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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, 02 August 24
COAL MARKET DEVELOPMENTS: FALLING PRICES AMID RECORD-HIGH OUTPUT - WORLD BANK
Coal prices inched up in May (m/m) following an 8 percent decline in 2024Q1. The Australian and South African benchmarks have plummeted more ...
Friday, 26 July 24
FUELEU MARITME IS COMING. IS YOUR CHARTERPARTY READY? - GARD
With less than six months to implementation of FuelEU Maritime in EU and EEA trades, there has been little published advice regarding how to alloca ...
Thursday, 04 July 24
INDIA'S COAL PRODUCTION RISES 14% IN JUNE - PTI
The country’s coal production rose by 14.49% to 84.63 million tonne (MT) in June. The country’s coal output was 73.92 MT in June last f ...
Tuesday, 02 July 24
NTPC CAPTIVE COAL OUTPUT GROWS 15% IN Q1; DESPATCH RISES 17%
State-owned NTPC on Monday reported a 15 per cent year-on-year increase in the production of coal from captives mines to 9.862 metric million tonne ...
Friday, 28 June 24
KOSPO INVITED BIDS FOR 400,000 MT OF MINIMUM 4000 NCV COAL FOR FIVE YEARS
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for total 400,000 MT of Low Calorific Value Coal for 5 years starting from July 2024 until ...
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- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Antam Resourcindo - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Sical Logistics Limited - India
- Iligan Light & Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Authority, New Zealand
- Commonwealth Bank - Australia
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Indogreen Group - Indonesia
- Aditya Birla Group - India
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- Sree Jayajothi Cements Limited - India
- MS Steel International - UAE
- Jorong Barutama Greston.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Xindia Steels Limited - India
- Mercuria Energy - Indonesia
- Vedanta Resources Plc - India
- Singapore Mercantile Exchange
- Borneo Indobara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Jaiprakash Power Ventures ltd
- London Commodity Brokers - England
- Karaikal Port Pvt Ltd - India
- Dalmia Cement Bharat India
- Central Java Power - Indonesia
- Price Waterhouse Coopers - Russia
- Energy Development Corp, Philippines
- Energy Link Ltd, New Zealand
- Straits Asia Resources Limited - Singapore
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- Indo Tambangraya Megah - Indonesia
- Grasim Industreis Ltd - India
- Parliament of New Zealand
- ASAPP Information Group - India
- Indonesian Coal Mining Association
- Merrill Lynch Commodities Europe
- Kideco Jaya Agung - Indonesia
- Wilmar Investment Holdings
- Binh Thuan Hamico - Vietnam
- The Treasury - Australian Government
- Offshore Bulk Terminal Pte Ltd, Singapore
- Baramulti Group, Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Global Green Power PLC Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Sakthi Sugars Limited - India
- Tamil Nadu electricity Board
- Agrawal Coal Company - India
- South Luzon Thermal Energy Corporation
- Attock Cement Pakistan Limited
- White Energy Company Limited
- LBH Netherlands Bv - Netherlands
- CNBM International Corporation - China
- The University of Queensland
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- Global Coal Blending Company Limited - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Ind-Barath Power Infra Limited - India
- Georgia Ports Authority, United States
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Petron Corporation, Philippines
- Electricity Generating Authority of Thailand
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- The State Trading Corporation of India Ltd
- Ambuja Cements Ltd - India
- India Bulls Power Limited - India
- Thai Mozambique Logistica
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- New Zealand Coal & Carbon
- Eastern Coal Council - USA
- Rashtriya Ispat Nigam Limited - India
- Mjunction Services Limited - India
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- Siam City Cement - Thailand
- Standard Chartered Bank - UAE
- Sinarmas Energy and Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- PNOC Exploration Corporation - Philippines
- SMG Consultants - Indonesia
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- CIMB Investment Bank - Malaysia
- Madhucon Powers Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Gujarat Mineral Development Corp Ltd - India
- Coastal Gujarat Power Limited - India
- Altura Mining Limited, Indonesia
- GAC Shipping (India) Pvt Ltd
- Star Paper Mills Limited - India
- Parry Sugars Refinery, India
- Mercator Lines Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- Semirara Mining Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- VISA Power Limited - India
- Metalloyd Limited - United Kingdom
- Essar Steel Hazira Ltd - India
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Sojitz Corporation - Japan
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Indika Energy - Indonesia
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- Planning Commission, India
- Australian Coal Association
- Videocon Industries ltd - India
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
- Directorate Of Revenue Intelligence - India
- European Bulk Services B.V. - Netherlands
- Bhoruka Overseas - Indonesia
- Toyota Tsusho Corporation, Japan
- Gujarat Electricity Regulatory Commission - India
- PTC India Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SN Aboitiz Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- Kepco SPC Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Therma Luzon, Inc, Philippines
- Salva Resources Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Trasteel International SA, Italy
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- Central Electricity Authority - India
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Ministry of Transport, Egypt
- PowerSource Philippines DevCo
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- Coalindo Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Larsen & Toubro Limited - India
- Eastern Energy - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Bhatia International Limited - India
- Bharathi Cement Corporation - India
- Renaissance Capital - South Africa
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Goldman Sachs - Singapore
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sarangani Energy Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Vizag Seaport Private Limited - India
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Barasentosa Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Australian Commodity Traders Exchange
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Kaltim Prima Coal - Indonesia
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- IEA Clean Coal Centre - UK
- Chamber of Mines of South Africa
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