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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, 30 June 22
FINANCIAL GAINS SUPPORT COAL TRANSITION - BALTIC EXCHANGE
Support for the shift away from coal dependency continues to mount, with the International Monetary Fund (IMF) calculating that the move would gene ...
Thursday, 30 June 22
WHY ARE LNG SHIPPING STOCKS RESILIENT? - DREWRY
LNG shipping stocks are proving resilient despite uncertainties about growth in global GDP, high inflation and the ongoing geopolitical crisis caus ...
Thursday, 30 June 22
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The spot price of Australian thermal coal is higher than that of coking coal, an unprecedented situation that highlights just how the global market ...
Thursday, 30 June 22
SHANXI PROVINCE RAISES ANNUAL COAL OUTPUT TO 1.3 BILLION TONS TO ENSURE CHINA’S ENERGY SUPPLY - GLOBAL TIMES
North China’s Shanxi Province, a major coal-producing region, recently announced a move to increase its annual coal production output by 107 ...
Thursday, 30 June 22
DIVERGENCE BETWEEN HIGH- AND LOW-GRADE THERMAL COAL PRICES IN APAC TO NARROW - FITCH RATINGS
Prices between high- and low-grade thermal coal in Asia-Pacific (APAC) have diverged since late March 2022, but Fitch Ratings expects the gap to na ...
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- Altura Mining Limited, Indonesia
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- Semirara Mining and Power Corporation, Philippines
- SMC Global Power, Philippines
- Manunggal Multi Energi - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Central Electricity Authority - India
- Vizag Seaport Private Limited - India
- Krishnapatnam Port Company Ltd. - India
- Karbindo Abesyapradhi - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- Bangladesh Power Developement Board
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- London Commodity Brokers - England
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Samtan Co., Ltd - South Korea
- Energy Development Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Marubeni Corporation - India
- Grasim Industreis Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- Georgia Ports Authority, United States
- Attock Cement Pakistan Limited
- Singapore Mercantile Exchange
- Meenaskhi Energy Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Baramulti Group, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Power Finance Corporation Ltd., India
- San Jose City I Power Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Lanco Infratech Ltd - India
- Australian Coal Association
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Kobexindo Tractors - Indoneisa
- Standard Chartered Bank - UAE
- Sarangani Energy Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Straits Asia Resources Limited - Singapore
- PTC India Limited - India
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- Goldman Sachs - Singapore
- Intertek Mineral Services - Indonesia
- TeaM Sual Corporation - Philippines
- Salva Resources Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Aditya Birla Group - India
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- PetroVietnam Power Coal Import and Supply Company
- Indonesian Coal Mining Association
- South Luzon Thermal Energy Corporation
- The Treasury - Australian Government
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Tata Chemicals Ltd - India
- Latin American Coal - Colombia
- The University of Queensland
- Orica Mining Services - Indonesia
- Bhushan Steel Limited - India
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Global Coal Blending Company Limited - Australia
- Indo Tambangraya Megah - Indonesia
- Tamil Nadu electricity Board
- Parry Sugars Refinery, India
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- AsiaOL BioFuels Corp., Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- India Bulls Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Madhucon Powers Ltd - India
- Jaiprakash Power Ventures ltd
- Chettinad Cement Corporation Ltd - India
- Uttam Galva Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Formosa Plastics Group - Taiwan
- Oldendorff Carriers - Singapore
- Indika Energy - Indonesia
- Electricity Generating Authority of Thailand
- Port Waratah Coal Services - Australia
- Minerals Council of Australia
- PNOC Exploration Corporation - Philippines
- Gujarat Sidhee Cement - India
- Cigading International Bulk Terminal - Indonesia
- Indian Oil Corporation Limited
- Heidelberg Cement - Germany
- Simpson Spence & Young - Indonesia
- Iligan Light & Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Agrawal Coal Company - India
- Independent Power Producers Association of India
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- Rio Tinto Coal - Australia
- Siam City Cement PLC, Thailand
- Indian Energy Exchange, India
- Cement Manufacturers Association - India
- CNBM International Corporation - China
- Orica Australia Pty. Ltd.
- Leighton Contractors Pty Ltd - Australia
- Kapuas Tunggal Persada - Indonesia
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Ministry of Finance - Indonesia
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Star Paper Mills Limited - India
- Coal and Oil Company - UAE
- Kohat Cement Company Ltd. - Pakistan
- Petrochimia International Co. Ltd.- Taiwan
- Sical Logistics Limited - India
- GVK Power & Infra Limited - India
- Ambuja Cements Ltd - India
- Bhatia International Limited - India
- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- Interocean Group of Companies - India
- Coalindo Energy - Indonesia
- Australian Commodity Traders Exchange
- Mjunction Services Limited - India
- Antam Resourcindo - Indonesia
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Africa Commodities Group - South Africa
- Toyota Tsusho Corporation, Japan
- Miang Besar Coal Terminal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Larsen & Toubro Limited - India
- Kaltim Prima Coal - Indonesia
- Petron Corporation, Philippines
- Mintek Dendrill Indonesia
- Energy Link Ltd, New Zealand
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Romanian Commodities Exchange
- Gujarat Mineral Development Corp Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Electricity Authority, New Zealand
- Jindal Steel & Power Ltd - India
- Renaissance Capital - South Africa
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Xindia Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMG Consultants - Indonesia
- Kumho Petrochemical, South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Sindya Power Generating Company Private Ltd
- Thiess Contractors Indonesia
- Vedanta Resources Plc - India
- Kartika Selabumi Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Economic Council, Georgia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- Aboitiz Power Corporation - Philippines
- New Zealand Coal & Carbon
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- Meralco Power Generation, Philippines
- Sakthi Sugars Limited - India
- Makarim & Taira - Indonesia
- Wilmar Investment Holdings
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- Posco Energy - South Korea
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Binh Thuan Hamico - Vietnam
- PowerSource Philippines DevCo
- Bukit Baiduri Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Chamber of Mines of South Africa
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
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