Moody’s: Outlook for Asian oil refining, marketing sector stable on steady earnings growth

Posted on : 03-10-2017 | By : sabah today | In : National Business

PETALING JAYA: The outlook for the Asian oil refining and marketing (R&M) sector is stable, with earnings before interest, tax, depreciation and amortisation (Ebitda) of rated companies growing a modest 5% through 2018, according to Moody’s Investors Service.

“Driven by China’s and India’s appetite for petroleum products and continued capacity rationalisation, we believe refining margins will remain firm, thereby supporting the growth in earnings,” says Rachel Chua, a Moody’s Assistant Vice President and Analyst.

“Specifically, we expect the average Asian refining margins to be largely in line with the average of US$6.2 per barrel for the last three years, but better than US$5.1 per barrel in 2016.

“The recent forced closure of about a quarter of US refining capacity has created an undersupply situation, causing fuel prices including gasoline, diesel and jet fuel to surge. Nonetheless, we expect the recent spike in crack spreads and refining margins to temper and normalise as the supply crunch eases gradually,” she says.
Moody’s conclusions are contained in its just-released report, “Refining and marketing – Asia, Outlook stable on modest Ebitda growth and firm refining margins”.

This outlook reflects Moody’s expectations for the fundamental business conditions in the sector over the next 12-18 months and has been stable since October 2014, when Moody’s initiated its outlook opinion.

Supply and demand will vary by country, but for the region as a whole, Moody’s estimates that Asia’s incremental growth in demand for fuel of around 0.7 million barrels per day (bpd) will outpace net refining capacity additions of 0.4-0.5 million barrels per day (bpd) over the next 12-18 months.

At the same time, the bulk of the incremental growth in refining capacity will come from China and Vietnam. Still, with demand growth surpassing capacity additions over the last five years, Asia is likely to remain a net importer of refined petroleum products over at least the next three years, the international rating agency notes.

Rising demand for diesel will keep diesel crack spreads healthy. The modest pace of industrial activities in the region and China will drive demand for diesel, which is a transport fuel and is also used in the agriculture, mining and construction sectors.

Meanwhile, gasoline demand and gasoline crack spreads will remain supported by low pump prices as global crude oil prices continue to stay below US$60 per barrel.

Diesel and gasoline typically make up around 60% of Asian refiners’ product slate.

However, Moody’s adds that Asian refiners continue to be exposed to the economic slowdown in China, industry cyclicality and geopolitical risks, despite the rating agency’s stable outlook.

“We could change our outlook to negative if net refining capacity additions and increasing refinery output in Asia materially outpace growth in demand, such that our projected Ebitda for the industry declines by more than 10%; or if demand from China and India contracts; or if geopolitical developments materially alter operating conditions,” it adds.

Moody’s would consider a positive outlook if regional demand overwhelms capacity additions such that refining margins exceed US$8 per barrel on a sustained basis, leading us to raise our Ebitda-growth forecast above 10%.

CM proud of achievement (Sabah’s financial management is the best in Malaysia)

Posted on : 03-10-2017 | By : sabah today | In : Local

KOTA KINABALU: Chief Minister Tan Sri Musa Haji Aman is proud that Sabah’s financial management is the best in Malaysia.

“During the National Finance Council meeting, the Auditor General always reports on which states that achieve high rating (in financial management). And Sabah is definitely the best.

“As the Chief Minister, I feel proud of this achievement,” Musa said at the presentation of excellent financial management awards to State ministries, departments and agencies based on the National Audit Department’s accountability index for the year 2015 and 2016 here yesterday.

The event saw the presentation of a pewter plaque and RM15,000 incentive to 25 State ministries, departments and agencies which had attained five-star rating in 2015, followed by 22 State ministries, departments and agencies in 2016.

Musa, who is also Sabah Finance Minister, said only a few State departments and agencies were accorded the top rating in accountability index back in 2007.

“But if we are committed, transparent, competent in executing our responsibilities, we will definitely achieve success and five-star rating. This has become a reality as our performances improved year after year,” he  said.

In 2015, Musa said 25 of the State ministries, departments and agencies achieved the five-star rating under the accountability index, the highest among all the Malaysian states.

According to him, the success of a ministry, department or agency could also create healthy competition for the others. In the past, Musa said the district councils’ financial records were not good. However, when district councils such as Tambunan, Papar and Beluran successfully achieved five-star rating one by one, others began thinking of attaining the top rating as well, he said.

“Hence, we see the district councils working hard with transparency until almost all the district councils in Sabah have obtained five stars,” he disclosed.

Musa said the award presentation ceremony yesterday was a form of appreciation by the State Government to the ministries, departments and agencies that have worked hard with sincerity to enable them to achieve the top rating.

“We, in Sabah, should be proud of this. But, we must not be complacent. We must improve our performances from time to time,” he reminded.

Musa also said he is aware that some agencies and departments have made mistakes in the past.

“We are not perfect. More importantly, we realize that if we are not sincere, honest and trustworthy, we will face the consequences,” he said.

Musa also urged all ministries, departments and agencies to continue their hard work to achieve the five-star rating.

“So long as we have the will, nothing is impossible,” he said

Also present were deputy Auditor-General Tuan Haji Khalid Khan bin Abdullah Khan, representing Auditor General Tan Sri Dr Madinah binti Mohamad, State Secretary Tan Sri Sukarti Wakiman, Permanent Secretary to the Ministry of Finance, Datuk Pg Hassanel bin Datuk Pg Haji Mohd Tahir and State Cabinet ministers.