Bangkok--17 Mar--Moody's
In a new report, Moody's Investors Service says that displaced demand from Japan's nuclear shutdown will shift to Asia-Pacific thermal-energy producers such as Australia's upstream Woodside Petroleum (Baa1 negative), Indonesia's thermal-coal miner Adaro(Ba1 stable), Korea's refiner SK Innovation (Baa3 Stable), and Thailand's petrochemical firm PTT Chemical (Baa3 review for upgrade).
Renee Lam, the lead author of the report and a Moody's vice president in Hong Kong, says, "These firms and others in the region can capitalize onnear- and longer-term displaced demand as Japan must now rely more on non-nuclear fuel." Lam also expects global crude prices to remain high, despite a near-term drop from dislocation in Japan.
Lam notes, "Refinery shutdowns in Japan, accounting for 9% of Asian capacity and 2% of global capacity, have pushed up Asian refining margins. Strong margins benefiting non-Japanese, regional refineries should continue at least in the near term." She adds, "We expect strong results for our rated refiners in the first half of this year."
Lam says, "However, high-oil prices stemming from political instability in the Middle East and North Africa are putting pressure on refining and marketing (R&M) firms' working capital." She adds, "Over the longer term, R&M companies' performance still hinges on continuing growth in industrial demand."
Lam also says, "Downstream petrochemical producers in Asia are set to capitalize on displaced sourcing in the region as Japan is a major exporter of petrochemicals to its neighboring countries."
A contributor to the report, Matthew Moore, a Moody's assistant vice president in Sydney, says,
"Exploration and production (E&P) companies with a lot of natural-gas production stand to benefit from an anticipated increase in Japanese demand for liquefied natural gas (LNG) to replace lost nuclear-power capacity." He adds, "In that sense, the Australian E&P sector will benefit the most in the medium to long term, with over ten projects representing more than half of current global production planned or under development." Moore notes, "However, long-term contracts tying up much of this LNG capacity may limit the near-term benefits."
Another contributor, Simon Wong, a vice president in Moody's Singapore office, adds, "Like LNG, substituted demand from crippled Japanese nuclear reactors will keep prices buoyant for Indonesia- and Australia-based producers of thermal coal."
The report, entitled "Situation in Japan Rebalances Asia-Pacific Energy Market", is available at www.moodys.com.