25 Jun 2020
Posted in Oil & Gas
APAC refinery sector in prolonged battle with COVID-19, says GlobalData
Nation-wide lockdowns across the Asia-Pacific (APAC) region to curtail the spread of COVID-19 has resulted in a steep decline in the demand for transportation fuel. This has resulted in piling up of stocks and higher inventory costs, which have forced refiners to look for alternative strategies to reduce their losses. Capping production capacities, slashing capital expenditure and stalling avoidable projects have become a norm for several refiners to conserve cash and sustain the crisis, says GlobalData, a leading data and analytics company.
While these approaches may provide temporary solutions, the region’s refinery sector might look for diverse opportunities and regular review of strategies to stay prepared for any such disaster in the future
Haseeb Ahmed, Oil and Gas Analyst at GlobalData, comments: “While several refineries have reduced their operating capacities, a few others have decided to suspend the operations to navigate through the current crisis. SK Innovation Co Ltd’s Ulsan refinery (South Korea) is currently operating at 85% due to a sharp fall in the fuel demand amidst the COVID-19 outbreak. In India, Kochi refinery operated by Bharat Petroleum Corp Ltd has reduced nearly a third of its 311 millions barrel per day (mbd) production capacity. Few other refineries, such as the Limay and Tabangao in the Phillippines have suspended the operations to tackle the devastating impacts caused by the pandemic.
Some companies in the region have reduced their capex in response to the economic slowdown caused by COVID-19. PetroChina Company Limited has reduced its 2020 capex guidance by a third, bringing it down to nearly US$28.9bn, while PT Pertamina slashed capex from the initially planned US$7bn to US$6bn, indicating the magnitude of impact of the current crisis on the region’s refinery sector.
Ahmed concludes: “Refinery operators in the region may look to restructure their businesses to evaluate diverse opportunities. Review of delayed or stalled projects, based on demand, prices and profitability is likely to become vital. Automation and digitalization may take the center stage that can reduce dependence on the human workforce while equipping refiners to tackle similar pandemic crisis in the long run.”