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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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Friday, 05 January 24
BANGLADESH’S 2023 COAL-FIRED POWER OUTPUT TRIPLED, EASING SHORTAGES - REUTERS
Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power s ...
Tuesday, 02 January 24
COAL TRADE CONTINUES TO HEAD EAST - BALTIC EXCHANGE
The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the Inte ...
Tuesday, 02 January 24
COAL CARGOES: AVOIDING EXPLOSION AND SELF-HEATING - GARD
KNOWLEDGE TO ELEVATE
Despite its contribution to greenhouse gas emissions, global coal consumption climbed to an all-time high in 2022 and is ...
Tuesday, 02 January 24
SINOPEC FORECASTS CHINA’S COAL CONSUMPTION TO PEAK AROUND 2025 - REUTERS
China Petrochemical Corp, or Sinopec, expects coal consumption to peak around 2025 at 4.37 billion metric tons, the state energy group said in an o ...
Thursday, 07 December 23
CHINA TO SET UP COAL PRODUCTION RESERVE TO STABILISE PRICES - REUTERS
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 ...
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- Wilmar Investment Holdings
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- Thiess Contractors Indonesia
- Australian Commodity Traders Exchange
- Videocon Industries ltd - India
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- Therma Luzon, Inc, Philippines
- Africa Commodities Group - South Africa
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Orica Mining Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Interocean Group of Companies - India
- Central Java Power - Indonesia
- European Bulk Services B.V. - Netherlands
- Commonwealth Bank - Australia
- VISA Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- Renaissance Capital - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Heidelberg Cement - Germany
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Romanian Commodities Exchange
- Iligan Light & Power Inc, Philippines
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
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- Directorate General of MIneral and Coal - Indonesia
- Mjunction Services Limited - India
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- Sojitz Corporation - Japan
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- San Jose City I Power Corp, Philippines
- Minerals Council of Australia
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- Semirara Mining Corp, Philippines
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- McConnell Dowell - Australia
- Larsen & Toubro Limited - India
- Metalloyd Limited - United Kingdom
- Baramulti Group, Indonesia
- Energy Link Ltd, New Zealand
- Intertek Mineral Services - Indonesia
- Jaiprakash Power Ventures ltd
- Orica Australia Pty. Ltd.
- India Bulls Power Limited - India
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Barasentosa Lestari - Indonesia
- Indogreen Group - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Malabar Cements Ltd - India
- Central Electricity Authority - India
- Anglo American - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- Essar Steel Hazira Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMC Global Power, Philippines
- The State Trading Corporation of India Ltd
- CNBM International Corporation - China
- Formosa Plastics Group - Taiwan
- Merrill Lynch Commodities Europe
- Toyota Tsusho Corporation, Japan
- Vizag Seaport Private Limited - India
- Parry Sugars Refinery, India
- Binh Thuan Hamico - Vietnam
- Salva Resources Pvt Ltd - India
- Sakthi Sugars Limited - India
- OPG Power Generation Pvt Ltd - India
- Siam City Cement - Thailand
- MS Steel International - UAE
- GMR Energy Limited - India
- SN Aboitiz Power Inc, Philippines
- Australian Coal Association
- Semirara Mining and Power Corporation, Philippines
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bulk Trading Sa - Switzerland
- Meenaskhi Energy Private Limited - India
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- Aboitiz Power Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Kepco SPC Power Corporation, Philippines
- Marubeni Corporation - India
- Indo Tambangraya Megah - Indonesia
- Global Business Power Corporation, Philippines
- Bangladesh Power Developement Board
- Kideco Jaya Agung - Indonesia
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- Chamber of Mines of South Africa
- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
- Parliament of New Zealand
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- Bayan Resources Tbk. - Indonesia
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Sindya Power Generating Company Private Ltd
- Holcim Trading Pte Ltd - Singapore
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- GVK Power & Infra Limited - India
- TeaM Sual Corporation - Philippines
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- Kobexindo Tractors - Indoneisa
- Economic Council, Georgia
- GAC Shipping (India) Pvt Ltd
- Sinarmas Energy and Mining - Indonesia
- Independent Power Producers Association of India
- Uttam Galva Steels Limited - India
- Standard Chartered Bank - UAE
- CIMB Investment Bank - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- PowerSource Philippines DevCo
- Banpu Public Company Limited - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Sical Logistics Limited - India
- New Zealand Coal & Carbon
- Bhatia International Limited - India
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- AsiaOL BioFuels Corp., Philippines
- IHS Mccloskey Coal Group - USA
- Planning Commission, India
- Energy Development Corp, Philippines
- Latin American Coal - Colombia
- The Treasury - Australian Government
- Siam City Cement PLC, Thailand
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Petron Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indika Energy - Indonesia
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- Port Waratah Coal Services - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Samtan Co., Ltd - South Korea
- Sarangani Energy Corporation, Philippines
- Aditya Birla Group - India
- Star Paper Mills Limited - India
- Kartika Selabumi Mining - Indonesia
- Directorate Of Revenue Intelligence - India
- Xindia Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Electricity Authority, New Zealand
- Lanco Infratech Ltd - India
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- Coalindo Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- Cigading International Bulk Terminal - Indonesia
- Medco Energi Mining Internasional
- Pendopo Energi Batubara - Indonesia
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Attock Cement Pakistan Limited
- Ministry of Transport, Egypt
- Cement Manufacturers Association - India
- Georgia Ports Authority, United States
- Indian Oil Corporation Limited
- Thai Mozambique Logistica
- Tata Chemicals Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Timah Investasi Mineral - Indoneisa
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- The University of Queensland
- Indian Energy Exchange, India
- Bukit Baiduri Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Kaltim Prima Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Jorong Barutama Greston.PT - Indonesia
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
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