Insight 2016 Asia Energy Outlook Oct 2015 | Petroleum Industry

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  October 2015www.platts.com CHINESE DRAGONS SLUMBER AFTER GLOBAL FORAYMIDDLE EAST OIL EXPORTERS PUMP UP AS PRICES RETREAT ARAB GULF FLEXES REFINING MUSCLE 2016 ASIA ENERGY OUTLOOK A GAME-CHANGER YEAR 2015 Platts Top 250 Global Energy Company Rankings ®   Every dawn brings with it new opportunity & every new opportunity - A unique set of risk.              themes of today’s Commodity and Energy Trading Industry. With the growing need to address                                                             GLOBAL THOUGHT LEADERSHIP. DELIVERED.  OCTOBER 2015  i nsight iii CONTENTS i nsight 1 4 CHINESE DRAGONS SLUMBER  After a rush of global acquisitions worth more than $152 billion, China’s state-controlled oil and gas giants are taking a breather and reflecting. 10 LOW PRICES HIGH VOLUME More than a year after oil prices started to slide, Middle East Gulf producers are feeling distinctly pinched, but it is only recently that the biggest of them has admitted as much. 16 FLEXING REFINING MUSCLE The long-expected deluge of oil products from new Middle Eastern refineries is about to hit export markets, which would turn the net-importing region into a global force in diesel and even gasoline by 2020. 20 LOVE FOR US CONDENSATES More US condensates have reached South Korea and Japan this year and the trend could widen across Asia, where refiners are seeking cheaper options to costlier Qatari and Australian ultra-light crude. 26 HAIL GASOLINE!  Asia’s new refinery and upgrading projects have led to a gasoil surplus, though gasoline production has lagged steady demand growth, thrusting up its profit margins to the best among refined products. 32 CHEAPER OIL SPURS TANKERS Growing diversity of cheaper crude oil supplies has bolstered global trade flows and propelled tanker markets to seven-year highs. 38 SHIFTING SANDS The oil price collapse and slowing Chinese economy have caused a paradigm shift in the global petrochemical industry. 44 PRICE REFORM BATTLES Governments from Indonesia to India seized the window of opportunity provided by last year’s oil price crash to jettison their fuel subsidy burdens, widening budget deficits and defying the most astute of policy planners. 48 JOKOWI’S REPORT CARD Just over a year after Joko Widodo became Indonesia’s president on a vow to form a pro-business government and giving hope to the embattled oil industry, progress has been patchy to say the least. 52 LNG CENTER STAGE  After years of calling the shots, the balance of power is beginning to shift away from sellers in the LNG market. 56 HEADWINDS FOR AUSTRALIA LNG  Australia’s giant LNG industry is in an unprecedented transition from the construction boom seen since 2009 into its A$450 billion operational phase, which would catapult it to the top of the producers list. 60 THERMAL COAL STRUGGLES Plunging oil markets may help regional coal miners to slash production costs, but sagging Chinese demand has dampened thermal coal prices, with no respite seen till at least 2017. 66 COAL CONCERNS India’s coal shortage has impacted 13,000 megawatt of thermal power capacities in recent times, putting $15 billion worth of investments at risk. 68 ENERGY GIANTS AWAKE  Asia-Pacific’s oil and gas giants are hunkered down. To cut costs while energy prices are freefalling, up to 20% of the region’s oil rigs now stand idle. 71 SURVIVING THE DOWNTURN The dramatic fall in global oil prices has put the spotlight on credit risk in energy sectors around the world. 76 ASIAN MAJORS EMERGE Platts have opened up a consultation on adding new grades – Al Shaheen and Murban – to the Dubai and Oman baskets. The test of new Asian majors goes beyond these benchmarks. Global oil markets must continue to rebalance around the top energy firms taking a more active role within them. 79 ASEAN ENERGY The Association of Southeast Asian Nations, better known as ASEAN, is set for remarkable growth and opportunity. 82 A GAME-CHANGER YEAR For many in the energy industry, 2014 will be remembered as a pivotal year marked by an abrupt upending of $100 oil and further seismic shifts in world energy production and consumption. Platts Top 250 Global Energy Company Rankings ®  reviewed.  i nsight i nsight OCTOBER 2015 October 2015 2 EDITOR’S NOTE  We are living in interesting times.Not just in China, which is seeing slowing growth, currency devaluation and stock market plunges; the rest of the energy world is also experiencing volatile times.Te oil price crash in the past year, makes this ever more so.Te times are testing the resilience, ingenuity and versatility of energy companies 󿬁ght for a sliver of a globalized oil, gas and petrochemical market. While cheaper crude can help Asian re󿬁ners revive emaciated margins amid a regional glut, Chinese upstream giants are recalibrating their staggering global assets acquired when oil was expensive.Te oil and gas production surge in major consumer the United States, and Russia are testing the will of big Middle Eastern producers, especially Saudi Arabia, to keep the pumps 󿬂owing to support market share, but risking extended low prices.Te supply boom is offering Asian consumers wider and cheaper options. Global shipments, as well as weaker oil prices – which prompted traders to use vessels as storage – extend a lifeline to the tanker market that had 󿬂oundered on oversupply in recent years.Cheaper oil has helped China to build up reserves and entrench its clout as a global trader. It has emboldened governments, long saddled with hefty, but politically expedient subsidies, to push through protracted price reforms, helping to ease the pain of the slowing economy.Mounting crude market competition has spurred Middle Eastern producers to diversify their industry, bee󿬁ng up the oil re󿬁ning as  well as petrochemical sectors, by using abundant domestic feedstock, and enticing new customers. Rising re󿬁ning capacities are inundating markets with diesel amid slowing demand growth; though escalating gasoline usage lifts pro󿬁ts. Petrochemical makers are sharpening focus on the most value-added and specialized products, while leveraging the cheapest feedstocks from multiple sources. We are witnessing spot LNG trade emerging in a hitherto long-term contract arena, as new supplies are turning the market from favoring sellers to buyers. Cleaner and cheaper gas is asserting itself in markets once dominated by coal, as industries grapple with slowdown and emerging countries become sensitive to climate change. Yet, it is too soon to draw the curtains on thermal coal, as India seeks more imports to 󿬁ll domestic shortfalls; while cheaper fuels slash mining costs in Indonesia.Te industry is exploring new opportunities, but must exercise prudence to sustain pro󿬁tability, in an Asia-Paci󿬁c energy sector that holds a stable outlook, albeit with a negative bias. Japanese poet Kenji Miyazawa once said, “We must embrace pain and burn it as fuel for our journey.” As the sands shift, which companies will show true grit? — Ramthan Hussain, Editor ISSN 2153-1528 (print)ISSN 2153-1536 (online) Production Manager: Nelson SprinkleProduction Office: Insight Magazine 1800 Larimer Suite 2000 Denver, CO 80202 GLOBAL DIRECTOR, CONFERENCES  Steven McCarthy AND STRATEGIC MEDIA  857-383-5727 steven.mccarthy@platts.com PUBLISHER  Murray Fisher 720-264-6644 murray.fisher@platts.com ADVERTISING SALES MANAGERS  Robin Mason 631-642-2600 robin.mason@platts.com CUSTOMER SERVICE Circulation Manager:  Pamela Curran 720-264-6636 pamela.curran@platts.com  Article reprints and permissions:  The YGS Group +1 717-505-9701, ext 105 plattsreprints@theygsgroup.com PLATTS Business office:  20 Canada Square 9th Floor London, E14 5LH, UK  Fax: +44 20 7176 6144 (Sales) Fax: +44 20 7176 6172 (Editorial)President: Imogen Dillon HatcherVP Finance: Hywel Thomas PLATTS NEWS & PRICING SERVICES Global Head of Content: Martin FraenkelGlobal Editorial Director, Oil: Dave ErnsbergerGlobal Editorial Director, Petrochemicals & Agriculture: Simon James ThorneGlobal Director, Metals Content & TSI: Steven RandallGlobal Editorial Director,Power & Gas: Sarah Cottle Get a free subscription at: http://marketing.platts.com/forms/SMSInsightSubscribeor send e-mail to: pamela.curran@platts.com
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