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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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Wednesday, 20 May 20
ADARO ENERGY BOOKED A 5% INCREASE IN COAL PRODUCTION VOLUME Y-O-Y IN 1Q2020
PT. Adaro Energy Tbk, Indonesia’s one of the largest coal miner, booked a 5% increase in coal production volume year-over-year in 1Q2020. The ...
Wednesday, 20 May 20
BRAZIL SOYBEAN EXPORTS HAVE BEEN SURGING THIS YEAR - BANCHERO COSTA
Brazil soybean exports have been surging this year, thanks to a combination of strong demand from China, a bumper crop, and favourable exchange rat ...
Wednesday, 20 May 20
MARKET INSIGHT
Seafarers keep maritime trade going so that the food, raw materials, energy and manufactured goods on which so many depend can continue moving arou ...
Tuesday, 19 May 20
AMENDMENT OF THE INDONESIAN MINING LAW: TYING UP LOOSE ENDS - UMBRA
KNOWLEDGE TO ELEVATE
The finalized draft of Law on the amendment of the Mining Law (Bill) was publicly released on 11 May 2020 and was then ap ...
Monday, 18 May 20
TAKING ADVANTAGE OF VIRUS DISTRACTION - BALTIC EXCHANGE
As the industry grapples to deal with exceptional Covid-19-related challenges, a deeper threat is coming to the fore. At this time of crisis, more ...
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- Bhushan Steel Limited - India
- Gujarat Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- Australian Coal Association
- Indika Energy - Indonesia
- Star Paper Mills Limited - India
- Bhatia International Limited - India
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- Maharashtra Electricity Regulatory Commission - India
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- Wood Mackenzie - Singapore
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- Chettinad Cement Corporation Ltd - India
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- Bukit Baiduri Energy - Indonesia
- Energy Link Ltd, New Zealand
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- Electricity Authority, New Zealand
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- Metalloyd Limited - United Kingdom
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- AsiaOL BioFuels Corp., Philippines
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- McConnell Dowell - Australia
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- Economic Council, Georgia
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- Wilmar Investment Holdings
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- Petrochimia International Co. Ltd.- Taiwan
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- Kobexindo Tractors - Indoneisa
- Directorate Of Revenue Intelligence - India
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- Billiton Holdings Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
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- Tamil Nadu electricity Board
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- Sindya Power Generating Company Private Ltd
- Toyota Tsusho Corporation, Japan
- Ministry of Finance - Indonesia
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- Jorong Barutama Greston.PT - Indonesia
- Australian Commodity Traders Exchange
- Price Waterhouse Coopers - Russia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CNBM International Corporation - China
- Mjunction Services Limited - India
- Bukit Makmur.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- Uttam Galva Steels Limited - India
- Marubeni Corporation - India
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- OPG Power Generation Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Thai Mozambique Logistica
- International Coal Ventures Pvt Ltd - India
- Madhucon Powers Ltd - India
- White Energy Company Limited
- TeaM Sual Corporation - Philippines
- Global Business Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- The State Trading Corporation of India Ltd
- Eastern Energy - Thailand
- India Bulls Power Limited - India
- LBH Netherlands Bv - Netherlands
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- Chamber of Mines of South Africa
- Planning Commission, India
- Formosa Plastics Group - Taiwan
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- Sree Jayajothi Cements Limited - India
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- Edison Trading Spa - Italy
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- Ministry of Transport, Egypt
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- Orica Australia Pty. Ltd.
- Xindia Steels Limited - India
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- Deloitte Consulting - India
- PowerSource Philippines DevCo
- Meenaskhi Energy Private Limited - India
- Renaissance Capital - South Africa
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Neyveli Lignite Corporation Ltd, - India
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- Coastal Gujarat Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Parliament of New Zealand
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- Carbofer General Trading SA - India
- Aboitiz Power Corporation - Philippines
- Independent Power Producers Association of India
- Vijayanagar Sugar Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Attock Cement Pakistan Limited
- VISA Power Limited - India
- Aditya Birla Group - India
- Georgia Ports Authority, United States
- Africa Commodities Group - South Africa
- Cigading International Bulk Terminal - Indonesia
- Tata Chemicals Ltd - India
- Cement Manufacturers Association - India
- Mercuria Energy - Indonesia
- Petron Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- London Commodity Brokers - England
- The University of Queensland
- SMC Global Power, Philippines
- European Bulk Services B.V. - Netherlands
- Siam City Cement PLC, Thailand
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Coalindo Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Malabar Cements Ltd - India
- Makarim & Taira - Indonesia
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- MS Steel International - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- Pipit Mutiara Jaya. PT, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sojitz Corporation - Japan
- Antam Resourcindo - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- Indian Oil Corporation Limited
- Ministry of Mines - Canada
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Orica Mining Services - Indonesia
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Thiess Contractors Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Energy Development Corp, Philippines
- Parry Sugars Refinery, India
- IEA Clean Coal Centre - UK
- Pendopo Energi Batubara - Indonesia
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Posco Energy - South Korea
- Indogreen Group - Indonesia
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- Sical Logistics Limited - India
- Kideco Jaya Agung - Indonesia
- Kepco SPC Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Romanian Commodities Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Power Finance Corporation Ltd., India
- Commonwealth Bank - Australia
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