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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, 09 September 20
MARKET INSIGHT - INTERMODAL
The uneventful summer lull which is coming to an end soon has left its stigma on the newbuilding market, which has already been devastated by the g ...
Saturday, 05 September 20
INDIA WON'T KICK ITS COAL HABIT SO EASILY - HINDU BUSINESS LINE
India has traditionally considered itself lucky to have been endowed with abundant coal reserves, which it has sought to use to meet its energy nee ...
Saturday, 05 September 20
FINANCING COMPLETE FOR 900MW FIFTH PHASE OF MASSIVE DUBAI SOLAR PARK: ARABIAN BUSINESS
Saudi-based ACWA Power on Thursday announced it has completed the signing of all financing agreements for the fifth phase of the Mohammed bin Rashi ...
Saturday, 05 September 20
POLISH COAL DEMAND EXPECTED TO FALL BY 7 MLN TONNES NEXT YEAR: MINISTER - REUTERS
Poland’s demand for coal is expected to fall by around 7 million tonnes next year, or more than 10% of annual hard coal production, after a d ...
Saturday, 05 September 20
PAKISTAN'S NEW 27-YEAR POWER PLAN RISKS LOCKING IN LONG-TERM OVERCAPACITY, LEAVING IMPORTED COAL AND LNG PLANTS STRANDED - IEEFA
Wind and solar, the country’s cheapest source of new generation, also overlooked
Pakistan risks locking itself into building m ...
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- Trasteel International SA, Italy
- Mercator Lines Limited - India
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
- Thai Mozambique Logistica
- Binh Thuan Hamico - Vietnam
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Planning Commission, India
- South Luzon Thermal Energy Corporation
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Essar Steel Hazira Ltd - India
- Bukit Makmur.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PTC India Limited - India
- Billiton Holdings Pty Ltd - Australia
- Indian Oil Corporation Limited
- LBH Netherlands Bv - Netherlands
- Anglo American - United Kingdom
- Grasim Industreis Ltd - India
- Kartika Selabumi Mining - Indonesia
- Energy Development Corp, Philippines
- Star Paper Mills Limited - India
- Aboitiz Power Corporation - Philippines
- GVK Power & Infra Limited - India
- Barasentosa Lestari - Indonesia
- Georgia Ports Authority, United States
- Medco Energi Mining Internasional
- Merrill Lynch Commodities Europe
- Mintek Dendrill Indonesia
- Deloitte Consulting - India
- Siam City Cement PLC, Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Minerals Council of Australia
- Standard Chartered Bank - UAE
- Thiess Contractors Indonesia
- Wood Mackenzie - Singapore
- Singapore Mercantile Exchange
- Simpson Spence & Young - Indonesia
- Oldendorff Carriers - Singapore
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Price Waterhouse Coopers - Russia
- Tata Chemicals Ltd - India
- Wilmar Investment Holdings
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Sojitz Corporation - Japan
- Lanco Infratech Ltd - India
- Tamil Nadu electricity Board
- Bayan Resources Tbk. - Indonesia
- Rio Tinto Coal - Australia
- New Zealand Coal & Carbon
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Bhoruka Overseas - Indonesia
- Kepco SPC Power Corporation, Philippines
- MS Steel International - UAE
- Kaltim Prima Coal - Indonesia
- GMR Energy Limited - India
- Borneo Indobara - Indonesia
- Meenaskhi Energy Private Limited - India
- Goldman Sachs - Singapore
- Xindia Steels Limited - India
- PowerSource Philippines DevCo
- Kalimantan Lumbung Energi - Indonesia
- Bulk Trading Sa - Switzerland
- Ind-Barath Power Infra Limited - India
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- Africa Commodities Group - South Africa
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Gujarat Sidhee Cement - India
- SMG Consultants - Indonesia
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
- Mjunction Services Limited - India
- Chettinad Cement Corporation Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Directorate General of MIneral and Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Finance - Indonesia
- Coastal Gujarat Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- Electricity Authority, New Zealand
- AsiaOL BioFuels Corp., Philippines
- The University of Queensland
- Sree Jayajothi Cements Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Maharashtra Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Eastern Energy - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Indogreen Group - Indonesia
- Indika Energy - Indonesia
- White Energy Company Limited
- London Commodity Brokers - England
- Coal and Oil Company - UAE
- Kapuas Tunggal Persada - Indonesia
- Toyota Tsusho Corporation, Japan
- Jaiprakash Power Ventures ltd
- Carbofer General Trading SA - India
- Eastern Coal Council - USA
- Alfred C Toepfer International GmbH - Germany
- Gujarat Mineral Development Corp Ltd - India
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Formosa Plastics Group - Taiwan
- Agrawal Coal Company - India
- Larsen & Toubro Limited - India
- Independent Power Producers Association of India
- Vedanta Resources Plc - India
- Bhatia International Limited - India
- Makarim & Taira - Indonesia
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Dalmia Cement Bharat India
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- Salva Resources Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Karaikal Port Pvt Ltd - India
- CNBM International Corporation - China
- Metalloyd Limited - United Kingdom
- Semirara Mining Corp, Philippines
- Mercuria Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- Malabar Cements Ltd - India
- Indonesian Coal Mining Association
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- Riau Bara Harum - Indonesia
- Central Java Power - Indonesia
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Bhushan Steel Limited - India
- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
- GN Power Mariveles Coal Plant, Philippines
- Bukit Baiduri Energy - Indonesia
- Romanian Commodities Exchange
- Aditya Birla Group - India
- Madhucon Powers Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Ministry of Transport, Egypt
- Kobexindo Tractors - Indoneisa
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- Jindal Steel & Power Ltd - India
- Savvy Resources Ltd - HongKong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ambuja Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- Antam Resourcindo - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Manunggal Multi Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Altura Mining Limited, Indonesia
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- PNOC Exploration Corporation - Philippines
- Sakthi Sugars Limited - India
- Interocean Group of Companies - India
- Economic Council, Georgia
- PetroVietnam Power Coal Import and Supply Company
- Global Business Power Corporation, Philippines
- Australian Coal Association
- Bharathi Cement Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Australian Commodity Traders Exchange
- Globalindo Alam Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- European Bulk Services B.V. - Netherlands
- Orica Mining Services - Indonesia
- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Iligan Light & Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Therma Luzon, Inc, Philippines
- Bangladesh Power Developement Board
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Videocon Industries ltd - India
- Posco Energy - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
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