A tripling of LNG output likely to hit the shipping market


A predicted tripling of sanctions for global LNG projects in 2019 threatens to disrupt future shipping logistics as demand for the gas enters a more volatile phase because of a rapid increase in supply.

This is the result of a likely record year for final investment decisions (FIDs) that will ultimately deliver more than 60M tonnes of LNG per year (mta), nearly three times the 21 mta sanctioned in 2018, as the research director for Wood Mackenzie Giles Farrer forecasts. Inevitably, increased availability of LNG will influence where tankers deliver their loads.

But Wood Mackenzie also predicts shorter-term volatility in the vagaries of the weather that could affect shipping movements – “a mild end to [the 2019] winter could send more LNG into Europe and drive prices down further,” he said.

The energy consultant’s predictions come at a time of concern over the availability of LNG tankers to handle the huge extra output, particularly in the spot market because most of the fleet are locked into exclusive long-term charters. In a mid-2018 study, the International Energy Agency highlighted a possible shortfall in vessels as a threat to the security of supply, particularly in more remote regions.

The dearth of available LNG carriers is reflected in rocketing spot charter rates. In November, they shot to US$190,000 a day, five times higher than in early May.

Overall though, it appears the tanker fleet will have to adjust to changes in demand in the medium-term future. “Asian LNG demand growth will not keep pace with LNG supply and Europe – northwest Europe in particular – will have to absorb the surplus, especially during the summer,” he predicted in a release this week. “But Europe needs additional imports and flexibility, given its increased reliance on maxed-out Russian and Norwegian imports.”

It is therefore likely, he added, “there would be more LNG imports than required. And that in turn would provide competition to pipe imports and put pressure on prices,” he said. However Mr Farrer does not see the level of oversupply in 2019 that others fear.

A record number of LNG projects, as measured by volume, are due to get the green light. Wood Mackenzie sees the frontrunners in the race to hit FID in 2019 as the giant US$27Bn Arctic LNG-2 project in Russia, at least one project in Mozambique and three in America. Of the latter, Wood Mackenzie identifies three major operations as top picks – Golden Pass, Calcasieu Pass and Sabine Pass Train 6.

But that is not all. There are other projects in the pipeline in America as well as in Qatar, Papua New Guinea, Australia and Nigeria, all aiming for FID in 2019.

Wood Mackenzie sees other global influences that would inevitably determine the course of the growing LNG shipping network. “A recession would bring gas/LNG demand and oil prices down, delay FIDs and push the global LNG market back a few years,” said Mr Farrer. “But there could be a worse scenario for the gas market: a major economic downturn happening in 2020 or 2021, just after 60-100 mta of LNG has taken FID. That would wipe out our forecast price recovery post-2020 and make our forecast that prices soften a little around 2025 look a lot worse.”

Chinese demand is also less certain than it was in 2018, particularly if Beijing rethinks its headlong switch from coal to gas. In the last two years demand for LNG hovered between 40-45% growth, but that could fall to about 20%. However, as Wood Mackenzie pointed out, even if that happened China would remain by far the largest customer for LNG in the global market.

https://www.lngworldshipping.com/news/view,a-tripling-of-lng-output-likely-to-hit-the-shipping-market_56372.htm

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US LNG exports edge up on week

Liquefied natural gas exports from the U.S. increased over the last week, according to data from the Energy Information Administration (EIA).

EIA stated in its weekly report that eleven LNG vessels, seven from Sabine Pass and two from Cove Point, departed from the United States between May 9 and May 15.

According to the data, the eleven vessels held a combined LNG-carrying capacity of 38.0 bcf.

Two vessels—one at Sabine Pass and one at Corpus Christi—were loading at their terminals on Wednesday.

It is worth noting that Sempra Energy, the owner of the Cameron LNG facility in Louisiana, started LNG production from its Train 1 and expects to load cargoes in the coming weeks.

https://www.lngworldnews.com/us-lng-exports-edge-up-on-week-4/

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LNGC: Spot rates moving further up, limited ship availability
The LNGC spot market continues to heat up, with another six fixtures (at least) concluded last week according to Poten & Partners. Another five are on subjects

With this, vessel availability remains low, withonly two vessels promptly available in the Atlantic basin. Eight ships free in the Pacific, however most of these are less efficient steam shipsRates have surged over the past week, with TFDE-rates quoted on average around USD 56,500/day –up near 50% in two weeks. So far in May we have seen near 25 fixtures, which sets the month on par to beat theall-timehigh count of 44x fixtures from May last year.Brokers are now already talking about MEGI-rates approaching six digits, withTeekay LNG Partners having fixed a 2008-built ship to Cheniere for a year at aroundUSD 80,000/day. This would peg MEGI-rates near USD 100,000/day for the same duration

Flex LNG is reportedly also closing in on maiden work for its next newbuild, with the Constellation (according to Tradewinds) on subjects for a 20-40-dayjob straight out of the yard

While the longer-termsustainability of LNGC spot rates have been dampened (in our view)after all the newbuild orders over the past six months, we still expect strong momentum going forward. Flex LNG and Golar LNG are our toppicks on this rebound

Saudi Arabia wants to buy tons of American natural gas

New York (CNN Business)Saudi Arabia has placed a huge bet on American natural gas.
In a sign of shifting energy fortunes, Saudi Aramco announced a mega preliminary agreement on Wednesday to buy 5 million tons of liquefied natural gas per year from a Port Arthur, Texas export project that's under development.
If completed, the purchase from San Diego-based Sempra Energy (SRE) would be one of the largest LNG deals ever signed, according to consulting firm Wood Mackenzie.
Aramco, Saudi Arabia's crown jewel, would also inject a cash infusion into the Port Arthur development in exchange for a 25% stake.

"This is a major statement about the Saudis entering the LNG market and about how price competitive the outlook is for US gas," said Ira Joseph, head of gas and power at S&P Global Platts.
Although the agreement calls for Saudi Arabia to purchase LNG from the United States, Joseph said it's unlikely the fuel would end up being used to meet the kingdom's vast electricity needs. More likely, Aramco will try to sign up buyers in South America and Europe for the LNG.
"We expect Saudi Aramco will use this volume to establish a global portfolio as it seeks to become a global gas player," Giles Farrer, Wood Mackenzie's research director, wrote in a report.
Saudi investment offsets trade war headaches
Aramco is the world's largest oil company and owns America's largest refinery, which is also located in Port Arthur. But Aramco is just beginning to build its LNG footprint.
"We see significant opportunities in this market and we will continue to pursue strategic partnerships which enable us to meet rising global demand for LNG," Amin Nasser, Aramco's CEO, said in a statement.
The shale revolution has made the United States the world's largest producer of natural gas, a title it's held since 2009 after surpassing Russia.
There's so much natural gas that much of it is being turned into LNG, a super-cooled form of the fuel that it can be transported by ship overseas. China and other developing nations have turned to LNG as a cleaner alternative to coal.
The support from deep-pocketed Saudi Arabia could offset trade war headwinds facing America's US LNG industry.
But US-China and US-Saudi relations are tense.
China imposed a 10% tariff on US LNG in September. Earlier this month, China retaliated against new US tariffs by raising the duties on LNG to 25%. US oil, on the other hand, has been spared China's tariff wrath -- for now at least.
The Saudi Arabian government has been accused of ordering the death of journalist Jamal Khashoggi, and its conflict with Yemen has been condemned by the US Congress. Sempra other companies doing business with Saudi Arabia faces a risk of criticism.
Sempra did not respond to a request for comment about concerns over its partnership with Saudi Arabia.
State oil companies hedge their portfolios
Foreign oil companies are helping to accelerate America's transformation into an LNG powerhouse.
ExxonMobil (XOM) has partnered with Qatar's state oil company on Golden Pass LNG, an export project located in Sabine Pass, Texas. The $10 billion project, scheduled for completion in 2024, is expected to have the ability to eventually export about 16 million tons of LNG a year.
The deals are further evidence of OPEC nations trying to hedge their bets due in part to rising concerns about climate change.

"As the energy transition intensifies," Farrer said, oil-focused national oil companies are "diversifying their exposure away from oil and into gas and LNG."
Farrer said Aramco has also been rumored to be interested in LNG deals in Australia, Arctic Russia and other major markets.

For Sempra, the Aramco deal is likely to increase confidence around the Port Arthur project, which is one of five LNG developments the company is working on in North America.
Wood Mackenzie said the Port Arthur project now likely has enough export volume under contract to secure debt financing. A final investment decision could be reached by the end of 2019 or early 2020.


https://edition.cnn.com/2019/05/22/business/saudi-arabia-natural-gas-lng/index.html
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