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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, 04 November 22
CHINA EXPANDS COAL TERM CONTRACTS TO ALL MINES TO STABILIZE MARKET - REUTERS
China has expanded long-term thermal coal supply contracts for 2023 to all coal mines and asked power utilities to source more of their demand thro ...
Thursday, 03 November 22
HANDYSIZE VALUES MOVING UP IN OCTOBER, WHILE LNG VALUES SKYROCKET - VESSELSVALUE
Handysize values have increased this month across most ages, following a period of decline. Values for generic 10 year old Handysizes have moved up ...
Thursday, 03 November 22
EUROPEAN GAS SUPPLY SURPLUS, NOVEMBER HBA DOWN TO US$ 308.2 PER TON - ESDM
European gas supply conditions have a major influence in determining fluctuations in the Reference Coal Price (HBA). The November 2022 HBA recorded ...
Wednesday, 02 November 22
MARKET INSIGHT - INTERMODAL
Only five weeks before western sanctions’ full effect, uncertainty over energy has markets and governments on the edge. What was initially th ...
Tuesday, 01 November 22
CHINA COAL TRADE DISRUPTED BY COVID OUTBREAKS AS WINTER LOOMS - REUTERS
China’s strict COVID-19 policy is constraining coal supplies and pushing up prices, industry officials and traders say, just weeks before the ...
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- Kapuas Tunggal Persada - Indonesia
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- Anglo American - United Kingdom
- Samtan Co., Ltd - South Korea
- Ambuja Cements Ltd - India
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- Essar Steel Hazira Ltd - India
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Minerals Council of Australia
- Ceylon Electricity Board - Sri Lanka
- Kartika Selabumi Mining - Indonesia
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- Mintek Dendrill Indonesia
- Marubeni Corporation - India
- Bharathi Cement Corporation - India
- Planning Commission, India
- Price Waterhouse Coopers - Russia
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- CNBM International Corporation - China
- PowerSource Philippines DevCo
- Tamil Nadu electricity Board
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- Vizag Seaport Private Limited - India
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
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- The University of Queensland
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- Kepco SPC Power Corporation, Philippines
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- International Coal Ventures Pvt Ltd - India
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- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Baramulti Group, Indonesia
- The Treasury - Australian Government
- Power Finance Corporation Ltd., India
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- Bukit Makmur.PT - Indonesia
- GVK Power & Infra Limited - India
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- Krishnapatnam Port Company Ltd. - India
- Bhushan Steel Limited - India
- Interocean Group of Companies - India
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- Formosa Plastics Group - Taiwan
- SN Aboitiz Power Inc, Philippines
- Xindia Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Petron Corporation, Philippines
- Barasentosa Lestari - Indonesia
- ICICI Bank Limited - India
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- SMC Global Power, Philippines
- Gujarat Sidhee Cement - India
- Lanco Infratech Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Sindya Power Generating Company Private Ltd
- European Bulk Services B.V. - Netherlands
- Energy Link Ltd, New Zealand
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- White Energy Company Limited
- Directorate Of Revenue Intelligence - India
- Karaikal Port Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- Chamber of Mines of South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- Videocon Industries ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Standard Chartered Bank - UAE
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Coalindo Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jorong Barutama Greston.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Semirara Mining Corp, Philippines
- Bhatia International Limited - India
- The State Trading Corporation of India Ltd
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Latin American Coal - Colombia
- Straits Asia Resources Limited - Singapore
- Heidelberg Cement - Germany
- London Commodity Brokers - England
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
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- SMG Consultants - Indonesia
- Independent Power Producers Association of India
- Makarim & Taira - Indonesia
- Siam City Cement - Thailand
- Central Java Power - Indonesia
- Orica Australia Pty. Ltd.
- Deloitte Consulting - India
- Mercator Lines Limited - India
- Medco Energi Mining Internasional
- Salva Resources Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Global Coal Blending Company Limited - Australia
- Maheswari Brothers Coal Limited - India
- ASAPP Information Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tata Chemicals Ltd - India
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
- MS Steel International - UAE
- Indian Energy Exchange, India
- Holcim Trading Pte Ltd - Singapore
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Renaissance Capital - South Africa
- Savvy Resources Ltd - HongKong
- Coastal Gujarat Power Limited - India
- Antam Resourcindo - Indonesia
- Coal and Oil Company - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Wilmar Investment Holdings
- Rashtriya Ispat Nigam Limited - India
- Intertek Mineral Services - Indonesia
- Bulk Trading Sa - Switzerland
- Parliament of New Zealand
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- Indika Energy - Indonesia
- New Zealand Coal & Carbon
- AsiaOL BioFuels Corp., Philippines
- Commonwealth Bank - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parry Sugars Refinery, India
- Singapore Mercantile Exchange
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- Vedanta Resources Plc - India
- Siam City Cement PLC, Thailand
- Indonesian Coal Mining Association
- Therma Luzon, Inc, Philippines
- Aditya Birla Group - India
- Electricity Authority, New Zealand
- Banpu Public Company Limited - Thailand
- Uttam Galva Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Romanian Commodities Exchange
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- Posco Energy - South Korea
- Ministry of Transport, Egypt
- Kohat Cement Company Ltd. - Pakistan
- Globalindo Alam Lestari - Indonesia
- Cement Manufacturers Association - India
- Bukit Baiduri Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Kaltim Prima Coal - Indonesia
- VISA Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Simpson Spence & Young - Indonesia
- Larsen & Toubro Limited - India
- Africa Commodities Group - South Africa
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Carbofer General Trading SA - India
- Sinarmas Energy and Mining - Indonesia
- Pendopo Energi Batubara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Malabar Cements Ltd - India
- Rio Tinto Coal - Australia
- Wood Mackenzie - Singapore
- Sree Jayajothi Cements Limited - India
- Eastern Coal Council - USA
- GMR Energy Limited - India
- Altura Mining Limited, Indonesia
- Iligan Light & Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Merrill Lynch Commodities Europe
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- Australian Coal Association
- Bayan Resources Tbk. - Indonesia
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- CIMB Investment Bank - Malaysia
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- Thai Mozambique Logistica
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