Moody’s: Global refining, marketing industry to see earnings rise this year

The global refining and marketing industry will continue to see pockets of earnings growth over the next year, but flat conditions overall, with product demand expected to increase modestly this year by 1.2 million b/d, according to a recent report from Moody’s. That demand increase will be roughly in line with net global capacity additions, Moody’s said.

The outlook reflects Moody’s expectations for the fundamental business conditions in the industry over the next 12-18 months, during which time it expects the R&M sector’s earnings before interest, taxes, depreciation, and amortization (EBITDA) to remain volatile but to rise by about 8% through mid- to late-2015.

North American companies, particularly Gulf Coast refiners, have the most favorable positions, Moody’s said, but capacity additions in China and elsewhere in the world will water down earnings growth for the overall sector.

North American refiners will retain their advantage over competitors elsewhere, with cheaper feedstock and natural gas prices, and lower costs for renewable identification number contributing to 10% or higher EBITDA growth through mid- to late-2015.

Shifting crude discount advantages to the Gulf Coast from the Midcontinent, plus strong export opportunities to Latin America and Europe, give an edge to refiners with big Gulf Coast operations, including Phillips 66, Marathon Petroleum Corp., and Valero Energy Corp., Moody’s said.

These three refiners also will continue expanding their logistics and midstream operations. Companies in the Midcontinent, such as HollyFrontier Corp. and CVR Refining, lack this export advantage. Refiners with a big presence in California, including Valero Corp. and Tesoro Corp., face a crucial year in 2015, when environmental rules become stricter (OGJ Online, Sept. 19, 2013).

China will be the biggest source of new refining capacity worldwide in 2014-15, and significant Middle East capacity additions will likely go into service in 2015 but are less predictable. Moody’s expects 2% EBITDA growth this year for the Asian R&M sector overall.

In China, the world’s largest source of demand growth for refined products, capacity additions of more than 1.2 million b/d through 2015 will outpace demand growth for refined products. Moody’s anticipates about 1 million b/d of additional capacity for the Middle East, but notes that accurately projecting projects in certain countries can be difficult, since a national oil company’s plans are not always visible.

India’s demand for refined products will increase at a far-slower pace of 1% through mid- to late-2015, due to declining gross domestic product growth and government price increases on both gasoline and middle distillates.

Latin American growth for refined products will remain strong through mid- to late-2015, with few capacity additions, but the region’s reliance on costly refined product imports will hold back EBITDA growth to no more than 2%. Most of the region’s big projects for boosting refining capacity have either been delayed or called off. Moody’s doesn’t expect Mexico’s Petroleos Mexicanos (Pemex) or Brazil’s Petroleo Brasileiro SA (Petrobras) to pursue additional new refineries, but Colombia’s Ecopetrol SA’s modest capacity expansions will come onstream in 2015.

Growth for European refining operations will stay roughly flat through mid- to late-2015. Economic improvements in Germany, France, and elsewhere in the Euro-zone will modestly lift the region’s demand for refined products, but Europe will need meaningful capacity rationalization to prevent margin erosion in 2015 and beyond.

Europe’s older, less efficient, lower-complexity refineries, which rely on high-cost feedstocks, cannot compete easily with the new, high-complexity facilities of the Middle East. A number of integrated oil companies intend to reduce their European footprints, but political sensitivities in Europe can also stall or prevent widespread capacity curtailments (OGJ, Dec. 2, 2013, p. 34).

Rather than shut down capacity, operators such as Murphy Oil Corp. often try to sell off unwanted capacity, even as they continue to generate losses. Italy’s Eni SPA plans to cut its refining capacity by 22% by 2017, thereby reducing its total capacity by one-third since 2012.

Moody’s notes that it would change its outlook to negative if net refining capacity additions worldwide begin to outpace growth in demand for refined products, particularly with China’s growth slowing through 2015 alongside further capacity additions in China and the Middle East. Conversely, Moody’s would change its outlook to positive if worldwide demand overwhelmed capacity additions, and if the US and Chinese economies began surging simultaneously.

Related Articles

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

SIBUR plans MTBE expansion at Togliattikauchuk

07/01/2015 Russian conglomerate OAO SIBUR Holding, Moscow, has started preparatory work for a project designed to expand production capacity for methyl tertia...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...

USGS: Water usage for fracturing varies widely across shale plays

07/01/2015 The volume of water required to hydraulically fracture wells varies widely across the country, according to the first national analysis and map of ...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.

register:WEBCAST


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected