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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, 04 November 21
FASTER DECARBONISATION: BACK TO BASICS FOR THE MINING INDUSTRY? - WOOD MACKENZIE
To the uninitiated, rugby is a technical and complicated game. As young schoolboys it was all a wee bit confusing and we invariably ended up on the ...
Wednesday, 03 November 21
CHINA TO LAUNCH NEW DATA MONITORING SYSTEM, TARGETING COAL MARKET SPECULATION, HOARDING - GLOBAL TIMES
China’s top economic planner announced on Sunday a new data system for supervising the implementation of medium- and long-term contracts of c ...
Wednesday, 03 November 21
CHINA’S STATE PLANNER SAYS COAL SUPPLY IMPROVING, PRICES STABILISING - REUTERS
China’s coal supply situation has seen significant improvement with joint efforts from coal producers, logistics and downstream users, while ...
Wednesday, 03 November 21
HIGHER COKING COAL PRICES TO PARE PROFITABILITY OF STEELMAKERS IN SECOND HALF OF FY22 - CRISIL RATINGS
The operating margin of primary steelmakers will reduce by a third to 24-26% in the second half of this fiscal versus the first half as input cost ...
Wednesday, 03 November 21
MARKET INSIGHT - INTERMODAL
November is here and soon the all time seasonal favorite “all I want or Christmas is you” by Mariah Carey will be played in radio stati ...
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- Indo Tambangraya Megah - Indonesia
- Africa Commodities Group - South Africa
- Iligan Light & Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Semirara Mining Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Makarim & Taira - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Finance - Indonesia
- Heidelberg Cement - Germany
- Star Paper Mills Limited - India
- Kaltim Prima Coal - Indonesia
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- Coal and Oil Company - UAE
- Tata Chemicals Ltd - India
- Price Waterhouse Coopers - Russia
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- TeaM Sual Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Interocean Group of Companies - India
- Formosa Plastics Group - Taiwan
- AsiaOL BioFuels Corp., Philippines
- Indogreen Group - Indonesia
- Vizag Seaport Private Limited - India
- VISA Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- Sical Logistics Limited - India
- Kepco SPC Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Baramulti Group, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Krishnapatnam Port Company Ltd. - India
- Latin American Coal - Colombia
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Central Java Power - Indonesia
- Bayan Resources Tbk. - Indonesia
- Mintek Dendrill Indonesia
- Meralco Power Generation, Philippines
- Attock Cement Pakistan Limited
- Gujarat Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Siam City Cement - Thailand
- Bhatia International Limited - India
- White Energy Company Limited
- India Bulls Power Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- McConnell Dowell - Australia
- Power Finance Corporation Ltd., India
- Edison Trading Spa - Italy
- Offshore Bulk Terminal Pte Ltd, Singapore
- IHS Mccloskey Coal Group - USA
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
- Siam City Cement PLC, Thailand
- Standard Chartered Bank - UAE
- Energy Development Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Indonesian Coal Mining Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Independent Power Producers Association of India
- Malabar Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- Bangladesh Power Developement Board
- Barasentosa Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Economic Council, Georgia
- Thiess Contractors Indonesia
- Mercuria Energy - Indonesia
- Indian Oil Corporation Limited
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Cement Manufacturers Association - India
- LBH Netherlands Bv - Netherlands
- Vedanta Resources Plc - India
- Sarangani Energy Corporation, Philippines
- Agrawal Coal Company - India
- Trasteel International SA, Italy
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Coalindo Energy - Indonesia
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- Videocon Industries ltd - India
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- Singapore Mercantile Exchange
- Sojitz Corporation - Japan
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sinarmas Energy and Mining - Indonesia
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- The University of Queensland
- MS Steel International - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Carbofer General Trading SA - India
- Maharashtra Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- The State Trading Corporation of India Ltd
- CNBM International Corporation - China
- IEA Clean Coal Centre - UK
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Merrill Lynch Commodities Europe
- Electricity Authority, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Samtan Co., Ltd - South Korea
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Miang Besar Coal Terminal - Indonesia
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- Australian Commodity Traders Exchange
- Directorate Of Revenue Intelligence - India
- Oldendorff Carriers - Singapore
- GVK Power & Infra Limited - India
- Marubeni Corporation - India
- London Commodity Brokers - England
- Cigading International Bulk Terminal - Indonesia
- Chamber of Mines of South Africa
- Ind-Barath Power Infra Limited - India
- Sree Jayajothi Cements Limited - India
- Kobexindo Tractors - Indoneisa
- San Jose City I Power Corp, Philippines
- Madhucon Powers Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Binh Thuan Hamico - Vietnam
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Mines - Canada
- Georgia Ports Authority, United States
- Electricity Generating Authority of Thailand
- Petron Corporation, Philippines
- Coastal Gujarat Power Limited - India
- PTC India Limited - India
- Metalloyd Limited - United Kingdom
- Borneo Indobara - Indonesia
- Tamil Nadu electricity Board
- South Luzon Thermal Energy Corporation
- Jaiprakash Power Ventures ltd
- Alfred C Toepfer International GmbH - Germany
- SMG Consultants - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Global Coal Blending Company Limited - Australia
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Toyota Tsusho Corporation, Japan
- Xindia Steels Limited - India
- Orica Mining Services - Indonesia
- Mercator Lines Limited - India
- SMC Global Power, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Essar Steel Hazira Ltd - India
- ASAPP Information Group - India
- Karbindo Abesyapradhi - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining and Power Corporation, Philippines
- New Zealand Coal & Carbon
- Parliament of New Zealand
- Aboitiz Power Corporation - Philippines
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- International Coal Ventures Pvt Ltd - India
- Wilmar Investment Holdings
- Posco Energy - South Korea
- PNOC Exploration Corporation - Philippines
- Ministry of Transport, Egypt
- Kalimantan Lumbung Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- Larsen & Toubro Limited - India
- Billiton Holdings Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jorong Barutama Greston.PT - Indonesia
- Australian Coal Association
- Parry Sugars Refinery, India
- Central Electricity Authority - India
- Indika Energy - Indonesia
- Commonwealth Bank - Australia
- Global Business Power Corporation, Philippines
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Anglo American - United Kingdom
- Kideco Jaya Agung - Indonesia
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