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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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19/09/24

LNG-burning vessels well positioned ahead of 2025

LNG-burning vessels well positioned ahead of 2025

New York, 19 September (Argus) — Vessels outfitted with dual-fuel LNG-burning engines are poised to have the lowest marine fuel expense heading into 2025 when the EU will tighten its marine EU emissions trading system (ETS) regulations and add a new regulation, " FuelEU", from 1 January 2025. Considering both regulations, at current price levels, fossil LNG (also known as grey LNG) will be priced the cheapest compared with conventional marine fuels and other commonly considered alternative fuels such as biodiesel and methanol. The EU's FuelEU maritime regulation will require ship operators traveling in, out and within EU territorial waters to gradually reduce their greenhouse gas (GHG) intensity on a lifecycle basis, starting with a 2pc reduction in 2025, 6pc in 2030 and so on until getting to an 80pc drop, compared with 2020 base year levels. The FuelEU GHG intensity maximum is set at 85.69 grams of CO2-equivalent per MJ (gCO2e/MJ) from 2030 to 2034, dropping to 77.94 gCO2e/MJ in 2035. Vessel pools exceeding the FuelEU's limits will be fined €2,400/t ($2,675/t) of very low-sulphur fuel oil (VLFSO) energy equivalent. GHG emissions from grey LNG vary depending on the type of marine engine used to burn the LNG, but ranges from about 76.3-92.3 gCO2e/MJ, according to non-governmental environmental lobby group Transport & Environment. This makes a number of LNG-burning, ocean-going vessels compliant with FuelEU regulation through 2034. The EU's ETS for marine shipping commenced this year and requires that ship operators pay for 40pc of their GHG generated on voyages within, in and out of the EU. Next year, the EU ETS emissions limit will increase to 70pc. Even with the added 70pc CO2 emissions cost, US Gulf coast grey LNG was assessed at $639/t VLSFOe, compared with the second cheapest VLSFO at $689/t, B30 biodiesel at $922/t and grey methanol at $931/t VLSFOe average from 1-18 September (see chart). "In 2025, we expect [US natural gas] prices to rise as [US] LNG exports increase while domestic consumption and production remain relatively flat for much of the year," says the US Energy Information Administration. "We forecast the Henry Hub price to average around $2.20/million British thermal units (mmBtu) in 2024 and $3.10/mmBtu in 2025." Provided that prices of biodiesel and methanol remain relatively flat, the projected EIA US 2025 LNG price gains would not affect LNG's price ranking, keeping it the cheapest alternative marine fuel option for ship owners traveling between the US Gulf coast and Europe. LNG for bunkering global consumption from vessels 5,000 gross tonnes and over reached 12.9mn t in 2023, according to the International Maritime Organization (IMO), up from 11mn t in 2022 and 12.6mn t in 2021. The maritime port authority of Singapore reported 111,000t of LNG bunker sales and the port authorities of Rotterdam and Antwerp reported 319,000t in 2023 from all size vessels. Among vessels 5,000 gross tonnes and over, LNG carriers accounted for 89pc of LNG bunker demand globally, followed by container ships at 3.6pc, according to the IMO. The large gap between LNG global and LNG Singapore, Rotterdam, and Antwerp bunker demand, is likely the result of most of the demand taking place at the biggest LNG export locations where LNG carriers call, such as the US Gulf coast, Qatar, Australia, Russia and Malaysia. By Stefka Wechsler USGC bunkers and bunker alternatives $/t VLSFOe Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Industry decarbonization talks mark progress: EDF


19/09/24
19/09/24

Industry decarbonization talks mark progress: EDF

Houston, 19 September (Argus) — Growing decarbonization discussions in the oil and gas industry is a sign that momentum is building toward reducing emissions, according to Mark Brownstein, senior vice president of energy transition for the Environmental Defense Fund (EDF). Brownstein, speaking on the sidelines of the Gastech conference in Houston, Texas, noted a "robust conversation" was happening to address CO2 and methane emissions from natural gas use, which was "something you would not have seen five years ago." "Now, what would really make me happy, is to come back here next year, and see that it's not just talk," he said. "That there's real investment, that there's real action and that we're actually beginning to see emissions of methane and other pollutants going down." Brownstein noted that more than 70 companies in the oil and gas industry have committed to the COP 28 decarbonization charter to get to near-zero methane emissions by 2030. "That is a commitment that needs to be expanded to all players," he said. "A commitment that needs to be expanded by investment and real action. I believe the industry can do it. But of course you need to see it." Earlier this year the EDF helped launch MethaneSAT, a satellite that will allow for real-time monitoring of global methane emissions, aimed at bringing transparency to global emissions data. By David Haydon Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Fed rate cuts 'no bearing' for CCUS: NET Power


19/09/24
19/09/24

Fed rate cuts 'no bearing' for CCUS: NET Power

Houston, 19 September (Argus) — Interest rate cut by the US Federal Reserve this week have "no bearing" on carbon capture, use and storage (CCUS) projects, according to the chief executive of power technology company NET Power, since most are still in the development phase. The majority of CCUS projects are in the "pre-revenue" stage with companies that are still "more focused on the engineering" aspects, chief executive Danny Rice said on the sidelines of the Gastech conference in Houston, Texas, today. The Fed on Thursday cut its target interest rate by 50 basis points, the first cut since 2020 and following an aggressive rate increase regimen to fight inflation. Lower interests rates lower borrowing costs for companies. Rice said earlier in the day during a CCUS panel discussion there was still a need to "get capital costs down". "Historically it would be challenging to deploy a new technology and scale into a flat or declining market, but ... we're talking about decarbonization for power generation," Rice said. "Power generation is growing globally." CCUS projects and other carbon capture technologies have been repeatedly criticized by non-governmental organisations as an excuse for continued fossil fuel use, although the UN Intergovernmental Panel on Climate Change has backed the technology. Rice stressed the importance of an "objective, physics-driven view" for policy regarding decarbonization, describing CCUS projects for gas-fired powerplants as the most cost-effective method to decarbonize power. "People are going away from this exercise of 'what's clean or not'," Rice said. "What matters is the outputs. The affordability, the reliability, the carbon intensity." By David Haydon Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Western Australia to allow some onshore gas exports


19/09/24
19/09/24

Western Australia to allow some onshore gas exports

Darwin, 19 September (Argus) — Western Australia's (WA) state government will allow onshore developers of gas fields to export about 20pc of their output as LNG during a five-year window, in response to a growing failure to bring on new supplies for the domestic market. WA previously banned onshore gas exports, except in the case of Australian independent Beach Energy's 250 TJ/d (6.7mn m³/d) Waitsia stage 2 project . Beach may be required to share its infrastructure with fellow Perth basin firms, the WA government said, to expedite market access for new projects. Australian mining firm Mineral Resources, which has argued for permission to export 85pc of the gas from its Lockyer project as LNG and fellow WA-based firm Strike Energy may benefit from the changes, as both hold significant reserves in the Perth basin. The changes apply to new onshore developments or existing projects seeking to expand production. Developers are required to reserve 80pc of gas produced for WA, with this rising to 100pc from 2031 onwards. The policy shift follows dire outlooks for WA's gas supplies as the state attempts to wean itself off coal-fired power generation. It currently contributes about a third of the electricity into the state's largest power grid. A parliamentary report last month warned WA cannot rely on sporadic appeals for more gas to meet demand. "These policy changes are sensible responses that balance the need for Western Australia to secure its energy future while encouraging onshore producers to bring on more gas supply as and when it is needed," mines and petroleum Minister David Michael said on 19 September. The 15pc reservation for offshore LNG projects will continue, while WA has promised more transparency on the policy with the publication of a yearly WA Domestic Gas Statement to reveal how producers are meeting obligations, with a review to take place after two years. An interim parliamentary report tabled earlier this year showed about 8pc of the state's offshore gas output has reached WA consumers since 2006, representing just over half the required volumes. Following public criticism of LNG producers' contributions, Australian independent Woodside Energy has since pledged an extra 32PJ (854mn m³) of domestic supplies by the end of 2025 . WA will also seek to strengthen laws designed to prevent companies banking prospective onshore oil and gas tenements, with a review into the "use it or lose it" policy to be led by the state's energy department. By Tom Major 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: Update


18/09/24
18/09/24

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.

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