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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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Thursday, 13 October 22
OPEC DOWNGRADES CRUDE OIL DEMAND, AS WORLD ECONOMY ENTERS SLOWDOWN
Crude Oil Price Movements
The OPEC Reference Basket (ORB) declined m-o-m by $6.58 in September, or 6.5%, to average $95.32/b. Pressure from equ ...
Wednesday, 12 October 22
MARKET INSIGHT - INTERMODAL
Sale and Purchase activity during the first three quarters of 2022 has been remarkable.
Focusing only on Tankers and Bulkers, such v ...
Monday, 10 October 22
ENERGY TRANSITION BOOSTS GLOBAL LONG-TERM DEMAND FOR METALS - FITCH RATINGS
The energy transition will significantly increase demand for metals used in manufacturing of electric vehicles (EVs) and renewable power generation ...
Monday, 10 October 22
GLOBAL CEOS EXPECT IMPENDING RECESSION TO BE 'SHORT AND SHARP,' POLL SHOWS - CNBC
Global CEOs are anticipating a recession in the next 12 months, according to a new survey by professional services firm KPMG, which said more than ...
Thursday, 06 October 22
AUSTRALIA’S RESOURCES REVENUE TO HIT RECORD AMID UKRAINE CONFLICT - REUTERS
Australian resources and energy export earnings are forecast to jump 7% to a record A$450 billion ($290 billion) this fiscal year, bolstered by soa ...
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- Deloitte Consulting - India
- Bhushan Steel Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Independent Power Producers Association of India
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Energy Development Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- IHS Mccloskey Coal Group - USA
- Aboitiz Power Corporation - Philippines
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- Economic Council, Georgia
- LBH Netherlands Bv - Netherlands
- Commonwealth Bank - Australia
- London Commodity Brokers - England
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Global Coal Blending Company Limited - Australia
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Bhatia International Limited - India
- The State Trading Corporation of India Ltd
- Krishnapatnam Port Company Ltd. - India
- ICICI Bank Limited - India
- Tamil Nadu electricity Board
- Siam City Cement - Thailand
- Gujarat Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- Parry Sugars Refinery, India
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- SN Aboitiz Power Inc, Philippines
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- Kapuas Tunggal Persada - Indonesia
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
- India Bulls Power Limited - India
- Ind-Barath Power Infra Limited - India
- SMC Global Power, Philippines
- Meralco Power Generation, Philippines
- Global Business Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Energy Link Ltd, New Zealand
- PowerSource Philippines DevCo
- McConnell Dowell - Australia
- Mjunction Services Limited - India
- Edison Trading Spa - Italy
- Planning Commission, India
- Kaltim Prima Coal - Indonesia
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- Aditya Birla Group - India
- Barasentosa Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- Altura Mining Limited, Indonesia
- Goldman Sachs - Singapore
- Bharathi Cement Corporation - India
- European Bulk Services B.V. - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Minerals Council of Australia
- Australian Coal Association
- Metalloyd Limited - United Kingdom
- Malabar Cements Ltd - India
- Star Paper Mills Limited - India
- Renaissance Capital - South Africa
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Cigading International Bulk Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Bhoruka Overseas - Indonesia
- Standard Chartered Bank - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The Treasury - Australian Government
- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Samtan Co., Ltd - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Georgia Ports Authority, United States
- Mercuria Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- PTC India Limited - India
- Bangladesh Power Developement Board
- Cement Manufacturers Association - India
- Marubeni Corporation - India
- Pendopo Energi Batubara - Indonesia
- MS Steel International - UAE
- VISA Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Antam Resourcindo - Indonesia
- Interocean Group of Companies - India
- Ministry of Finance - Indonesia
- Larsen & Toubro Limited - India
- Kobexindo Tractors - Indoneisa
- Attock Cement Pakistan Limited
- Sinarmas Energy and Mining - Indonesia
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- Thai Mozambique Logistica
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- Coastal Gujarat Power Limited - India
- South Luzon Thermal Energy Corporation
- Jorong Barutama Greston.PT - Indonesia
- Coalindo Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Ministry of Mines - Canada
- Global Green Power PLC Corporation, Philippines
- Indonesian Coal Mining Association
- Savvy Resources Ltd - HongKong
- Neyveli Lignite Corporation Ltd, - India
- Petrochimia International Co. Ltd.- Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Sojitz Corporation - Japan
- Banpu Public Company Limited - Thailand
- Kideco Jaya Agung - Indonesia
- Therma Luzon, Inc, Philippines
- Parliament of New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Makarim & Taira - Indonesia
- Wilmar Investment Holdings
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- Xindia Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Eastern Coal Council - USA
- Posco Energy - South Korea
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- New Zealand Coal & Carbon
- Straits Asia Resources Limited - Singapore
- Karbindo Abesyapradhi - Indoneisa
- CIMB Investment Bank - Malaysia
- Heidelberg Cement - Germany
- Power Finance Corporation Ltd., India
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Electricity Authority, New Zealand
- GAC Shipping (India) Pvt Ltd
- Rashtriya Ispat Nigam Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indika Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bayan Resources Tbk. - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- Vedanta Resources Plc - India
- White Energy Company Limited
- Sarangani Energy Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- Uttam Galva Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- International Coal Ventures Pvt Ltd - India
- Borneo Indobara - Indonesia
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- Tata Chemicals Ltd - India
- Eastern Energy - Thailand
- Central Electricity Authority - India
- San Jose City I Power Corp, Philippines
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Holcim Trading Pte Ltd - Singapore
- Oldendorff Carriers - Singapore
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- Binh Thuan Hamico - Vietnam
- Orica Mining Services - Indonesia
- Vizag Seaport Private Limited - India
- SMG Consultants - Indonesia
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- The University of Queensland
- Directorate Of Revenue Intelligence - India
- Mercator Lines Limited - India
- Billiton Holdings Pty Ltd - Australia
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
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