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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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Friday, 10 July 20
GLOBAL SHIPPING EARNINGS FORECAST CUT AS SUPPLY SET TO OUTSTRIP DEMAND - MOODY'S
EBITDA forecast worsens, keeping outlook negative. We now expect the aggregate EBITDA of rated shipping companies to fall by around 16%-18% in 2020 ...
Friday, 10 July 20
SLOW RECOVERY IN TANKER RATES TO WEIGH ON BUANA LINTAS LAUTAN - FITCH RATINGS
Fitch Ratings believes that international tanker rates are likely improve after their sharp fall since May 2020, albeit at a slow pace. The weaknes ...
Wednesday, 08 July 20
MARKET INSIGHT - INTERMODAL
During the previous month, the dry bulk market witnessed an impressive increase in the BDI index that has reached 1800 points from 500 with a clear ...
Tuesday, 07 July 20
COAL INDIA WORKERS STRIKE CUTS OUTPUT BY 56%: OFFICIAL - REUTERS
A strike at Coal India Ltd cut production by 56% in the three days ending July 4 as workers oppose opening up coal mining to the private sector, a ...
Tuesday, 07 July 20
WHAT DOES THE PATHWAY TO A NET-ZERO ECONOMY LOOK LIKE FOR MINERS? - WOOD MACKENZIE
Wind, solar, electric vehicles, stationary storage and transmission are all central to achieving the Paris Agreement decarbonisation goals.
&nb ...
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- Thai Mozambique Logistica
- VISA Power Limited - India
- Gujarat Sidhee Cement - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Oil Corporation Limited
- Sakthi Sugars Limited - India
- Bukit Baiduri Energy - Indonesia
- The Treasury - Australian Government
- GVK Power & Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Goldman Sachs - Singapore
- European Bulk Services B.V. - Netherlands
- Coalindo Energy - Indonesia
- Xindia Steels Limited - India
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- Binh Thuan Hamico - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Port Waratah Coal Services - Australia
- Oldendorff Carriers - Singapore
- Ministry of Transport, Egypt
- South Luzon Thermal Energy Corporation
- Indogreen Group - Indonesia
- Global Green Power PLC Corporation, Philippines
- Latin American Coal - Colombia
- Samtan Co., Ltd - South Korea
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Attock Cement Pakistan Limited
- Kartika Selabumi Mining - Indonesia
- Orica Mining Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Tamil Nadu electricity Board
- OPG Power Generation Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- CNBM International Corporation - China
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Medco Energi Mining Internasional
- Central Electricity Authority - India
- Kepco SPC Power Corporation, Philippines
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Standard Chartered Bank - UAE
- Australian Coal Association
- Sree Jayajothi Cements Limited - India
- Central Java Power - Indonesia
- Altura Mining Limited, Indonesia
- Wilmar Investment Holdings
- TNB Fuel Sdn Bhd - Malaysia
- Parliament of New Zealand
- Agrawal Coal Company - India
- Iligan Light & Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Mercuria Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Energy Exchange, India
- Ministry of Finance - Indonesia
- Borneo Indobara - Indonesia
- Karaikal Port Pvt Ltd - India
- Eastern Energy - Thailand
- Baramulti Group, Indonesia
- Price Waterhouse Coopers - Russia
- Edison Trading Spa - Italy
- Toyota Tsusho Corporation, Japan
- Rio Tinto Coal - Australia
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- Indika Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Carbofer General Trading SA - India
- Jorong Barutama Greston.PT - Indonesia
- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- San Jose City I Power Corp, Philippines
- Independent Power Producers Association of India
- Energy Development Corp, Philippines
- PTC India Limited - India
- Parry Sugars Refinery, India
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- Interocean Group of Companies - India
- Kobexindo Tractors - Indoneisa
- Salva Resources Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Meralco Power Generation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Aditya Birla Group - India
- Metalloyd Limited - United Kingdom
- Vedanta Resources Plc - India
- CIMB Investment Bank - Malaysia
- Bharathi Cement Corporation - India
- Kumho Petrochemical, South Korea
- Heidelberg Cement - Germany
- Dalmia Cement Bharat India
- Georgia Ports Authority, United States
- Electricity Authority, New Zealand
- Power Finance Corporation Ltd., India
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Renaissance Capital - South Africa
- Planning Commission, India
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Aboitiz Power Corporation - Philippines
- Banpu Public Company Limited - Thailand
- International Coal Ventures Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Anglo American - United Kingdom
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Directorate Of Revenue Intelligence - India
- Chamber of Mines of South Africa
- Bhushan Steel Limited - India
- Tata Chemicals Ltd - India
- McConnell Dowell - Australia
- Mercator Lines Limited - India
- Commonwealth Bank - Australia
- PowerSource Philippines DevCo
- London Commodity Brokers - England
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- Maharashtra Electricity Regulatory Commission - India
- Straits Asia Resources Limited - Singapore
- Indonesian Coal Mining Association
- Ambuja Cements Ltd - India
- The State Trading Corporation of India Ltd
- Essar Steel Hazira Ltd - India
- Madhucon Powers Ltd - India
- Merrill Lynch Commodities Europe
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- Bhatia International Limited - India
- Pendopo Energi Batubara - Indonesia
- Grasim Industreis Ltd - India
- Jindal Steel & Power Ltd - India
- Wood Mackenzie - Singapore
- Australian Commodity Traders Exchange
- Coastal Gujarat Power Limited - India
- Global Business Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Kaltim Prima Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Asmin Koalindo Tuhup - Indonesia
- Sarangani Energy Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Deloitte Consulting - India
- PNOC Exploration Corporation - Philippines
- IEA Clean Coal Centre - UK
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- TeaM Sual Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Singapore Mercantile Exchange
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Economic Council, Georgia
- Cigading International Bulk Terminal - Indonesia
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- Semirara Mining Corp, Philippines
- Marubeni Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Ind-Barath Power Infra Limited - India
- Siam City Cement - Thailand
- Leighton Contractors Pty Ltd - Australia
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- The University of Queensland
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- ASAPP Information Group - India
- GAC Shipping (India) Pvt Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Africa Commodities Group - South Africa
- Ceylon Electricity Board - Sri Lanka
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Posco Energy - South Korea
- Thiess Contractors Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- Kideco Jaya Agung - Indonesia
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Minerals Council of Australia
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