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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, 01 August 20
ASIA HOPE FOR LONG-TERM OIL DEMAND - BALTIC BRIEFING
Oil demand in Asia Pacific might be expected to plunge 1.8m barrels per day (bpd) this year, but there are still strong prospects for growth over t ...
Friday, 31 July 20
SHORT-TERM IMPACT ON THE CHEMICAL SHIPPING MARKET IF THE INDIA-CHINA DISPUTE ESCALATES - DREWRY
Due to the India-China dispute, the threat of deteriorating trade relations between the two countries has become real. Meanwhile, we expect freight ...
Friday, 31 July 20
PANAMAX: THE PERIOD MARKET REMAINS QUIET WITH FEW FIXTURES REPORTED - FEARNLEYS
Capesize
After weeks of dropping rates, there are finally some resistance for the Capes. Pacific rounds improving to upper15,000s by the middle ...
Friday, 31 July 20
PANDEMIC SENDING SOUTH AFRICAN COAL INDUSTRY TO EARLIER GRAVE - IEEFA
Could South Africa’s coal export industry, one of the largest in the world, be about to take a severe hit from the coronavirus?
...
Friday, 31 July 20
BOTSWANA PLANS MORE COAL-FIRED POWER AS AFRICAN SOLAR ACCELERATES - IEEFA
An African economic leader like Botswana should embrace solar to reduce subsidies and tariff hikes
As Sub-Saharan solar ambition has ...
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- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- San Jose City I Power Corp, Philippines
- Medco Energi Mining Internasional
- Australian Commodity Traders Exchange
- Parliament of New Zealand
- Orica Australia Pty. Ltd.
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMC Global Power, Philippines
- Eastern Coal Council - USA
- Electricity Authority, New Zealand
- Coal and Oil Company - UAE
- White Energy Company Limited
- Savvy Resources Ltd - HongKong
- Gujarat Sidhee Cement - India
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Xindia Steels Limited - India
- TeaM Sual Corporation - Philippines
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Uttam Galva Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- ICICI Bank Limited - India
- Straits Asia Resources Limited - Singapore
- Australian Coal Association
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Vizag Seaport Private Limited - India
- Vedanta Resources Plc - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- Maheswari Brothers Coal Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhatia International Limited - India
- PNOC Exploration Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- ASAPP Information Group - India
- GVK Power & Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- London Commodity Brokers - England
- Kartika Selabumi Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Africa Commodities Group - South Africa
- Altura Mining Limited, Indonesia
- PTC India Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Anglo American - United Kingdom
- Kobexindo Tractors - Indoneisa
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- Parry Sugars Refinery, India
- Electricity Generating Authority of Thailand
- Gujarat Mineral Development Corp Ltd - India
- Tata Chemicals Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- Ambuja Cements Ltd - India
- Riau Bara Harum - Indonesia
- CIMB Investment Bank - Malaysia
- Heidelberg Cement - Germany
- Barasentosa Lestari - Indonesia
- Bayan Resources Tbk. - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement PLC, Thailand
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- Rio Tinto Coal - Australia
- Independent Power Producers Association of India
- MS Steel International - UAE
- Sical Logistics Limited - India
- Bulk Trading Sa - Switzerland
- Kepco SPC Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Agrawal Coal Company - India
- Globalindo Alam Lestari - Indonesia
- Posco Energy - South Korea
- The University of Queensland
- European Bulk Services B.V. - Netherlands
- Chettinad Cement Corporation Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Standard Chartered Bank - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indonesian Coal Mining Association
- Central Java Power - Indonesia
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
- Toyota Tsusho Corporation, Japan
- Binh Thuan Hamico - Vietnam
- Banpu Public Company Limited - Thailand
- Georgia Ports Authority, United States
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- Goldman Sachs - Singapore
- Merrill Lynch Commodities Europe
- Directorate General of MIneral and Coal - Indonesia
- SMG Consultants - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Port Waratah Coal Services - Australia
- IHS Mccloskey Coal Group - USA
- Sindya Power Generating Company Private Ltd
- South Luzon Thermal Energy Corporation
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Kaltim Prima Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Singapore Mercantile Exchange
- The Treasury - Australian Government
- Deloitte Consulting - India
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Global Business Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- Samtan Co., Ltd - South Korea
- Essar Steel Hazira Ltd - India
- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- Sree Jayajothi Cements Limited - India
- The State Trading Corporation of India Ltd
- Energy Development Corp, Philippines
- Makarim & Taira - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- Marubeni Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- India Bulls Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Central Electricity Authority - India
- Jaiprakash Power Ventures ltd
- Baramulti Group, Indonesia
- Lanco Infratech Ltd - India
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Oldendorff Carriers - Singapore
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- Bukit Makmur.PT - Indonesia
- Sojitz Corporation - Japan
- Intertek Mineral Services - Indonesia
- Karaikal Port Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Attock Cement Pakistan Limited
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Leighton Contractors Pty Ltd - Australia
- Malabar Cements Ltd - India
- CNBM International Corporation - China
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- Planning Commission, India
- Ind-Barath Power Infra Limited - India
- Ministry of Transport, Egypt
- OPG Power Generation Pvt Ltd - India
- New Zealand Coal & Carbon
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- Kumho Petrochemical, South Korea
- Kapuas Tunggal Persada - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Star Paper Mills Limited - India
- Cement Manufacturers Association - India
- Semirara Mining and Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Minerals Council of Australia
- Sakthi Sugars Limited - India
- Metalloyd Limited - United Kingdom
- VISA Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Commonwealth Bank - Australia
- Mercator Lines Limited - India
- Simpson Spence & Young - Indonesia
- GMR Energy Limited - India
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- Indian Energy Exchange, India
- Mintek Dendrill Indonesia
- Therma Luzon, Inc, Philippines
- Antam Resourcindo - Indonesia
- Trasteel International SA, Italy
- Price Waterhouse Coopers - Russia
- Aditya Birla Group - India
- Pendopo Energi Batubara - Indonesia
- Chamber of Mines of South Africa
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