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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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Friday, 18 November 22
REALITIES OF LOI LIABILITIES - BALTIC EXCHANGE
KNOWLEDGE TO ELEVATE
The cargo misdelivery claim in Trafigura Maritime Logistics Pte Ltd v. Clearlake Shipping Pte Ltd (Miracle Hope) [2022] E ...
Tuesday, 15 November 22
CHINA SEES RISING COAL STORAGE AMID SUPPLY PUSH - XINHUA
Coal stockpiles at China’s power plants have seen considerable increases, ensuring energy supply for the winter, the country’s energy r ...
Tuesday, 15 November 22
SEABORNE THERMAL COAL PRICES START TO EASE, BUT PROCESS IS UNEVEN - REUTERS
Prices for seaborne thermal coal have started to drop as fears of a winter energy crunch ease, but the rate of decline has varied across the differ ...
Thursday, 10 November 22
INDIA: THERMAL PLANTS HAVE ADEQUATE COAL STOCKS AT 25.6 MILLION TONNES, SAYS GOVT - IANS
The coal stock with domestic dry fuel-based power plants, as on October 31, was 25.6 million tonnes, the government said, adding that the availabil ...
Tuesday, 08 November 22
OUTLOOK ON CHINA’S WEAKENED BASIC MATERIALS SECTOR CLOUDED BY POLICY SWINGS - FITCH RATINGS
Fitch Ratings expects basic materials demand in China to improve qoq in 4Q22, driven by seasonally higher construction activity, solid infrastructu ...
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- Straits Asia Resources Limited - Singapore
- Australian Coal Association
- Krishnapatnam Port Company Ltd. - India
- Goldman Sachs - Singapore
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- PTC India Limited - India
- Star Paper Mills Limited - India
- White Energy Company Limited
- Marubeni Corporation - India
- IHS Mccloskey Coal Group - USA
- Central Electricity Authority - India
- Ministry of Transport, Egypt
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Mercuria Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Indonesian Coal Mining Association
- Africa Commodities Group - South Africa
- Latin American Coal - Colombia
- Attock Cement Pakistan Limited
- Bhatia International Limited - India
- ICICI Bank Limited - India
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- CIMB Investment Bank - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Australia Pty. Ltd.
- Planning Commission, India
- Maharashtra Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- Kobexindo Tractors - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Baramulti Group, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sakthi Sugars Limited - India
- Ministry of Mines - Canada
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Orica Mining Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Binh Thuan Hamico - Vietnam
- Karaikal Port Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Energy Link Ltd, New Zealand
- TeaM Sual Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
- Malabar Cements Ltd - India
- The Treasury - Australian Government
- Pendopo Energi Batubara - Indonesia
- IEA Clean Coal Centre - UK
- Romanian Commodities Exchange
- PetroVietnam Power Coal Import and Supply Company
- VISA Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Coalindo Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Larsen & Toubro Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The State Trading Corporation of India Ltd
- Bukit Makmur.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Renaissance Capital - South Africa
- Ambuja Cements Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Gujarat Sidhee Cement - India
- Meralco Power Generation, Philippines
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- New Zealand Coal & Carbon
- Indian Energy Exchange, India
- Eastern Energy - Thailand
- Bayan Resources Tbk. - Indonesia
- LBH Netherlands Bv - Netherlands
- Aboitiz Power Corporation - Philippines
- GVK Power & Infra Limited - India
- Siam City Cement - Thailand
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Kepco SPC Power Corporation, Philippines
- Electricity Authority, New Zealand
- Edison Trading Spa - Italy
- Sojitz Corporation - Japan
- Semirara Mining Corp, Philippines
- Borneo Indobara - Indonesia
- Tamil Nadu electricity Board
- Anglo American - United Kingdom
- Coal and Oil Company - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Formosa Plastics Group - Taiwan
- Timah Investasi Mineral - Indoneisa
- Agrawal Coal Company - India
- Essar Steel Hazira Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Jindal Steel & Power Ltd - India
- PowerSource Philippines DevCo
- Madhucon Powers Ltd - India
- Indo Tambangraya Megah - Indonesia
- Eastern Coal Council - USA
- Bangladesh Power Developement Board
- Interocean Group of Companies - India
- Minerals Council of Australia
- Global Business Power Corporation, Philippines
- Cement Manufacturers Association - India
- McConnell Dowell - Australia
- Coastal Gujarat Power Limited - India
- GMR Energy Limited - India
- ASAPP Information Group - India
- Electricity Generating Authority of Thailand
- Savvy Resources Ltd - HongKong
- Thai Mozambique Logistica
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- Vizag Seaport Private Limited - India
- OPG Power Generation Pvt Ltd - India
- Bharathi Cement Corporation - India
- Ind-Barath Power Infra Limited - India
- Wood Mackenzie - Singapore
- Bhoruka Overseas - Indonesia
- Mercator Lines Limited - India
- Samtan Co., Ltd - South Korea
- Deloitte Consulting - India
- Independent Power Producers Association of India
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Altura Mining Limited, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Videocon Industries ltd - India
- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Singapore Mercantile Exchange
- MS Steel International - UAE
- Toyota Tsusho Corporation, Japan
- South Luzon Thermal Energy Corporation
- Parry Sugars Refinery, India
- Karbindo Abesyapradhi - Indoneisa
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Salva Resources Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- GAC Shipping (India) Pvt Ltd
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Simpson Spence & Young - Indonesia
- Wilmar Investment Holdings
- Trasteel International SA, Italy
- Maheswari Brothers Coal Limited - India
- Sree Jayajothi Cements Limited - India
- Posco Energy - South Korea
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Economic Council, Georgia
- Grasim Industreis Ltd - India
- Mintek Dendrill Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Tata Chemicals Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Heidelberg Cement - Germany
- Australian Commodity Traders Exchange
- PNOC Exploration Corporation - Philippines
- Carbofer General Trading SA - India
- TNB Fuel Sdn Bhd - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Xindia Steels Limited - India
- Makarim & Taira - Indonesia
- Parliament of New Zealand
- Central Java Power - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Thiess Contractors Indonesia
- Energy Development Corp, Philippines
- Rio Tinto Coal - Australia
- SMG Consultants - Indonesia
- Price Waterhouse Coopers - Russia
- The University of Queensland
- Bukit Asam (Persero) Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- Gujarat Mineral Development Corp Ltd - India
- SMC Global Power, Philippines
- Mjunction Services Limited - India
- Kohat Cement Company Ltd. - Pakistan
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