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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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Friday, 10 July 20
GLOBAL SHIPPING EARNINGS FORECAST CUT AS SUPPLY SET TO OUTSTRIP DEMAND - MOODY'S
EBITDA forecast worsens, keeping outlook negative. We now expect the aggregate EBITDA of rated shipping companies to fall by around 16%-18% in 2020 ...
Friday, 10 July 20
SLOW RECOVERY IN TANKER RATES TO WEIGH ON BUANA LINTAS LAUTAN - FITCH RATINGS
Fitch Ratings believes that international tanker rates are likely improve after their sharp fall since May 2020, albeit at a slow pace. The weaknes ...
Wednesday, 08 July 20
MARKET INSIGHT - INTERMODAL
During the previous month, the dry bulk market witnessed an impressive increase in the BDI index that has reached 1800 points from 500 with a clear ...
Tuesday, 07 July 20
COAL INDIA WORKERS STRIKE CUTS OUTPUT BY 56%: OFFICIAL - REUTERS
A strike at Coal India Ltd cut production by 56% in the three days ending July 4 as workers oppose opening up coal mining to the private sector, a ...
Tuesday, 07 July 20
WHAT DOES THE PATHWAY TO A NET-ZERO ECONOMY LOOK LIKE FOR MINERS? - WOOD MACKENZIE
Wind, solar, electric vehicles, stationary storage and transmission are all central to achieving the Paris Agreement decarbonisation goals.
&nb ...
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- Africa Commodities Group - South Africa
- OPG Power Generation Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- Price Waterhouse Coopers - Russia
- Binh Thuan Hamico - Vietnam
- Coastal Gujarat Power Limited - India
- Salva Resources Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Renaissance Capital - South Africa
- Madhucon Powers Ltd - India
- Barasentosa Lestari - Indonesia
- Toyota Tsusho Corporation, Japan
- Jindal Steel & Power Ltd - India
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Indian Oil Corporation Limited
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- San Jose City I Power Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercator Lines Limited - India
- Sakthi Sugars Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- Latin American Coal - Colombia
- The Treasury - Australian Government
- Billiton Holdings Pty Ltd - Australia
- Thai Mozambique Logistica
- GMR Energy Limited - India
- Australian Commodity Traders Exchange
- Xindia Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- Romanian Commodities Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Vizag Seaport Private Limited - India
- Posco Energy - South Korea
- Anglo American - United Kingdom
- Kapuas Tunggal Persada - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Globalindo Alam Lestari - Indonesia
- Cement Manufacturers Association - India
- TNB Fuel Sdn Bhd - Malaysia
- Intertek Mineral Services - Indonesia
- Sojitz Corporation - Japan
- Jorong Barutama Greston.PT - Indonesia
- Meralco Power Generation, Philippines
- Timah Investasi Mineral - Indoneisa
- Borneo Indobara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Metalloyd Limited - United Kingdom
- Videocon Industries ltd - India
- Tata Chemicals Ltd - India
- Kumho Petrochemical, South Korea
- ASAPP Information Group - India
- Port Waratah Coal Services - Australia
- Iligan Light & Power Inc, Philippines
- Mjunction Services Limited - India
- Indika Energy - Indonesia
- Electricity Authority, New Zealand
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- New Zealand Coal & Carbon
- Wood Mackenzie - Singapore
- Thiess Contractors Indonesia
- Manunggal Multi Energi - Indonesia
- Indonesian Coal Mining Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Attock Cement Pakistan Limited
- Mercuria Energy - Indonesia
- Star Paper Mills Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement - Thailand
- Energy Link Ltd, New Zealand
- PowerSource Philippines DevCo
- Indian Energy Exchange, India
- Eastern Coal Council - USA
- Aboitiz Power Corporation - Philippines
- Tamil Nadu electricity Board
- Essar Steel Hazira Ltd - India
- Electricity Generating Authority of Thailand
- PTC India Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rio Tinto Coal - Australia
- Bulk Trading Sa - Switzerland
- GVK Power & Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Sindya Power Generating Company Private Ltd
- Planning Commission, India
- Kobexindo Tractors - Indoneisa
- Power Finance Corporation Ltd., India
- Aditya Birla Group - India
- MS Steel International - UAE
- SMG Consultants - Indonesia
- Minerals Council of Australia
- Medco Energi Mining Internasional
- Vijayanagar Sugar Pvt Ltd - India
- Bhatia International Limited - India
- Australian Coal Association
- Global Business Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Central Electricity Authority - India
- Krishnapatnam Port Company Ltd. - India
- Vedanta Resources Plc - India
- Ministry of Transport, Egypt
- Deloitte Consulting - India
- Carbofer General Trading SA - India
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Semirara Mining Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Edison Trading Spa - Italy
- Bharathi Cement Corporation - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- Parliament of New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Lanco Infratech Ltd - India
- Ministry of Finance - Indonesia
- Altura Mining Limited, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
- Dalmia Cement Bharat India
- CNBM International Corporation - China
- Georgia Ports Authority, United States
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Makarim & Taira - Indonesia
- Therma Luzon, Inc, Philippines
- Orica Mining Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Uttam Galva Steels Limited - India
- Malabar Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- Kaltim Prima Coal - Indonesia
- Riau Bara Harum - Indonesia
- Banpu Public Company Limited - Thailand
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- The University of Queensland
- Neyveli Lignite Corporation Ltd, - India
- Directorate Of Revenue Intelligence - India
- Maharashtra Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Larsen & Toubro Limited - India
- The State Trading Corporation of India Ltd
- Gujarat Sidhee Cement - India
- McConnell Dowell - Australia
- Parry Sugars Refinery, India
- Chamber of Mines of South Africa
- Coal and Oil Company - UAE
- ICICI Bank Limited - India
- Kideco Jaya Agung - Indonesia
- VISA Power Limited - India
- Trasteel International SA, Italy
- Kalimantan Lumbung Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- London Commodity Brokers - England
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Agrawal Coal Company - India
- Independent Power Producers Association of India
- Karaikal Port Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bangladesh Power Developement Board
- GN Power Mariveles Coal Plant, Philippines
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Baiduri Energy - Indonesia
- Bhushan Steel Limited - India
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- IHS Mccloskey Coal Group - USA
- International Coal Ventures Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- White Energy Company Limited
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
- Antam Resourcindo - Indonesia
- Eastern Energy - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMC Global Power, Philippines
- Global Coal Blending Company Limited - Australia
- GAC Shipping (India) Pvt Ltd
- Pendopo Energi Batubara - Indonesia
- Siam City Cement PLC, Thailand
- Simpson Spence & Young - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Central Java Power - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
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