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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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Monday, 24 August 20
A COMBINATION OF DEVELOPMENTS DROVE THE FALLOFF COAL PRICES - CHIEF ECONOMIST’ OFFICE, AUSTRALIA
China, rising domestic production combined with subdued power demand;
India, a lockdown coupled with government directives that fav ...
Monday, 24 August 20
AUSTRALIA'S THERMAL COAL EXPORTS ARE FORECAST TO DROP FROM AN ESTIMATED $20 BILLION IN 2019-20 TO $16 BILLION IN 2020-21: REPORT
Thermal coal spot prices have fallen sharply as the impact of COVID-19 drives a contraction in seaborne trade for only the second time this century ...
Saturday, 22 August 20
REPORT SEES INDIA’S RELIANCE ON THERMAL POWER DROPPING TO 50% IN 2021, 43% IN 2026 - ET ENERGY | IEEFA
India’s dependence on thermal power will reduce to 50 per cent by 2021-22 and 43 per cent by 2026-27 on the back of renewable energy (RE) cap ...
Friday, 21 August 20
323 MILLION ELECTRIC VEHICLES WILL BE ON THE ROADS BY 2040 - WOOD MACKENZIE
Electric vehicle (EV) sales are expected to reach 45 million units per year by 2040, with a total global EV stock of 323 million, according to new ...
Friday, 21 August 20
BHP COMMITS TO SELLING ITS THERMAL COALMINES WITHIN TWO YEARS - THE GUARDIAN
Move follows pressure from investors but company stops short of full exit from coalmining
BHP has announced it plans to sell off its ...
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- South Luzon Thermal Energy Corporation
- European Bulk Services B.V. - Netherlands
- Pendopo Energi Batubara - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- Straits Asia Resources Limited - Singapore
- SMG Consultants - Indonesia
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- Chamber of Mines of South Africa
- Miang Besar Coal Terminal - Indonesia
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- Standard Chartered Bank - UAE
- Leighton Contractors Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- Carbofer General Trading SA - India
- Parry Sugars Refinery, India
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- Siam City Cement - Thailand
- Binh Thuan Hamico - Vietnam
- VISA Power Limited - India
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Vizag Seaport Private Limited - India
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- Romanian Commodities Exchange
- LBH Netherlands Bv - Netherlands
- Madhucon Powers Ltd - India
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Agrawal Coal Company - India
- Manunggal Multi Energi - Indonesia
- Price Waterhouse Coopers - Russia
- Barasentosa Lestari - Indonesia
- Attock Cement Pakistan Limited
- Africa Commodities Group - South Africa
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maheswari Brothers Coal Limited - India
- Trasteel International SA, Italy
- Tamil Nadu electricity Board
- Parliament of New Zealand
- Baramulti Group, Indonesia
- Sojitz Corporation - Japan
- Bulk Trading Sa - Switzerland
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Essar Steel Hazira Ltd - India
- Savvy Resources Ltd - HongKong
- Renaissance Capital - South Africa
- Jaiprakash Power Ventures ltd
- Global Green Power PLC Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Indo Tambangraya Megah - Indonesia
- Medco Energi Mining Internasional
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Kaltim Prima Coal - Indonesia
- McConnell Dowell - Australia
- Altura Mining Limited, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- Latin American Coal - Colombia
- Sinarmas Energy and Mining - Indonesia
- Ambuja Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Sidhee Cement - India
- Uttam Galva Steels Limited - India
- Thai Mozambique Logistica
- Eastern Coal Council - USA
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Indian Energy Exchange, India
- Singapore Mercantile Exchange
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- Sree Jayajothi Cements Limited - India
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- GMR Energy Limited - India
- TeaM Sual Corporation - Philippines
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Ministry of Transport, Egypt
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Borneo Indobara - Indonesia
- The Treasury - Australian Government
- CIMB Investment Bank - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bhatia International Limited - India
- Indonesian Coal Mining Association
- Timah Investasi Mineral - Indoneisa
- Sakthi Sugars Limited - India
- Coal and Oil Company - UAE
- ICICI Bank Limited - India
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Australian Coal Association
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Eastern Energy - Thailand
- Marubeni Corporation - India
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Bhushan Steel Limited - India
- Bayan Resources Tbk. - Indonesia
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Malabar Cements Ltd - India
- The University of Queensland
- Kepco SPC Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Gujarat Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Indika Energy - Indonesia
- Xindia Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- SMC Global Power, Philippines
- Edison Trading Spa - Italy
- Simpson Spence & Young - Indonesia
- Riau Bara Harum - Indonesia
- Star Paper Mills Limited - India
- Minerals Council of Australia
- Coalindo Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Port Waratah Coal Services - Australia
- Power Finance Corporation Ltd., India
- Karaikal Port Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Planning Commission, India
- Wilmar Investment Holdings
- Kobexindo Tractors - Indoneisa
- Sarangani Energy Corporation, Philippines
- San Jose City I Power Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Bukit Baiduri Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Merrill Lynch Commodities Europe
- Cigading International Bulk Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- Heidelberg Cement - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Indian Oil Corporation Limited
- Semirara Mining Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- PowerSource Philippines DevCo
- Australian Commodity Traders Exchange
- Coastal Gujarat Power Limited - India
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Orica Australia Pty. Ltd.
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- Bhoruka Overseas - Indonesia
- IHS Mccloskey Coal Group - USA
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Mercuria Energy - Indonesia
- White Energy Company Limited
- London Commodity Brokers - England
- Toyota Tsusho Corporation, Japan
- Maharashtra Electricity Regulatory Commission - India
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Ind-Barath Power Infra Limited - India
- Energy Development Corp, Philippines
- CNBM International Corporation - China
- Cement Manufacturers Association - India
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- Wood Mackenzie - Singapore
- Bharathi Cement Corporation - India
- Kumho Petrochemical, South Korea
- Mjunction Services Limited - India
- MS Steel International - UAE
- Central Electricity Authority - India
- Kapuas Tunggal Persada - Indonesia
- Thiess Contractors Indonesia
- Aditya Birla Group - India
- Gujarat Mineral Development Corp Ltd - India
- Posco Energy - South Korea
- Sindya Power Generating Company Private Ltd
- Lanco Infratech Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- Petron Corporation, Philippines
- Global Business Power Corporation, Philippines
- Georgia Ports Authority, United States
- Ministry of Finance - Indonesia
- Bangladesh Power Developement Board
- Indogreen Group - Indonesia
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