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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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Thursday, 22 December 22
RUSSIAN OIL EXPORTS CRATER BY 54% IN THE FIRST FULL WEEK OF THE EU'S EMBARGO AMID A SHORTAGE OF TANKERS WILLING TO CARRY CARGOES - BUSINESS INSIDER
Since the European Union imposed its seaborne crude sanctions, Russian oil exports have tumbled by more than half, according to data compiled by Bl ...
Thursday, 22 December 22
CHINA TIGHTENS VERIFICATION OF SHIPS’ ENERGY CONSUMPTION DATA - GARD
From 22 December 2022, ships trading to Chinese ports must record their energy consumption data in accordance with the requirements of their Ship E ...
Thursday, 22 December 22
AN OVERVIEW OF THE LNG MARKET - VESSELSVALUE
LNG values have continued to strengthen, spurred by skyrocketing earnings that have surpassed last year’s record breaking peaks. In November, ...
Thursday, 22 December 22
COKING COAL SLUMPS AS TALKS ON AUSTRALIA-CHINA TRADE RIFT LOOM - REUTERS
Chinese coking coal futures dropped more than 3 per cent on Tuesday (Dec 20), extending losses, as supply of the steelmaking input might increase i ...
Thursday, 22 December 22
COAL AND GAS PRICE CAPS MAY COMPOUND POLITICAL RISK FOR AUSTRALIAN CORPORATES - FITCH RATINGS
Australia’s introduction of temporary price caps on domestic sales of gas and coal used for electricity generation will probably have limited ...
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- India Bulls Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Energy Link Ltd, New Zealand
- The State Trading Corporation of India Ltd
- Deloitte Consulting - India
- Star Paper Mills Limited - India
- MS Steel International - UAE
- Wilmar Investment Holdings
- Price Waterhouse Coopers - Russia
- Chettinad Cement Corporation Ltd - India
- White Energy Company Limited
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Agrawal Coal Company - India
- Indogreen Group - Indonesia
- Kepco SPC Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- GMR Energy Limited - India
- Central Electricity Authority - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhatia International Limited - India
- Riau Bara Harum - Indonesia
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Merrill Lynch Commodities Europe
- Mjunction Services Limited - India
- Coastal Gujarat Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Tamil Nadu electricity Board
- TeaM Sual Corporation - Philippines
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- Ministry of Mines - Canada
- Central Java Power - Indonesia
- PNOC Exploration Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- PowerSource Philippines DevCo
- Gujarat Mineral Development Corp Ltd - India
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Australian Coal Association
- Electricity Authority, New Zealand
- Edison Trading Spa - Italy
- San Jose City I Power Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Indonesian Coal Mining Association
- Kideco Jaya Agung - Indonesia
- Borneo Indobara - Indonesia
- Sindya Power Generating Company Private Ltd
- Metalloyd Limited - United Kingdom
- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- Lanco Infratech Ltd - India
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- Singapore Mercantile Exchange
- Coalindo Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Global Business Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Orica Australia Pty. Ltd.
- Heidelberg Cement - Germany
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- Toyota Tsusho Corporation, Japan
- Indian Oil Corporation Limited
- Videocon Industries ltd - India
- Larsen & Toubro Limited - India
- Directorate Of Revenue Intelligence - India
- GVK Power & Infra Limited - India
- Economic Council, Georgia
- ICICI Bank Limited - India
- Miang Besar Coal Terminal - Indonesia
- Madhucon Powers Ltd - India
- VISA Power Limited - India
- PTC India Limited - India
- Meralco Power Generation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Rio Tinto Coal - Australia
- Bukit Baiduri Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Bangladesh Power Developement Board
- Australian Commodity Traders Exchange
- Salva Resources Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- Kumho Petrochemical, South Korea
- Malabar Cements Ltd - India
- Thiess Contractors Indonesia
- Planning Commission, India
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Chamber of Mines of South Africa
- Minerals Council of Australia
- Semirara Mining Corp, Philippines
- ASAPP Information Group - India
- Marubeni Corporation - India
- Petron Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- New Zealand Coal & Carbon
- Carbofer General Trading SA - India
- Oldendorff Carriers - Singapore
- Meenaskhi Energy Private Limited - India
- Bukit Makmur.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Attock Cement Pakistan Limited
- Manunggal Multi Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Sical Logistics Limited - India
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- McConnell Dowell - Australia
- Altura Mining Limited, Indonesia
- IHS Mccloskey Coal Group - USA
- Kobexindo Tractors - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Bharathi Cement Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- SMG Consultants - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Timah Investasi Mineral - Indoneisa
- Aditya Birla Group - India
- Antam Resourcindo - Indonesia
- The University of Queensland
- Parry Sugars Refinery, India
- Grasim Industreis Ltd - India
- Renaissance Capital - South Africa
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Straits Asia Resources Limited - Singapore
- International Coal Ventures Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Energy Development Corp, Philippines
- Gujarat Sidhee Cement - India
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Rashtriya Ispat Nigam Limited - India
- Bhushan Steel Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indo Tambangraya Megah - Indonesia
- Romanian Commodities Exchange
- Indika Energy - Indonesia
- Parliament of New Zealand
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Ceylon Electricity Board - Sri Lanka
- Latin American Coal - Colombia
- Independent Power Producers Association of India
- South Luzon Thermal Energy Corporation
- Sojitz Corporation - Japan
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- Karaikal Port Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Ambuja Cements Ltd - India
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- London Commodity Brokers - England
- Directorate General of MIneral and Coal - Indonesia
- Port Waratah Coal Services - Australia
- SN Aboitiz Power Inc, Philippines
- Eastern Energy - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- Ministry of Transport, Egypt
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Wood Mackenzie - Singapore
- PetroVietnam Power Coal Import and Supply Company
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