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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, 29 January 21
COAL EXPORTS FROM AUSTRALIA TO MAINLAND CHINA DECLINED BY -22.2% Y-O-Y IN 2020 - BANCHERO COSTA
In the 12 months of 2020, global seaborne coal trade declined by as much as -12.7% year-on-year, according to vessel tracking data from Refinitiv, ...
Friday, 29 January 21
OPEC+, COVID-19 AND ENERGY TRANSITION - 3 THEMES IMPACTING OIL MARKETS AND REFINING IN 2021 - WOOD MACKENZIE
Wood Mackenzie’s latest outlook report shows that the art of balancing oil markets and the refining sector in 2021 hinges upon three key them ...
Thursday, 28 January 21
STRONG CHINESE THERMAL COAL IMPORTS TO BENEFIT INDONESIAN MINERS IN THE NEAR TERM - FITCH RATINGS
China's thermal coal imports are likely to remain strong ahead of the Chinese New Year in mid-February on robust demand, high utilisation at do ...
Thursday, 28 January 21
WIND PROPULSION FOR DRY BULK CARRIERS - OLDENDORFF
Oldendorff Carriers (OC) has signed a Joint Development Project (JDP) with Anemoi Marine Technologies (Anemoi), Lloyd’s Register (LR) and Sha ...
Thursday, 28 January 21
BUMA PRICED A USD400 MILLION 7.75% 5-YEAR SENIOR NOTES
PT Delta Dunia Makmur Tbk. announced that its subsidiary, PT Bukit Makmur Mandiri Utama priced a USD400 million 5-year (non-callable 2-year)& ...
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- TNB Fuel Sdn Bhd - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- Gujarat Sidhee Cement - India
- Bangladesh Power Developement Board
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Central Java Power - Indonesia
- GAC Shipping (India) Pvt Ltd
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- CIMB Investment Bank - Malaysia
- Aboitiz Power Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- San Jose City I Power Corp, Philippines
- Barasentosa Lestari - Indonesia
- Mercuria Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Metalloyd Limited - United Kingdom
- Toyota Tsusho Corporation, Japan
- Thai Mozambique Logistica
- Economic Council, Georgia
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- Medco Energi Mining Internasional
- Bukit Makmur.PT - Indonesia
- ICICI Bank Limited - India
- Latin American Coal - Colombia
- White Energy Company Limited
- Indian Energy Exchange, India
- ASAPP Information Group - India
- Bhatia International Limited - India
- Renaissance Capital - South Africa
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Gujarat Electricity Regulatory Commission - India
- Ministry of Mines - Canada
- Bayan Resources Tbk. - Indonesia
- Kaltim Prima Coal - Indonesia
- Agrawal Coal Company - India
- Kobexindo Tractors - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- New Zealand Coal & Carbon
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Bukit Baiduri Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Georgia Ports Authority, United States
- Vedanta Resources Plc - India
- Mintek Dendrill Indonesia
- The University of Queensland
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- TeaM Sual Corporation - Philippines
- The Treasury - Australian Government
- Asmin Koalindo Tuhup - Indonesia
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Kideco Jaya Agung - Indonesia
- Energy Development Corp, Philippines
- Port Waratah Coal Services - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining Corp, Philippines
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Ministry of Transport, Egypt
- Simpson Spence & Young - Indonesia
- Orica Mining Services - Indonesia
- PTC India Limited - India
- Anglo American - United Kingdom
- PetroVietnam Power Coal Import and Supply Company
- Tamil Nadu electricity Board
- GMR Energy Limited - India
- Commonwealth Bank - Australia
- Indika Energy - Indonesia
- Tata Chemicals Ltd - India
- Power Finance Corporation Ltd., India
- Banpu Public Company Limited - Thailand
- LBH Netherlands Bv - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Romanian Commodities Exchange
- Vizag Seaport Private Limited - India
- Larsen & Toubro Limited - India
- CNBM International Corporation - China
- Xindia Steels Limited - India
- Kumho Petrochemical, South Korea
- Eastern Energy - Thailand
- Straits Asia Resources Limited - Singapore
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- Independent Power Producers Association of India
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maheswari Brothers Coal Limited - India
- Wilmar Investment Holdings
- Jaiprakash Power Ventures ltd
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- Attock Cement Pakistan Limited
- Videocon Industries ltd - India
- Coastal Gujarat Power Limited - India
- Iligan Light & Power Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- Rio Tinto Coal - Australia
- Standard Chartered Bank - UAE
- Sakthi Sugars Limited - India
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- International Coal Ventures Pvt Ltd - India
- Minerals Council of Australia
- Oldendorff Carriers - Singapore
- Lanco Infratech Ltd - India
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- European Bulk Services B.V. - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- OPG Power Generation Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Miang Besar Coal Terminal - Indonesia
- Sical Logistics Limited - India
- Aditya Birla Group - India
- Uttam Galva Steels Limited - India
- Australian Commodity Traders Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Petron Corporation, Philippines
- Sojitz Corporation - Japan
- Grasim Industreis Ltd - India
- Bhoruka Overseas - Indonesia
- Wood Mackenzie - Singapore
- Australian Coal Association
- Directorate General of MIneral and Coal - Indonesia
- Sarangani Energy Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Ambuja Cements Ltd - India
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Neyveli Lignite Corporation Ltd, - India
- Ind-Barath Power Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Makarim & Taira - Indonesia
- Global Business Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- PowerSource Philippines DevCo
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- Bharathi Cement Corporation - India
- South Luzon Thermal Energy Corporation
- Posco Energy - South Korea
- Coalindo Energy - Indonesia
- Parliament of New Zealand
- Singapore Mercantile Exchange
- Ministry of Finance - Indonesia
- Indo Tambangraya Megah - Indonesia
- London Commodity Brokers - England
- VISA Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Planning Commission, India
- Africa Commodities Group - South Africa
- Riau Bara Harum - Indonesia
- Star Paper Mills Limited - India
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- India Bulls Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- Pendopo Energi Batubara - Indonesia
- Bhushan Steel Limited - India
- Madhucon Powers Ltd - India
- Siam City Cement PLC, Thailand
- Trasteel International SA, Italy
- Indian Oil Corporation Limited
- Dalmia Cement Bharat India
- Bukit Asam (Persero) Tbk - Indonesia
- SMC Global Power, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Indonesian Coal Mining Association
- Chettinad Cement Corporation Ltd - India
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- Mjunction Services Limited - India
- AsiaOL BioFuels Corp., Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Goldman Sachs - Singapore
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- SMG Consultants - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Manunggal Multi Energi - Indonesia
- Electricity Generating Authority of Thailand
- Kohat Cement Company Ltd. - Pakistan
- McConnell Dowell - Australia
- Globalindo Alam Lestari - Indonesia
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