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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, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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- Planning Commission, India
- Coalindo Energy - Indonesia
- Australian Commodity Traders Exchange
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Coal and Oil Company - UAE
- Baramulti Group, Indonesia
- New Zealand Coal & Carbon
- Singapore Mercantile Exchange
- ICICI Bank Limited - India
- Sical Logistics Limited - India
- Attock Cement Pakistan Limited
- Jorong Barutama Greston.PT - Indonesia
- Chamber of Mines of South Africa
- Rio Tinto Coal - Australia
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining Corp, Philippines
- Cement Manufacturers Association - India
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coastal Gujarat Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Merrill Lynch Commodities Europe
- VISA Power Limited - India
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- Ambuja Cements Ltd - India
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Goldman Sachs - Singapore
- Indian Energy Exchange, India
- Central Java Power - Indonesia
- Interocean Group of Companies - India
- The State Trading Corporation of India Ltd
- Bharathi Cement Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- Global Green Power PLC Corporation, Philippines
- Ministry of Finance - Indonesia
- Agrawal Coal Company - India
- CNBM International Corporation - China
- Parry Sugars Refinery, India
- Bhatia International Limited - India
- Jaiprakash Power Ventures ltd
- White Energy Company Limited
- Bhushan Steel Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Videocon Industries ltd - India
- Minerals Council of Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Electricity Authority, New Zealand
- Larsen & Toubro Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Wood Mackenzie - Singapore
- Tamil Nadu electricity Board
- Maharashtra Electricity Regulatory Commission - India
- Economic Council, Georgia
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Renaissance Capital - South Africa
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Standard Chartered Bank - UAE
- Sinarmas Energy and Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- Sindya Power Generating Company Private Ltd
- SMC Global Power, Philippines
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Mjunction Services Limited - India
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Global Business Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- SMG Consultants - Indonesia
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- MS Steel International - UAE
- Australian Coal Association
- Alfred C Toepfer International GmbH - Germany
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Siam City Cement - Thailand
- Aboitiz Power Corporation - Philippines
- Romanian Commodities Exchange
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- Bulk Trading Sa - Switzerland
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement PLC, Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- CIMB Investment Bank - Malaysia
- Indika Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Karbindo Abesyapradhi - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Eastern Energy - Thailand
- Bhoruka Overseas - Indonesia
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Commonwealth Bank - Australia
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- Indonesian Coal Mining Association
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Port Waratah Coal Services - Australia
- Bukit Makmur.PT - Indonesia
- Star Paper Mills Limited - India
- Deloitte Consulting - India
- Central Electricity Authority - India
- Orica Australia Pty. Ltd.
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Transport, Egypt
- Barasentosa Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- The University of Queensland
- Ind-Barath Power Infra Limited - India
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- Madhucon Powers Ltd - India
- Parliament of New Zealand
- Banpu Public Company Limited - Thailand
- International Coal Ventures Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Sakthi Sugars Limited - India
- Simpson Spence & Young - Indonesia
- Oldendorff Carriers - Singapore
- Iligan Light & Power Inc, Philippines
- Marubeni Corporation - India
- Mercuria Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Formosa Plastics Group - Taiwan
- TeaM Sual Corporation - Philippines
- Electricity Generating Authority of Thailand
- Gujarat Mineral Development Corp Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Petron Corporation, Philippines
- Energy Development Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Vedanta Resources Plc - India
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Georgia Ports Authority, United States
- Tata Chemicals Ltd - India
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Global Coal Blending Company Limited - Australia
- Lanco Infratech Ltd - India
- Mintek Dendrill Indonesia
- Kobexindo Tractors - Indoneisa
- Indogreen Group - Indonesia
- South Luzon Thermal Energy Corporation
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Oil Corporation Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- India Bulls Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Trasteel International SA, Italy
- Uttam Galva Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Independent Power Producers Association of India
- Riau Bara Harum - Indonesia
- Altura Mining Limited, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Metalloyd Limited - United Kingdom
- Thiess Contractors Indonesia
- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- PNOC Exploration Corporation - Philippines
- Ministry of Mines - Canada
- Vizag Seaport Private Limited - India
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- Medco Energi Mining Internasional
- Latin American Coal - Colombia
- Straits Asia Resources Limited - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Manunggal Multi Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- Thai Mozambique Logistica
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Malabar Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ASAPP Information Group - India
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