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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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Monday, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Malabar Cements Ltd - India
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- Commonwealth Bank - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Global Green Power PLC Corporation, Philippines
- Interocean Group of Companies - India
- Ministry of Mines - Canada
- Maharashtra Electricity Regulatory Commission - India
- Chamber of Mines of South Africa
- GN Power Mariveles Coal Plant, Philippines
- Ceylon Electricity Board - Sri Lanka
- Gujarat Sidhee Cement - India
- Minerals Council of Australia
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- PTC India Limited - India
- Eastern Coal Council - USA
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- Kobexindo Tractors - Indoneisa
- Ministry of Transport, Egypt
- Independent Power Producers Association of India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mjunction Services Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Antam Resourcindo - Indonesia
- CIMB Investment Bank - Malaysia
- Gujarat Electricity Regulatory Commission - India
- MS Steel International - UAE
- Coal and Oil Company - UAE
- Holcim Trading Pte Ltd - Singapore
- Sakthi Sugars Limited - India
- Jaiprakash Power Ventures ltd
- Deloitte Consulting - India
- IEA Clean Coal Centre - UK
- Aditya Birla Group - India
- PetroVietnam Power Coal Import and Supply Company
- Ind-Barath Power Infra Limited - India
- Ministry of Finance - Indonesia
- Makarim & Taira - Indonesia
- Australian Coal Association
- GAC Shipping (India) Pvt Ltd
- Orica Australia Pty. Ltd.
- Sree Jayajothi Cements Limited - India
- Borneo Indobara - Indonesia
- Therma Luzon, Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sojitz Corporation - Japan
- Planning Commission, India
- Port Waratah Coal Services - Australia
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Mercuria Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ICICI Bank Limited - India
- OPG Power Generation Pvt Ltd - India
- Electricity Authority, New Zealand
- Meenaskhi Energy Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Heidelberg Cement - Germany
- Kideco Jaya Agung - Indonesia
- New Zealand Coal & Carbon
- Ambuja Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Central Electricity Authority - India
- Kaltim Prima Coal - Indonesia
- Videocon Industries ltd - India
- Vedanta Resources Plc - India
- Kalimantan Lumbung Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Kumho Petrochemical, South Korea
- Central Java Power - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Posco Energy - South Korea
- Renaissance Capital - South Africa
- Karaikal Port Pvt Ltd - India
- White Energy Company Limited
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- Asmin Koalindo Tuhup - Indonesia
- Agrawal Coal Company - India
- Indika Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- London Commodity Brokers - England
- Thai Mozambique Logistica
- Latin American Coal - Colombia
- Mintek Dendrill Indonesia
- Oldendorff Carriers - Singapore
- The University of Queensland
- Sical Logistics Limited - India
- Global Business Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Bhatia International Limited - India
- Banpu Public Company Limited - Thailand
- Larsen & Toubro Limited - India
- Grasim Industreis Ltd - India
- South Luzon Thermal Energy Corporation
- Petron Corporation, Philippines
- Energy Development Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Merrill Lynch Commodities Europe
- Parry Sugars Refinery, India
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Lanco Infratech Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Baramulti Group, Indonesia
- Xindia Steels Limited - India
- Sarangani Energy Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Star Paper Mills Limited - India
- Global Coal Blending Company Limited - Australia
- Energy Link Ltd, New Zealand
- Bukit Makmur.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- Formosa Plastics Group - Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Barasentosa Lestari - Indonesia
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Indian Energy Exchange, India
- Pipit Mutiara Jaya. PT, Indonesia
- ASAPP Information Group - India
- Intertek Mineral Services - Indonesia
- Indonesian Coal Mining Association
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Wood Mackenzie - Singapore
- Bulk Trading Sa - Switzerland
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Energy - Thailand
- VISA Power Limited - India
- The Treasury - Australian Government
- Carbofer General Trading SA - India
- SMG Consultants - Indonesia
- SMC Global Power, Philippines
- Indian Oil Corporation Limited
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- Indogreen Group - Indonesia
- Price Waterhouse Coopers - Russia
- LBH Netherlands Bv - Netherlands
- Siam City Cement PLC, Thailand
- Bharathi Cement Corporation - India
- Meralco Power Generation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Electricity Generating Authority of Thailand
- Wilmar Investment Holdings
- Cigading International Bulk Terminal - Indonesia
- Marubeni Corporation - India
- GVK Power & Infra Limited - India
- Simpson Spence & Young - Indonesia
- Coalindo Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Uttam Galva Steels Limited - India
- PowerSource Philippines DevCo
- Salva Resources Pvt Ltd - India
- Siam City Cement - Thailand
- Jindal Steel & Power Ltd - India
- PNOC Exploration Corporation - Philippines
- Orica Mining Services - Indonesia
- India Bulls Power Limited - India
- Semirara Mining Corp, Philippines
- Trasteel International SA, Italy
- McConnell Dowell - Australia
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- Dalmia Cement Bharat India
- TNB Fuel Sdn Bhd - Malaysia
- Power Finance Corporation Ltd., India
- Bayan Resources Tbk. - Indonesia
- Coastal Gujarat Power Limited - India
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- TeaM Sual Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhushan Steel Limited - India
- Straits Asia Resources Limited - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Georgia Ports Authority, United States
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