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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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Tuesday, 11 April 23
OIL RISES ON CHINA STIMULUS EXPECTATIONS, WEAKER DOLLAR - REUTERS
Oil prices rose on Tuesday on expectations of potential economic stimulus by China, healthy demand in the rest of Asia and a drop in U.S. crude sto ...
Sunday, 09 April 23
CHINA’S BUSINESS INCOME REBOUND POINTS TO IMPROVING ECONOMY: OFFICIAL - XINHUA
Chinese businesses have posted a strong rebound in sales revenue since the beginning of this year in the latest signal of an improving economy.
...
Sunday, 09 April 23
COAL INDIA TO BOOST SUPPLIES TO INDUSTRIES AS UTILITIES’ INVENTORIES RISE - REUTERS
Coal India Ltd will increase supplies to industries, the world’s largest coal miner said on Wednesday as fuel inventories at utilities run by ...
Thursday, 06 April 23
MARKET INSIGHT - INTERMODAL
LNG Current Supply/Demand Dynamics
This year, LNG supply will likely exceed demand, so prices will need to decline to levels that will encourag ...
Sunday, 26 March 23
EUROPE’S RUSH TO LNG COULD TURN INTO 'WORLD’S MOST EXPENSIVE AND UNNECESSARY INSURANCE POLICY'- CNBC
Europe’s rapid buildout of liquefied natural gas infrastructure is on track to far exceed demand by the end of the decade, according to new r ...
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- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- The Treasury - Australian Government
- Edison Trading Spa - Italy
- Global Green Power PLC Corporation, Philippines
- VISA Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Wood Mackenzie - Singapore
- Sarangani Energy Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- White Energy Company Limited
- SN Aboitiz Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Ambuja Cements Ltd - India
- India Bulls Power Limited - India
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Thiess Contractors Indonesia
- Eastern Energy - Thailand
- Marubeni Corporation - India
- Wilmar Investment Holdings
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Mintek Dendrill Indonesia
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Kartika Selabumi Mining - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sical Logistics Limited - India
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- Krishnapatnam Port Company Ltd. - India
- Bukit Asam (Persero) Tbk - Indonesia
- Oldendorff Carriers - Singapore
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining and Power Corporation, Philippines
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Iligan Light & Power Inc, Philippines
- Star Paper Mills Limited - India
- Meenaskhi Energy Private Limited - India
- Kapuas Tunggal Persada - Indonesia
- Simpson Spence & Young - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Kepco SPC Power Corporation, Philippines
- Bhatia International Limited - India
- Ceylon Electricity Board - Sri Lanka
- Globalindo Alam Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Indonesian Coal Mining Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- Indogreen Group - Indonesia
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Latin American Coal - Colombia
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Parry Sugars Refinery, India
- Agrawal Coal Company - India
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Tata Chemicals Ltd - India
- Kobexindo Tractors - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- Singapore Mercantile Exchange
- Kohat Cement Company Ltd. - Pakistan
- Parliament of New Zealand
- Planning Commission, India
- Ministry of Transport, Egypt
- Attock Cement Pakistan Limited
- Altura Mining Limited, Indonesia
- Uttam Galva Steels Limited - India
- Xindia Steels Limited - India
- Electricity Authority, New Zealand
- Samtan Co., Ltd - South Korea
- Gujarat Sidhee Cement - India
- Borneo Indobara - Indonesia
- ASAPP Information Group - India
- GMR Energy Limited - India
- Madhucon Powers Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Price Waterhouse Coopers - Russia
- PNOC Exploration Corporation - Philippines
- Baramulti Group, Indonesia
- International Coal Ventures Pvt Ltd - India
- Renaissance Capital - South Africa
- Semirara Mining Corp, Philippines
- Jaiprakash Power Ventures ltd
- Maheswari Brothers Coal Limited - India
- Mercuria Energy - Indonesia
- Minerals Council of Australia
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement - Thailand
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Ministry of Mines - Canada
- PetroVietnam Power Coal Import and Supply Company
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Indian Energy Exchange, India
- Port Waratah Coal Services - Australia
- Global Coal Blending Company Limited - Australia
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dalmia Cement Bharat India
- Sakthi Sugars Limited - India
- GVK Power & Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- Georgia Ports Authority, United States
- Coastal Gujarat Power Limited - India
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- CIMB Investment Bank - Malaysia
- TNB Fuel Sdn Bhd - Malaysia
- London Commodity Brokers - England
- PTC India Limited - India
- Tamil Nadu electricity Board
- Posco Energy - South Korea
- SMC Global Power, Philippines
- Indian Oil Corporation Limited
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Kalimantan Lumbung Energi - Indonesia
- Makarim & Taira - Indonesia
- Commonwealth Bank - Australia
- Bangladesh Power Developement Board
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Power Finance Corporation Ltd., India
- Kumho Petrochemical, South Korea
- Toyota Tsusho Corporation, Japan
- Carbofer General Trading SA - India
- Bhoruka Overseas - Indonesia
- Romanian Commodities Exchange
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Sojitz Corporation - Japan
- Merrill Lynch Commodities Europe
- Ind-Barath Power Infra Limited - India
- Deloitte Consulting - India
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- Essar Steel Hazira Ltd - India
- Orica Australia Pty. Ltd.
- Timah Investasi Mineral - Indoneisa
- Interocean Group of Companies - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- PowerSource Philippines DevCo
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- CNBM International Corporation - China
- Indo Tambangraya Megah - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Africa Commodities Group - South Africa
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- Independent Power Producers Association of India
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Coal and Oil Company - UAE
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Kideco Jaya Agung - Indonesia
- McConnell Dowell - Australia
- IEA Clean Coal Centre - UK
- Central Java Power - Indonesia
- Australian Commodity Traders Exchange
- Metalloyd Limited - United Kingdom
- Intertek Mineral Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Bhushan Steel Limited - India
- Manunggal Multi Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Neyveli Lignite Corporation Ltd, - India
- AsiaOL BioFuels Corp., Philippines
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Economic Council, Georgia
- Aboitiz Power Corporation - Philippines
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- Malabar Cements Ltd - India
- Medco Energi Mining Internasional
- Chettinad Cement Corporation Ltd - India
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