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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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Monday, 19 December 22
ENERGY CRISIS FUELS COAL COMEBACK IN GERMANY - REUTERS
Coal has made a comeback in Germany this year, as Europe’s largest economy turns to the dirty fuel to power it through an energy crisis.
...
Thursday, 15 December 22
MARKET INSIGHT - INTERMODAL
While observing the ship repair market very close to the end of the year, we are confident that shipyards worldwide are entering a new era. The nex ...
Tuesday, 13 December 22
STRONG COAL PRICES SUPPORT ROBUST EARNINGS AT INDONESIAN COAL MINERS - FITCH RATINGS
Fitch Ratings expects cash flow generation at Indonesian coal miners to remain strong in 2023, based on its forecast for coal prices to remain high ...
Tuesday, 13 December 22
BIMCO CII CLAUSE FINALLY RELEASED: DOES IT MAKE ANY SENSE OF CCI? - WFW
WHAT IS CII?
The new International Maritime Organisation’s (“IMO’s”) Carbon Intensity Indicator (“CII”) cer ...
Tuesday, 13 December 22
COAL BASE RAMPS UP ENERGY SUPPLY FOR WINTER NEEDS - XINHUA
Inner Mongolia Autonomous Region, China’s leading coal production base, has kicked its production into high gear to meet heating needs as col ...
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- SN Aboitiz Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- London Commodity Brokers - England
- Economic Council, Georgia
- Manunggal Multi Energi - Indonesia
- Bukit Baiduri Energy - Indonesia
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Toyota Tsusho Corporation, Japan
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- Global Coal Blending Company Limited - Australia
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Parry Sugars Refinery, India
- Eastern Coal Council - USA
- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Energy - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- The State Trading Corporation of India Ltd
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- McConnell Dowell - Australia
- Deloitte Consulting - India
- Planning Commission, India
- Dalmia Cement Bharat India
- Asmin Koalindo Tuhup - Indonesia
- Agrawal Coal Company - India
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Thiess Contractors Indonesia
- Vizag Seaport Private Limited - India
- Rashtriya Ispat Nigam Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Mintek Dendrill Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Edison Trading Spa - Italy
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- Latin American Coal - Colombia
- GMR Energy Limited - India
- Savvy Resources Ltd - HongKong
- Tamil Nadu electricity Board
- Ind-Barath Power Infra Limited - India
- Jaiprakash Power Ventures ltd
- Trasteel International SA, Italy
- Sarangani Energy Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Cigading International Bulk Terminal - Indonesia
- Orica Mining Services - Indonesia
- Standard Chartered Bank - UAE
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- Attock Cement Pakistan Limited
- Sree Jayajothi Cements Limited - India
- Renaissance Capital - South Africa
- Mercuria Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indian Energy Exchange, India
- Wood Mackenzie - Singapore
- SMC Global Power, Philippines
- OPG Power Generation Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Grasim Industreis Ltd - India
- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
- Antam Resourcindo - Indonesia
- Mercator Lines Limited - India
- Pendopo Energi Batubara - Indonesia
- Commonwealth Bank - Australia
- Riau Bara Harum - Indonesia
- Krishnapatnam Port Company Ltd. - India
- The University of Queensland
- Neyveli Lignite Corporation Ltd, - India
- Sindya Power Generating Company Private Ltd
- Ministry of Mines - Canada
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Bangladesh Power Developement Board
- Leighton Contractors Pty Ltd - Australia
- Bhatia International Limited - India
- Star Paper Mills Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bhoruka Overseas - Indonesia
- Interocean Group of Companies - India
- Globalindo Alam Lestari - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Java Power - Indonesia
- Baramulti Group, Indonesia
- Therma Luzon, Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- Timah Investasi Mineral - Indoneisa
- IHS Mccloskey Coal Group - USA
- SMG Consultants - Indonesia
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Directorate Of Revenue Intelligence - India
- CIMB Investment Bank - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Ministry of Transport, Egypt
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Videocon Industries ltd - India
- Essar Steel Hazira Ltd - India
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Africa Commodities Group - South Africa
- ASAPP Information Group - India
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- Coal and Oil Company - UAE
- PetroVietnam Power Coal Import and Supply Company
- Vedanta Resources Plc - India
- Central Electricity Authority - India
- Intertek Mineral Services - Indonesia
- Indogreen Group - Indonesia
- Posco Energy - South Korea
- Global Green Power PLC Corporation, Philippines
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- Sical Logistics Limited - India
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Bulk Trading Sa - Switzerland
- New Zealand Coal & Carbon
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Finance - Indonesia
- Mjunction Services Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- White Energy Company Limited
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Alfred C Toepfer International GmbH - Germany
- Global Business Power Corporation, Philippines
- ICICI Bank Limited - India
- Port Waratah Coal Services - Australia
- MS Steel International - UAE
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Indian Oil Corporation Limited
- PTC India Limited - India
- GAC Shipping (India) Pvt Ltd
- Singapore Mercantile Exchange
- Meenaskhi Energy Private Limited - India
- Uttam Galva Steels Limited - India
- Xindia Steels Limited - India
- Coastal Gujarat Power Limited - India
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Minerals Council of Australia
- Oldendorff Carriers - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kartika Selabumi Mining - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Anglo American - United Kingdom
- Jindal Steel & Power Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Metalloyd Limited - United Kingdom
- Energy Link Ltd, New Zealand
- Altura Mining Limited, Indonesia
- Indonesian Coal Mining Association
- Bharathi Cement Corporation - India
- Binh Thuan Hamico - Vietnam
- Gujarat Sidhee Cement - India
- Goldman Sachs - Singapore
- Ambuja Cements Ltd - India
- Wilmar Investment Holdings
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- Rio Tinto Coal - Australia
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Independent Power Producers Association of India
- European Bulk Services B.V. - Netherlands
- Lanco Infratech Ltd - India
- VISA Power Limited - India
- Power Finance Corporation Ltd., India
- Gujarat Mineral Development Corp Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- LBH Netherlands Bv - Netherlands
- The Treasury - Australian Government
- Thai Mozambique Logistica
- Australian Commodity Traders Exchange
- Semirara Mining Corp, Philippines
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