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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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Saturday, 23 January 21
GOVT PLANNING TO OPEN UP COAL MARKETING TO STREAMLINE PROCESS - THE INDIAN EXPRESS
The government is considering opening up coal marketing, Coal Secretary Anil Kumar Jain said on Thursday. Currently, production by Coal India is al ...
Thursday, 21 January 21
LNG MARKET RIDING HIGH, BUT WILL THE GAINS CONTINUE? - DREWRY
The LNG market started 2021 on a high note with Asian spot prices crossing $30 per MMBtu while LNG shipping rates recorded a high $350k per day due ...
Thursday, 21 January 21
CHINA'S SPOT THERMAL COAL PRICES REFRESH RECORD HIGH - MYSTEEL
Despite the moderate rebound in temperatures across most regions of China after late December’s deep-freeze, thermal coal prices in the count ...
Wednesday, 20 January 21
CORONAVIRUS OUTBREAK IN HEBEI HAS LIMITED IMPACT ON CHINA'S STEEL INDUSTRY - FITCH RATINGS
The recent Covid-19 outbreak in the steel producing hub Hebei will not have material impact on China’s steel industry, Fitch Ratings says.
...
Wednesday, 20 January 21
MARKET INSIGHT - INTERMODAL
While 2020 is finally behind us, its negative impacts are still hovering over the shipping market. That being said, it is still too early to even s ...
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- Ceylon Electricity Board - Sri Lanka
- Borneo Indobara - Indonesia
- The University of Queensland
- Binh Thuan Hamico - Vietnam
- IHS Mccloskey Coal Group - USA
- Essar Steel Hazira Ltd - India
- Global Green Power PLC Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Edison Trading Spa - Italy
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- Sojitz Corporation - Japan
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- Malabar Cements Ltd - India
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- Semirara Mining and Power Corporation, Philippines
- Larsen & Toubro Limited - India
- PTC India Limited - India
- The Treasury - Australian Government
- Indian Oil Corporation Limited
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- Uttam Galva Steels Limited - India
- South Luzon Thermal Energy Corporation
- Power Finance Corporation Ltd., India
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- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- CNBM International Corporation - China
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- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- LBH Netherlands Bv - Netherlands
- Mintek Dendrill Indonesia
- Electricity Generating Authority of Thailand
- Ministry of Transport, Egypt
- Goldman Sachs - Singapore
- Sakthi Sugars Limited - India
- Samtan Co., Ltd - South Korea
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
- VISA Power Limited - India
- Attock Cement Pakistan Limited
- Carbofer General Trading SA - India
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- Standard Chartered Bank - UAE
- Neyveli Lignite Corporation Ltd, - India
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- Cigading International Bulk Terminal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Economic Council, Georgia
- Australian Coal Association
- Banpu Public Company Limited - Thailand
- Mercator Lines Limited - India
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- Electricity Authority, New Zealand
- Thiess Contractors Indonesia
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- ICICI Bank Limited - India
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- Altura Mining Limited, Indonesia
- The State Trading Corporation of India Ltd
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- Planning Commission, India
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- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Indo Tambangraya Megah - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Meralco Power Generation, Philippines
- PowerSource Philippines DevCo
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Vedanta Resources Plc - India
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Tata Chemicals Ltd - India
- Wood Mackenzie - Singapore
- Miang Besar Coal Terminal - Indonesia
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sarangani Energy Corporation, Philippines
- GVK Power & Infra Limited - India
- Indonesian Coal Mining Association
- Kapuas Tunggal Persada - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
- Mercuria Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Manunggal Multi Energi - Indonesia
- London Commodity Brokers - England
- AsiaOL BioFuels Corp., Philippines
- Coalindo Energy - Indonesia
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
- Renaissance Capital - South Africa
- Romanian Commodities Exchange
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- Chamber of Mines of South Africa
- Deloitte Consulting - India
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- Price Waterhouse Coopers - Russia
- Indian Energy Exchange, India
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- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Directorate General of MIneral and Coal - Indonesia
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- Merrill Lynch Commodities Europe
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- Intertek Mineral Services - Indonesia
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
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- Straits Asia Resources Limited - Singapore
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- GAC Shipping (India) Pvt Ltd
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- Riau Bara Harum - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bukit Asam (Persero) Tbk - Indonesia
- SMC Global Power, Philippines
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Semirara Mining Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Commonwealth Bank - Australia
- Georgia Ports Authority, United States
- Sree Jayajothi Cements Limited - India
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- Videocon Industries ltd - India
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Australian Commodity Traders Exchange
- Antam Resourcindo - Indonesia
- ASAPP Information Group - India
- Grasim Industreis Ltd - India
- Eastern Energy - Thailand
- Gujarat Sidhee Cement - India
- Vijayanagar Sugar Pvt Ltd - India
- Bharathi Cement Corporation - India
- Global Coal Blending Company Limited - Australia
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Heidelberg Cement - Germany
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- Coal and Oil Company - UAE
- Ind-Barath Power Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Wilmar Investment Holdings
- Petrochimia International Co. Ltd.- Taiwan
- Asmin Koalindo Tuhup - Indonesia
- Sical Logistics Limited - India
- Tamil Nadu electricity Board
- Jaiprakash Power Ventures ltd
- OPG Power Generation Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Marubeni Corporation - India
- India Bulls Power Limited - India
- White Energy Company Limited
- Eastern Coal Council - USA
- Sindya Power Generating Company Private Ltd
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- Ambuja Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Cement Manufacturers Association - India
- Bhoruka Overseas - Indonesia
- Orica Mining Services - Indonesia
- Minerals Council of Australia
- Energy Link Ltd, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Global Business Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Energy Development Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Savvy Resources Ltd - HongKong
- Therma Luzon, Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- New Zealand Coal & Carbon
- Vizag Seaport Private Limited - India
- IEA Clean Coal Centre - UK
- GMR Energy Limited - India
- Gujarat Mineral Development Corp Ltd - India
- San Jose City I Power Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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