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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, 10 August 22
THE FUTURE OF COAL: EIGHT KEY THEMES FROM THE GLOBAL COAL FORUM - WOOD MACKENZIE
Coal investors face a multi-layered and unavoidable challenge: markets distorted by war, trade constraints and the existential threat of the energy ...
Saturday, 06 August 22
SUMITOMO Q1 PROFIT RISES 45% ON STRONGER PRICES OF COAL, NICKEL - REUTERS
Japanese trading house Sumitomo Corp 8053.T said on Wednesday its net profit for the April-June quarter rose 45% to a record thanks to higher price ...
Saturday, 06 August 22
GERMANY'S ENERGY U-TURN: COAL INSTEAD OF GAS - DEUTSCHE WELLE
Berlin has realized it will never again import as much energy from Russia as before the Ukraine war. So the challenge is to wean Germany off its de ...
Saturday, 30 July 22
NUANCES OF FORCE MAJEURE CLAUSE - BALTIC EXCHANGE
Knowledge to Elevate
In NKD Maritime Limited v. Bart Maritime (No 2) Inc (Shagang Giant) [2022] EWHC 1615 (Comm), Bart Maritime (No 2) Inc (th ...
Saturday, 30 July 22
AEMO URGES QUICKER SHIFT TO RENEWABLES AMID COAL FAILURES AND SOARING FOSSIL FUEL COSTS
The Australian Energy Market Operator has called for an accelerated shift to wind and solar, backed up by batteries and other storage, as a devasta ...
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- Thai Mozambique Logistica
- VISA Power Limited - India
- Independent Power Producers Association of India
- Deloitte Consulting - India
- Ind-Barath Power Infra Limited - India
- PTC India Limited - India
- Kartika Selabumi Mining - Indonesia
- Billiton Holdings Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- Miang Besar Coal Terminal - Indonesia
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Mercuria Energy - Indonesia
- GMR Energy Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Indogreen Group - Indonesia
- Mjunction Services Limited - India
- Bharathi Cement Corporation - India
- Energy Link Ltd, New Zealand
- Dalmia Cement Bharat India
- AsiaOL BioFuels Corp., Philippines
- Bukit Baiduri Energy - Indonesia
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Sinarmas Energy and Mining - Indonesia
- Attock Cement Pakistan Limited
- Borneo Indobara - Indonesia
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- Makarim & Taira - Indonesia
- Commonwealth Bank - Australia
- Altura Mining Limited, Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Medco Energi Mining Internasional
- White Energy Company Limited
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Makmur.PT - Indonesia
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- CIMB Investment Bank - Malaysia
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Bhatia International Limited - India
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
- Orica Mining Services - Indonesia
- Indonesian Coal Mining Association
- GVK Power & Infra Limited - India
- Riau Bara Harum - Indonesia
- Sarangani Energy Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Sindya Power Generating Company Private Ltd
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- The University of Queensland
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Anglo American - United Kingdom
- Sojitz Corporation - Japan
- Formosa Plastics Group - Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
- Semirara Mining Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Georgia Ports Authority, United States
- Latin American Coal - Colombia
- Samtan Co., Ltd - South Korea
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
- Essar Steel Hazira Ltd - India
- Malabar Cements Ltd - India
- Heidelberg Cement - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- European Bulk Services B.V. - Netherlands
- MS Steel International - UAE
- CNBM International Corporation - China
- TeaM Sual Corporation - Philippines
- Sical Logistics Limited - India
- McConnell Dowell - Australia
- SN Aboitiz Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Central Electricity Authority - India
- Mintek Dendrill Indonesia
- Maheswari Brothers Coal Limited - India
- Uttam Galva Steels Limited - India
- Indian Oil Corporation Limited
- Intertek Mineral Services - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Port Waratah Coal Services - Australia
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- Cement Manufacturers Association - India
- Indo Tambangraya Megah - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- Pendopo Energi Batubara - Indonesia
- Siam City Cement - Thailand
- Sakthi Sugars Limited - India
- Alfred C Toepfer International GmbH - Germany
- Metalloyd Limited - United Kingdom
- Bulk Trading Sa - Switzerland
- Rio Tinto Coal - Australia
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Antam Resourcindo - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Goldman Sachs - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Thiess Contractors Indonesia
- Jindal Steel & Power Ltd - India
- IEA Clean Coal Centre - UK
- Simpson Spence & Young - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Carbofer General Trading SA - India
- ICICI Bank Limited - India
- Baramulti Group, Indonesia
- Salva Resources Pvt Ltd - India
- Vedanta Resources Plc - India
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- LBH Netherlands Bv - Netherlands
- Posco Energy - South Korea
- Oldendorff Carriers - Singapore
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- Chettinad Cement Corporation Ltd - India
- Bhushan Steel Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Parry Sugars Refinery, India
- GAC Shipping (India) Pvt Ltd
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- Savvy Resources Ltd - HongKong
- Eastern Coal Council - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Xindia Steels Limited - India
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- The Treasury - Australian Government
- Pipit Mutiara Jaya. PT, Indonesia
- Agrawal Coal Company - India
- Semirara Mining and Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- Wilmar Investment Holdings
- Iligan Light & Power Inc, Philippines
- Videocon Industries ltd - India
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Chamber of Mines of South Africa
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- Globalindo Alam Lestari - Indonesia
- Power Finance Corporation Ltd., India
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Grasim Industreis Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- ASAPP Information Group - India
- GN Power Mariveles Coal Plant, Philippines
- Karaikal Port Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Indian Energy Exchange, India
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Africa Commodities Group - South Africa
- Holcim Trading Pte Ltd - Singapore
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- Kaltim Prima Coal - Indonesia
- Lanco Infratech Ltd - India
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
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