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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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Tuesday, 29 December 20
CORROSION-RESISTANT STEELS FOR CARGO OIL TANKS - DNV GL
KNOWLEDGE TO ELEVATE
Crude oil is a complex mixture of substances at varying ratios and in most cases contains at least some salt water. ...
Tuesday, 29 December 20
CHINA COKING COAL FUTURES RISE FOR THIRD DAY ON SUPPLY WORRIES - REUTERS
Chinese coking coal futures extended gains into a third session on Monday, jumping as much as 6.2% as lower imports, sliding inventories and mines ...
Wednesday, 23 December 20
COKING COAL'S DECLINE LIKELY TO FOLLOW THE PATH OF THERMAL COAL’S PROGRESSIVE DEMISE - IEEFA
Technology disruption the likely theme of global energy markets in 2021
There has been a growing tsunami of climate commitment annou ...
Wednesday, 23 December 20
MARKET INSIGHT - INTERMODAL
As we all know, China forges more steel than the rest of the world combined, and even during this unprecedented pandemic, the nation is set to brea ...
Tuesday, 22 December 20
2021 DRY BULK OUTLOOK - SUPPLY GROWTH - TORVALD KLAVENESS
In the first article in the series we mentioned that dry bulk freight was in a super cycle between 2001 and 2008. The growth in global yard capacit ...
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- Standard Chartered Bank - UAE
- Aboitiz Power Corporation - Philippines
- Sakthi Sugars Limited - India
- Bukit Baiduri Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Australian Coal Association
- SN Aboitiz Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- Globalindo Alam Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Cigading International Bulk Terminal - Indonesia
- Oldendorff Carriers - Singapore
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- Formosa Plastics Group - Taiwan
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- GVK Power & Infra Limited - India
- Goldman Sachs - Singapore
- Vizag Seaport Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Meralco Power Generation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Thai Mozambique Logistica
- Metalloyd Limited - United Kingdom
- PowerSource Philippines DevCo
- TeaM Sual Corporation - Philippines
- The Treasury - Australian Government
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- Indika Energy - Indonesia
- Uttam Galva Steels Limited - India
- Neyveli Lignite Corporation Ltd, - India
- London Commodity Brokers - England
- Cement Manufacturers Association - India
- CNBM International Corporation - China
- ICICI Bank Limited - India
- International Coal Ventures Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- AsiaOL BioFuels Corp., Philippines
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- Kaltim Prima Coal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Salva Resources Pvt Ltd - India
- Heidelberg Cement - Germany
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Videocon Industries ltd - India
- Altura Mining Limited, Indonesia
- Maheswari Brothers Coal Limited - India
- Billiton Holdings Pty Ltd - Australia
- Malabar Cements Ltd - India
- Independent Power Producers Association of India
- Binh Thuan Hamico - Vietnam
- Siam City Cement - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Carbofer General Trading SA - India
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Energy Link Ltd, New Zealand
- Sarangani Energy Corporation, Philippines
- Marubeni Corporation - India
- Semirara Mining and Power Corporation, Philippines
- VISA Power Limited - India
- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- Essar Steel Hazira Ltd - India
- ASAPP Information Group - India
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- Global Business Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- Savvy Resources Ltd - HongKong
- Gujarat Mineral Development Corp Ltd - India
- Star Paper Mills Limited - India
- Power Finance Corporation Ltd., India
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- MS Steel International - UAE
- The University of Queensland
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Ind-Barath Power Infra Limited - India
- Xindia Steels Limited - India
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Renaissance Capital - South Africa
- Central Electricity Authority - India
- Electricity Authority, New Zealand
- Indogreen Group - Indonesia
- Lanco Infratech Ltd - India
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Directorate General of MIneral and Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Posco Energy - South Korea
- Petron Corporation, Philippines
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Thiess Contractors Indonesia
- Sree Jayajothi Cements Limited - India
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- Tata Chemicals Ltd - India
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Global Coal Blending Company Limited - Australia
- PTC India Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- Economic Council, Georgia
- European Bulk Services B.V. - Netherlands
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Minerals Council of Australia
- Bangladesh Power Developement Board
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Edison Trading Spa - Italy
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- Bayan Resources Tbk. - Indonesia
- Toyota Tsusho Corporation, Japan
- IEA Clean Coal Centre - UK
- White Energy Company Limited
- Holcim Trading Pte Ltd - Singapore
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Grasim Industreis Ltd - India
- Pendopo Energi Batubara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Mjunction Services Limited - India
- Barasentosa Lestari - Indonesia
- Tamil Nadu electricity Board
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Rio Tinto Coal - Australia
- Coal and Oil Company - UAE
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- Meenaskhi Energy Private Limited - India
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Kumho Petrochemical, South Korea
- Romanian Commodities Exchange
- Iligan Light & Power Inc, Philippines
- Dalmia Cement Bharat India
- Bhatia International Limited - India
- Bulk Trading Sa - Switzerland
- Kobexindo Tractors - Indoneisa
- SMG Consultants - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bharathi Cement Corporation - India
- Indonesian Coal Mining Association
- Baramulti Group, Indonesia
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Intertek Mineral Services - Indonesia
- Madhucon Powers Ltd - India
- Parliament of New Zealand
- Larsen & Toubro Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- Gujarat Electricity Regulatory Commission - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PetroVietnam Power Coal Import and Supply Company
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