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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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Tuesday, 04 August 20
KOEN INVITED BIDS FOR TOTAL 900K MT OF MIN 5600 NCV COAL FOR 3 YEARS
COALspot.com: South Korea’s KOREA SOUTH-EAST POWER CO., LTD. (KOEN) has issued an international tender for 260,000 to 300,000 Tons (MT) min. ...
Tuesday, 04 August 20
THE WORLD’S FLEET OF COAL-FIRED POWER STATIONS HAS GOT SMALLER FOR THE FIRST TIME ON RECORD, WITH MORE CAPACITY RETIRED IN THE FIRST HALF OF 2020 THAN THE AMOUNT OPENED - IEA
This is according to the latest Global Coal Plant Tracker (GCPT) results by Global Energy Monitor (GEM), which we completed last month and report f ...
Monday, 03 August 20
U.S. COAL CONSUMPTION, WHICH HAS DECLINED SINCE ITS 2007 PEAK, FELL TO ITS LOWEST POINT IN APRIL 2020 - EIA
According to the U.S. Energy Information Administration’s (EIA) most recent Monthly Energy Review, the United States consumed 6.5 quadrillion ...
Monday, 03 August 20
LOW OIL PRICE AND CORONA VIRUS HIT SUB-SAHARAN AFRICA OIL PRODUCERS - FITCH RATINGS
The collapse in oil prices and the coronavirus shock is worsening the fiscal and external balances of sub-Saharan African oil producers, Fitch Rati ...
Saturday, 01 August 20
SHIP SHAPE - OUCH: FIS
Thursday afternoon saw a report that US GDP in Q2 shrank by 32.9%. Now this may have beaten expectations, but it’s a bit like saying that you ...
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Therma Luzon, Inc, Philippines
- Indian Oil Corporation Limited
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- Binh Thuan Hamico - Vietnam
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- Global Business Power Corporation, Philippines
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- MS Steel International - UAE
- Indogreen Group - Indonesia
- Eastern Coal Council - USA
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- Standard Chartered Bank - UAE
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- CNBM International Corporation - China
- SMC Global Power, Philippines
- The University of Queensland
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- GAC Shipping (India) Pvt Ltd
- Jindal Steel & Power Ltd - India
- Kartika Selabumi Mining - Indonesia
- Goldman Sachs - Singapore
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- New Zealand Coal & Carbon
- Sakthi Sugars Limited - India
- Siam City Cement - Thailand
- Bhushan Steel Limited - India
- Coal and Oil Company - UAE
- European Bulk Services B.V. - Netherlands
- Economic Council, Georgia
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- IHS Mccloskey Coal Group - USA
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Siam City Cement PLC, Thailand
- Semirara Mining Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
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- White Energy Company Limited
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- Africa Commodities Group - South Africa
- Timah Investasi Mineral - Indoneisa
- Planning Commission, India
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- Eastern Energy - Thailand
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- Gujarat Mineral Development Corp Ltd - India
- Heidelberg Cement - Germany
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
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- Ministry of Finance - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
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- International Coal Ventures Pvt Ltd - India
- Bharathi Cement Corporation - India
- Intertek Mineral Services - Indonesia
- Australian Commodity Traders Exchange
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- Wilmar Investment Holdings
- Sical Logistics Limited - India
- Rashtriya Ispat Nigam Limited - India
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- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- Altura Mining Limited, Indonesia
- Straits Asia Resources Limited - Singapore
- India Bulls Power Limited - India
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GVK Power & Infra Limited - India
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- Lanco Infratech Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Antam Resourcindo - Indonesia
- McConnell Dowell - Australia
- Bayan Resources Tbk. - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- San Jose City I Power Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Star Paper Mills Limited - India
- Vedanta Resources Plc - India
- Posco Energy - South Korea
- ICICI Bank Limited - India
- Formosa Plastics Group - Taiwan
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Australian Coal Association
- Agrawal Coal Company - India
- Indika Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Georgia Ports Authority, United States
- Kohat Cement Company Ltd. - Pakistan
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Larsen & Toubro Limited - India
- Metalloyd Limited - United Kingdom
- London Commodity Brokers - England
- ASAPP Information Group - India
- Global Coal Blending Company Limited - Australia
- Baramulti Group, Indonesia
- PNOC Exploration Corporation - Philippines
- Orica Mining Services - Indonesia
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Trasteel International SA, Italy
- Videocon Industries ltd - India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Port Waratah Coal Services - Australia
- Commonwealth Bank - Australia
- Tamil Nadu electricity Board
- Electricity Authority, New Zealand
- Simpson Spence & Young - Indonesia
- Price Waterhouse Coopers - Russia
- Holcim Trading Pte Ltd - Singapore
- Independent Power Producers Association of India
- Energy Link Ltd, New Zealand
- LBH Netherlands Bv - Netherlands
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- PetroVietnam Power Coal Import and Supply Company
- Parliament of New Zealand
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
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- Merrill Lynch Commodities Europe
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- TNB Fuel Sdn Bhd - Malaysia
- Coalindo Energy - Indonesia
- Singapore Mercantile Exchange
- Uttam Galva Steels Limited - India
- VISA Power Limited - India
- Sojitz Corporation - Japan
- Barasentosa Lestari - Indonesia
- Cement Manufacturers Association - India
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