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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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Sunday, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- Parry Sugars Refinery, India
- Parliament of New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- TeaM Sual Corporation - Philippines
- Indian Oil Corporation Limited
- Pendopo Energi Batubara - Indonesia
- Minerals Council of Australia
- Rio Tinto Coal - Australia
- Orica Mining Services - Indonesia
- Electricity Authority, New Zealand
- Mjunction Services Limited - India
- Iligan Light & Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Lanco Infratech Ltd - India
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- LBH Netherlands Bv - Netherlands
- Siam City Cement - Thailand
- GAC Shipping (India) Pvt Ltd
- Billiton Holdings Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Vedanta Resources Plc - India
- Renaissance Capital - South Africa
- McConnell Dowell - Australia
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- Sree Jayajothi Cements Limited - India
- Central Electricity Authority - India
- Carbofer General Trading SA - India
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- San Jose City I Power Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Videocon Industries ltd - India
- Malabar Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Uttam Galva Steels Limited - India
- ICICI Bank Limited - India
- Africa Commodities Group - South Africa
- Siam City Cement PLC, Thailand
- Indian Energy Exchange, India
- MS Steel International - UAE
- Wood Mackenzie - Singapore
- Kartika Selabumi Mining - Indonesia
- Eastern Coal Council - USA
- Ceylon Electricity Board - Sri Lanka
- Bangladesh Power Developement Board
- Sical Logistics Limited - India
- Anglo American - United Kingdom
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- London Commodity Brokers - England
- Indo Tambangraya Megah - Indonesia
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- Essar Steel Hazira Ltd - India
- Energy Development Corp, Philippines
- Eastern Energy - Thailand
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- Heidelberg Cement - Germany
- Mercator Lines Limited - India
- Economic Council, Georgia
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Power Finance Corporation Ltd., India
- The Treasury - Australian Government
- Neyveli Lignite Corporation Ltd, - India
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Barasentosa Lestari - Indonesia
- Indonesian Coal Mining Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Savvy Resources Ltd - HongKong
- Marubeni Corporation - India
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- VISA Power Limited - India
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- PTC India Limited - India
- Meenaskhi Energy Private Limited - India
- Sakthi Sugars Limited - India
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Kepco SPC Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- Directorate Of Revenue Intelligence - India
- Vizag Seaport Private Limited - India
- Merrill Lynch Commodities Europe
- IHS Mccloskey Coal Group - USA
- Coastal Gujarat Power Limited - India
- Latin American Coal - Colombia
- Altura Mining Limited, Indonesia
- Global Business Power Corporation, Philippines
- ASAPP Information Group - India
- Salva Resources Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Bhatia International Limited - India
- Sinarmas Energy and Mining - Indonesia
- Bukit Makmur.PT - Indonesia
- Energy Link Ltd, New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Tata Chemicals Ltd - India
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Global Coal Blending Company Limited - Australia
- Madhucon Powers Ltd - India
- Kumho Petrochemical, South Korea
- Toyota Tsusho Corporation, Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- Oldendorff Carriers - Singapore
- Indogreen Group - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Grasim Industreis Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Banpu Public Company Limited - Thailand
- Riau Bara Harum - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Baiduri Energy - Indonesia
- Central Java Power - Indonesia
- Metalloyd Limited - United Kingdom
- Kideco Jaya Agung - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Australian Commodity Traders Exchange
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- Alfred C Toepfer International GmbH - Germany
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Bhushan Steel Limited - India
- Xindia Steels Limited - India
- Jaiprakash Power Ventures ltd
- Bayan Resources Tbk. - Indonesia
- IEA Clean Coal Centre - UK
- Planning Commission, India
- Wilmar Investment Holdings
- Bharathi Cement Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Trasteel International SA, Italy
- CIMB Investment Bank - Malaysia
- Samtan Co., Ltd - South Korea
- The State Trading Corporation of India Ltd
- Manunggal Multi Energi - Indonesia
- Goldman Sachs - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Sidhee Cement - India
- SMC Global Power, Philippines
- GMR Energy Limited - India
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- The University of Queensland
- Dalmia Cement Bharat India
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- Baramulti Group, Indonesia
- Star Paper Mills Limited - India
- PowerSource Philippines DevCo
- Sojitz Corporation - Japan
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- Thiess Contractors Indonesia
- Coalindo Energy - Indonesia
- India Bulls Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Globalindo Alam Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- SMG Consultants - Indonesia
- Australian Coal Association
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- New Zealand Coal & Carbon
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
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