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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, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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- Oldendorff Carriers - Singapore
- Jindal Steel & Power Ltd - India
- Bukit Baiduri Energy - Indonesia
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Deloitte Consulting - India
- Orica Australia Pty. Ltd.
- London Commodity Brokers - England
- Tamil Nadu electricity Board
- Videocon Industries ltd - India
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- Gujarat Mineral Development Corp Ltd - India
- Bhoruka Overseas - Indonesia
- The University of Queensland
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- Planning Commission, India
- South Luzon Thermal Energy Corporation
- Straits Asia Resources Limited - Singapore
- TeaM Sual Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Renaissance Capital - South Africa
- Global Coal Blending Company Limited - Australia
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- Rashtriya Ispat Nigam Limited - India
- Minerals Council of Australia
- Africa Commodities Group - South Africa
- Samtan Co., Ltd - South Korea
- Central Java Power - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- MS Steel International - UAE
- PTC India Limited - India
- Makarim & Taira - Indonesia
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
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- Cigading International Bulk Terminal - Indonesia
- Semirara Mining Corp, Philippines
- Indonesian Coal Mining Association
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- Vedanta Resources Plc - India
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- Eastern Coal Council - USA
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- Ceylon Electricity Board - Sri Lanka
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- Central Electricity Authority - India
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- Ministry of Transport, Egypt
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- Krishnapatnam Port Company Ltd. - India
- Carbofer General Trading SA - India
- Altura Mining Limited, Indonesia
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- Bhushan Steel Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bhatia International Limited - India
- European Bulk Services B.V. - Netherlands
- Timah Investasi Mineral - Indoneisa
- Kepco SPC Power Corporation, Philippines
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Global Green Power PLC Corporation, Philippines
- Tata Chemicals Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Edison Trading Spa - Italy
- Savvy Resources Ltd - HongKong
- Uttam Galva Steels Limited - India
- Siam City Cement PLC, Thailand
- Intertek Mineral Services - Indonesia
- McConnell Dowell - Australia
- The Treasury - Australian Government
- PNOC Exploration Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- Chamber of Mines of South Africa
- Commonwealth Bank - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Maheswari Brothers Coal Limited - India
- Mercuria Energy - Indonesia
- Mjunction Services Limited - India
- Australian Commodity Traders Exchange
- Sical Logistics Limited - India
- Aboitiz Power Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Orica Mining Services - Indonesia
- Kumho Petrochemical, South Korea
- Chettinad Cement Corporation Ltd - India
- Coalindo Energy - Indonesia
- Meralco Power Generation, Philippines
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
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- Price Waterhouse Coopers - Russia
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- Pendopo Energi Batubara - Indonesia
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Directorate General of MIneral and Coal - Indonesia
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- VISA Power Limited - India
- ASAPP Information Group - India
- Coal and Oil Company - UAE
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Iligan Light & Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- CIMB Investment Bank - Malaysia
- Manunggal Multi Energi - Indonesia
- Malabar Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Antam Resourcindo - Indonesia
- GVK Power & Infra Limited - India
- Mintek Dendrill Indonesia
- Gujarat Sidhee Cement - India
- Binh Thuan Hamico - Vietnam
- Coastal Gujarat Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Interocean Group of Companies - India
- Sarangani Energy Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Aditya Birla Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Link Ltd, New Zealand
- Larsen & Toubro Limited - India
- Simpson Spence & Young - Indonesia
- Mercator Lines Limited - India
- Salva Resources Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- Globalindo Alam Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- SMC Global Power, Philippines
- Agrawal Coal Company - India
- Sree Jayajothi Cements Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Vizag Seaport Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- Metalloyd Limited - United Kingdom
- GMR Energy Limited - India
- Ministry of Finance - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- Sakthi Sugars Limited - India
- Indogreen Group - Indonesia
- India Bulls Power Limited - India
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- CNBM International Corporation - China
- Economic Council, Georgia
- Heidelberg Cement - Germany
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- Independent Power Producers Association of India
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- Wood Mackenzie - Singapore
- Grasim Industreis Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- White Energy Company Limited
- Electricity Authority, New Zealand
- San Jose City I Power Corp, Philippines
- Power Finance Corporation Ltd., India
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Wilmar Investment Holdings
- Marubeni Corporation - India
- Global Business Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Attock Cement Pakistan Limited
- Georgia Ports Authority, United States
- Leighton Contractors Pty Ltd - Australia
- Thiess Contractors Indonesia
- Parry Sugars Refinery, India
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