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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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Wednesday, 17 August 22
CHINA'S COAL-RICH SHANXI MAKES STRIDES IN HIGH-QUALITY DEVELOPMENT - XINHUA
Shanxi, a major coal-producing province in north China, has made continuous advances in high-quality development over the past decade, according to ...
Wednesday, 17 August 22
PAXOCEAN, HONG LAM MARINE AND BUREAU VERITAS SIGN MOU TO DEVELOP AMMONIA BUNKER VESSEL DESIGN - BUREAU VERITAS
PaxOcean Engineering Pte. Ltd. has signed a Memorandum of Understanding (MOU) with Singapore-based bunker vessel operator Hong Lam Marine and class ...
Wednesday, 17 August 22
GOODFUELSS ASIA-PACIFIC BRANCH KICKSTARTS SUSTAINABLE BIOFUEL DELIVERIES WITH NYK AS FIRST CLIENT - GOOD FUELS
GoodFuels, the leading biofuels pioneer for the global transport industry, has today announced that it has successfully supplied sustainable marine ...
Tuesday, 16 August 22
EU BAN ON RUSSIAN COAL IMPORTS COMES INTO FORCE - DEUTSCHE WELLE
The European Union banned Russian coal imports in response to the invasion of Ukraine as part of sanctions in April. Since then, it’s been sc ...
Thursday, 11 August 22
MARKET INSIGHT - INTERMODAL
On July 22nd, Ukraine signed a deal with Russia to release 22mn tons of grain from Ukraine’s 3 major ports (Yuzhny, Chornomorsk, Odesa). Such ...
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- Heidelberg Cement - Germany
- Sojitz Corporation - Japan
- Larsen & Toubro Limited - India
- Indogreen Group - Indonesia
- Salva Resources Pvt Ltd - India
- Indika Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Krishnapatnam Port Company Ltd. - India
- Bhoruka Overseas - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Miang Besar Coal Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Altura Mining Limited, Indonesia
- Globalindo Alam Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Orica Australia Pty. Ltd.
- Jaiprakash Power Ventures ltd
- Cement Manufacturers Association - India
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- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- Sical Logistics Limited - India
- LBH Netherlands Bv - Netherlands
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Siam City Cement - Thailand
- Thiess Contractors Indonesia
- ICICI Bank Limited - India
- The Treasury - Australian Government
- McConnell Dowell - Australia
- Latin American Coal - Colombia
- Timah Investasi Mineral - Indoneisa
- Price Waterhouse Coopers - Russia
- Merrill Lynch Commodities Europe
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Ministry of Mines - Canada
- Ind-Barath Power Infra Limited - India
- Georgia Ports Authority, United States
- GMR Energy Limited - India
- Simpson Spence & Young - Indonesia
- Global Green Power PLC Corporation, Philippines
- Posco Energy - South Korea
- Electricity Authority, New Zealand
- Borneo Indobara - Indonesia
- Central Java Power - Indonesia
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- Videocon Industries ltd - India
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- Samtan Co., Ltd - South Korea
- Kohat Cement Company Ltd. - Pakistan
- Rio Tinto Coal - Australia
- South Luzon Thermal Energy Corporation
- Mjunction Services Limited - India
- GAC Shipping (India) Pvt Ltd
- Semirara Mining and Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- Bangladesh Power Developement Board
- Toyota Tsusho Corporation, Japan
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Parry Sugars Refinery, India
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- SMC Global Power, Philippines
- TeaM Sual Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Independent Power Producers Association of India
- Eastern Coal Council - USA
- Economic Council, Georgia
- Indian Oil Corporation Limited
- Minerals Council of Australia
- Kartika Selabumi Mining - Indonesia
- Energy Link Ltd, New Zealand
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Siam City Cement PLC, Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Carbofer General Trading SA - India
- Indo Tambangraya Megah - Indonesia
- Aditya Birla Group - India
- Commonwealth Bank - Australia
- Oldendorff Carriers - Singapore
- Gujarat Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Sarangani Energy Corporation, Philippines
- Vedanta Resources Plc - India
- Kumho Petrochemical, South Korea
- OPG Power Generation Pvt Ltd - India
- Dalmia Cement Bharat India
- Deloitte Consulting - India
- Planning Commission, India
- MS Steel International - UAE
- Bhatia International Limited - India
- Australian Commodity Traders Exchange
- Gujarat Mineral Development Corp Ltd - India
- Bhushan Steel Limited - India
- Petron Corporation, Philippines
- Goldman Sachs - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Eastern Energy - Thailand
- CNBM International Corporation - China
- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Bayan Resources Tbk. - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Antam Resourcindo - Indonesia
- Parliament of New Zealand
- Singapore Mercantile Exchange
- Makarim & Taira - Indonesia
- IHS Mccloskey Coal Group - USA
- Indonesian Coal Mining Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Trasteel International SA, Italy
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
- Bukit Baiduri Energy - Indonesia
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Thai Mozambique Logistica
- Coal and Oil Company - UAE
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Manunggal Multi Energi - Indonesia
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Uttam Galva Steels Limited - India
- IEA Clean Coal Centre - UK
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- Romanian Commodities Exchange
- Ceylon Electricity Board - Sri Lanka
- Global Business Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Aboitiz Power Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Power Finance Corporation Ltd., India
- Marubeni Corporation - India
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- PowerSource Philippines DevCo
- Mercator Lines Limited - India
- The State Trading Corporation of India Ltd
- Electricity Generating Authority of Thailand
- Wood Mackenzie - Singapore
- Maharashtra Electricity Regulatory Commission - India
- New Zealand Coal & Carbon
- Savvy Resources Ltd - HongKong
- Sree Jayajothi Cements Limited - India
- Mintek Dendrill Indonesia
- White Energy Company Limited
- Vizag Seaport Private Limited - India
- CIMB Investment Bank - Malaysia
- Jindal Steel & Power Ltd - India
- Edison Trading Spa - Italy
- ASAPP Information Group - India
- Meralco Power Generation, Philippines
- Kobexindo Tractors - Indoneisa
- The University of Queensland
- Baramulti Group, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- London Commodity Brokers - England
- Bahari Cakrawala Sebuku - Indonesia
- Australian Coal Association
- Meenaskhi Energy Private Limited - India
- Chettinad Cement Corporation Ltd - India
- Mercuria Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- Star Paper Mills Limited - India
- Attock Cement Pakistan Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Lanco Infratech Ltd - India
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- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
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