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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, 29 May 20
DRY BULK SHIPPING: NO QUICK RECOVERY FOR THE DRY BULK MARKET AS COVID-19 DIGS DEEPER
The outlook is poor for dry bulk, as the negative demand shock and overcapacity come together to send rates to multi-year lows, even a return to wo ...
Thursday, 28 May 20
COVID-19: A FORCE MAJEURE EVENT? - KYPRIANOU
KNOWLEDGE TO ELEVATE
While seeing the unexpected COVID-19 outbreak expanding worldwide and the first cases being identified in Cyprus, the com ...
Thursday, 28 May 20
OIL DEMAND RECOVERED BY 20% IN MAY AGAINST APRIL: RUSSIAN ENERGY MINISTER - TASS
Oil demand remains at a low level but the demand in May increased by 20% against April, Russian Energy Minister Alexander Novak said, cited by the ...
Thursday, 28 May 20
MARKET INSIGHT - INTERMODAL
Earlier in May, China’s top leaders convened for the annual National People's Congress, following over two months of delays due to the co ...
Wednesday, 27 May 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.94 PCT - XINHUA
China Taiyuan coal transaction price index stood at 125.03 points Monday, up 0.94 percent week on week.
The index, released by China ...
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- Jorong Barutama Greston.PT - Indonesia
- The State Trading Corporation of India Ltd
- Antam Resourcindo - Indonesia
- Altura Mining Limited, Indonesia
- Savvy Resources Ltd - HongKong
- Holcim Trading Pte Ltd - Singapore
- GAC Shipping (India) Pvt Ltd
- Toyota Tsusho Corporation, Japan
- Sarangani Energy Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Anglo American - United Kingdom
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- Straits Asia Resources Limited - Singapore
- Tata Chemicals Ltd - India
- GMR Energy Limited - India
- Mercuria Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Bharathi Cement Corporation - India
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
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- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Agrawal Coal Company - India
- Vizag Seaport Private Limited - India
- Aditya Birla Group - India
- Heidelberg Cement - Germany
- Maheswari Brothers Coal Limited - India
- Iligan Light & Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Salva Resources Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Energy Link Ltd, New Zealand
- European Bulk Services B.V. - Netherlands
- Coastal Gujarat Power Limited - India
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- Ministry of Transport, Egypt
- Directorate General of MIneral and Coal - Indonesia
- Economic Council, Georgia
- Essar Steel Hazira Ltd - India
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Thai Mozambique Logistica
- Energy Development Corp, Philippines
- The Treasury - Australian Government
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tamil Nadu electricity Board
- Cement Manufacturers Association - India
- Neyveli Lignite Corporation Ltd, - India
- Makarim & Taira - Indonesia
- Aboitiz Power Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Directorate Of Revenue Intelligence - India
- Kaltim Prima Coal - Indonesia
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- Indika Energy - Indonesia
- New Zealand Coal & Carbon
- Semirara Mining and Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ICICI Bank Limited - India
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- Kideco Jaya Agung - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- CNBM International Corporation - China
- Globalindo Alam Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- Timah Investasi Mineral - Indoneisa
- Australian Coal Association
- Bhatia International Limited - India
- Medco Energi Mining Internasional
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- GVK Power & Infra Limited - India
- South Luzon Thermal Energy Corporation
- Pipit Mutiara Jaya. PT, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement - Thailand
- Semirara Mining Corp, Philippines
- Uttam Galva Steels Limited - India
- Global Business Power Corporation, Philippines
- Indonesian Coal Mining Association
- Parry Sugars Refinery, India
- Mjunction Services Limited - India
- Borneo Indobara - Indonesia
- PTC India Limited - India
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- LBH Netherlands Bv - Netherlands
- Orica Mining Services - Indonesia
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- Romanian Commodities Exchange
- Carbofer General Trading SA - India
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Sojitz Corporation - Japan
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- SMG Consultants - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Leighton Contractors Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Sindya Power Generating Company Private Ltd
- Australian Commodity Traders Exchange
- VISA Power Limited - India
- Larsen & Toubro Limited - India
- IEA Clean Coal Centre - UK
- TNB Fuel Sdn Bhd - Malaysia
- PNOC Exploration Corporation - Philippines
- Petron Corporation, Philippines
- The University of Queensland
- Grasim Industreis Ltd - India
- Marubeni Corporation - India
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- Formosa Plastics Group - Taiwan
- Banpu Public Company Limited - Thailand
- Power Finance Corporation Ltd., India
- Vedanta Resources Plc - India
- Trasteel International SA, Italy
- Coal and Oil Company - UAE
- PetroVietnam Power Coal Import and Supply Company
- Asmin Koalindo Tuhup - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Electricity Generating Authority of Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Sree Jayajothi Cements Limited - India
- Deloitte Consulting - India
- Wilmar Investment Holdings
- International Coal Ventures Pvt Ltd - India
- Indian Oil Corporation Limited
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
- Singapore Mercantile Exchange
- Attock Cement Pakistan Limited
- Simpson Spence & Young - Indonesia
- Pendopo Energi Batubara - Indonesia
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Indian Energy Exchange, India
- Gujarat Mineral Development Corp Ltd - India
- Independent Power Producers Association of India
- Port Waratah Coal Services - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- Alfred C Toepfer International GmbH - Germany
- Miang Besar Coal Terminal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Parliament of New Zealand
- Therma Luzon, Inc, Philippines
- McConnell Dowell - Australia
- Edison Trading Spa - Italy
- Merrill Lynch Commodities Europe
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Indo Tambangraya Megah - Indonesia
- Electricity Authority, New Zealand
- Gujarat Sidhee Cement - India
- Latin American Coal - Colombia
- Mercator Lines Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Wood Mackenzie - Singapore
- SN Aboitiz Power Inc, Philippines
- India Bulls Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Dalmia Cement Bharat India
- Price Waterhouse Coopers - Russia
- Standard Chartered Bank - UAE
- Rio Tinto Coal - Australia
- OPG Power Generation Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Bangladesh Power Developement Board
- Central Electricity Authority - India
- AsiaOL BioFuels Corp., Philippines
- Mintek Dendrill Indonesia
- Global Green Power PLC Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Sical Logistics Limited - India
- Kohat Cement Company Ltd. - Pakistan
- TeaM Sual Corporation - Philippines
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