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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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Wednesday, 29 July 20
2019 U.S. COAL PRODUCTION FALLS TO ITS LOWEST LEVEL SINCE 1978 - EIA
In 2019, U.S. coal production totaled 706 million short tons (MMst), a 7% decrease from the 756 MMst mined in 2018. Last year’s production wa ...
Wednesday, 29 July 20
MARKET INSIGHT - INTERMODAL
The dry bulk sector is beginning to recover from reduced SnP activity recorded in the first quarter of 2020. The table below illustrates that appro ...
Tuesday, 28 July 20
DEUTSCHE BANK TO END GLOBAL BUSINESS ACTIVITIES IN COAL MINING BY 2025 - REUTERS
Deutsche Bank, in a revamp of its policies for fossil fuels, said on Monday that it would end business activities worldwide related to coal mining ...
Monday, 27 July 20
IEEFA ENERGY FINANCE CONFERENCE 2020: COAL, LNG, PETROCHEMICAL SECTORS FACE POOR OUTLOOK AND UPHILL BATTLE FOR INVESTORS
Fossil fuel industries were becoming less financially attractive even before the global coronavirus pandemic
Three major fossil fuel ...
Friday, 24 July 20
IPA: THERMAL COAL IMPORTS AT MAJOR PORTS DECLINE 35 PC TO 17.71 MT IN APR TO JUNE - ECONOMIC TIMES
These ports had handled 27.13 MT of thermal coal and 14.95 MT of coking coal in the April-June period of the previous financial year
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- Trasteel International SA, Italy
- Eastern Coal Council - USA
- Kepco SPC Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Indian Oil Corporation Limited
- Indonesian Coal Mining Association
- Orica Mining Services - Indonesia
- Bhoruka Overseas - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement PLC, Thailand
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Commonwealth Bank - Australia
- Planning Commission, India
- Latin American Coal - Colombia
- Kartika Selabumi Mining - Indonesia
- Australian Coal Association
- Directorate Of Revenue Intelligence - India
- SMG Consultants - Indonesia
- Vedanta Resources Plc - India
- Xindia Steels Limited - India
- White Energy Company Limited
- Cigading International Bulk Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- Energy Development Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Tata Chemicals Ltd - India
- Bukit Baiduri Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Authority, New Zealand
- Romanian Commodities Exchange
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Siam City Cement - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Jaiprakash Power Ventures ltd
- Petrochimia International Co. Ltd.- Taiwan
- Leighton Contractors Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- Essar Steel Hazira Ltd - India
- Grasim Industreis Ltd - India
- Agrawal Coal Company - India
- VISA Power Limited - India
- Africa Commodities Group - South Africa
- International Coal Ventures Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- CNBM International Corporation - China
- Dalmia Cement Bharat India
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Salva Resources Pvt Ltd - India
- ASAPP Information Group - India
- Cement Manufacturers Association - India
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Minerals Council of Australia
- Eastern Energy - Thailand
- Bukit Makmur.PT - Indonesia
- TeaM Sual Corporation - Philippines
- Price Waterhouse Coopers - Russia
- ICICI Bank Limited - India
- Star Paper Mills Limited - India
- Central Electricity Authority - India
- Ministry of Transport, Egypt
- Power Finance Corporation Ltd., India
- Mintek Dendrill Indonesia
- Riau Bara Harum - Indonesia
- Mercator Lines Limited - India
- Coalindo Energy - Indonesia
- Orica Australia Pty. Ltd.
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- Attock Cement Pakistan Limited
- Parry Sugars Refinery, India
- Barasentosa Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- Meenaskhi Energy Private Limited - India
- Bulk Trading Sa - Switzerland
- Ambuja Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Goldman Sachs - Singapore
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Aboitiz Power Corporation - Philippines
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Banpu Public Company Limited - Thailand
- Singapore Mercantile Exchange
- Coastal Gujarat Power Limited - India
- Straits Asia Resources Limited - Singapore
- Neyveli Lignite Corporation Ltd, - India
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Sinarmas Energy and Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- South Luzon Thermal Energy Corporation
- Oldendorff Carriers - Singapore
- Antam Resourcindo - Indonesia
- Vizag Seaport Private Limited - India
- Indian Energy Exchange, India
- Posco Energy - South Korea
- Kumho Petrochemical, South Korea
- Simpson Spence & Young - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- Larsen & Toubro Limited - India
- Bhushan Steel Limited - India
- Manunggal Multi Energi - Indonesia
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- Bayan Resources Tbk. - Indonesia
- Sakthi Sugars Limited - India
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- Malabar Cements Ltd - India
- Chamber of Mines of South Africa
- Renaissance Capital - South Africa
- Tamil Nadu electricity Board
- Kideco Jaya Agung - Indonesia
- Ind-Barath Power Infra Limited - India
- Borneo Indobara - Indonesia
- Anglo American - United Kingdom
- Ministry of Mines - Canada
- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
- Semirara Mining Corp, Philippines
- Economic Council, Georgia
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- European Bulk Services B.V. - Netherlands
- Carbofer General Trading SA - India
- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Semirara Mining and Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- The Treasury - Australian Government
- Interocean Group of Companies - India
- PetroVietnam Power Coal Import and Supply Company
- Maharashtra Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Jindal Steel & Power Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Makarim & Taira - Indonesia
- MS Steel International - UAE
- Bangladesh Power Developement Board
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- The State Trading Corporation of India Ltd
- Kobexindo Tractors - Indoneisa
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- McConnell Dowell - Australia
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- LBH Netherlands Bv - Netherlands
- Energy Link Ltd, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Altura Mining Limited, Indonesia
- Australian Commodity Traders Exchange
- Wood Mackenzie - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Heidelberg Cement - Germany
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Global Business Power Corporation, Philippines
- Petron Corporation, Philippines
- Port Waratah Coal Services - Australia
- Sindya Power Generating Company Private Ltd
- IHS Mccloskey Coal Group - USA
- GVK Power & Infra Limited - India
- Kaltim Prima Coal - Indonesia
- Meralco Power Generation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- IEA Clean Coal Centre - UK
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Indo Tambangraya Megah - Indonesia
- India Bulls Power Limited - India
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Central Java Power - Indonesia
- The University of Queensland
- Coal and Oil Company - UAE
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