LNG
Overview
LNG's role as a key feedstock is well established as it helps manage both input costs and carbon emissions. Heavy industrial users' drive to achieve net zero targets has added a new dimension to how and where it is being deployed. Overall, its use is expected to increase and is tipped to become the strongest-growing fossil fuel.
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Latest LNG news
Browse the latest market moving news on the global LNG industry.
Japan’s Kline receives new LNG-fuelled car carrier
Japan’s Kline receives new LNG-fuelled car carrier
Tokyo, 28 November (Argus) — Japanese shipping company Kawasaki Kisen Kaisha (Kline) received an LNG-fuelled car carrier on 28 November, as it looks to use more lower-carbon marine fuels as part of its decarbonisation efforts. Kline received the car carrier Pontus Highway with a capacity of 7,000 vehicles from Chinese shipbuilder China Merchants Jinling Shipyard. The vessel is equipped with a dual fuel engine and is designed to curb emissions of CO2 by 25-30pc, sulphide oxide by almost 100pc and nitrogen oxide by around 75pc, compared to conventional fuel oil. Kline previously commissioned the LNG-fuelled car carrier Nereus Highway , also built by China Merchants Jinling Shipyard, in the first half of August . It received LNG-fuelled car carrier Poseidon Highway , built by domestic shipbuilder Imabari Shipbuilding, on 1 October . Kline said LNG-fuelled ships have an advantage in securing fuel as supply facilities for these vessels are well-established at ports, especially compared to methanol- and ammonia-fuelled vessels. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Santos wins costs in gas pipeline case
Australia’s Santos wins costs in gas pipeline case
Townsville, 28 November (Argus) — Australian independent Santos will receive millions of dollars in legal costs, months after the Federal Court ruled in the firm's favour regarding a lawsuit intended to derail its $4.6bn Barossa gas field in the Timor Sea. Environmental law group the Environmental Defenders Office (EDO) must pay Santos' legal bills of slightly more than A$9mn ($5.8mn), 100pc of the company's costs incurred defending a 2023 court case. The EDO's lawyers claimed Barossa's gas export pipeline required a new environmental plan because of cultural heritage matters, but the court found the action brought on behalf of three Tiwi islander Aboriginal people failed to establish any new facts following a cultural survey along the route of the 262km pipeline. Justice Natalie Charlesworth dismissed the independence and credibility of an EDO-commissioned underwater map showing cultural sites, with court papers released showing an expert offered to move the location of one such site so it would conflict with the pipeline. The decision may have a chilling effect on further legal challenges to oil, gas and coal projects in Australia. Court action planned against Australian independent Woodside's $12.5bn Scarborough project offshore Western Australia was called off in August , with the applicant labelling the case as "expensive and risky". Australia's conservative Coalition alliance has promised to end taxpayer funding for the EDO if it wins control of federal parliament in 2025. The October 2022 budget pledged A$9.8mn over four years and A$2.6mn/yr in ongoing funding to the EDO and fellow national legal organisation Environmental Justice Australia. Santos plans to bring its $4.6bn, 84pc complete Barossa field in the Timor Sea on line in July-September 2025, a slight delay from the previously guided first half of 2025. The field will provide feedstock for the 3.7mn t/yr Darwin LNG terminal, which exported its final cargo from the Bayu-Undan field in 2023. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
LNG use poses risk to Cambodia's energy security: IEEFA
LNG use poses risk to Cambodia's energy security: IEEFA
Singapore, 28 November (Argus) — Cambodia's increasing reliance on LNG for power generation could be detrimental to its energy security because of instability in LNG markets, according to Institute for Energy Economics and Financial Analysis (IEEFA). Rapid economic growth and electrification have led to Cambodia's electricity demand growing by 16pc/yr since 2009, according to IEEFA's report released on 26 November. Its power generation is mostly from hydropower and coal, but the country aims to boost its gas-fired power generation to meet its decarbonisation targets. Cambodia has a net zero by 2050 goal, and aims to reach 70pc renewable energy generation by 2030. The share of coal in Cambodia's power mix was 45pc in 2023, with hydropower representing 44pc, solar 5pc and imports from neighbouring countries making up the remaining 6pc. The country in 2021 declared that it would not build new coal plants beyond those already approved. Natural gas had not played a role in the country's power mix until recently, but "optimism has grown in recent years regarding the ability of new LNG-to-power projects to help the country meet rising electricity demand," stated the report. Gas operator Cambodian Natural Gas imported the country's first LNG shipment in 2020 from China's state-owned firm CNOOC, according to IEEFA. The firm also planned to complete a 1,200MW LNG-fired power plant and a 3mn t/yr import terminal by 2023, although there has been no progress as of June this year. Cambodian officials in November 2023 announced the cancellation of a 700MW coal project, which will be replaced with a 800MW gas-fired power plant instead. Cambodia is seeking to build these large LNG-fired power plants because of concerns over the intermittency of renewables such as wind and power, and LNG is viewed as a suitable transition fuel for grid reliability. The government expects LNG-fired capacity to reach 900MW by 2040, which would require roughly 840,000 t/yr of imports. When considering long-term wholesale prices of $8-16/mn Btu, Cambodia's LNG import bill could range between $361mn-722mn/yr, according to IEEFA. Some forecasts estimate that Cambodia's LNG-fired capacity could rise to as much as 2,700MW by 2040 and 8,700MW by 2050, stated the report. This would entail import requirements of 2.53mn t/yr in 2040 and 8.14mn t/yr in 2050. The fuel import costs for 2,700MW of LNG-fired capacity could amount to $1.08bn-2.17bn. LNG volatility LNG markets have been volatile over the past two years, because of factors such as geopolitical tensions and outages at supply facilities. Other emerging Asian economies such as Pakistan and Bangladesh faced fuel and power shortages because they have been unable to secure affordable LNG supplies, and this "demonstrates the evident risks of LNG importation for developing countries," states the report. Cambodia already has one of the highest electricity tariffs in Asia at $0.16/kWh, so higher LNG prices could require higher tariffs. LNG prices in Asia have been roughly $14/mn Btu and would have to fall below $5mn/mn Btu to compete with other electricity sources, according to IEEFA, but these low price levels are rare. The ANEA price, the Argus assessment for spot LNG deliveries to northeast Asia for the front-half month, stood at $15.08/mn Btu on 27 November. Cambodia's LNG demand and LNG-fired power plant expansions remain uncertain, so long-term offtake commitments will be challenging and the country will likely have to initially source cargoes from the sport market, according to the report. But the spot market poses risks in terms of supply security and price stability. Establishing an LNG supply chain also entails rigid long-term contracts that lock in fossil fuel infrastructure for decades. By Prethika Nair Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Freight nadir disrupts LNG pricing structures
Freight nadir disrupts LNG pricing structures
London, 20 November (Argus) — Prompt spot charter rates for LNG carriers have bucked the usual seasonal trend and reached record lows in recent weeks — limiting the scope for price signals to direct or redirect LNG flows, and help balance the global market. The recent weakness in prompt charter market values has been focused in the Atlantic basin. This stands in contrast with the Novembers of previous years, when the Atlantic has mostly kept at a premium to the Pacific because of European floating storage. The ARV2 prompt rate for US-northwest Europe by tri-fuel diesel-electric (TFDE) carriers was already approaching its record low — set in March 2021 — in the first half of October, passing it later in the month and staying lower. But while the ARV1 prompt rate for Australia-northeast Asia by TFDE carriers had held a sizeable premium to the ARV2 rate, recent falls in the Pacific rate pushed it below its record low — also set in March 2021 — on 15 November, probably partly as some vessels were repositioned to the Pacific from the Atlantic. Sublet market The weak LNG freight market mainly reflects the quick pace of newbuild vessel deliveries in recent months and weak demand for loadings from liquefaction capacity additions. It also reflects minimal incentive for floating storage or inter-basin sailing — at least for those companies not sat on surplus shipping. Around 60 new LNG carriers are due on the water this year, nearly double 2023's 31 deliveries. And the pace of new deliveries will quicken next year, when 91 are scheduled to be delivered. But record low rates and, perhaps more importantly, the fact they are holding there for a sustained period, also reflects a structural shift in LNG freight supply in recent years, which was papered over by a run of strong fourth quarters in 2021-23, and which severely limits the market's ability to react to price signals. Atlantic prompt rates had risen above $250,000/d by January 2021, with exceptionally low vessel availability leaving some firms unable to deliver US cargoes to Asia over Europe, despite a substantial premium for Pacific deliveries. At points that winter, participants reported no open vessels in the entire market. While already moving in this direction at the end of the last decade, winter LNG freight in the past few years has had few TFDE or two-stroke vessels — and for substantial periods, none — offered for prompt spot charters by shipowners themselves within the season. Instead, nearly all vessel supply has taken the form of charterers seeking to sublet carriers they have previously secured for fixed terms — be it for short or long periods. This has stemmed, in no small part, from record high rates during the fourth quarter of recent years leading to a flurry of term chartering ahead of winter. Most firms have preferred the risk of a shipping surplus than the risk of a shortage, after a tight freight market in the middle of winter 2020-21 left some firms having to cancel loadings because they could not find vessels to deliver them. Term chartering was slower this summer than in recent years, and yet almost no owners were left with open vessels ahead of winter, according to market participants. This means carriers offered for subletting are poised to make up the vast bulk of supply in the winter spot charter market — even before charterers piled into the market just before the end of the summer, racing to find carriers as the floating storage incentive failed to emerge and the inter-basin arbitrage closed. And the vast majority of carriers coming on to the water in the latter half of this year are already tied to term charters, with few speculative newbuild orders likely to deliver in the next couple of years. Owners holding open shipping in such a weak market would have been better able to remove vessels from the market when rates fell below their operational costs — deemed by some market participants to a little over $20,000/d, at least for TFDE carriers — effectively acting as a supply-side response to price signals. But this is not an option available to charterers holding surplus ships, with the exception of carriers taken on bareboat charters, pushing them to seek employment at rates below this threshold. For the many firms sat on spare shipping that they initially hoped they could use themselves or sublet in a stronger market, this has taken the form of actual charters or — more commonly — finding employment within their portfolios, such as aggressively competing for fob cargoes or undertaking inter-basin deliveries, even when the spot arbitrage has been closed. New shipping economics Asian LNG markets had continued to command a premium to Europe, although it was insufficient to cover the additional shipping costs — based on spot charter rates — for delivery of US cargoes to Asia rather than Europe, assuming spot deliveries around the Cape of Good Hope route. But for firms sitting on surplus carriers that they are unable to sublet even close to their term charters on the vessels, or sublet at all, there has remained an incentive to continue delivering US LNG to Asia to recoup at least some of their freight costs so long as the additional boil-off and return fuel costs are covered. Together with the inter-basin arbitrage being open for much of the past summer, during which some fourth-quarter US cargoes would have been marketed and then sold into Asia, firms with shipping they deem a sunk cost continuing to deliver to Asia have bolstered inter-basin flows. In turn, this has weighed on European receipts, even when the arbitrage has been closed on strong European demand and comparatively weak Asian interest in more purchases, leaving Europe to bid higher and higher relative to Asia as price signals have failed to result in a sufficient redirection of flows to Europe and balance fundamentals between the two basins. European prices in recent days have instead had to inch closer to prices on Asia-Pacific markets — so those markets' premium is not sufficient to even cover the additional boil-off and return fuel costs — and European values even turned to a premium over Asia last week. This eventually spurred a large number of diversions of laden carriers to Europe through mid-November, which has helped to balance out global supply. Almost 10 carriers laden with LNG from the US or west Africa have been diverted away from routes towards Asia in recent days, and were sailing for European delivery, although it remains to be seen how long lived this change in flows might be, given that European prices softened against Asian values in recent days. Forward rates for fixtures throughout this winter remain close to prompt rates' nadir, and even more ships could come to the spot charter market as more US LNG flows to Europe instead of Asia. This suggests that Europe's need to compete at almost price-parity with Asia — rather than just hold at enough of a discount so that the additional spot freight costs are not covered — to keep enough LNG flowing in its direction may remain, at least in the short-term. But beyond next quarter, together with expected LNG supply increases in the US, carriers tied to short-term winter charters are due to come off-charter as the season draws to a close. And if rates do remain at such lows, owners taking back these ships will eventually be faced with a decision on whether to seek new fixtures or take them into short-term lay-up. LNG carrier deliveries (no. of carriers) ARV charter rates 2019-24 ARV freight rates vs 3-yr avg Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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