State-run Bangladesh Petroleum Corporation plans to start imports of 10 ppm sulfur gas oil in July 2018, ahead of a government mandate to switch to the ultra-low sulfur diesel grade from 2019, a senior BPC official said December 6.
The country’s sole gas oil importer expects to import around 1.75 million mt of 10 ppm sulfur gas oil during July-December 2018, he added.
“We want to start importing the cleaner gas oil earlier from mid-2018 to stay in advance over the mandatory provision of shifting the gas oil specifications to lower sulfur content,” he said.BPC is set to roll out tighter gas oil specifications in January 2019, from the current 500 ppm sulfur gas oil grade under a directive from the Ministry of Environment and Forests.
But the directive only applies to imports as Bangladesh’s sole refinery is still producing 0.25% sulfur gas oil.
In general, oil companies need a lead time — which can take up to several months — ahead of any mandatory switch to tighter specifications fuel in order to clear existing supply and flush their distribution lines and storages.
While BPC’s existing gas oil suppliers are able to start supply of 10 ppm sulfur gas oil from early 2018 as many newly built refineries are producing ultra-low sulfur diesel in larger volumes, BPC is already in the final stage of awarding its oil products tender for first-half 2018 that includes 780,000-980,000 mt of 500 ppm sulfur gas oil, the official said.
Adding to this, BPC is in final negotiations with term suppliers to import 0.05% sulfur gas oil during H1 2018, which means BPC will not be able to take in 10 ppm sulfur gas oil until its next term cycle, he added. Meanwhile, BPC may have to raise pump prices of gas oil to offset higher import costs of 10 ppm sulfur gas oil. Currently, the retail price of 500 ppm sulfur gas oil is Taka 65/liter (81 cents/liter).
BPC last lowered the sulfur content in its gas oil import specifications in January 2015 to 500 ppm, from 2,000-2,500 ppm.Its 1.5 million mt/year (33,000 b/d) refinery at Chittagong however, is still producing 0.25% sulfur gas oil. The refinery is expected to be upgraded to produce 10 ppm sulfur gas oil after the planned 3 million mt/year refinery, that can meet ultra-low sulfur diesel specifications, to be built near the existing unit comes online by 2021.
Bangladesh has been importing around 3.5 million-3.7 million mt/year of gas oil over the past several years to meet mounting domestic demand.
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Market Watch
Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b
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2018 was a year that started with crude prices at US$62/b and ended at US$46/b. In between those two points, prices had gently risen up to peak of US$80/b as the oil world worried about the impact of new American sanctions on Iran in September before crashing down in the last two months on a rising tide of American production. What did that mean for the financial health of the industry over the last quarter and last year?
Nothing negative, it appears. With the last of the financial results from supermajors released, the world’s largest oil firms reported strong profits for Q418 and blockbuster profits for the full year 2018. Despite the blip in prices, the efforts of the supermajors – along with the rest of the industry – to keep costs in check after being burnt by the 2015 crash has paid off.
ExxonMobil, for example, may have missed analyst expectations for 4Q18 revenue at US$71.9 billion, but reported a better-than-expected net profit of US$6 billion. The latter was down 28% y-o-y, but the Q417 figure included a one-off benefit related to then-implemented US tax reform. Full year net profit was even better – up 5.7% to US$20.8 billion as upstream production rose to 4.01 mmboe/d – allowing ExxonMobil to come close to reclaiming its title of the world’s most profitable oil company.
But for now, that title is still held by Shell, which managed to eclipse ExxonMobil with full year net profits of US$21.4 billion. That’s the best annual results for the Anglo-Dutch firm since 2014; product of the deep and painful cost-cutting measures implemented after. Shell’s gamble in purchasing the BG Group for US$53 billion – which sparked a spat of asset sales to pare down debt – has paid off, with contributions from LNG trading named as a strong contributor to financial performance. Shell’s upstream output for 2018 came in at 3.78 mmb/d and the company is also looking to follow in the footsteps of ExxonMobil, Chevron and BP in the Permian, where it admits its footprint is currently ‘a bit small’.
Shell’s fellow British firm BP also reported its highest profits since 2014, doubling its net profits for the full year 2018 on a 65% jump in 4Q18 profits. It completes a long recovery for the firm, which has struggled since the Deepwater Horizon disaster in 2010, allowing it to focus on the future – specifically US shale through the recent US$10.5 billion purchase of BHP’s Permian assets. Chevron, too, is focusing on onshore shale, as surging Permian output drove full year net profit up by 60.8% and 4Q18 net profit up by 19.9%. Chevron is also increasingly focusing on vertical integration again – to capture the full value of surging Texas crude by expanding its refining facilities in Texas, just as ExxonMobil is doing in Beaumont. French major Total’s figures may have been less impressive in percentage terms – but that it is coming from a higher 2017 base, when it outperformed its bigger supermajor cousins.
So, despite the year ending with crude prices in the doldrums, 2018 seems to be proof of Big Oil’s ability to better weather price downturns after years of discipline. Some of the control is loosening – major upstream investments have either been sanctioned or planned since 2018 – but there is still enough restraint left over to keep the oil industry in the black when trends turn sour.
Supermajor Net Profits for 4Q18 and 2018
1. ExxonMobil:
- 4Q18 – Net profit US$6 billion (-28%);
- 2018 – Net profit US$20.8 (+5.7%)
2. Shell:
- 4Q18 – Net profit US$5.69 billion (+32.3%);
- 2018 – Net profit US$21.4 billion (+36%)
3. Chevron:
- 4Q18 – Net profit US$3.73 billion (+19.9%);
- 2018 – Net profit US$14.8 billion (+60.8%)
4. BP:
- 4Q18 – Net profit US$3.48 billion (+65%);
- 2018 - Net profit US$12.7 billion (+105%)
5. Total:
- 4Q18 – Net profit US$3.88 billion (+16%);
- 2018 - Net profit US$13.6 billion (+28%)