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By CS LNG, Apr 1 2020 12:22PM

LNG SPOT MARKET FLOODED WITH EXCESS CARGOES

Reuters is reporting that LNG suppliers have been flooding the LNG spot market with excess cargoes as global demand continues to dwindle. The lockdowns and strict travel restrictions implemented to help slow the spread of the coronavirus outbreak worldwide have disrupted industrial output, subsequently impacting on LNG demand. The largest drop offs in LNG demand have been recorded in countries such as: India, Italy and Spain. This latest LNG glut is pushing Asian LNG spot prices back towards the record low that was recorded in February (i.e. when Chinese demand collapsed during the initial outbreak of the coronavirus). Prior to the events that led to the record low, prices were already at seasonal lows due to the impact of the ongoing trade war between the US and China, in addition to a warm winter. As LNG spot prices suffer in Asia with gas demand plummeting at double-digit rates, according to IHS Markit, LNG imports to Europe will experience a significant boost. Indeed, estimates suggest that total LNG deliveries to the continent will reach approximately 11 million t (a 14% increase from previous record set in December 2019).

Source: LNG Industry 30/03/2020


CS LNG comment: As the world ‘collapses’ it is no wonder that the market is flooded especially as US exporters follow a capitalistic mentality rather than the pragmatic one of easing in production when a) no one wants it; b) no one actually needs it and c) no one can store it! Charter rates may be holding up for the moment at their current low levels but there is limited storage availability. So maybe the US will shut in soon!



INVESTORS APPLAUD AS WOODSIDE ICES $53B OF LNG PROJECTS

Investors have applauded Woodside Petroleum for taking what they see as the only feasible path with a brutal decision to put $53 billion of LNG growth projects in Western Australia on ice in response to the oil price crash. The deferral of the Scarborough, Pluto-2 and Browse projects represents a turnaround from Woodside's previous determination to press ahead. But it comes after an unprecedented drop in oil prices which has combined with the demand shock from COVID-19 to wreck investment plans across the global industry. "These are extraordinary and challenging times for us, and a few months ago no-one could really have foreseen these circumstances," chief executive Peter Coleman told investors as he advised of a 60 per cent cut to investment spending this year and a 50 per cent drop in total spending to $US2.4 billion. The news of the deferral of the huge projects, which would employ thousands during construction, capped a horror two weeks for the domestic oil and gas sector, which has seen more than 500 contract workers laid off at Woodside-run offshore and onshore gas plants in WA, as well as axed investment plans by Santos and Oil Search. Also on Friday, Beach Energy advised of a 30 per cent cut in its investment budget for 2020-21, while Incitec Pivot and Central Petroleum halted work on a gas project in Queensland and Origin Energy interrupted its Beetaloo unconventional gas drilling project in the Northern Territory. In the broader resources sector, South32 flagged a potential delay to its Eagle Downs coking coal project in Queensland and is suspending a $120 million share buyback, while refiner Viva Energy delayed an off-market share buyback and postponed its annual general meeting. At Woodside, the 2020 target for a final go-aheads on the $US11.4 billion Scarborough and Pluto-2 LNG expansion has been pushed back into 2021, while the late 2021 target for a final investment decision on the $US20.5 billion Browse project has been dropped with no revised target set. "That was essential path forward," said Simon Mawhinney, portfolio manager at value investor Allan Gray, who said he was "ecstatic" about the move to keep valuable gas in the ground until the market improves. "Yet again this company has displayed itself to have been one of the better managed oil and gas companies in Australia." Mr Mawhinney said, adding that Allan Gray has taken the opportunity from the recent dive in share prices to add to its holding in Woodside. Shares in Woodside, which have halved since January, still shed 4.6 per cent to $17.18 shortly before the close of trading. The project delays will rein back capex this year to as low as $US1.7 billion, from an original budget of as much as $US4.4 billion. A remaining budget for discretionary capex this year of about $US600 million leaves scope for further reductions.

Source: Australian Financial Review 27/03/2020


CS LNG comment: As a cryogenic industry maybe, this article should have read into ‘cryogenic storage’ rather than ‘put on ice’ given the length of time this delay will be!



ASIAN PRICES CRASH BELOW $3/MMBTU AS INDIANS TURN AWAY CARGOES

Asian spot LNG prices crashed below $3/mmBtu reversing three weeks of gains, after Indian buyers cancelled or diverted cargoes as a lockdown caused gas demand to slump. The average LNG price for May delivery into northeast Asia LNG-AS was estimated at about $2.80/mmBtu, down 70 cents, or 20% from the previous week, traders said. Prices for cargoes delivered in April were estimated around $3.00/mmBtu, also down 70 cents from a week ago. Indian LNG importers, including top buyer Petronet LNG, Gail (India) and GSPC, issued force majeure notices to suppliers this week as domestic demand and port operations were hit by a nationwide lockdown to curb the spread of coronavirus, sources told Reuters. India’s GSPC also cancelled an import tender for 11 cargoes for deliveries in May to March, a company source said. The force majeure in turn has caused a flood of supply in the spot market, depressing prices, traders said. Qatargas has approached several buyers in Asia and Europe offering cargoes for loading or delivery in April, three sources familiar with the matter said. Two other traders said Qatar had offered about 10 cargoes, though this could not be confirmed. Cheniere Energy also offered a cargo for early April loading from Sabine Pass, traders said. Sakhalin Energy and Petronas were offering cargoes for delivery in May, they added. Indonesia’s Bontang plant may have sold an early-May loading cargo to a Chinese buyer, one source said, though this could not immediately be confirmed. KUFPEC may have sold a cargo for first-half May loading from the Wheatstone plant to a portfolio company at $3 to $3.20/mmBtu, the source added. One the buy side, some requirements were seen from China and Colombia. Thailand’s PTT bought two cargoes for delivery in May from Qatargas at $3.05 to $3.15/mmBtu through a buy tender, traders said. Providing some upside, Woodside Petroleum, which produces LNG at North West Shelf LNG, Pluto LNG and has a stake in Wheatstone LNG in Western Australia, said on Friday its trading team has “recently begun placing some spot production back into China as industrial output and demand restarts”. It added that it would defer major maintenance at the North West Shelf LNG plant in Western Australia as it was slashing spending.

Source: Hellenic Shipping Company 30/03/2020


CS LNG comment: As we mentioned earlier, the world just does not need any more LNG during this virus crisis and given current medical prognosis this could last another 6-9 months! Don’t expect the prices to rise much this year.



HÖEGH BUMPS FSRU INDEPENDENCE FUNDS, NABS LNG CARRIER DEAL

Höegh LNG has secured an extension and upsizing of its FSRU Independence debt facility as well as an interim time charter for one of its vessels. The company received a commitment letter from five of its relationship banks for the amendment and extension of the Independence’s $61 million debt facility maturing in May 2020, Höegh LNG said in its statement on Thursday. Under the new terms, the commercial tranche will be upsized by $45 million to $106 million with maturity in December 2024, with the additional funds available for general corporate use. The Independence debt facility also consists of two tranches guaranteed by export credit agencies which remain unchanged, save for a reduction of their respective funding margins. Further, a unit of the company has entered into an interim LNG carrier time-charter with an Asian-based trading house, for a period of around 7 months from mid-2020. The rate reflects the current term market for large size DFDE LNG carriers, the company said noting that either Höegh Gannet or Höegh Gallant will be deployed for this contract. This charter and other short-term charters concluded increase the group’s contract coverage for 2020 to around 92 percent, the statement reads.

Source: LNG World News 26/03/2020


CS LNG comment: A very ‘cagey’ statement from Hoegh who like most companies have to be suffering at the moment (CS LNG included!) Perhaps the potential purchase option of the Independence by the Lithuanians has been shelved for the time being necessitating the debt facility extension and we doubt that the ‘current market rate’ for their 7 month commitment even covers 50% of their loan repayment on that vessel.



VIRUS LOOKS SET TO DELAY BP’S TANGGUH LNG EXPANSION

BP will be bracing for a delay in the start-up of its third LNG train at the Tangguh LNG project in West Papua province, Indonesia, due to the Covid-19 pandemic. The project already delayed by one year, from the original target completion in 3Q 2020 to 3Q 2021, due to disruption caused by two tsunamis in 2018, now looks set to be delayed further as the workforce building the expansion has been drastically reduced to stem the spread of the coronavirus. Deputy chairman of operations at Indonesian upstream regulator SKK Migas, Julius Wiratno, told local media that, because of the coronavirus, the project has adopted physical distancing among workers. This triggered a drastic fall in workers on site – from 13,000 people to 10,000 as of the third week of March. This will further be cut to 3,000 core workers only. The consortium of contractors, which include Chiyoda and Saipem, building the third 3.8mtpa LNG train, made a decision that they would temporarily stop field work from 15 March due to force majeure, based on the World Health Organization (WHO) declaration of Covid-19 as a global pandemic. However, analysts at Jakarta-based research firm Tenggara Strategics said the consortium’s decision reportedly angered both SKK Migas and BP as it was not yet clear who would be responsible for the resulting cost overruns. The Tangguh Train 3 expansion project comes under a cost recovery contract, meaning SKK Migas – or the government – would ultimately bear the cost, predicted Tenggara. The consortium has already sent many workers home and told them not to return to work until they receive official notifications to do so. After the tsunamis of 2018, which delayed deliveries of construction materials to the site, many of the workers were also sent home, but many of them did not want to return to work. Due to the delay following the natural disasters, the engineering procurement construction (EPC) contractors demanded an adjustment to the EPC cost from $2.4 billion to $3.4 billion. “This time, it is not clear yet how long the coronavirus will delay the project and how much the delay will cost the government,” Tenggara said in its latest report. Sources told Tenggara that the contractors have asked BP to bear all the additional costs caused by the termination of work. These costs include field worker salaries, accommodation costs, heavy equipment costs, logistics costs and subcontractor fees. The sources reported that BP has refused to pay all the costs and instead, asked the consortium to continue with the works for Tangguh Train 3. “According to the source, BP wants to avoid further delay in the completion of Tangguh Train 3 project because such a delay would incur costs greater than that having the works terminated,” reported the research firm. SKK Migas also wants to avoid any cost overrun resulting from work termination to be included under the cost recovery contract. Therefore, after several negotiations, SKK Migas and BP, have requested that the consortium not stop all works and that essential works must continue, reported Tenggara. When Train 3, initially expected to cost $8 billion before any delays, eventually comes online, the total capacity at Tangguh will be 11.4 mtpa. While LNG from Train 1 and Train 2 is mostly for export, 75% of LNG from Train 3 would be supplied to state utility PLN and the remaining 25% for export to Japan’s Kansai Electric Power Company.

Source: Energy Voice 30/03/2020


CS LNG comment: So just how many times can global companies use the excuse of the Covid-19 pandemic for delays, cancellations etc when the reality is the market conditions are really to blame!


By CS LNG, May 29 2019 08:21AM

1. ASIA LNG SPOT PRICE DROPS BELOW $5/MMBTU AS SUPPLY FLOODS MARKET

The Asian spot price for liquefied natural gas (LNG) has dropped to below $5 per million British thermal units (mmBtu) this week as sellers flooded the market with spot cargoes, trade sources said. The price is at its lowest level since the beginning of April. Oil majors Shell and BP each offered a July loading cargo at $4.60-$4.65/mmBtu on Wednesday in Platts market on close (MOC) window, at a price well below the $5.35/mmBtu levels seen last Friday, they added. A large tender by Egypt to sell up to 13 cargoes, as well as several sell tenders by Indonesia's Pertamina, Angola and Australia are also weighing on the market, sources said.

[Source: Energy World / Reuters 23/05/2019]


CS LNG comment: Well, it is still only May so they winter rush has not started yet, but it is looking ominous for pricing especially with more LNG supply coming on stream from US this summer. And just what impact will this have on charter rates? Let us wait and see!

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2. SAUDI ARAMCO INKS 20-YEAR DEAL WITH SEMPRA FOR LNG SUPPLY

Saudi Aramco signed a 20-year agreement to buy LNG from a forthcoming export terminal in Texas that U.S.-based Sempra Energy is developing, the two companies said on Wednesday. The Saudi state oil giant plans to become a major global gas player, and this deal will provide it with access to some of the world’s cheapest and most abundant natural gas via the U.S. shale boom. Aramco has been developing its own gas resources and eyeing gas assets in the United States, Russia, Australia and Africa. Demand for supercooled LNG hit a record in 2018 at 42.1 billion cubic feet per day (bcfd), according to the International Gas Union, and growth is expected to keep rising as countries wean themselves off dirtier coal. One billion cubic feet of gas is enough to supply about 5 million U.S. homes for a day. The sale-and-purchase agreement is for 5mtpa of LNG, equivalent to about 0.7 bcfd of natural gas. This is Saudi Arabia’s first known nonbinding agreement to buy LNG, and the largest such LNG deal since 2013, according to energy consultancy Wood Mackenzie. Aramco will also buy a 25% equity stake in the first phase of the multibillion-dollar project, to be constructed in Port Arthur, Texas, about 90 miles (145 km) from Houston, the companies said. “Port Arthur LNG could be one of the largest LNG export projects in North America, with potential expansion capabilities of up to eight liquefaction trains or approximately 45mtpa of capacity,” the companies said. Global LNG demand is expected to grow by about 5 percent a year through the mid-2020s, according to U.S. Energy Information Administration (EIA) projections. Since February 2016, when the United States started exporting the fuel from the Lower 48 states, it has become the world’s fourth biggest LNG exporter.

[Source: Reuters 22/05/2019]


CS LNG comment: Does this mean that the new LNG team at Sempra (now that Octavio and Co. have left) really knows what they are doing and what may have been missing for the past 10 years? Certainly, a deal of this magnitude with that off-taker is a real coup. DES or FOB?

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3. NOVATEK ANNOUNCES 3RD LNG PROJECT IN ARCTIC

As if in a great rush to develop its Arctic resources, Russian natural gas company Novatek this week made clear that it is starting the development of a third LNG project in the Yamal region. The Ob LNG will be based on the resources of the Verkhnetiuteyskoye and Zapadno-Seyakhinskoye fields, two structures located in the central part of the Yamal Peninsula. The fields hold a total of 157 billion cubic meters of natural gas and the projected new plant will produce up to 4,8 million tons of LNG per year. The plant and adjacent infrastructure will cost $5 billion and is to come in operation in year 2023, newspaper Kommersant reports with reference to a high-ranking representative of Novatek. The development of the Ob LNG will run parallel to the Arctic LNG 2, the company’s far bigger project currently under development on the nearby Gydan Peninsula. The Arctic LNG 2 will produce up to 19,8 million tons, and the first of the projected three trains is to be ready by year 2023. The announcement of the Ob LNG comes a the same time as Novatek signs a major contract with UK-based TechnipFMC on engineering and construction of the Arctic LNG 2. Novatek’s first Arctic project, the Yamal LNG, is already operating at full speed, which means an annual production of up to 16,5 million tons.

[Source: The Barents Observer 23/05/2019]


CS LNG comment: A step too far too quick? Does Novatek and its partners have the resources to manage two simultaneous projects?

By CS LNG, May 20 2019 08:11AM

1. RUSSIA'S GAZPROM CONSIDERS LINDE, SHELL TECHNOLOGIES FOR BALTIC LNG

Russian gas producer Gazprom is considering using technology made by industrial gases group Linde or Royal Dutch Shell at its Baltic LNG project, Gazprom board member Vitaly Markelov said on Tuesday. Russia does not have its own LNG technology. "We've looked at the efficiency of both technologies and they basically have the same indicators in terms of workability. The rest is a question of negotiation," Markelov said. Royal Dutch Shell quit Gazprom's liquefied natural gas project near the Baltic Sea port of Ust-Luga last month after the Russian company moved to integrate its Baltic LNG project and gas processing plants. Gazprom has already started designing the Baltic LNG complex, Markelov said

[Source: Yahoo / Reuters 14/05/2019]


CS LNG comment: Well they might be considering Shell technology, but no doubt Linde will win. (unless the recent Shell charter of the Gazprom FSRU is an entry ticket!).

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2. HOW SOUTH AFRICA CAN BENEFIT FROM MOZAMBIQUE’S LNG

Mozambique’s LNG reserves, highlighted this week by the government’s approval of ExxonMobil’s Rovuma project, represent a major opportunity for South Africa, Standard Bank oil and gas analyst Paul Eardley-Taylor argues in research this week. Rovuma can deliver 15.2m tonnes of LNG per year and has the potential to help turn Mozambique into the fourth-largest LNG producer globally, according to Standard Bank. The International Energy Agency predicts that gas will overtake coal in the global energy mix by 2030, with LNG playing a major role. Mozambique’s reserves imply capital expenditure of $128bn over the next decade, and South African companies are well-placed to win contracts, Eardley-Taylor says. Though South Africa is relatively poor in terms of gas, the country’s limited shipping distances from Mozambique will help favourable delivery prices, he argues. Crucially, South Africa’s peak demand period in the winter falls at a different time to that in the northern hemisphere, meaning that South Africa is in an ideal position to make competitive LNG purchases and even take risks in the spot market, he argues, adding that South Africa’s government needs to be talking directly with Mozambique project operators. Standard Bank and its shareholder, the Industrial and Commercial Bank of China, are the largest lenders to Mozambique’s Coral floating LNG development. Costs at state energy utility Eskom are at the core of many of South Africa’s problems. Costs of dollar-priced diesel used by Eskom could be slashed if Mozambique’s LNG is used, according to Eardley-Taylor.Spot LNG is currently around $32 barrel of oil equivalent (BOE), while contract LNG is around $37. Diesel costs more than double, at $77-$80, Eardley-Taylor says. Moody’s, the only ratings agency that continues to rate South Africa at investment grade, has said that Eskom is South Africa’s main source of contingent liability risk. Loss of that rating would have a catastrophic effect on the country’s investability. Eskom has set aside R50bn ($3.5bn) over the next five years just to keep its ageing electricity infrastructure running.

[Source: The Africa Report 16/05/2019]


CS LNG comment: South Africa can and should benefit from MzLNG but we doubt they will receive LNG. It is more likely to get gas via new pipelines given the recent track record of SA failing to do anything on the LNG front.

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3. TRADE WAR LEAVES LNG MEGA PROJECTS VULNERABLE

The escalation of the trade war between the United States and China could jeopardize several LNG mega projects awaiting final approval. That’s according to Rystad Energy, which said increased tariffs will create additional headwinds for U.S. LNG projects currently awaiting final investment decisions. “Rystad Energy expects China to be one of the biggest contributors in sponsoring new LNG projects over the coming years, and there will be a reluctance to signing new deals with U.S. projects as long as this trade war persists,” Sindre Knutsson, senior analyst at Rystad Energy’s gas markets team, said in a company statement. “For example, Cheniere and Sinopec agreed late last year on a 20-year deal that would supply 2mtpa of LNG to China starting in 2023. This deal could have been signed once the trade tensions were resolved, but due to the heightened tensions this has not happened,” Knutsson added. According to Rystad Energy, China’s decision to impose tariffs on U.S. LNG will make LNG projects outside the United States more attractive. On Monday, China’s ministry of finance revealed that the country would impose a 25 percent tariff on U.S. LNG from June 1. On May 10, the office of the United States trade representative revealed that the United States had increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. According to a report published by DNV GL last month, the majority of LNG-focused oil and gas professionals believe several new LNG infrastructure projects will need to be initiated this year to ensure supply can meet demand after 2025. DNV GL’s report drew upon a global survey of 291 senior LNG professionals, conducted in December 2018. The report also includes findings from DNV GL’s annual study on the outlook for the oil and gas industry, based on a survey of 791 senior oil and gas professionals, conducted during late October and early November 2018.

[Source: Rigzone 16/05/2019]


CS LNG comment: And how long do we expect the trade war to last? Will DT win another term? But China needs the US LNG in the game otherwise the SE Asian producers will hike their prices.