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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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Sunday, 14 June 20
INDONESIAN COAL WAS STILL IN DEMAND; A 52,000-DWT SUPRAMAX FIXING DELIVERY CJK FOR A ROUND VOYAGE VIA INDONESIA AT $6,250 - BALTIC BRIEFING
Capesize
The Capesize market made new highs for the year this week after strong iron ore demand to the far east continued to develop in the mar ...
Friday, 12 June 20
CHINA CURBS COAL IMPORTS AFTER 5 MONTHS OF RECORD INFLOWS - SOURCES: REUTERS
China has stepped up customs checks for coal imports, leading to lengthy processing delays at ports, four sources familiar with the matter said, as ...
Friday, 12 June 20
COAL INDIA LIMITED SET FOR MARKETING DRIVE TO CREATE DEMAND - FINANCIAL EXPRESS
State-run miner Coal India (CIL), which is primarily focused on supplying coal to the power sector, is now reorienting its marketing to create dema ...
Friday, 12 June 20
MOODY'S REVISES BRENT OIL PRICE OUTLOOK TO $35/BARREL IN 2020 - TASS
Low oil prices are likely to exert the highest pressure on Iraq, Oman and Kuwait due to the limited space for the fiscal policy pursuit and higher ...
Thursday, 11 June 20
JAN-MAY, INDONESIA SHIPPED 175.15 MILLION TONS OF COAL TO ITS OVERSEAS BUYERS
Indonesia's coal production for the first 5 months of this year have reached 228 million tons. January – May 2020, Indonesia shipped US$ ...
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- Makarim & Taira - Indonesia
- Star Paper Mills Limited - India
- Edison Trading Spa - Italy
- Tata Chemicals Ltd - India
- Mercuria Energy - Indonesia
- Australian Commodity Traders Exchange
- Jorong Barutama Greston.PT - Indonesia
- Oldendorff Carriers - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
- Independent Power Producers Association of India
- European Bulk Services B.V. - Netherlands
- Simpson Spence & Young - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- MS Steel International - UAE
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Ministry of Mines - Canada
- Eastern Energy - Thailand
- CNBM International Corporation - China
- Semirara Mining and Power Corporation, Philippines
- Tamil Nadu electricity Board
- Sindya Power Generating Company Private Ltd
- Meenaskhi Energy Private Limited - India
- Marubeni Corporation - India
- Banpu Public Company Limited - Thailand
- VISA Power Limited - India
- Indian Oil Corporation Limited
- Videocon Industries ltd - India
- Essar Steel Hazira Ltd - India
- Global Business Power Corporation, Philippines
- Agrawal Coal Company - India
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Eastern Coal Council - USA
- LBH Netherlands Bv - Netherlands
- Siam City Cement PLC, Thailand
- Sojitz Corporation - Japan
- Anglo American - United Kingdom
- SN Aboitiz Power Inc, Philippines
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- Medco Energi Mining Internasional
- OPG Power Generation Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Salva Resources Pvt Ltd - India
- Baramulti Group, Indonesia
- Cement Manufacturers Association - India
- Larsen & Toubro Limited - India
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- Minerals Council of Australia
- GMR Energy Limited - India
- Bhatia International Limited - India
- ICICI Bank Limited - India
- IHS Mccloskey Coal Group - USA
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Coal and Oil Company - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Vizag Seaport Private Limited - India
- Sree Jayajothi Cements Limited - India
- Chamber of Mines of South Africa
- Binh Thuan Hamico - Vietnam
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- Malabar Cements Ltd - India
- Bayan Resources Tbk. - Indonesia
- Barasentosa Lestari - Indonesia
- Thiess Contractors Indonesia
- PTC India Limited - India
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Karaikal Port Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Coalindo Energy - Indonesia
- Interocean Group of Companies - India
- Attock Cement Pakistan Limited
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- Directorate Of Revenue Intelligence - India
- Bhoruka Overseas - Indonesia
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- McConnell Dowell - Australia
- Price Waterhouse Coopers - Russia
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
- Neyveli Lignite Corporation Ltd, - India
- AsiaOL BioFuels Corp., Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Dalmia Cement Bharat India
- Kaltim Prima Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- Uttam Galva Steels Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- Mintek Dendrill Indonesia
- Energy Link Ltd, New Zealand
- GAC Shipping (India) Pvt Ltd
- International Coal Ventures Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Mjunction Services Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Xindia Steels Limited - India
- Metalloyd Limited - United Kingdom
- ASAPP Information Group - India
- Intertek Mineral Services - Indonesia
- Gujarat Sidhee Cement - India
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Bulk Trading Sa - Switzerland
- Globalindo Alam Lestari - Indonesia
- Electricity Authority, New Zealand
- CIMB Investment Bank - Malaysia
- Toyota Tsusho Corporation, Japan
- Manunggal Multi Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Parliament of New Zealand
- Port Waratah Coal Services - Australia
- Sical Logistics Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Riau Bara Harum - Indonesia
- Ambuja Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Global Green Power PLC Corporation, Philippines
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kepco SPC Power Corporation, Philippines
- Aditya Birla Group - India
- Siam City Cement - Thailand
- The University of Queensland
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- Bukit Baiduri Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- Formosa Plastics Group - Taiwan
- Latin American Coal - Colombia
- Mercator Lines Limited - India
- Semirara Mining Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Kapuas Tunggal Persada - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Planning Commission, India
- Orica Mining Services - Indonesia
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indo Tambangraya Megah - Indonesia
- Samtan Co., Ltd - South Korea
- Central Java Power - Indonesia
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Savvy Resources Ltd - HongKong
- Heidelberg Cement - Germany
- Gujarat Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Kumho Petrochemical, South Korea
- Power Finance Corporation Ltd., India
- Pendopo Energi Batubara - Indonesia
- Commonwealth Bank - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parry Sugars Refinery, India
- White Energy Company Limited
- Australian Coal Association
- Central Electricity Authority - India
- San Jose City I Power Corp, Philippines
- Carbofer General Trading SA - India
- SMC Global Power, Philippines
- PowerSource Philippines DevCo
- Krishnapatnam Port Company Ltd. - India
- Renaissance Capital - South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- Wood Mackenzie - Singapore
- GVK Power & Infra Limited - India
- Goldman Sachs - Singapore
- The State Trading Corporation of India Ltd
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- IEA Clean Coal Centre - UK
- Vedanta Resources Plc - India
- Borneo Indobara - Indonesia
- Electricity Generating Authority of Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- Sarangani Energy Corporation, Philippines
- Petron Corporation, Philippines
- Coastal Gujarat Power Limited - India
- London Commodity Brokers - England
- Miang Besar Coal Terminal - Indonesia
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