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    Asia Downstream Oil & Gas Risk/Reward Index


    July 29, 2022 - Fitch Solutions Sector Intelligence

     

      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Asia Downstream Oil & Gas Risk/Reward Index

      • 18 Jul 2022
      • Asia (Region)
      • Oil & Gas

      Key View: Asia is still set to see a broad-based post-pandemic demand recovery as markets continue to transition to living with virus instead of tightening social distancing rules, although the near-term risks remain elevated due to soaring global oil and gas prices, spill-over effects from the war in Ukraine and high inflation pressure.

      Larger Consumer Markets Continue To Outperform

      Asia - Downstream Oil & Gas Risk/Reward Index Heat Map

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      Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: Fitch Solutions

      Main Regional Features And Latest Updates

      • As a region, Asia ranks second in our Downstream Risk/Reward Index (RRI), behind North America and Western Europe due to lower Country Rewards and overall risk scores.
      • Asia’s score for Industry Rewards improves to 56.2 from 55.5 in the previous quarter as scores for ‘refinery utilisation’ and ‘fuel demand growth’ metrics improve on account of favourable base effects and easing pandemic headwinds.
      • That said, soaring global oil and gas prices, supply chain disruptions and high inflation pose significant downside risks to near-term fuel demand growth, and broader economic performances.
      • In addition, the adherence to strict Zero Covid-19 protocols continue to drag on the demand recoveries and reopening plans in certain economies, while higher input costs are scuppering refining operations in certain emerging markets.
      • Mainland China continues to underperform in the RRI by continuing to be placed at fifth, reflective of persistent demand downsides from structural economic headwinds, strict anti-pandemic protocols and tightening environmental measures raising costs and other operational barriers for businesses.
      • Looking past the immediate downside risks posed by the pandemic, Asia continues to be an attractive downstream market for potential investors, supported by large, populous emerging economies with strong fuel demand growth potential.
      • Asia’s score of 57.5 for Country Rewards well outperforms the global average, although overall performance is held in check by the dominance of SOEs in several large emerging markets and the out-sized influence of a few giant conglomerates in the developed markets that limit room for new entrants.
      • As with the upstream, there is significant disparity between the Risks scores of several highly developed refining powerhouses in Asia, such as South Korea and Singapore and those of the emerging markets.

      India Far Ahead, While Mainland China Underperforms

      Asia - Downstream Risk/Reward Index

      ""

      Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: Fitch Solutions

      Post-Pandemic Recovery In Play, But With Risks

      Asia is still set to see a broad-based post-pandemic demand recovery as markets continue to transition to living with the coronavirus instead of tightening

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