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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, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
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- CNBM International Corporation - China
- ICICI Bank Limited - India
- Energy Link Ltd, New Zealand
- Energy Development Corp, Philippines
- Formosa Plastics Group - Taiwan
- AsiaOL BioFuels Corp., Philippines
- Australian Commodity Traders Exchange
- Carbofer General Trading SA - India
- Mintek Dendrill Indonesia
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- IEA Clean Coal Centre - UK
- Economic Council, Georgia
- Romanian Commodities Exchange
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Africa Commodities Group - South Africa
- Larsen & Toubro Limited - India
- South Luzon Thermal Energy Corporation
- Edison Trading Spa - Italy
- Indo Tambangraya Megah - Indonesia
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- Straits Asia Resources Limited - Singapore
- Parry Sugars Refinery, India
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maheswari Brothers Coal Limited - India
- Uttam Galva Steels Limited - India
- PNOC Exploration Corporation - Philippines
- Videocon Industries ltd - India
- Baramulti Group, Indonesia
- Antam Resourcindo - Indonesia
- Simpson Spence & Young - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Orica Mining Services - Indonesia
- Bulk Trading Sa - Switzerland
- Goldman Sachs - Singapore
- Kobexindo Tractors - Indoneisa
- Binh Thuan Hamico - Vietnam
- Agrawal Coal Company - India
- Ministry of Transport, Egypt
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Bukit Asam (Persero) Tbk - Indonesia
- Rio Tinto Coal - Australia
- Xindia Steels Limited - India
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Mercator Lines Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Grasim Industreis Ltd - India
- Semirara Mining and Power Corporation, Philippines
- ASAPP Information Group - India
- Marubeni Corporation - India
- The Treasury - Australian Government
- GVK Power & Infra Limited - India
- Lanco Infratech Ltd - India
- Iligan Light & Power Inc, Philippines
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Attock Cement Pakistan Limited
- India Bulls Power Limited - India
- Medco Energi Mining Internasional
- MS Steel International - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Vedanta Resources Plc - India
- Mercuria Energy - Indonesia
- Sical Logistics Limited - India
- Coal and Oil Company - UAE
- Jindal Steel & Power Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ministry of Mines - Canada
- Coastal Gujarat Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- McConnell Dowell - Australia
- Sarangani Energy Corporation, Philippines
- Sakthi Sugars Limited - India
- Oldendorff Carriers - Singapore
- Star Paper Mills Limited - India
- Latin American Coal - Colombia
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- San Jose City I Power Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Anglo American - United Kingdom
- Banpu Public Company Limited - Thailand
- Cigading International Bulk Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Ceylon Electricity Board - Sri Lanka
- Manunggal Multi Energi - Indonesia
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- Australian Coal Association
- Bayan Resources Tbk. - Indonesia
- Minerals Council of Australia
- Meenaskhi Energy Private Limited - India
- Global Coal Blending Company Limited - Australia
- Alfred C Toepfer International GmbH - Germany
- GMR Energy Limited - India
- Savvy Resources Ltd - HongKong
- Indogreen Group - Indonesia
- Aboitiz Power Corporation - Philippines
- Bharathi Cement Corporation - India
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- TeaM Sual Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- Directorate Of Revenue Intelligence - India
- Riau Bara Harum - Indonesia
- LBH Netherlands Bv - Netherlands
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Posco Energy - South Korea
- Bhatia International Limited - India
- Renaissance Capital - South Africa
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- Cement Manufacturers Association - India
- Wood Mackenzie - Singapore
- Ind-Barath Power Infra Limited - India
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Kideco Jaya Agung - Indonesia
- Singapore Mercantile Exchange
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Ambuja Cements Ltd - India
- PTC India Limited - India
- IHS Mccloskey Coal Group - USA
- Globalindo Alam Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- Aditya Birla Group - India
- Bukit Makmur.PT - Indonesia
- Central Electricity Authority - India
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kaltim Prima Coal - Indonesia
- Essar Steel Hazira Ltd - India
- SN Aboitiz Power Inc, Philippines
- White Energy Company Limited
- Dalmia Cement Bharat India
- SMC Global Power, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- SMG Consultants - Indonesia
- Sinarmas Energy and Mining - Indonesia
- OPG Power Generation Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Deloitte Consulting - India
- Samtan Co., Ltd - South Korea
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- Commonwealth Bank - Australia
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Global Green Power PLC Corporation, Philippines
- VISA Power Limited - India
- Interocean Group of Companies - India
- Gujarat Sidhee Cement - India
- Siam City Cement - Thailand
- The State Trading Corporation of India Ltd
- Toyota Tsusho Corporation, Japan
- Electricity Authority, New Zealand
- Krishnapatnam Port Company Ltd. - India
- Indika Energy - Indonesia
- Electricity Generating Authority of Thailand
- Chettinad Cement Corporation Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Intertek Mineral Services - Indonesia
- Kartika Selabumi Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Australia Pty. Ltd.
- The University of Queensland
- Kumho Petrochemical, South Korea
- Altura Mining Limited, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- European Bulk Services B.V. - Netherlands
- Merrill Lynch Commodities Europe
- Chamber of Mines of South Africa
- Wilmar Investment Holdings
- Bukit Baiduri Energy - Indonesia
- Petron Corporation, Philippines
- Coalindo Energy - Indonesia
- Heidelberg Cement - Germany
- Bhushan Steel Limited - India
- New Zealand Coal & Carbon
- Central Java Power - Indonesia
- Malabar Cements Ltd - India
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