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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, 22 December 20
INDIA'S COAL DEMAND IS SET TO EXPAND DESPITE PLUMMETING IN 2020 - IEA
Coal consumption in India amounted to 979 Mt in 2019, with the largest share being thermal coal (including lignite) for electricity generation (687 ...
Tuesday, 22 December 20
SOUTHEAST ASIA'S COAL DEMAND IS SET TO EXPAND AFTER THE PANDEMIC-INDUCED HIATUS IN 2020 - IEA
Coal consumption in Southeast Asia has more than doubled in the last decade, with the largest growth in Indonesia and Viet Nam, followed by Malaysi ...
Tuesday, 22 December 20
COAL DEMAND IS RISING QUICKLY IN PAKISTAN AND MORE SLOWLY IN BANGLADESH - IEA
Pakistan had 150 MW of installed coal power capacity in 2015. Since 2017, in addition to a few small plants for industry, Pakistan has commissioned ...
Tuesday, 22 December 20
AFRICA PERSPECTIVE INDICATES NO MAJOR SHIFTS FOR COAL CONSUMPTION - IEA
Overall countries on the African continent consumed 197 Mt of coal in 2019, 12 Mt less (-6%) than 2018.
South Africa, the continent& ...
Monday, 21 December 20
COAL PRICES WITHSTAND DESPITE COVID-19 AND CHINESE IMPORT QUOTAS - IEA
Coal prices vary by region as well as by grade and quality. The price rebound starting in 2016 ended in 2018, moving in a downward trend in 2019. A ...
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- PowerSource Philippines DevCo
- Intertek Mineral Services - Indonesia
- Thiess Contractors Indonesia
- Global Business Power Corporation, Philippines
- Ministry of Mines - Canada
- Port Waratah Coal Services - Australia
- Energy Development Corp, Philippines
- Merrill Lynch Commodities Europe
- Orica Australia Pty. Ltd.
- Thai Mozambique Logistica
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
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- Indian Oil Corporation Limited
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- Singapore Mercantile Exchange
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- Malabar Cements Ltd - India
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- Salva Resources Pvt Ltd - India
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- White Energy Company Limited
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- Global Green Power PLC Corporation, Philippines
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- Bangladesh Power Developement Board
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- Bhoruka Overseas - Indonesia
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- Ind-Barath Power Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Xindia Steels Limited - India
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- SMG Consultants - Indonesia
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- AsiaOL BioFuels Corp., Philippines
- Miang Besar Coal Terminal - Indonesia
- Standard Chartered Bank - UAE
- Independent Power Producers Association of India
- San Jose City I Power Corp, Philippines
- Iligan Light & Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Medco Energi Mining Internasional
- Barasentosa Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Electricity Authority, New Zealand
- Deloitte Consulting - India
- Bharathi Cement Corporation - India
- Parry Sugars Refinery, India
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Ambuja Cements Ltd - India
- Meralco Power Generation, Philippines
- Savvy Resources Ltd - HongKong
- Carbofer General Trading SA - India
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- OPG Power Generation Pvt Ltd - India
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- Semirara Mining and Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Sindya Power Generating Company Private Ltd
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- Coalindo Energy - Indonesia
- Mjunction Services Limited - India
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- Indonesian Coal Mining Association
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- India Bulls Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Orica Mining Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- The State Trading Corporation of India Ltd
- International Coal Ventures Pvt Ltd - India
- Star Paper Mills Limited - India
- Africa Commodities Group - South Africa
- Chettinad Cement Corporation Ltd - India
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Indo Tambangraya Megah - Indonesia
- Bukit Makmur.PT - Indonesia
- Baramulti Group, Indonesia
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- New Zealand Coal & Carbon
- Interocean Group of Companies - India
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Therma Luzon, Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- Energy Link Ltd, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- PNOC Exploration Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Gujarat Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- CNBM International Corporation - China
- Ministry of Finance - Indonesia
- IHS Mccloskey Coal Group - USA
- Eastern Energy - Thailand
- Mintek Dendrill Indonesia
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Agrawal Coal Company - India
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- Antam Resourcindo - Indonesia
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- Indian Energy Exchange, India
- ASAPP Information Group - India
- PetroVietnam Power Coal Import and Supply Company
- PTC India Limited - India
- Altura Mining Limited, Indonesia
- The University of Queensland
- Indika Energy - Indonesia
- Anglo American - United Kingdom
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