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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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Tuesday, 02 June 20
THE HISTORIC DECLINE OF US COAL - WOOD MACKENZIE
The first commercial power plant in the US was Thomas Edison’s coal-fired Pearl Street station in lower Manhattan, which started operating in ...
Tuesday, 02 June 20
COAL INDIA'S MAY SALES DRIVEN SHARPLY LOWER BY SLUMP IN POWER DEMAND - REUTER
Coal India’s sales fell 23.3% in May as utilities refrained from purchases amid record stockpiles and tepid demand because of a nationwide lo ...
Tuesday, 02 June 20
TUAH TURANGGA AGUNG RECORDED 4.54 MILLION TONS OF COAL SALES IN THE FIRST FOUR MONTHS OF 2020
PT United Tractors Tbk through its subsidiary, PT Tuah Turangga Agung recorded 4.54 million tons of coal sales in the first four months of 2020, up ...
Tuesday, 02 June 20
SOURING SINO-AUSTRALIA TRADE RELATIONS - BALTIC EXCHANGE
Cooling relations between the commodity powerhouses of China and Australia may point to trade troubles ahead when the world emerges from the Covid- ...
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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- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Mining Services - Indonesia
- Antam Resourcindo - Indonesia
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- Holcim Trading Pte Ltd - Singapore
- SMC Global Power, Philippines
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- Coal and Oil Company - UAE
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- Medco Energi Mining Internasional
- CNBM International Corporation - China
- Ambuja Cements Ltd - India
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- Wood Mackenzie - Singapore
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- Electricity Authority, New Zealand
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- OPG Power Generation Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Kepco SPC Power Corporation, Philippines
- Xindia Steels Limited - India
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- White Energy Company Limited
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- Tata Chemicals Ltd - India
- Trasteel International SA, Italy
- Gujarat Electricity Regulatory Commission - India
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- Chamber of Mines of South Africa
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- Uttam Galva Steels Limited - India
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- Global Business Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Merrill Lynch Commodities Europe
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- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
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- PetroVietnam Power Coal Import and Supply Company
- Grasim Industreis Ltd - India
- Parliament of New Zealand
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- Bhushan Steel Limited - India
- The State Trading Corporation of India Ltd
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- Bharathi Cement Corporation - India
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Heidelberg Cement - Germany
- Tamil Nadu electricity Board
- Economic Council, Georgia
- Ministry of Transport, Egypt
- Globalindo Alam Lestari - Indonesia
- Indogreen Group - Indonesia
- IEA Clean Coal Centre - UK
- Barasentosa Lestari - Indonesia
- Posco Energy - South Korea
- CIMB Investment Bank - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- Independent Power Producers Association of India
- Gujarat Mineral Development Corp Ltd - India
- India Bulls Power Limited - India
- Mercuria Energy - Indonesia
- Eastern Coal Council - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- IHS Mccloskey Coal Group - USA
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Iligan Light & Power Inc, Philippines
- Minerals Council of Australia
- GN Power Mariveles Coal Plant, Philippines
- Power Finance Corporation Ltd., India
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- Kalimantan Lumbung Energi - Indonesia
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- South Luzon Thermal Energy Corporation
- Directorate General of MIneral and Coal - Indonesia
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- New Zealand Coal & Carbon
- Semirara Mining and Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
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- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
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- Bayan Resources Tbk. - Indonesia
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- Samtan Co., Ltd - South Korea
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- Straits Asia Resources Limited - Singapore
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- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- The Treasury - Australian Government
- Attock Cement Pakistan Limited
- Salva Resources Pvt Ltd - India
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- GAC Shipping (India) Pvt Ltd
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- Altura Mining Limited, Indonesia
- Vizag Seaport Private Limited - India
- Lanco Infratech Ltd - India
- McConnell Dowell - Australia
- Africa Commodities Group - South Africa
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Wilmar Investment Holdings
- Jorong Barutama Greston.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ICICI Bank Limited - India
- Bukit Makmur.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Electricity Generating Authority of Thailand
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- SMG Consultants - Indonesia
- MS Steel International - UAE
- PNOC Exploration Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhoruka Overseas - Indonesia
- Sindya Power Generating Company Private Ltd
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Pendopo Energi Batubara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Chettinad Cement Corporation Ltd - India
- Sojitz Corporation - Japan
- Planning Commission, India
- Port Waratah Coal Services - Australia
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Latin American Coal - Colombia
- Essar Steel Hazira Ltd - India
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- PTC India Limited - India
- Price Waterhouse Coopers - Russia
- The University of Queensland
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Semirara Mining Corp, Philippines
- Carbofer General Trading SA - India
- Kobexindo Tractors - Indoneisa
- Indian Oil Corporation Limited
- Indian Energy Exchange, India
- Indonesian Coal Mining Association
- Parry Sugars Refinery, India
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- GMR Energy Limited - India
- Baramulti Group, Indonesia
- Edison Trading Spa - Italy
- Mercator Lines Limited - India
- Simpson Spence & Young - Indonesia
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Renaissance Capital - South Africa
- Oldendorff Carriers - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- TeaM Sual Corporation - Philippines
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- Australian Coal Association
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
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- Intertek Mineral Services - Indonesia
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- Deloitte Consulting - India
- Australian Commodity Traders Exchange
- Larsen & Toubro Limited - India
- Sical Logistics Limited - India
- Goldman Sachs - Singapore
- Orica Australia Pty. Ltd.
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- Bahari Cakrawala Sebuku - Indonesia
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