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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, 29 May 20
DRY BULK SHIPPING: NO QUICK RECOVERY FOR THE DRY BULK MARKET AS COVID-19 DIGS DEEPER
The outlook is poor for dry bulk, as the negative demand shock and overcapacity come together to send rates to multi-year lows, even a return to wo ...
Thursday, 28 May 20
COVID-19: A FORCE MAJEURE EVENT? - KYPRIANOU
KNOWLEDGE TO ELEVATE
While seeing the unexpected COVID-19 outbreak expanding worldwide and the first cases being identified in Cyprus, the com ...
Thursday, 28 May 20
OIL DEMAND RECOVERED BY 20% IN MAY AGAINST APRIL: RUSSIAN ENERGY MINISTER - TASS
Oil demand remains at a low level but the demand in May increased by 20% against April, Russian Energy Minister Alexander Novak said, cited by the ...
Thursday, 28 May 20
MARKET INSIGHT - INTERMODAL
Earlier in May, China’s top leaders convened for the annual National People's Congress, following over two months of delays due to the co ...
Wednesday, 27 May 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.94 PCT - XINHUA
China Taiyuan coal transaction price index stood at 125.03 points Monday, up 0.94 percent week on week.
The index, released by China ...
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- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Bhatia International Limited - India
- OPG Power Generation Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Power Finance Corporation Ltd., India
- Coalindo Energy - Indonesia
- Anglo American - United Kingdom
- Kobexindo Tractors - Indoneisa
- Directorate Of Revenue Intelligence - India
- Antam Resourcindo - Indonesia
- CNBM International Corporation - China
- Indogreen Group - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Kartika Selabumi Mining - Indonesia
- Coastal Gujarat Power Limited - India
- Deloitte Consulting - India
- Jindal Steel & Power Ltd - India
- Indonesian Coal Mining Association
- Indika Energy - Indonesia
- Sakthi Sugars Limited - India
- Electricity Generating Authority of Thailand
- Aditya Birla Group - India
- Thiess Contractors Indonesia
- The University of Queensland
- The State Trading Corporation of India Ltd
- Minerals Council of Australia
- Oldendorff Carriers - Singapore
- Aboitiz Power Corporation - Philippines
- Planning Commission, India
- Vizag Seaport Private Limited - India
- Australian Commodity Traders Exchange
- Billiton Holdings Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Energy Development Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Coal and Oil Company - UAE
- Gujarat Sidhee Cement - India
- Siam City Cement - Thailand
- India Bulls Power Limited - India
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- IEA Clean Coal Centre - UK
- Gujarat Mineral Development Corp Ltd - India
- Malabar Cements Ltd - India
- Indian Oil Corporation Limited
- Edison Trading Spa - Italy
- Global Coal Blending Company Limited - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Kepco SPC Power Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Holcim Trading Pte Ltd - Singapore
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- Uttam Galva Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Interocean Group of Companies - India
- Krishnapatnam Port Company Ltd. - India
- Wood Mackenzie - Singapore
- Global Business Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- Goldman Sachs - Singapore
- Sree Jayajothi Cements Limited - India
- ASAPP Information Group - India
- Latin American Coal - Colombia
- International Coal Ventures Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- SN Aboitiz Power Inc, Philippines
- Sojitz Corporation - Japan
- Tata Chemicals Ltd - India
- Thai Mozambique Logistica
- Attock Cement Pakistan Limited
- SMG Consultants - Indonesia
- Agrawal Coal Company - India
- Meralco Power Generation, Philippines
- South Luzon Thermal Energy Corporation
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Sindya Power Generating Company Private Ltd
- Global Green Power PLC Corporation, Philippines
- Dalmia Cement Bharat India
- Karbindo Abesyapradhi - Indoneisa
- Ind-Barath Power Infra Limited - India
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- Riau Bara Harum - Indonesia
- Central Electricity Authority - India
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Essar Steel Hazira Ltd - India
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Bharathi Cement Corporation - India
- Central Java Power - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Chamber of Mines of South Africa
- Wilmar Investment Holdings
- Price Waterhouse Coopers - Russia
- Maharashtra Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bulk Trading Sa - Switzerland
- Bhoruka Overseas - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- Tamil Nadu electricity Board
- Eastern Coal Council - USA
- Kideco Jaya Agung - Indonesia
- Indo Tambangraya Megah - Indonesia
- Renaissance Capital - South Africa
- GVK Power & Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Alfred C Toepfer International GmbH - Germany
- VISA Power Limited - India
- Therma Luzon, Inc, Philippines
- Videocon Industries ltd - India
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- MS Steel International - UAE
- Cement Manufacturers Association - India
- Samtan Co., Ltd - South Korea
- Medco Energi Mining Internasional
- Kalimantan Lumbung Energi - Indonesia
- Mintek Dendrill Indonesia
- Parliament of New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Siam City Cement PLC, Thailand
- Orica Australia Pty. Ltd.
- Ceylon Electricity Board - Sri Lanka
- IHS Mccloskey Coal Group - USA
- Georgia Ports Authority, United States
- Globalindo Alam Lestari - Indonesia
- London Commodity Brokers - England
- Trasteel International SA, Italy
- Port Waratah Coal Services - Australia
- Energy Link Ltd, New Zealand
- Meenaskhi Energy Private Limited - India
- McConnell Dowell - Australia
- Standard Chartered Bank - UAE
- White Energy Company Limited
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Karaikal Port Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Bangladesh Power Developement Board
- The Treasury - Australian Government
- Jaiprakash Power Ventures ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Intertek Mineral Services - Indonesia
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Australian Coal Association
- AsiaOL BioFuels Corp., Philippines
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Iligan Light & Power Inc, Philippines
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Romanian Commodities Exchange
- Pendopo Energi Batubara - Indonesia
- Heidelberg Cement - Germany
- Chettinad Cement Corporation Ltd - India
- Xindia Steels Limited - India
- Posco Energy - South Korea
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Leighton Contractors Pty Ltd - Australia
- Orica Mining Services - Indonesia
- Larsen & Toubro Limited - India
- Simpson Spence & Young - Indonesia
- Merrill Lynch Commodities Europe
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Metalloyd Limited - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Marubeni Corporation - India
- Lanco Infratech Ltd - India
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Mercator Lines Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Africa Commodities Group - South Africa
- Ministry of Mines - Canada
- Bank of Tokyo Mitsubishi UFJ Ltd
- Carbofer General Trading SA - India
- Madhucon Powers Ltd - India
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
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