...

...and will cause a widespread phenomenal rise in refined products margin even before reaching end of 2019.

Posted by probability > 2017-12-15 18:55 | Report Abuse

Just like the Simple Refiners are taking proactive steps above...the marine Fuel Oil consumers (the ships) will also modify their existing engines system to handle low sulfur Fuel Oil or Diesel...much ahead of end 2019.

both the above will have 'reciprocal effect' and thus 'accelerate the refining margins rise ' to reflect as it would be by 2020.

Posted by probability > 2017-12-15 19:51 | Report Abuse

European refiners see life after IMO 2020, but it COSTS:

http://www.hellenicshippingnews.com/european-refiners-see-life-after-imo-2020-but-it-costs/

In the immediate aftermath of the IMO announcement, Europe’s refiners were reluctant to take a firm stance. Unanswered questions over scrubber uptake, potential non-compliance and future fuel oil price spreads made choosing a strategy difficult. Refiners also had to ask whether it was really worth investing hundreds of millions, if not billions of dollars, in new upgrading equipment in a structurally disadvantaged sector, with no real guarantees of returns.


BUT AS THE REALITY KICKS IN

But as the reality of the new regulation has started to sink in, the mood among Europe’s refiners has shifted: fresh investment is back on the cards.

Take Spain’s Cepsa, a major player in the Mediterranean bunkers market. Last week at the International Downstream Technology and Strategy conference in Dubrovnik, Cepsa confirmed that it is in the basic engineering phase for a potential residual hydrocracker that will cost close to $2bn — a massive investment project for a mid-sized refiner. The following day at the International Bottom of the Barrel Technology conference, also in Dubrovnik, Poland’s PKN Orlen said it is considering investing in a similar unit at its 263,000 b/d Mazeikiai plant in Lithuania, having already decided to upgrade the H-oil unit at its 325,000 b/d Plock plant to produce a low-sulphur fuel oil blending component as well as install a new visbreaker in time for 2020. Croatia’s Ina, another Mediterranean bunker supplier, confirmed that it will complete a new delayed coking unit at the 90,000 b/d Rijeka plant by 2020. Amec Foster Wheeler, speaking to Argus on the conference sidelines, said it had just sold a new coking unit to a refiner in northwest Europe, though the buyer remains confidential.

A number of IMO-relevant projects are already underway. ExxonMobil’s 310,000 b/d Antwerp plant, Lotos’s 210,000 b/d Gdansk refinery and NIS’s 110,000 b/d Pancevo facility are all building delayed coking units. Total is due to start up a solvent deasphalting (SDA) unit at its 308,000 b/d Antwerp refinery, while Neste’s SDA began production in April at the 197,000 b/d Porvoo plant. Preem has commissioned a new vacuum distillation unit (VDU) and is considering building a residual hydrocracker at its 220,000 b/d Lysekil plant, while its 106,000 b/d Gothenburg plant has commissioned a new hydrogen production unit enabling further desulphurisation, due for completion by the end of 2018.

Refiners looking to cut down on high-sulphur fuel oil output must decide whether they will target the expected post 2020 low-sulphur fuel oil market or try to get out of fuel oil all together, focusing on middle distillate and light ends output.


TIMING IS THE MOST CRUCIAL

Timing is, perhaps, the most crucial element for decision making. A wide spread between high and low-sulphur fuel oil is likely to open up in the immediate aftermath of the regulation, but in the longer term, rising scrubber uptake as ship owners look to capitalise on cheap high-sulphur fuel oil could see it narrow significantly.



REFINERS WITH UPGRADING FACILITIES ALREADY IN PLACE WILL BE ABLE TO CAPITALISE

Refiners with upgrading facilities already in place by 2020 will be able to capitalise on this wide spread. But those with projects coming online in the mid-late 2020s will be exposed to the immediate drop in high-sulphur fuel oil values and then, by the time any new units are up and running, only stand to benefit from a small premium for any low-sulphur product.

The lead time for a delayed coking unit is around five years. For residual cracking units it is around the same. SDA lead times are shorter — around three years — and were plugged by Honeywell UOP and KBR at the Dubrovnik conference, both major engineering firms. Converting vacuum residue into deasphalted oil (DAO) that can be used as either cracker feedstock or, following hydrotreatment, low-sulphur fuel oil, gives a flexibility that is particularly attractive for refiners wishing to hedge their bets about which products will be most profitable in the long term.

Posted by LandFrost > 2018-01-17 08:16 | Report Abuse

As per annual report 2016 (and also the print screen captured above), the tax losses c/f & unabsorbed reinvestment allowance are "stated at gross amount". It means you should knock it off against profit before tax level(gross@100%) instead of the income tax amount (net@25%)