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Cheniere expects no LNG winter cancellations

  • Spanish Market: Natural gas
  • 07/08/20

US LNG producer Cheniere expects its customers to lift their contractual volumes in full this winter as the market recovers from the effects of the Covid-19 outbreak.

The firm expects a recovery in global LNG demand, particularly in Asia, to continue throughout the rest of the year and further support regional price spreads, providing no incentive for US offtakers to cancel any of their contractual volumes during the winter. "We think our customers will be lifting during the winter, it's economic to be lifting," the firm's senior vice-president and chief financial officer Zach Davis said.

Asian LNG demand was broadly flat in April-June compared with a year earlier, mostly as lower demand from Japan and South Korea was offset by stronger Chinese demand, the firm's executive vice-president and chief commercial officer Anatol Feygin said. Going forward, Chinese demand is expected to grow further as the country's economy shows signs of strong recovery, with its purchasing managers' index (PMI) seen "in expansion mode" for the past four months, he added. The firm also expects Japanese and South Korean demand to recover in the coming months, as a result of lower retail prices in South Korea and with some Japanese nuclear capacity expected to be off line.

A substantial portion of US cargoes has been cancelled by long-term offtakers in recent months, as LNG delivered prices across the world fell below the cost of feedgas at US facilities, or held too tight a premium to that level for firms to be able to deliver those cargoes at a profit. Cheniere — which operates around half of the US' total liquefaction capacity — exported 78 cargoes in April-June, down from 104 cargoes a year earlier and as many as 128 cargoes in the first quarter of this year. Exports totalled 274 trillion Btu, suggesting an average cargo size of 3.51 trillion Btu, down from 361 trillion Btu a year earlier and 453 trillion Btu in the first quarter of 2020.

About half of the 50 cargoes not produced in the second quarter may have been turned down by long-term offtakers. Cancellation revenues totalled about $300mn in the second quarter, already including $50mn of third-quarter cancellations. The average revenue is $10mn for each cargo cancelled, Feygin said, suggesting about 30 cargoes were cancelled by long-term offtakers, already accounting for five that were expected for loading in July-September.

The firm's long-term supply obligations grew during the second quarter with a number of long-term contracts from the second liquefaction train at the Corpus Christi facility starting in May. These include contracts with Pertamina, Naturgy, Woodside, Iberdrola and EDF. These firms have long-term supply agreements with Cheniere for an aggregate volume of approximately 5.4mn t/yr.

Cheniere uses excess production at its facilities to meet the supply obligations of its trading arm. The firm likely replaced most of the cargoes it did not produce with third-party purchases, which totalled 34 trillion Btu — or approximately 10 cargoes — in the second quarter, up from 14 trillion Btu in January-March. The firm was only heard to have issued one purchase tender for six summer cargoes in March, suggesting most of its third-party purchases were concluded bilaterally or by bidding for cargoes tendered by other suppliers.

This supply response "is what we were designed to handle, and we took advantage of opportunities from facilities that were not as equipped to handle [such market conditions]", the firm's chief executive Jack Fusco said. "We were able to secure cheap cargoes" to meet customers' requirements, he added. The firm's margin per mn Btu increased in recent months as the firm sold less spot LNG, which typically has lower margins than volumes sold under long-term contracts.

Global supply growth slowed this year, as a result of fewer capacity additions and as global liquefaction capacity adjusted to the impact of the Covid-19 outbreak on demand, Feygin said. Global supply shrank by approximately 1mn t in the second quarter, ending a string of six consecutive quarters in which global supply grew on average by 10mn t each quarter, he added.

But the firm considers the medium and long-term fundamentals of the LNG market to have actually improved, a view again centred on China as the key driver of global demand in the coming years. The 20pc growth in the country's LNG demand seen in the second quarter, driven by economic recovery and a supply switch from pipeline gas to LNG, is "just the start", Feygin said, although he conceded that the ample commercial opportunities are counterbalanced by geopolitical headwinds.

Cheniere is building a third liquefaction train at the Corpus Christi facility, which is 90pc complete and on course to be commissioned in the first half of next year, as well as a sixth liquefaction train at the Sabine Pass facility, which is 64pc complete and is expected to be commissioned in the second half of 2022, ahead of the previously planned start in the first half of 2023.


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18/09/24

US Fed cuts rate by half point, signals more: Update

US Fed cuts rate by half point, signals more: Update

Adds chairman Powell comments, economic projections. Houston, 18 September (Argus) — The US Federal Reserve cut its target interest rate by 50 basis points today, the first rate cut since 2020, with policymakers signaling they expect to make another half-point worth of cuts by the end of 2024. The Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate to 4.75-5pc from the prior range of 5.25-5.5pc, which was a 23-year high. The Fed had kept the target rate unchanged since July 2023 after hiking it for more than a year in the most intense rate-tightening campaign in four decades to quash inflation, which peaked at 9.1pc in mid-2022. "The committee has gained greater confidence that inflation is moving sustainably toward 2pc, and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in its statement after the two-day meeting. "Job gains have slowed, and the unemployment rate has moved up but remains low." In their latest economic projections, the Fed board and policymakers expect the target rate range will end 2024 near a midpoint of 4.4pc compared with an end of year midpoint of 5.1pc projected in June, which implies further cuts amounting to 50 basis points by the end of 2024. Policymakers also penciled in another 100 basis points of cuts over the course of 2025. "We're recalibrating policy down over time to a more neutral level and we're moving at the pace that we think is appropriate given developments in the economy," Fed chair Jerome Powell told a press conference after the meeting. "The economy can develop in a way that will cause us to go faster or slower. The US economy is in a good place and our decision today is designed to keep it there." The Fed's economic projections see core Personal Consumption Expenditures inflation — the Fed's favorite measure of inflation — ending 2024 at a median rate of 2.6pc, down from a prior forecast of 2.8pc. Policymakers see core PCE inflation falling to a median of 2.2pc by the end of next year. The outlook for the unemployment rate for the end of 2024 climbed to 4.4pc from 4pc penciled in at the June meeting. Policymakers expect gross domestic product (GDP) growth to end 2024 at an annual 2pc, slightly down from a prior 2.1pc projection. The latest policy meeting comes as the Consumer Price Index (CPI) eased to an annual 2.5pc in August , down from 2.9pc in July, the Labor Department reported on 11 September. Inflation had ticked up to 3.5pc in March from 3.1pc in January, prompting the Fed to turn more cautious about beginning its rate cuts. US job growth has recently slowed sharply, falling to an average 116,000 in the three months through August from 211,000 for the prior three months. The jobless rate rose to 4.3pc in July, the highest in three years, before edging down to 4.2pc in August. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Volatile energy prices risk the transition: IEF


18/09/24
18/09/24

Volatile energy prices risk the transition: IEF

Houston, 18 September (Argus) — High or volatile energy prices risk undermining emissions reductions efforts, International Energy Forum (IEF) secretary-general Joseph McMonigle said today at the Gastech conference in Houston, Texas. "If the public starts to connect high prices and volatility to the energy transition, we're in big trouble and we risk losing public support for the transition and climate policy," he said. McMonigle made his comments on a panel with several energy ministers, who discussed the issues of balancing energy security concerns with transitioning to cleaner fuel sources for electricity. When asked what he would consider a "call to action" for the global energy sector, McMonigle suggested investments in emerging technologies. "I think to allow trading of carbon credits is really important to accelerate the transition," he said. "Also, to provide financing for CCS (carbon capture and storage), which I think is one of the technologies that does not have enough investment behind it." By David Haydon Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US Fed cuts rate by half point, signals more to come


18/09/24
18/09/24

US Fed cuts rate by half point, signals more to come

Houston, 18 September (Argus) — The US Federal Reserve cut its target interest rate by 50 basis points today, the first rate cut since 2020, with officials signaling they expect to make another half point worth of cuts by the end of 2024. The Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate to 4.75-5pc from the prior range of 5.25-5.5pc, which was a two-decade high. The Fed had kept the target rate unchanged since July 2023 after hiking it for more than a year in the most aggressive increase campaign in four decades to quash inflation, which peaked at 9.1pc in mid-2022. "The committee has gained greater confidence that inflation is moving sustainably toward 2pc and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in its statement after the two-day meeting. "Job gains have slowed, and the unemployment rate has moved up but remains low." The Fed board and policymakers, in their latest economic projections, expect the target rate range will end 2024 near a midpoint of 4.4pc compared with an end of year midpoint of 5.1pc projected in June, which implies further cuts amounting to 50 basis points by the end of 2024. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Dutch government eyes gas storage levy from 2026


18/09/24
18/09/24

Dutch government eyes gas storage levy from 2026

London, 18 September (Argus) — The Dutch government has proposed a new levy from 2026 to recoup the cost of filling the Bergermeer gas storage facility since 2022 in its 2025 budget plan. The government's draft budget presented on Tuesday said that preparations were ongoing to introduce a levy on booked capacity on top of gas system operator GTS' transport tariffs. The levy would apply to both domestic users and "users abroad" to ensure that "the costs associated with the gas storage filling measures are borne by the users who benefit from the filling of storages", the government said. The levy is expected to generate €146.7mn/yr ($163mn/yr) from 2026 until at least 2029, according to the draft budget. That phrasing suggests that the levy may not take effect before 2026. The government tasked state-owned holding company EBN with filling Bergermeer to 90pc of capacity in summer 2022 if market participants failed to do so, and has left that legal requirement in place until 2025. And the Dutch government's draft budget earmarks more money for the stockbuild in coming years, amounting to about €256mn for 2025 and €233mn for 2026, up from €67mn in 2023 and €105mn in 2024. The Hague's new coalition government has focussed on gas security of supply, proposing further steps to support domestic production and ensure that storages are filled. As part of this, it intends to propose legislation to prevent and react to an energy supply crisis, while aiming to reduce demand, maintain LNG capacity and focus on long-term contracts, the government said. The government also plans to amend the mining act, the gas act and other existing laws to "structurally safeguard the security of gas supply", it said. In its government programme released on Friday , the cabinet said it was examining how the government could more proactively ensure the gas stockfill. All the country's storage sites remain "crucial for guaranteeing security of supply and realising energy independence", the budget said. This includes the country's largest storage site at Norg, where the government compensates operator Nam — a 50:50 joint venture between Shell and ExxonMobil — to use the facility to ensure security of supply . The government has paid Nam €491mn for that this year, down from €757mn a year earlier, because of lower gas prices, the budget shows. The German government implemented a similar storage levy in 2022 to recoup the cost of filling storage sites ahead of the winter heating season. But after EU pressure from central and eastern European neighbours regarding the large negative impacts of the levy on their effort to diversify away from Russian gas, the German government decided to stop charging the levy on outbound flows from the beginning of next year. By Lucas Waelbroeck Boix and Till Stehr Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Hoekstra to face 'tough' EU parliamentary hearings


18/09/24
18/09/24

Hoekstra to face 'tough' EU parliamentary hearings

Brussels, 18 September (Argus) — EU climate commissioner Wopke Hoekstra, who has been nominated again for the role, is expected to face "tough" hearings in the European Parliament, according to a senior European official. The official told Argus that Hoekstra might have a "slight" advantage, as he underwent parliamentary hearings in 2023 when he took over fellow Dutchman Frans Timmermans' climate portfolio. At the time, Hoekstra was questioned extensively about past work with Shell and on climate issues. European Commission president Ursula von der Leyen put forward new commissioner candidates on 17 September, assigning Hoekstra the climate, net-zero, and clean growth portfolio. All candidates will undergo hearings before the EU parliament votes on the new commission line-up. Hoekstra has said he is "honoured and humbled", but formal appointment depends on how he performs during the hearings before the European Parliament's energy, environment and other committees. Hoekstra's mandate would include drafting legislation to enshrine a 90pc cut in greenhouse gas (GHG) emissions by 2040, from 1990 levels, into European law. The commission's 2040 target, revealed in February, referred to a "net GHG emissions reduction of 90pc". Hoekstra last year made a "personal" commitment to defend a "minimum target of at least 90pc" net GHG cuts. Von der Leyen has tasked Hoekstra with designing climate policies for the post-2030 period and developing an Industrial Decarbonisation Accelerator Act. Other key objectives include channelling investment toward net-zero infrastructure and ensuring revenues from the EU's emissions trading system (ETS) are used "effectively" to drive decarbonisation. Hoekstra's responsibilities extend to advancing a single market for CO2, boosting carbon removals for hard-to-abate sectors, and phasing out fossil fuel subsidies. Hoekstra would work closely with former Danish climate minister Dan Jorgensen, who is nominated for the energy and housing portfolio, if both are appointed. Jorgensen will be responsible for advancing the Electrification Action Plan for industrial transition and overseeing a roadmap to phase out Russian energy imports. He is tasked with ensuring the "full use" of joint procurement mechanisms, with a mandate to extend the current aggregated demand system from gas to include hydrogen and potentially other commodities. Supervising both Hoekstra and Jorgensen, in addition to von der Leyen, will be Teresa Ribera, Spain's former climate minister. Ribera has been nominated as executive vice-president for a clean, just and competitive transition. European Parliament officials expect to receive financial declarations and other procedural documents in the coming days. That will allow parliamentary committees to send written questions to Hoekstra and other nominated commissioners, officially kicking off the hearing process. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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