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Tuesday, 01 September 20
COVID-19 PUSHES US LNG INTO A TIGHT SPOT - DREWRY
The pandemic-led weak projections for economic growth will derail US LNG exports in full-year 2020 with the country also losing ground in the long term due to major delays in liquefaction projects.
US LNG exports were strong between 2017 and 2019, driven by the shale gas boom, rising demand for natural gas in Asia and higher global LNG prices. The US exported 3.9 million tonnes of LNG in 2016 which increased at a whopping 114% CAGR to 38.2 million tonnes in 2019.
The US is currently the third-largest global LNG exporter with six operational LNG export terminals aggregating 62 mtpa of liquefaction capacity and another 41 mtpa capacity under construction. Brownfiled projects such as Sabine Pass, Corpus Christi, Cameron LNG and Elba Island will reach their full capacities between 2020 and 2027 and greenfield projects such as Golden Pass LNG and Calcasieu Pass will become operational during the same period.
Existing LNG production capacity in the US has been impacted by the pandemic with over 110 LNG cargoes being cancelled by Asian and European customers during June-August due to the low LNG spot price which narrowed the US-Asia and US-Europe price arbitrage. Moreover, major US LNG importers – Japan, South Korea and Taiwan – have seen their LNG demand dwindling, while US-China LNG trade has not been able to pick up as some would have hoped. With projections for LNG spot prices below $5 per MMBtu over the next few years, we expect more cancellations to occur in the coming years making the US a ‘swing LNG producer.’
The ‘second wave’ of LNG liquefaction including mega-LNG projects (such as Driftwood LNG, Port Arthur LNG, Golden Pass, Calcasieu LNG, Plaquemines LNG, Magnolia LNG, Jordan Cove LNG and Rio Grande LNG) constitute over 160 mtpa of planned liquefaction capacity. These projects were initially expected to be operational by 2025, but are currently facing major trouble in securing funding and long-term supply deals required for reaching an FID. Only two projects (Golden Pass and Calcasieu Pass LNG) have attained the FID and have started construction, while over 10 major LNG liquefaction projects which were expected to reach the FID in 2020 have been delayed due to low LNG prices and weak economic growth projections.
The future for these projects looks uncertain as most of them had fixed the all-inclusive selling price for LNG at $8 per MMBtu for Asia ($2 for Henry Hub, $3 for liquefaction, $2-3 transportation) which is highly uncompetitive in the current market. Only a marginal recovery in LNG prices is projected for the next few years which further increases the woes for promoters of the planned projects in securing funding and supply deals. Meanwhile, a major competitor for US LNG, Qatar enjoys a break-even price below $2 per MMBtu as well as proximity to the Asian market. Qatar’s North Field Expansion (NFE) project’s Phase-1 (33 mtpa) and Phase-2 (16 mtpa) are also backed by the government, increasing the probability of their completion and in the process creating more trouble for the planned US projects.
The pandemic has already created severe financial woes for some US projects. For instance, a deal between Driftwood’s promoter Tellurian and India’s Petronet LNG fell through, raising doubts over the proposed 27.6 mtpa project. Although negotiations are still underway, Tellurian faces high competition from Russian and African projects. Shell has also exited the Lake Charles LNG project, increasing the uncertainty of the project for the other participants, while Magnolia LNG’s promoter LNG Ltd has been taken over by another entity after it went bankrupt, delaying the project further.
Some projects like Lake Charles and Rio Grande have gone back to the drawing board and plan to reduce trains to decrease the capex cost while others are cutting workforce and raising loans to keep their projects afloat. Most project developers are hopingfor an easing of US-China tensions and the prospect of securinga share of the rising LNG demand in China, which is projected to grow at over 10% CAGR between 2020 and 2025. However, China’s LNG importers may not be too keen on long-term supply deals with US companies given the current low prices and the uncertainty over US-China trade relations. Ties between China and Qatar are also strengthening with the latter reserving 16 LNG carrier newbuild berths at a Chinese shipyard.
Overall, project delays are expected to hurt the US deeply in the long term while other LNG producers – Qatar, Russia and Mozambique – gain from the narrowing supply-demand gap from 2023 onwards. Qatar has already reserved LNG carrier newbuilding berths at shipyards and has selected a technology partner for the NFE project while Russia’s Arctic LNG-2 is on schedule with added investments made for Arc-7 LNG carriers and large FSUs to keep the Northern Sea Route (NSR) active most of the year.
US LNG woes have had a cascading effect on the LNG shipping market, depressing charter rates. The fall in US-Asia LNG trade has negatively affected shipping demand which, along with cancellations, has increased vessel availability in the market. At present, the fall in charter rates is arrested by a rise in floating storage, but this situation is not sustainable in the long term with LNG prices remaining depressed and over 120 LNG carriers scheduled to be delivered during 2020-21.
An estimated 140 new orders for LNG carriers during 2020-23 would be left hanging if the planned US LNG projects fail to progress. The loss of orders will impact LNG shipyards which have already begun to reel under low orders (only eight vessels were ordered in 1H20). While project-linked ordering from Qatar, Russia and Mozambique will bring some respite the drying up of speculative orders will most certainly be a huge loss for the LNG shipping market as a whole.
To conclude US LNG exports will grow at a slower pace in the coming years as long-term supply deals have already been signed for the under-construction projects. However, stiff competition from other producers amid low LNG prices will impact their share in the Asian market. The fall in US-Asia trade will negatively impact shipping demand and further reduce the number of vessels required for LNG trade. Overall, we expect US LNG exports to be seasonal in the long run with Europe playing a much larger role in the future.
Source: Drewry
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Monday, 09 August 21
AIIB MAY OFFICIALLY END COAL FINANCING IN 2022 - CHINA DAILY
The Asian Infrastructure Investment Bank may officially rule out coal projects if it updates its energy strategy next year, after shunning funding ...
Monday, 09 August 21
CHINA COAL INVENTORY THINS AMID PEAK POWER DEMAND- STATE MEDIA : REUTERS
China’s coal inventories have dropped to near historic lows since August due to peak summer electricity demand and transportation bottlenecks ...
Wednesday, 04 August 21
THE INDONESIAN COAL PRICE REFERENCE SURGED TO A FRESH RECORD HIGH OF USD 130.99 A TON IN AUGUST 2021
COALspot.com: The Indonesian Coal Price Reference ( HBA) surged to a fresh record high of USD 130.99 a ton in August 2021.
The ...
Wednesday, 04 August 21
MARKET INSIGHT - INTERMODAL
Unlike the Dry Bulk and Container sectors where freight rates have surged into 2021, the tankers market continues to experience lackluster earnings ...
Sunday, 01 August 21
SEABORNE HARD COAL TRADE IN 2020 DECREASED BY 149 MILLION MT, OR 12.1%, TO 1,083 MILLION MT - GERMAN COAL IMPORTERS ASSOCIATION
- Reduced coal-fired power plant fleet secures Germany’s power supply in severe winter of 2020/2021; little wind availability and hence stron ...
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- Ambuja Cements Ltd - India
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- Africa Commodities Group - South Africa
- Jorong Barutama Greston.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- London Commodity Brokers - England
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- SMC Global Power, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Intertek Mineral Services - Indonesia
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- Therma Luzon, Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- The State Trading Corporation of India Ltd
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- Orica Australia Pty. Ltd.
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- Heidelberg Cement - Germany
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- India Bulls Power Limited - India
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- Parry Sugars Refinery, India
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Kideco Jaya Agung - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- Aboitiz Power Corporation - Philippines
- Energy Link Ltd, New Zealand
- CNBM International Corporation - China
- Port Waratah Coal Services - Australia
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- The Treasury - Australian Government
- Georgia Ports Authority, United States
- Posco Energy - South Korea
- Riau Bara Harum - Indonesia
- Global Business Power Corporation, Philippines
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- Merrill Lynch Commodities Europe
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- Ceylon Electricity Board - Sri Lanka
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- Bhushan Steel Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Romanian Commodities Exchange
- Meenaskhi Energy Private Limited - India
- Thiess Contractors Indonesia
- South Luzon Thermal Energy Corporation
- Sojitz Corporation - Japan
- Alfred C Toepfer International GmbH - Germany
- Samtan Co., Ltd - South Korea
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Manunggal Multi Energi - Indonesia
- Eastern Coal Council - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
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- IHS Mccloskey Coal Group - USA
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- Anglo American - United Kingdom
- Ministry of Transport, Egypt
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- Indo Tambangraya Megah - Indonesia
- Chamber of Mines of South Africa
- Parliament of New Zealand
- Energy Development Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- Uttam Galva Steels Limited - India
- Renaissance Capital - South Africa
- The University of Queensland
- Indonesian Coal Mining Association
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Madhucon Powers Ltd - India
- Minerals Council of Australia
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- Indika Energy - Indonesia
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- Economic Council, Georgia
- Star Paper Mills Limited - India
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- TNB Fuel Sdn Bhd - Malaysia
- Thai Mozambique Logistica
- Bangladesh Power Developement Board
- Bayan Resources Tbk. - Indonesia
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Edison Trading Spa - Italy
- Tata Chemicals Ltd - India
- Planning Commission, India
- Semirara Mining Corp, Philippines
- Tamil Nadu electricity Board
- Jindal Steel & Power Ltd - India
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
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- Global Green Power PLC Corporation, Philippines
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- Vedanta Resources Plc - India
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Price Waterhouse Coopers - Russia
- ICICI Bank Limited - India
- Straits Asia Resources Limited - Singapore
- CIMB Investment Bank - Malaysia
- Borneo Indobara - Indonesia
- VISA Power Limited - India
- Latin American Coal - Colombia
- Binh Thuan Hamico - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Jaiprakash Power Ventures ltd
- IEA Clean Coal Centre - UK
- Sical Logistics Limited - India
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Xindia Steels Limited - India
- Ministry of Finance - Indonesia
- Globalindo Alam Lestari - Indonesia
- Mjunction Services Limited - India
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- TeaM Sual Corporation - Philippines
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- Wilmar Investment Holdings
- Kaltim Prima Coal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Eastern Energy - Thailand
- Carbofer General Trading SA - India
- Altura Mining Limited, Indonesia
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- Cement Manufacturers Association - India
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Australian Coal Association
- Siam City Cement - Thailand
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- OPG Power Generation Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- San Jose City I Power Corp, Philippines
- Mintek Dendrill Indonesia
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- Sinarmas Energy and Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Central Electricity Authority - India
- McConnell Dowell - Australia
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- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- New Zealand Coal & Carbon
- Karaikal Port Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Kobexindo Tractors - Indoneisa
- Independent Power Producers Association of India
- ASAPP Information Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Essar Steel Hazira Ltd - India
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
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- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- Coal and Oil Company - UAE
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- Malabar Cements Ltd - India
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