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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, 13 October 21
MARKET INSIGHT - INTERMODAL
Following up on our insight on May 2021, where we discussed about the Capesize market outlook for the second half of the year, we are pleased to se ...
Wednesday, 13 October 21
FBX INDEX: THE IMPOSSIBILITY OF SHORT-TERM FORECASTING - LARS JENSEN
Will freight rates on Asia-Europe or the Transpacific reach 40.000 USD/FFE in the run-up prior to Chinese New Year 2022? Or will they start droppin ...
Wednesday, 13 October 21
CHINA FLOODS: COAL PRICE HITS FRESH HIGH AS MINES SHUT - BBC
The price of coal used in China’s power plants has surged to a new record high as another of the country’s key mining regions is hit by ...
Tuesday, 12 October 21
BUMA SIGNS CONDITIONAL AGREEMENT FOR AUSTRALIAN ASSET ACQUISITION
PT Tbk. announced that its subsidiary, PT Bukit Makmur Mandiri Utama, through its newly incorporated Australian subsidiary, BUMA International Pty ...
Tuesday, 12 October 21
INDONESIA'S COAL-BASED POWER PLANTS ARE SUBJECT TO CARBON TAX NEXT YEAR, ELECTRICITY COSTS COULD RISE! - CNBC
The Indonesian government is planning plans to implement a carbon tax of IDR 30 per kilogram (kg) of carbon dioxide equivalent (CO2e) or equivalent ...
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- The State Trading Corporation of India Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Sical Logistics Limited - India
- India Bulls Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Finance - Indonesia
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- Sree Jayajothi Cements Limited - India
- Heidelberg Cement - Germany
- Thiess Contractors Indonesia
- The University of Queensland
- Directorate Of Revenue Intelligence - India
- Malabar Cements Ltd - India
- Baramulti Group, Indonesia
- Karaikal Port Pvt Ltd - India
- Wood Mackenzie - Singapore
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Simpson Spence & Young - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- Leighton Contractors Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Australian Commodity Traders Exchange
- Maheswari Brothers Coal Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- AsiaOL BioFuels Corp., Philippines
- McConnell Dowell - Australia
- South Luzon Thermal Energy Corporation
- Dalmia Cement Bharat India
- Tata Chemicals Ltd - India
- Kepco SPC Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Essar Steel Hazira Ltd - India
- Sakthi Sugars Limited - India
- Posco Energy - South Korea
- Petron Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Attock Cement Pakistan Limited
- PNOC Exploration Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- ICICI Bank Limited - India
- Uttam Galva Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Pendopo Energi Batubara - Indonesia
- Intertek Mineral Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Mercator Lines Limited - India
- Merrill Lynch Commodities Europe
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Kartika Selabumi Mining - Indonesia
- Siam City Cement - Thailand
- LBH Netherlands Bv - Netherlands
- Indonesian Coal Mining Association
- Global Business Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- Chamber of Mines of South Africa
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- Miang Besar Coal Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- White Energy Company Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PowerSource Philippines DevCo
- Savvy Resources Ltd - HongKong
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Madhucon Powers Ltd - India
- IEA Clean Coal Centre - UK
- Orica Mining Services - Indonesia
- Commonwealth Bank - Australia
- Iligan Light & Power Inc, Philippines
- Carbofer General Trading SA - India
- Thai Mozambique Logistica
- Formosa Plastics Group - Taiwan
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Kaltim Prima Coal - Indonesia
- Marubeni Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
- Port Waratah Coal Services - Australia
- Mintek Dendrill Indonesia
- Indian Oil Corporation Limited
- Krishnapatnam Port Company Ltd. - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Standard Chartered Bank - UAE
- Australian Coal Association
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- Vedanta Resources Plc - India
- Coalindo Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- Lanco Infratech Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Banpu Public Company Limited - Thailand
- IHS Mccloskey Coal Group - USA
- Georgia Ports Authority, United States
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indogreen Group - Indonesia
- Salva Resources Pvt Ltd - India
- Deloitte Consulting - India
- Antam Resourcindo - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bangladesh Power Developement Board
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- CNBM International Corporation - China
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- Latin American Coal - Colombia
- GMR Energy Limited - India
- Cigading International Bulk Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Star Paper Mills Limited - India
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- Ambuja Cements Ltd - India
- GVK Power & Infra Limited - India
- The Treasury - Australian Government
- Parry Sugars Refinery, India
- Cement Manufacturers Association - India
- Energy Link Ltd, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- San Jose City I Power Corp, Philippines
- Bhatia International Limited - India
- Semirara Mining Corp, Philippines
- Samtan Co., Ltd - South Korea
- Xindia Steels Limited - India
- Economic Council, Georgia
- Gujarat Mineral Development Corp Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- Gujarat Sidhee Cement - India
- Coastal Gujarat Power Limited - India
- Oldendorff Carriers - Singapore
- Ind-Barath Power Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Aditya Birla Group - India
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- Borneo Indobara - Indonesia
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- Central Electricity Authority - India
- ASAPP Information Group - India
- Rio Tinto Coal - Australia
- Bulk Trading Sa - Switzerland
- Power Finance Corporation Ltd., India
- MS Steel International - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Eastern Energy - Thailand
- Indo Tambangraya Megah - Indonesia
- Central Java Power - Indonesia
- Edison Trading Spa - Italy
- GN Power Mariveles Coal Plant, Philippines
- Manunggal Multi Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- Indika Energy - Indonesia
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Gujarat Electricity Regulatory Commission - India
- Bhushan Steel Limited - India
- Ceylon Electricity Board - Sri Lanka
- Vizag Seaport Private Limited - India
- Romanian Commodities Exchange
- PetroVietnam Power Coal Import and Supply Company
- Semirara Mining and Power Corporation, Philippines
- VISA Power Limited - India
- Planning Commission, India
- Bayan Resources Tbk. - Indonesia
- SMC Global Power, Philippines
- Barasentosa Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- PTC India Limited - India
- Therma Luzon, Inc, Philippines
- Interocean Group of Companies - India
- Trasteel International SA, Italy
- Coal and Oil Company - UAE
- SN Aboitiz Power Inc, Philippines
- Minerals Council of Australia
- Sojitz Corporation - Japan
- Mjunction Services Limited - India
- TeaM Sual Corporation - Philippines
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