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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, 11 June 20
CHINA'S BENCHMARK POWER COAL PRICE EDGES UP - XINHUA
China’s benchmark power coal price rose slightly during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Wednesday, 10 June 20
OPEC+ CUTS EXTENSION TO ACCELERATE MARKET REBALANCING - FITCH RATINGS
Fitch Ratings-London-08 June 2020: The OPEC+ agreement to extend by one month record oil production cuts should accelerate market rebalancing, Fitc ...
Wednesday, 10 June 20
MARKET INSIGHT - INTERMODAL
In contrast to the economic projections of the past two years for the first half of 2020, the oil & gas industry and those involved in it faced ...
Wednesday, 10 June 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX DOWN 0.19 PCT - XINHUA
China Taiyuan coal transaction price index stood at 123.71 points Monday, down 0.19 percent week on week.
The index, released by Chi ...
Tuesday, 09 June 20
BUNKER SUPPLY CONTRACTS - KEY CONSIDERATIONS FOR THE BUYER - GARD
KNOWLEDGE TO ELEVATE
Regardless of whether a buyer purchases fuel directly from physical suppliers or via brokers or traders and whether sale ...
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- Lanco Infratech Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Meenaskhi Energy Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Bhushan Steel Limited - India
- Star Paper Mills Limited - India
- Antam Resourcindo - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Heidelberg Cement - Germany
- TeaM Sual Corporation - Philippines
- Goldman Sachs - Singapore
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- Central Java Power - Indonesia
- The University of Queensland
- Sojitz Corporation - Japan
- Orica Mining Services - Indonesia
- Sakthi Sugars Limited - India
- New Zealand Coal & Carbon
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Bhatia International Limited - India
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- ASAPP Information Group - India
- Altura Mining Limited, Indonesia
- Edison Trading Spa - Italy
- Indian Oil Corporation Limited
- Kapuas Tunggal Persada - Indonesia
- Anglo American - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Singapore Mercantile Exchange
- Ministry of Finance - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Formosa Plastics Group - Taiwan
- Georgia Ports Authority, United States
- Indonesian Coal Mining Association
- Alfred C Toepfer International GmbH - Germany
- Central Electricity Authority - India
- Australian Coal Association
- Kideco Jaya Agung - Indonesia
- Wilmar Investment Holdings
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- Attock Cement Pakistan Limited
- Parry Sugars Refinery, India
- Ministry of Transport, Egypt
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Thai Mozambique Logistica
- Makarim & Taira - Indonesia
- Indo Tambangraya Megah - Indonesia
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- SMC Global Power, Philippines
- Kumho Petrochemical, South Korea
- Standard Chartered Bank - UAE
- Sindya Power Generating Company Private Ltd
- San Jose City I Power Corp, Philippines
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- Merrill Lynch Commodities Europe
- Madhucon Powers Ltd - India
- ICICI Bank Limited - India
- Planning Commission, India
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- London Commodity Brokers - England
- Electricity Generating Authority of Thailand
- Xindia Steels Limited - India
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Sical Logistics Limited - India
- Port Waratah Coal Services - Australia
- Cigading International Bulk Terminal - Indonesia
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- Oldendorff Carriers - Singapore
- Posco Energy - South Korea
- Samtan Co., Ltd - South Korea
- Baramulti Group, Indonesia
- IHS Mccloskey Coal Group - USA
- Sree Jayajothi Cements Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coalindo Energy - Indonesia
- Indian Energy Exchange, India
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Banpu Public Company Limited - Thailand
- Dalmia Cement Bharat India
- Australian Commodity Traders Exchange
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- PowerSource Philippines DevCo
- Krishnapatnam Port Company Ltd. - India
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Electricity Authority, New Zealand
- GMR Energy Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Siam City Cement - Thailand
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Global Green Power PLC Corporation, Philippines
- Energy Development Corp, Philippines
- Romanian Commodities Exchange
- CIMB Investment Bank - Malaysia
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Rio Tinto Coal - Australia
- Iligan Light & Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Wood Mackenzie - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Bayan Resources Tbk. - Indonesia
- Eastern Energy - Thailand
- Indika Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- The State Trading Corporation of India Ltd
- Barasentosa Lestari - Indonesia
- India Bulls Power Limited - India
- Riau Bara Harum - Indonesia
- Manunggal Multi Energi - Indonesia
- Larsen & Toubro Limited - India
- Aboitiz Power Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Orica Australia Pty. Ltd.
- Timah Investasi Mineral - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- Salva Resources Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Bharathi Cement Corporation - India
- Thiess Contractors Indonesia
- European Bulk Services B.V. - Netherlands
- Aditya Birla Group - India
- Grasim Industreis Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhoruka Overseas - Indonesia
- Mjunction Services Limited - India
- Minerals Council of Australia
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- GAC Shipping (India) Pvt Ltd
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- The Treasury - Australian Government
- Bukit Baiduri Energy - Indonesia
- VISA Power Limited - India
- White Energy Company Limited
- GVK Power & Infra Limited - India
- Global Coal Blending Company Limited - Australia
- Metalloyd Limited - United Kingdom
- Chamber of Mines of South Africa
- Coal and Oil Company - UAE
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Bulk Trading Sa - Switzerland
- Commonwealth Bank - Australia
- Directorate General of MIneral and Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Carbofer General Trading SA - India
- SN Aboitiz Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Africa Commodities Group - South Africa
- MS Steel International - UAE
- CNBM International Corporation - China
- Trasteel International SA, Italy
- Karaikal Port Pvt Ltd - India
- Borneo Indobara - Indonesia
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- Savvy Resources Ltd - HongKong
- Miang Besar Coal Terminal - Indonesia
- Global Business Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- Eastern Coal Council - USA
- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Tata Chemicals Ltd - India
- Indogreen Group - Indonesia
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- Gujarat Electricity Regulatory Commission - India
- Semirara Mining Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vizag Seaport Private Limited - India
- IEA Clean Coal Centre - UK
- LBH Netherlands Bv - Netherlands
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Uttam Galva Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Essar Steel Hazira Ltd - India
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