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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, 13 December 22
AUSTRALIA TO CAP PRICES OF COAL, GAS TO DRIVE DOWN ENERGY BILLS - REUTERS
Australia will cap coal and gas prices for a year in a bid to shave utility bills for households and businesses hit by soaring costs because of the ...
Tuesday, 13 December 22
YANCOAL AUSTRALIA TO PREPAY $459 MLN DEBT AS RECORD COAL PRICES BOOST CASHFLOWS - REUTERS
Coal miner Yancoal Australia Ltd. said on Friday it intended to prepay $459 million of its debt on or around Dec. 16, as elevated coal prices were ...
Tuesday, 13 December 22
WHY COAL LEADS THE RISE IN COMMODITIES THIS YEAR - MARKETWATCH
This year marked a resurgence for coal, often known — and loathed — by environmentalists as the dirtiest energy source, with prices mor ...
Thursday, 08 December 22
BIMCO TO REVISE WAR RISK CLAUSES
Work to revise the BIMCO War Cancellation Clause 2004, the BIMCO War Risks Clause for Time Chartering 2013 (CONWARTIME 2013) and the BIMCO War Risk ...
Thursday, 08 December 22
COAL ROYALTY PAYMENTS BOOST AUSTRALIAN STATE'S BUDGET FORECAST - REUTERS
Australia’s Queensland state on Wednesday forecast a record surplus for the current financial year, largely driven by higher royalty payments ...
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- Vedanta Resources Plc - India
- Wood Mackenzie - Singapore
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- Bank of Tokyo Mitsubishi UFJ Ltd
- Borneo Indobara - Indonesia
- Bharathi Cement Corporation - India
- Maheswari Brothers Coal Limited - India
- The Treasury - Australian Government
- Medco Energi Mining Internasional
- Star Paper Mills Limited - India
- Romanian Commodities Exchange
- Australian Commodity Traders Exchange
- Rashtriya Ispat Nigam Limited - India
- International Coal Ventures Pvt Ltd - India
- Ministry of Mines - Canada
- Globalindo Alam Lestari - Indonesia
- Posco Energy - South Korea
- Gujarat Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- Petron Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Global Green Power PLC Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Economic Council, Georgia
- Mercuria Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- TNB Fuel Sdn Bhd - Malaysia
- Timah Investasi Mineral - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Altura Mining Limited, Indonesia
- McConnell Dowell - Australia
- Riau Bara Harum - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Planning Commission, India
- Thiess Contractors Indonesia
- Energy Link Ltd, New Zealand
- Marubeni Corporation - India
- Sree Jayajothi Cements Limited - India
- Parry Sugars Refinery, India
- Leighton Contractors Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Kohat Cement Company Ltd. - Pakistan
- AsiaOL BioFuels Corp., Philippines
- Indonesian Coal Mining Association
- Gujarat Mineral Development Corp Ltd - India
- Bhushan Steel Limited - India
- Bhatia International Limited - India
- SN Aboitiz Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Kumho Petrochemical, South Korea
- The State Trading Corporation of India Ltd
- Australian Coal Association
- Ceylon Electricity Board - Sri Lanka
- Interocean Group of Companies - India
- Baramulti Group, Indonesia
- Barasentosa Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Sojitz Corporation - Japan
- Minerals Council of Australia
- Africa Commodities Group - South Africa
- Larsen & Toubro Limited - India
- Chamber of Mines of South Africa
- Dalmia Cement Bharat India
- ASAPP Information Group - India
- Wilmar Investment Holdings
- MS Steel International - UAE
- Coalindo Energy - Indonesia
- Carbofer General Trading SA - India
- The University of Queensland
- Trasteel International SA, Italy
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Essar Steel Hazira Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Electricity Authority, New Zealand
- Madhucon Powers Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Oldendorff Carriers - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- IHS Mccloskey Coal Group - USA
- Power Finance Corporation Ltd., India
- Kideco Jaya Agung - Indonesia
- Goldman Sachs - Singapore
- Manunggal Multi Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- Renaissance Capital - South Africa
- Karaikal Port Pvt Ltd - India
- Meralco Power Generation, Philippines
- ICICI Bank Limited - India
- Rio Tinto Coal - Australia
- Heidelberg Cement - Germany
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Jaiprakash Power Ventures ltd
- Sarangani Energy Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- PowerSource Philippines DevCo
- Gujarat Sidhee Cement - India
- Bukit Asam (Persero) Tbk - Indonesia
- SMG Consultants - Indonesia
- Makarim & Taira - Indonesia
- Bangladesh Power Developement Board
- Independent Power Producers Association of India
- Semirara Mining and Power Corporation, Philippines
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Kartika Selabumi Mining - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Salva Resources Pvt Ltd - India
- Tamil Nadu electricity Board
- Deloitte Consulting - India
- Aboitiz Power Corporation - Philippines
- CIMB Investment Bank - Malaysia
- European Bulk Services B.V. - Netherlands
- Toyota Tsusho Corporation, Japan
- LBH Netherlands Bv - Netherlands
- Merrill Lynch Commodities Europe
- Mercator Lines Limited - India
- Cement Manufacturers Association - India
- Indian Energy Exchange, India
- GVK Power & Infra Limited - India
- Eastern Energy - Thailand
- Intertek Mineral Services - Indonesia
- Malabar Cements Ltd - India
- Central Electricity Authority - India
- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
- Sinarmas Energy and Mining - Indonesia
- Commonwealth Bank - Australia
- Xindia Steels Limited - India
- Ministry of Finance - Indonesia
- Sindya Power Generating Company Private Ltd
- Orica Australia Pty. Ltd.
- VISA Power Limited - India
- Thai Mozambique Logistica
- Energy Development Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- Price Waterhouse Coopers - Russia
- Ministry of Transport, Egypt
- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- Central Java Power - Indonesia
- Vizag Seaport Private Limited - India
- Standard Chartered Bank - UAE
- Agrawal Coal Company - India
- Miang Besar Coal Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kobexindo Tractors - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement - Thailand
- Binh Thuan Hamico - Vietnam
- Metalloyd Limited - United Kingdom
- Coal and Oil Company - UAE
- IEA Clean Coal Centre - UK
- Tata Chemicals Ltd - India
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Jorong Barutama Greston.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Straits Asia Resources Limited - Singapore
- India Bulls Power Limited - India
- Mintek Dendrill Indonesia
- Sical Logistics Limited - India
- Latin American Coal - Colombia
- Banpu Public Company Limited - Thailand
- Global Coal Blending Company Limited - Australia
- Sakthi Sugars Limited - India
- Coastal Gujarat Power Limited - India
- GMR Energy Limited - India
- Formosa Plastics Group - Taiwan
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Therma Luzon, Inc, Philippines
- Indian Oil Corporation Limited
- Aditya Birla Group - India
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- Siam City Cement PLC, Thailand
- Antam Resourcindo - Indonesia
- Parliament of New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- South Luzon Thermal Energy Corporation
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Lanco Infratech Ltd - India
- Bhoruka Overseas - Indonesia
- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- Jindal Steel & Power Ltd - India
- Bulk Trading Sa - Switzerland
- Alfred C Toepfer International GmbH - Germany
- PTC India Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Iligan Light & Power Inc, Philippines
- Ambuja Cements Ltd - India
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