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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, 14 May 20
NEW COVID-19 GUIDELINES FOCUS ON SAFE INTERFACE BETWEEN SHIP AND SHORE STAFF - GARD
At a time when the COVID-19 pandemic is affecting the global population, it is important that ships’ crew and port workers protect each other ...
Wednesday, 13 May 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX DOWN 0.4 PCT - XINHUA
China Taiyuan coal transaction price index stood at 124.93 points Monday, down 0.4 percent week on week.
The index, released by Chin ...
Tuesday, 12 May 20
IN THE FIRST 4 MONTHS OF 2020, SOUTH KOREA IMPORTED 46.6 MLN TONNES OF CRUDE OIL BY SEA, A NET DECLINE OF 14.1% YOY - BC
South Korea is certainly one of the countries which has handled better the current Covid-19 crisis. In the first week of May 2020, new cases of ...
Tuesday, 12 May 20
OIL MARKET TURBULENCE PIVOTS FOCUS ON FLOATING STORAGE TECHNICAL NEEDS - LLOYD'S REGISTER
KNOWLEDGE TO ELEVATE
Negative oil prices and off-the-scale volatility in crude markets are positive for floating storage, as the next chapter ...
Tuesday, 12 May 20
A GLOBAL ECONOMIC RESTART HAS SLOWLY BEGUN AS COUNTRIES AROUND THE WORLD GRADUALLY - ALLIED
A global economic restart has slowly begun as countries around the world gradually set their return back to “normality”. Yet by all mea ...
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- Sarangani Energy Corporation, Philippines
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Africa Commodities Group - South Africa
- Deloitte Consulting - India
- Binh Thuan Hamico - Vietnam
- Malabar Cements Ltd - India
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- Toyota Tsusho Corporation, Japan
- Price Waterhouse Coopers - Russia
- Metalloyd Limited - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Kartika Selabumi Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- Meralco Power Generation, Philippines
- International Coal Ventures Pvt Ltd - India
- Latin American Coal - Colombia
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Global Business Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- AsiaOL BioFuels Corp., Philippines
- GAC Shipping (India) Pvt Ltd
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Pendopo Energi Batubara - Indonesia
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- Siam City Cement - Thailand
- Port Waratah Coal Services - Australia
- Rashtriya Ispat Nigam Limited - India
- Commonwealth Bank - Australia
- Mintek Dendrill Indonesia
- Agrawal Coal Company - India
- Ambuja Cements Ltd - India
- Antam Resourcindo - Indonesia
- Borneo Indobara - Indonesia
- Oldendorff Carriers - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining Corp, Philippines
- Makarim & Taira - Indonesia
- Therma Luzon, Inc, Philippines
- South Luzon Thermal Energy Corporation
- Formosa Plastics Group - Taiwan
- San Jose City I Power Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Java Power - Indonesia
- Energy Development Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Lanco Infratech Ltd - India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- The State Trading Corporation of India Ltd
- Merrill Lynch Commodities Europe
- Trasteel International SA, Italy
- Larsen & Toubro Limited - India
- Wilmar Investment Holdings
- TeaM Sual Corporation - Philippines
- Cement Manufacturers Association - India
- Economic Council, Georgia
- Gujarat Sidhee Cement - India
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- ICICI Bank Limited - India
- Jindal Steel & Power Ltd - India
- PowerSource Philippines DevCo
- Kobexindo Tractors - Indoneisa
- Wood Mackenzie - Singapore
- Australian Coal Association
- Intertek Mineral Services - Indonesia
- Georgia Ports Authority, United States
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Bayan Resources Tbk. - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Indika Energy - Indonesia
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Global Green Power PLC Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- MS Steel International - UAE
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- Krishnapatnam Port Company Ltd. - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- India Bulls Power Limited - India
- Goldman Sachs - Singapore
- Meenaskhi Energy Private Limited - India
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Mineral Development Corp Ltd - India
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Aboitiz Power Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Bhatia International Limited - India
- Bukit Makmur.PT - Indonesia
- Karaikal Port Pvt Ltd - India
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- PTC India Limited - India
- Anglo American - United Kingdom
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aditya Birla Group - India
- McConnell Dowell - Australia
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Kohat Cement Company Ltd. - Pakistan
- Riau Bara Harum - Indonesia
- Sakthi Sugars Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Simpson Spence & Young - Indonesia
- White Energy Company Limited
- Orica Australia Pty. Ltd.
- Australian Commodity Traders Exchange
- Dalmia Cement Bharat India
- PNOC Exploration Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- Bhoruka Overseas - Indonesia
- Barasentosa Lestari - Indonesia
- Banpu Public Company Limited - Thailand
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- Medco Energi Mining Internasional
- Parry Sugars Refinery, India
- Uttam Galva Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- Thai Mozambique Logistica
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Grasim Industreis Ltd - India
- Minerals Council of Australia
- Attock Cement Pakistan Limited
- Heidelberg Cement - Germany
- Planning Commission, India
- Jorong Barutama Greston.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Chamber of Mines of South Africa
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Singapore Mercantile Exchange
- Romanian Commodities Exchange
- Sical Logistics Limited - India
- Altura Mining Limited, Indonesia
- Kepco SPC Power Corporation, Philippines
- Xindia Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- The University of Queensland
- Ministry of Finance - Indonesia
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- New Zealand Coal & Carbon
- SN Aboitiz Power Inc, Philippines
- GMR Energy Limited - India
- ASAPP Information Group - India
- Essar Steel Hazira Ltd - India
- Parliament of New Zealand
- Mercator Lines Limited - India
- Straits Asia Resources Limited - Singapore
- Siam City Cement PLC, Thailand
- Ministry of Mines - Canada
- Indogreen Group - Indonesia
- Interocean Group of Companies - India
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- Madhucon Powers Ltd - India
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Electricity Generating Authority of Thailand
- Kideco Jaya Agung - Indonesia
- Directorate Of Revenue Intelligence - India
- Energy Link Ltd, New Zealand
- Power Finance Corporation Ltd., India
- Tata Chemicals Ltd - India
- Salva Resources Pvt Ltd - India
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