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July
2020
HYDROCARBON
ENGINEERING
16
The Philippine economy was already slowing down when
the government of President Rodrigo Duterte ordered the
lockdown for at least one month. Companies have begun
scaling back expansion plans and laying off workers.
If the government decides to extend the lockdown period
as well as expand it to other parts of the country, the Philippine
economy could tilt into an outright recession.
Petron, the country’s largest oil company, will likely be
forced to downsize its growth plan that includes the expansion
and upgrade of its two oil refineries.
The 100 000 bpd Bataan refinery on Luzon has been slated
for an expansion to produce 180 000 bpd of oil products and
1 million t of aromatics. The company could also delay plans to
expand the capacity of its 88 000 bpd Port Dickson refinery in
Malaysia to 178 000 bpd.
Days before Luzon’s lockdown, the company announced
that its 2019 net profit had plunged 67% to 2.3 billion peso from
7.1 billion peso the previous year. Revenues fell 8% to
514.4 billion peso, dragged down mostly by losses in its
domestic operations (US$1 = 51 peso).
The Bataan refinery was shut down for nearly four months
after it was hit by an earthquake in April 2019. As a result, Petron
said its sales of fuels and products dropped from
108.5 million bbl in 2018 to 107 million bbl last year. The
company’s performance was also weighed down by weak
refining margins that could continue through the rest of 2020.
Moody’s is likely to sharply downgrade the outlook for the
Philippine economy in view of the COVID-19 pandemic crisis.
Just before Luzon’s lockdown, the agency had forecast the
economy to grow by 5.4% for 2020. The World Bank has
forecast the country’s economy to grow by just 3%.
Singapore’s bunker fuel sales could fall
further
Singapore’s bunker fuel trade volume could fall again in 2020 to
‘achieve’ an unprecedented three consecutive years of decline.
Singapore’s sale of bunker fuel to the shipping industry fell
4.7% to 47.46 million t in 2019, according to the Maritime and
Port Authority of Singapore (MPA). In 2018, it was down 1.7% to
nearly 49.8 million t after reaching a record 50.64 million t in
2017.
The world’s weakened economic conditions have weighed
heavily on global shipping traffic and the industry’s demand for
bunker fuel.
While freight rates improved in 2019, global container
throughput growth slowed, said LamMin Pin, Singapore’s Senior
Minister of State for Transport.
“The US-China trade war was a major source of uncertainty,
dragging down sentiments across markets,” he said in a recent
speech.
Shipping firms and oil companies were also affected by
uncertainty in the run-up to the International Maritime
Organization’s (IMO) decision to reduce sulfur content in bunker
fuels to 0.5% from January 2020.
Lam said: “For most of last year, shipping companies did not
know whether compliant fuels would be available in sufficient
quantities and at a quality required to meet the IMO 2020 0.5%
global sulfur cap regulation that came into force at the start of
the year. The price differential between compliant fuels and
high sulfur fuel oil was an issue of much speculation.”
On a positive note, the recent decline in bunker
consumption is also due partly to increasing fuel efficiency as
shipping firms have been modernising their fleet.
Shipping traffic was already reeling from rising tensions in
the Middle East when falling oil prices and the coronavirus
dramatically undercut economic activities.
Thai state energy firm’s expansion
plan under threat
PTT plc, Thailand’s main energy firm, may have to revise its
ambitious expansion plan as it faces the simultaneous threats of
a global economic recession, slumping oil and gas prices, and
declining profitability in 2020.
The industry’s outlook has darkened considerably since the
Stock Exchange of Thailand-listed company released its annual
results on 20 February showing a 22.3% plunge in net profit for
2019. The largely state-owned firm reported net income of
92.95 billion baht compared with 119.65 billion baht in 2018
(US$1 = 32 baht).
Revenues fell nearly 5% from 2.34 billion baht in 2018 to
2.22 billion last year.
PTT attributed the sharp drop in profitability to the poor
performance of its downstream petrochemical and oil refining
businesses. Oil and petrochemical demand in Asia have slowed
sharply in response to weaker economic growth.
Thailand’s largest company owns and operates oil refineries
and petrochemical plants, a network of LPG terminals and fuel
stations, power plants, and gas pipelines in the Gulf of Thailand.
It also explores for oil and gas through upstream subsidiary
PTT Exploration and Production.
Despite the threats of worsening US-China ties and wars in
the Middle East, PTT started the year on an upbeat note by
releasing a five-year plan to invest over 180 billion baht to
expand its energy infrastructure.
The ‘People, Planet, and Prosperity’ programme focuses
mostly on boosting the role of natural gas and clean energy, and
the expansion of PTT’s fuels retail business in Southeast Asia.
Speaking to the media in February, PTT Chief Executive
Chansin Treenuchagron said he was hopeful the company’s
three refinery companies, IRPC, Thai Oil and PTT Global
Chemical, would improve on their combined 2019 profit margins
of 29.7 billion baht. They had invested substantially in recent
years to expand and upgrade their plants.
The company may have to delay plans to float its retail
business comprising fuels and coffee shops in Southeast Asia,
China and Oman.
Those plans, including the five-year expansion programme,
are under threat from the COVID-19 pandemic.
Malaysia’s new refinery further delayed
Southeast Asia’s largest refinery-petrochemical complex will be
further delayed from a full commercial start-up after it was hit
by another massive fire, its second in less than a year.
Five workers died and two were injured after the incident at
the Pengerang Refining and Petrochemical (PRefChem) complex
Table 3.
Singapore’s bunker and cargo volume,
million t (source: MPA)
2019
2018
2017
2016
Bunker sales 47.46
49.80
50.64
48.61
Cargo
626.52
630.13
627.69
593.30