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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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Monday, 04 May 20
U.S. ESTIMATED COAL PRODUCTION FALL 39.4% YEAR ON YEAR IN THE WEEK ENDED APRIL 25 - EIA
Estimated U.S. coal production totaled about 8.6 million short tons (MMst) For the week ended April 25, 2020, says EIA in its latest report.
E ...
Saturday, 02 May 20
SUPRAMAX: ASIA, STRONGER NUMBERS - A 55.000-DWT WAS FIXED FROM INDONESIA TO CHINA IN THE MID $6,000S - BALTIC BRIEFING
Capesize
A tepid week for the big ships, as macro concerns continued to weigh heavily on the index. All of the major voyage routes lost value, ...
Friday, 01 May 20
KOSPO INVITED OFFER FOR 5600 NCV COAL FOR Q3 2020 LOADING
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO) has issued an International tender for 260,000 Metric Tons (MT) steam coal for Boryeong Power ...
Friday, 01 May 20
GLOBAL COAL DEMAND TO FALL BY ABOUT 8% IN 2020,THE LARGEST DROP SINCE WORLD WAR II - IEA
We expect global coal demand to fall by about 8% in 2020, the largest drop since World War II, with coal use declining in virtually every sector of ...
Friday, 01 May 20
GLOBAL COAL DEMAND TO FALL BY 8% IN Q1 2020 RELATIVE TO Q1 2019 - IEA
We expect global coal demand to fall by 8% in Q1 2020 relative to Q1 2019. This significant drop was driven by lower demand in the electricity sect ...
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- TNB Fuel Sdn Bhd - Malaysia
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Power Finance Corporation Ltd., India
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- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
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- Coalindo Energy - Indonesia
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- Banpu Public Company Limited - Thailand
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- Wood Mackenzie - Singapore
- The University of Queensland
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- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Interocean Group of Companies - India
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
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- South Luzon Thermal Energy Corporation
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- Vizag Seaport Private Limited - India
- The State Trading Corporation of India Ltd
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- LBH Netherlands Bv - Netherlands
- Oldendorff Carriers - Singapore
- Antam Resourcindo - Indonesia
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- Posco Energy - South Korea
- Energy Development Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- McConnell Dowell - Australia
- Bulk Trading Sa - Switzerland
- Directorate General of MIneral and Coal - Indonesia
- GMR Energy Limited - India
- ASAPP Information Group - India
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
- Toyota Tsusho Corporation, Japan
- Global Coal Blending Company Limited - Australia
- Ministry of Finance - Indonesia
- Jindal Steel & Power Ltd - India
- Port Waratah Coal Services - Australia
- Baramulti Group, Indonesia
- Uttam Galva Steels Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Orica Australia Pty. Ltd.
- Binh Thuan Hamico - Vietnam
- India Bulls Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Minerals Council of Australia
- Iligan Light & Power Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Meenaskhi Energy Private Limited - India
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- Kohat Cement Company Ltd. - Pakistan
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- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Mercuria Energy - Indonesia
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- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- Essar Steel Hazira Ltd - India
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- Larsen & Toubro Limited - India
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- Intertek Mineral Services - Indonesia
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- Simpson Spence & Young - Indonesia
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- MS Steel International - UAE
- Maharashtra Electricity Regulatory Commission - India
- Sinarmas Energy and Mining - Indonesia
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- Parry Sugars Refinery, India
- Eastern Coal Council - USA
- Siam City Cement PLC, Thailand
- OPG Power Generation Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Commonwealth Bank - Australia
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- Georgia Ports Authority, United States
- Directorate Of Revenue Intelligence - India
- Standard Chartered Bank - UAE
- Carbofer General Trading SA - India
- Chamber of Mines of South Africa
- Aboitiz Power Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Edison Trading Spa - Italy
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- Karaikal Port Pvt Ltd - India
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Tamil Nadu electricity Board
- Kumho Petrochemical, South Korea
- Chettinad Cement Corporation Ltd - India
- Renaissance Capital - South Africa
- International Coal Ventures Pvt Ltd - India
- Xindia Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Grasim Industreis Ltd - India
- Economic Council, Georgia
- Independent Power Producers Association of India
- Leighton Contractors Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Indian Energy Exchange, India
- Bayan Resources Tbk. - Indonesia
- VISA Power Limited - India
- Agrawal Coal Company - India
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- Salva Resources Pvt Ltd - India
- Thai Mozambique Logistica
- Medco Energi Mining Internasional
- Australian Coal Association
- CIMB Investment Bank - Malaysia
- Star Paper Mills Limited - India
- Formosa Plastics Group - Taiwan
- AsiaOL BioFuels Corp., Philippines
- Ind-Barath Power Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- Bhushan Steel Limited - India
- Sojitz Corporation - Japan
- London Commodity Brokers - England
- Deloitte Consulting - India
- Sical Logistics Limited - India
- Planning Commission, India
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- Parliament of New Zealand
- Metalloyd Limited - United Kingdom
- Africa Commodities Group - South Africa
- IHS Mccloskey Coal Group - USA
- Gujarat Sidhee Cement - India
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- Tata Chemicals Ltd - India
- White Energy Company Limited
- Mjunction Services Limited - India
- Krishnapatnam Port Company Ltd. - India
- Aditya Birla Group - India
- Coal and Oil Company - UAE
- Karbindo Abesyapradhi - Indoneisa
- Petrochimia International Co. Ltd.- Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Price Waterhouse Coopers - Russia
- Romanian Commodities Exchange
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