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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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Saturday, 18 February 23
PAKISTAN PLANS TO QUADRUPLE DOMESTIC COAL-FIRED POWER, MOVE AWAY FROM GAS - REUTERS
Pakistan plans to quadruple its domestic coal-fired capacity to reduce power generation costs and will not build new gas-fired plants in the coming ...
Saturday, 18 February 23
2023 MARINE FUEL MARKET PREDICTIONS - JOHN BERGMAN, AURAMARINE
The drive for decarbonisation we witnessed in 2022 has continued into 2023, demonstrating the shipping’s industry positive strides in the fas ...
Saturday, 28 January 23
COAL GROWTH BLIP NOT TO BE REPEATED - BALTIC EXCHANGE
As 2022 drew to a close, global coal demand looked set to end the year just 1.2% up on the previous year. But that small increase was enough to pus ...
Thursday, 26 January 23
CHINA'S COAL OUTPUT INCREASES IN DECEMBER 2022 - XINHUA
China’s raw coal output posted stable expansion in December 2022, official data showed.
The country produced 400 million tonne ...
Thursday, 26 January 23
COKING COAL NARROWS THE GAP ON THERMAL AS CHINA REOPENS - REUTERS
The premium of high-grade thermal coal over coking coal in Asia is shrinking as China’s re-opening and ending of a ban on imports from Austra ...
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- OPG Power Generation Pvt Ltd - India
- Petron Corporation, Philippines
- Power Finance Corporation Ltd., India
- Africa Commodities Group - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Maharashtra Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- Posco Energy - South Korea
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- London Commodity Brokers - England
- Renaissance Capital - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Agrawal Coal Company - India
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- Barasentosa Lestari - Indonesia
- Madhucon Powers Ltd - India
- Globalindo Alam Lestari - Indonesia
- Indian Oil Corporation Limited
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- Bank of Tokyo Mitsubishi UFJ Ltd
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- Therma Luzon, Inc, Philippines
- Global Business Power Corporation, Philippines
- SMG Consultants - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Attock Cement Pakistan Limited
- Wilmar Investment Holdings
- GMR Energy Limited - India
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- TeaM Sual Corporation - Philippines
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- Salva Resources Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Larsen & Toubro Limited - India
- Indo Tambangraya Megah - Indonesia
- Sojitz Corporation - Japan
- Intertek Mineral Services - Indonesia
- Kumho Petrochemical, South Korea
- Timah Investasi Mineral - Indoneisa
- Energy Development Corp, Philippines
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- PNOC Exploration Corporation - Philippines
- Merrill Lynch Commodities Europe
- Offshore Bulk Terminal Pte Ltd, Singapore
- Holcim Trading Pte Ltd - Singapore
- Eastern Energy - Thailand
- Ambuja Cements Ltd - India
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- Planning Commission, India
- Electricity Authority, New Zealand
- Semirara Mining Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Goldman Sachs - Singapore
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- Ministry of Transport, Egypt
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- Ministry of Mines - Canada
- Malabar Cements Ltd - India
- Altura Mining Limited, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Aditya Birla Group - India
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- International Coal Ventures Pvt Ltd - India
- Mercuria Energy - Indonesia
- Deloitte Consulting - India
- Bharathi Cement Corporation - India
- Heidelberg Cement - Germany
- SN Aboitiz Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- San Jose City I Power Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- New Zealand Coal & Carbon
- Trasteel International SA, Italy
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- Commonwealth Bank - Australia
- PTC India Limited - India
- The Treasury - Australian Government
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Maheswari Brothers Coal Limited - India
- Borneo Indobara - Indonesia
- Medco Energi Mining Internasional
- Antam Resourcindo - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Minerals Council of Australia
- Gujarat Mineral Development Corp Ltd - India
- Essar Steel Hazira Ltd - India
- Indonesian Coal Mining Association
- The University of Queensland
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Makarim & Taira - Indonesia
- Iligan Light & Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Sindya Power Generating Company Private Ltd
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- McConnell Dowell - Australia
- Sical Logistics Limited - India
- Parry Sugars Refinery, India
- Sarangani Energy Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- PowerSource Philippines DevCo
- Kaltim Prima Coal - Indonesia
- Economic Council, Georgia
- Videocon Industries ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Manunggal Multi Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Dalmia Cement Bharat India
- CNBM International Corporation - China
- ICICI Bank Limited - India
- Standard Chartered Bank - UAE
- Australian Commodity Traders Exchange
- Central Java Power - Indonesia
- Chettinad Cement Corporation Ltd - India
- MS Steel International - UAE
- Bangladesh Power Developement Board
- Ministry of Finance - Indonesia
- Rio Tinto Coal - Australia
- GN Power Mariveles Coal Plant, Philippines
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- Parliament of New Zealand
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- India Bulls Power Limited - India
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
- Binh Thuan Hamico - Vietnam
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- VISA Power Limited - India
- Wood Mackenzie - Singapore
- Cement Manufacturers Association - India
- Interocean Group of Companies - India
- PetroVietnam Power Coal Import and Supply Company
- Samtan Co., Ltd - South Korea
- Siam City Cement - Thailand
- Global Coal Blending Company Limited - Australia
- Ind-Barath Power Infra Limited - India
- Star Paper Mills Limited - India
- ASAPP Information Group - India
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- Simpson Spence & Young - Indonesia
- Eastern Coal Council - USA
- Banpu Public Company Limited - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Central Electricity Authority - India
- Straits Asia Resources Limited - Singapore
- Bulk Trading Sa - Switzerland
- Krishnapatnam Port Company Ltd. - India
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Kalimantan Lumbung Energi - Indonesia
- Price Waterhouse Coopers - Russia
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Coal and Oil Company - UAE
- Metalloyd Limited - United Kingdom
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- Edison Trading Spa - Italy
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- Marubeni Corporation - India
- Indogreen Group - Indonesia
- Bukit Makmur.PT - Indonesia
- Romanian Commodities Exchange
- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Port Waratah Coal Services - Australia
- Meralco Power Generation, Philippines
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- Toyota Tsusho Corporation, Japan
- Orica Mining Services - Indonesia
- Bhatia International Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- South Luzon Thermal Energy Corporation
- Lanco Infratech Ltd - India
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Gujarat Sidhee Cement - India
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