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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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Thursday, 04 June 20
DON'T FORGET THE REAL PURPOSE OF RISK ASSESSMENTS - GARD
KNOWLEDGE TO ELEVATE
When doing a risk assessment, we often overcomplicate it and forget its real purpose.
Rather than ensuring that crew ...
Wednesday, 03 June 20
MARKET INSIGHT - INTERMODAL
Once again shipping is about to venture into uncharted waters and before the challenges of the past decade are forgotten, shipowners will have to o ...
Tuesday, 02 June 20
KOSPO LOOKING FOR 80000 MT OF 4200 NCV COAL FOR JULY
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO) has issued an International tender for 80,000 Metric Tons (MT) 4200 NCV coal for 12 - 21, July ...
Tuesday, 02 June 20
INDONESIAN COAL MINER BUMI RESOURCES Q1 OUTPUT UP 5% - REUTERS
Indonesia’s largest coal miner Bumi Resources posted a 5% increase in first-quarter output at 20.8 million tonnes, the company said in a stat ...
Tuesday, 02 June 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX DOWN 0.86 PCT - XINHUA
China Taiyuan coal transaction price index stood at 123.95 points Monday, down 0.86 percent week on week.
The index, released by Chi ...
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- Thiess Contractors Indonesia
- PowerSource Philippines DevCo
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- Sree Jayajothi Cements Limited - India
- Bhushan Steel Limited - India
- Edison Trading Spa - Italy
- Grasim Industreis Ltd - India
- Chamber of Mines of South Africa
- European Bulk Services B.V. - Netherlands
- SMG Consultants - Indonesia
- Madhucon Powers Ltd - India
- Bukit Baiduri Energy - Indonesia
- Cement Manufacturers Association - India
- Billiton Holdings Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Essar Steel Hazira Ltd - India
- Semirara Mining Corp, Philippines
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- New Zealand Coal & Carbon
- GN Power Mariveles Coal Plant, Philippines
- GAC Shipping (India) Pvt Ltd
- London Commodity Brokers - England
- Meralco Power Generation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Coalindo Energy - Indonesia
- Indika Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kideco Jaya Agung - Indonesia
- Price Waterhouse Coopers - Russia
- ASAPP Information Group - India
- Indian Energy Exchange, India
- Leighton Contractors Pty Ltd - Australia
- Heidelberg Cement - Germany
- AsiaOL BioFuels Corp., Philippines
- Orica Mining Services - Indonesia
- Carbofer General Trading SA - India
- Directorate Of Revenue Intelligence - India
- Kumho Petrochemical, South Korea
- Trasteel International SA, Italy
- Orica Australia Pty. Ltd.
- Xindia Steels Limited - India
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Banpu Public Company Limited - Thailand
- Globalindo Alam Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Australian Coal Association
- LBH Netherlands Bv - Netherlands
- Indogreen Group - Indonesia
- Straits Asia Resources Limited - Singapore
- PTC India Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Makarim & Taira - Indonesia
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Uttam Galva Steels Limited - India
- Therma Luzon, Inc, Philippines
- Central Java Power - Indonesia
- Kobexindo Tractors - Indoneisa
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- Riau Bara Harum - Indonesia
- Coastal Gujarat Power Limited - India
- Anglo American - United Kingdom
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement - Thailand
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- GVK Power & Infra Limited - India
- Attock Cement Pakistan Limited
- Toyota Tsusho Corporation, Japan
- Parry Sugars Refinery, India
- Bayan Resources Tbk. - Indonesia
- Marubeni Corporation - India
- Economic Council, Georgia
- Ministry of Transport, Egypt
- Baramulti Group, Indonesia
- Thai Mozambique Logistica
- Chettinad Cement Corporation Ltd - India
- Central Electricity Authority - India
- Bharathi Cement Corporation - India
- Videocon Industries ltd - India
- Pendopo Energi Batubara - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bangladesh Power Developement Board
- Australian Commodity Traders Exchange
- SN Aboitiz Power Inc, Philippines
- Vizag Seaport Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- Malabar Cements Ltd - India
- Ambuja Cements Ltd - India
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- OPG Power Generation Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhoruka Overseas - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Global Coal Blending Company Limited - Australia
- South Luzon Thermal Energy Corporation
- India Bulls Power Limited - India
- Bhatia International Limited - India
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- The Treasury - Australian Government
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- Indonesian Coal Mining Association
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- White Energy Company Limited
- Parliament of New Zealand
- McConnell Dowell - Australia
- Global Business Power Corporation, Philippines
- Aditya Birla Group - India
- MS Steel International - UAE
- Kepco SPC Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Ministry of Finance - Indonesia
- The University of Queensland
- Maheswari Brothers Coal Limited - India
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Mjunction Services Limited - India
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sakthi Sugars Limited - India
- Dalmia Cement Bharat India
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Metalloyd Limited - United Kingdom
- Merrill Lynch Commodities Europe
- Independent Power Producers Association of India
- Posco Energy - South Korea
- IEA Clean Coal Centre - UK
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Intertek Mineral Services - Indonesia
- Borneo Indobara - Indonesia
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- Ceylon Electricity Board - Sri Lanka
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Interocean Group of Companies - India
- Global Green Power PLC Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- Ministry of Mines - Canada
- Barasentosa Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Wilmar Investment Holdings
- Bukit Asam (Persero) Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Oldendorff Carriers - Singapore
- Iligan Light & Power Inc, Philippines
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- GMR Energy Limited - India
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Alfred C Toepfer International GmbH - Germany
- Georgia Ports Authority, United States
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- Mintek Dendrill Indonesia
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Power Finance Corporation Ltd., India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sojitz Corporation - Japan
- Africa Commodities Group - South Africa
- Jorong Barutama Greston.PT - Indonesia
- Antam Resourcindo - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- Sical Logistics Limited - India
- Lanco Infratech Ltd - India
- Planning Commission, India
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- Meenaskhi Energy Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
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