By CS LNG, Jan 7 2019 12:23PM
1. SHIP SHORTAGE THREATENS ASIAN LNG MARKET GROWTH
In the growing market for LNG, driven mainly by Asian demand, a shortage of transport vessels could become a bottleneck. While demand for LNG shipments to China is steadily growing as the country increases its consumption of eco-friendly natural gas, the supply of ships is not keeping pace with growing demand for spot charters. Spot charter rates for LNG carriers with a tank capacity of 150,000-170,000 cu. meters stood at the $190,000 per day range in November, five times higher than in early May. The market environment has changed considerably since 2015-2016, when the rates were around $20,000-30,000 per day amid anxiety about a glut of vessels. "We did not expect that we would run short of vessels so quickly," said a person in charge of LNG carriers at a major Japanese shipping company. A major reason behind the high charter rates is a surge in gas demand in China. In a drive to reduce serious air pollution, China is rapidly switching from coal to natural gas for power generation. Energy companies and trading houses in China are securing LNG carriers earlier to import LNG stably over the long term. Other countries in Asia are also turning to the consumption of natural gas. In 2018, Bangladesh began importing LNG and the Philippines also revealed plans to build its first LNG import terminal by investing more than $700 million. Energy research firm Bloomberg New Energy Finance estimates that global LNG demand will grow to 450 million tons by 2030, from 284 million tons in 2017, with Asia driving the growth. About 600 LNG ships are in use worldwide, and about 40 new vessels are expected to go into service in 2019. However, according to Nippon Yusen, most of the vessels are chartered exclusively for new projects under long-term contracts and only a limited number of them flow into the spot charter market. Spot LNG sales are increasing as natural gas, including American shale gas, which does not necessarily involve long-term contracts, has come to be exported on a full-scale over the past several years. LNG trading practices that have been rigid and characterized by long-term contracts covering a period of over 10 years are changing, but the insufficient transportation infrastructure, or carrying vessels, will become an obstacle. The International Energy Agency said in a recent report: "The risk of a lack of timely investment in the LNG carrier fleet could pose a threat to market development and security of supply, which could materialize even earlier than the risk of insufficient liquefaction capacity."
[Source: NIKKEI 02/01/2019]
CS LNG comment: The Japanese owners have been noticeably absent in speculative ship ordering ever since Fukushima in 2011 leaving the speculation to the new Greek owners. Whilst the spot rates did spike towards the end of 2018 most of that was down to the floating storage plays undertaken by the traders rather than the increased demand in China. There is still a lot of ‘slack’ in the fleet due to various inefficiencies. But unless the industry is prepared to pay reasonable rates to owners why should they risk more orders?
2. WHY TANZANIA OFFICIALS ARE IN NO HURRY TO FINALISE GAS DEALS
The fear among Tanzanian government officials of repeating past mistakes in mining pacts has been cited as the main cause of delays in starting negotiations with companies seeking to extract LNG in the south. The companies and the government are yet to sign a commercial framework agreement, with Dar es Salaam saying it needs time to make the right decisions for the benefit of the country. Officials are cautious not to bind the government to deals that may prove costly or loss-making in the future. Energy Minister Dr Medard Kalemani said the government must be "content with the kind of agreements that we as a country are going into before signing the deal." Equinor, a Norwegian company with interests in the sector has said it is ready to start talks with the Dar es Salaam administration on developing an LNG project based on a deepwater offshore discovery. The framework for the proposed $30 billion LNG plant is expected to outline and define all the attributes of the project, who is involved, the prices and all appropriate allocations. Gas firms say concrete investment decisions are on hold, awaiting the outcome of the negotiations between them and the government. Equinor Tanzania has been given the green light to proceed with negotiations with the government for the development of Block 2 offshore Tanzania. "The host government agreement (HGA) negotiations between Equinor and the government will set out the long-term framework for the LNG plant, which is not a part of the original production sharing agreement, but the decision to build the LNG plant has not yet been reached," said senior vice president and country manager for Equinor Tanzania, Mette H. Ottøy. "We have progressed our planning to a point where this is the next logical step and we are very happy that the government of Tanzania agrees with this.
[Source: The East African 01/01/2019]
CS LNG comment: 'Decide in haste repent at leisure’ is no doubt a phrase at the forefront of the Tanzania government. No doubt they are slightly suspicious of the Vikings from Equinor!
3. EXXON WINS BUYERS FOR ROVUMA LNG PROJECT OFF MOZAMBIQUE
Exxon Mobil says it has secured offtake commitments for the Rovuma LNG offshore Mozambique, paving the way for a final investment decision in 2019 and production to begin in 2024. XOM's joint venture partners in the Area 4 exploration and production concession include Eni and China's CNPC with a total 70% interest; XOM will head the development of the LNG facilities and Eni will lead the upstream work. "These commitments are an important step forward for the Rovuma LNG project and provide a solid foundation for securing project financing," says Eni's chief gas and LNG marketing and power officer.
[Source: Seeking Alpha 02/01/2019]
CS LNG comment: A little misleading this headline! The equity stakeholders have agreed to lift their equity gas which is not quite the same as finding buyers! Either way a good announcement and one that no doubt rattles Anadarko and their MzLNG project.