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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, 06 August 20
SUPRAMAX MARKET CONTINUED SIDEWAYS TREND, AND LITTLE INSPIRING NEWS APPEAR - FEARNLEYS
Capesize
There is presently a small correction in rates, but overall levels are up from previous week mainly due to increased demand in the Eas ...
Thursday, 06 August 20
KOREA SOUTH-EAST POWER INVITING BIDS FOR MIN 3,600-MAX 3,800 NCV COAL
COALspot.com: South Korea’s KOREA SOUTH-EAST POWER CO., LTD. (KOEN) inviting bids for 80,000 Tons (MT) Min 3,600~Max 3,800 kcal/kg NCV coal f ...
Wednesday, 05 August 20
NO NEW MINING LICENSES - A REMINDER TO GOVERNORS IN INDONESIA - SSEK
Indonesia’s acting Director General of Mining and Coal (“DGMC”) has issued a letter to the country’s provincial Governors t ...
Wednesday, 05 August 20
AUGUST 2020 HBA HITTING ITS LOWEST LEVELS IN HISTORY
COALspot.com: The Indonesia Coal Price Reference for the month of August plunged 30.73% YoY, hitting its lowest levels in history and highlighting ...
Wednesday, 05 August 20
SLUMP IN OIL REVENUE CHALLENGES MIDDLE EAST OIL EXPORTERS - INTERMODAL
The Covid-19 pandemic has had far-reaching consequences on the global capital markets. Despite the US government’s efforts for a quick and de ...
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- VISA Power Limited - India
- New Zealand Coal & Carbon
- Mintek Dendrill Indonesia
- Intertek Mineral Services - Indonesia
- Bhoruka Overseas - Indonesia
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- Pipit Mutiara Jaya. PT, Indonesia
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- Kumho Petrochemical, South Korea
- San Jose City I Power Corp, Philippines
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- Bhushan Steel Limited - India
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- Sinarmas Energy and Mining - Indonesia
- Sarangani Energy Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Therma Luzon, Inc, Philippines
- Thiess Contractors Indonesia
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- Planning Commission, India
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- Heidelberg Cement - Germany
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- Star Paper Mills Limited - India
- Meralco Power Generation, Philippines
- GAC Shipping (India) Pvt Ltd
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- Wood Mackenzie - Singapore
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- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
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- Energy Development Corp, Philippines
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- Toyota Tsusho Corporation, Japan
- Bharathi Cement Corporation - India
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- Romanian Commodities Exchange
- Madhucon Powers Ltd - India
- Mjunction Services Limited - India
- Electricity Generating Authority of Thailand
- Sical Logistics Limited - India
- Goldman Sachs - Singapore
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- Grasim Industreis Ltd - India
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Bhatia International Limited - India
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coalindo Energy - Indonesia
- Parry Sugars Refinery, India
- Ambuja Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Agrawal Coal Company - India
- The Treasury - Australian Government
- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Commonwealth Bank - Australia
- AsiaOL BioFuels Corp., Philippines
- Independent Power Producers Association of India
- Larsen & Toubro Limited - India
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- Bulk Trading Sa - Switzerland
- Power Finance Corporation Ltd., India
- Coal and Oil Company - UAE
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- Aboitiz Power Corporation - Philippines
- IEA Clean Coal Centre - UK
- Posco Energy - South Korea
- Formosa Plastics Group - Taiwan
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- Petron Corporation, Philippines
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- Timah Investasi Mineral - Indoneisa
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- Rio Tinto Coal - Australia
- India Bulls Power Limited - India
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- GN Power Mariveles Coal Plant, Philippines
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- Semirara Mining Corp, Philippines
- Directorate Of Revenue Intelligence - India
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- The State Trading Corporation of India Ltd
- Krishnapatnam Port Company Ltd. - India
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
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- Kaltim Prima Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Global Business Power Corporation, Philippines
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- Marubeni Corporation - India
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- Latin American Coal - Colombia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Georgia Ports Authority, United States
- Ind-Barath Power Infra Limited - India
- Oldendorff Carriers - Singapore
- Sakthi Sugars Limited - India
- Wilmar Investment Holdings
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Edison Trading Spa - Italy
- Siam City Cement - Thailand
- Sindya Power Generating Company Private Ltd
- Essar Steel Hazira Ltd - India
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- Vizag Seaport Private Limited - India
- Directorate General of MIneral and Coal - Indonesia
- PowerSource Philippines DevCo
- PNOC Exploration Corporation - Philippines
- Indika Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Altura Mining Limited, Indonesia
- Indian Energy Exchange, India
- Carbofer General Trading SA - India
- PTC India Limited - India
- Indonesian Coal Mining Association
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- SN Aboitiz Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Attock Cement Pakistan Limited
- Samtan Co., Ltd - South Korea
- Indo Tambangraya Megah - Indonesia
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Economic Council, Georgia
- Sree Jayajothi Cements Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Coastal Gujarat Power Limited - India
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- Australian Coal Association
- Central Java Power - Indonesia
- CNBM International Corporation - China
- SMC Global Power, Philippines
- Salva Resources Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- CIMB Investment Bank - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- Ministry of Finance - Indonesia
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