EVA S QUARTERLY LNG OUTLOOK

Transcription

1 EVA S QUARTERLY LNG OUTLOOK LNG Webinar Dustin Meyer Lead LNG Analyst! Arlington, VA ENERGY VENTURES ANALYSIS 1901 N. Moore St., Suite 1200 (703) Arlington, VA

2 OUTLINE 1. EVA s suite of LNG products 2. Highlights from EVA s most recent QUARTERLY LNG OUTLOOK!2

3 ABOUT ENERGY VENTURES ANALYSIS Energy Ventures Analysis is an energy consulting firm located in Arlington, Virginia. Since 1981, EVA has been publishing supply, demand, and price forecasts as part of its FUELCAST subscription service for the electric power, coal, natural gas, petroleum, renewable, and environmental sectors. EVA s cuttingedge expertise in energy market, economic, financial, and operation management matters has led our firm to international recognition. For over three decades, our innovative insights have helped our clients make confident, informed investment and operational decisions to maximize value and spur financial growth.! Our clients include: power & natural gas utilities fuel producers fuel transporters commodity traders regulators financial institutions!3

4 EVA S SUITE OF LNG PRODUCTS Monthly LNG Newsletter Quarterly LNG Outlook LNG Database and Forecasts Special Topic Articles Tailored to any client impacted by LNG, even those not actively participating in LNG market!4

5 U.S. LNG: CHENIERE REACHES FINISH LINE ON SABINE PASS T14 U.S. now has 18 of LNG export capacity online o All from Sabine Pass LNG T remains under construction o 5.25 Cove Point will be next online (Nov/Dec) Flows from Sabine Pass have fluctuated over past few months, but utilization remains very high o More than 175 cargoes to 25 different countries o Mexico remains by far the most popular destination Harvey shutin Sabine Pass for ~2 weeks, but backlog quickly cleared o Most of Cheniere s SPAs now in effect o Nearly all offtakers selling opportunistically, taking advantage of destination flexibility After busy 2017, 2018 to see fewer new trains U.S. LNG EXPORTS BY DESTINATION (# cargoes) South Korea 16 Chile 16 Through Sept 1, 2017 Mexico 38 China 12 Japan 11 Other 32 Argentina 11 Total: 175 cargoes Portugal 6 Spain 7 India 8 Kuwait 8 Jordan!5

6 U.S. LNG: THE GREAT BUILDOUT AND BEYOND Huge rampup of U.S. LNG exports in 2019 o 3.7 BCFD > 8.6 BCFD o The equivalent to building 75 GW of CCGT capacity, nearly all of which is on the Gulf Coast Delays at Cameron, Freeport disrupt narrative of easy brownfield construction o Cameron delay now ~1 year, though offtakers unlikely to be too upset 2 nd wave projects still struggle for commercial progress, but early signs of buyer interest emerge o KOGAS MOUs, Edison SPA signal that early2020s will be here sooner than many think Several projects have full FERC/DOE approval, just waiting to align buyers before FID o Still require 4year construction timeline, so FIDs in 2018 not out of the question o HHlinked LNG arbitrage not as wide, but advantages of U.S. LNG still clear Oil price movement, Qatari geopolitics, Aus domestic politics U.S. LNG EXPORTS BY PROJECT: BCFD Hurricane Harvey + T3 maintenanc Scheduled e maintenance at Sabine Pass Cove Point + Sabine T4 ramp up Cameron delayed to 2019 Jan16 Jul16 Jan17 Jul17 Jan18 Jul18 Jan19 Jul19 Sabine Pass LNG Cove Point Freeport LNG Cameron LNG Corpus Christi LNG Elba Island!6

7 PRICING DYNAMICS: U.S. LNG SET TO FLOW AT HIGH LEVELS U.S. LNG exports have not been curtailed due to prices Differentials out to end2019 suggest curtailments are unlikely, despite impending glut Winter 2017/2018 margins expected to be strong, as both European hubs and Asian spot LNG prices moving upward o In contrast, EVA expects Henry Hub to hold near $3/ MMBTU o Counters the narrative: this winter likely tighter than last CURRENT DRIVERS OF MARKET PRICES Henry Hub Mild summer kept prices south of $3/MMBTU. Assuming normal winter, prices unlikely to shift upward. NW Europe High summer temps in South and storage demand in North has bumped forward curves above $6/MMBTU. OilLinked LNG Brent gains outpacing WTI, but despite OPEC's efforts, still struggling to sustain prices above $55/BBL. Spot LNG Hot summer temps in major NE Asia markets supporting modest price premium over Euro hub prices.!7

8 GLOBAL SUPPLY: IT S NOT ALL U.S., AUSTRALIA Still 98 of global capacity under construction, ~75% of which is in U.S./Australia o Mozambique joined the club in June with Coral FLNG o Fortuna FLNG FID in a few months? Australia s timeline is ahead of U.S., though schedule keeps slipping A few crucial delays have kept the market tighter than expected, push worst of glut forward o Wheatstone pushed back to end2017 o Cameron pushed to early2019 o Prelude FLNG likely in late2018 o GLNG operation below nameplate Additional serious delays unlikely, but Russia s Yamal worth focusing on o 16.5, with an aggressive timeline, but so far on track for late2017 exports o Extremely difficult operating environment, so delays are possible UNDER CONSTRUCTION LNG CAPACITY Malaysia Indonesia 3.8 Russia 16.5 Australia 21.0 Cameroon 1.2 Mozambique 3.4 United States 51.0 Total: 98 As of 9/2017 NEW AUSTRALIAN LNG CAPACITY: Gorgon LNG T3 Wheatstone LNG T1 Wheatstone LNG T2 Prelude FLNG T1 Ichthys LNG T1 Ichthys LNG T2!8

9 ASIAN LNG DEMAND: MORE ROBUST THAN EXPECTED Through 1H of 2017, JKT LNG demand was strong due to warmer than average weather o Now shifting to peak demand winter, though storage remains at healthy levels Previously expected to hold flat or decline, Korean LNG demand now has considerable upside after Presidential election o 2 nd largest importer, heavy shift away from coal/ nuclear Chinese LNG demand increased +25% through 1H 2017 after a 37% increase in 2016 o Increasingly active on the spot market, including purchasing U.S. LNG (one of Top 5 buyers) o Huge effort underway to convert homes in the North from coal to gas heating o Largest offtaker of new Australian capacity India demand surprisingly flat through 2017, as price remains an issue Wildcard: Bangladesh JKT & S.E. ASIA LNG DEMAND: Japan South Korea Taiwan Thailand Indonesia Singapore Malaysia Philippines Bangladesh CHINA & INDIA LNG DEMAND: China India!9

10 MENA/EUROPE LNG DEMAND: EUROPE NOT QUITE BACKSTOP With Asian demand firming, imports into Europe lower than expected o But still higher than past several years o A few bright spots: Spain, Italy and Turkey Q4 imports could spike, as storage levels remain low heading into peak demand season o U.K. imports could emerge as highly seasonal due to closure of main gas storage facility o However, differential between NW Euro hubs and spot LNG likely to widen, so suppliers may keep focus on Asian markets In MENA, the two most intriguing narratives are: o Egypt, whose transition from LNG exporter to importer is already in the process of reversing o Pakistan, which now has two FSRUs online (nearly), and several more in development o Government projecting 30 of demand by early2020s Note: Pakistan & Bangladesh have potential to disrupt entire narrative of midterm LNG market EUROPE LNG DEMAND: U.K. Spain Turkey France Italy Belgium Portugal Lithuania Poland Other MENA LNG DEMAND: Egypt Kuwait Dubai Jordan Pakistan Other!

11 N. AMERICA/S. AMERICA LNG DEMAND: STRONG HYDRO LIMITS DEMAND South America was the leading early recipient of U.S. LNG in 2016, but 2017 has been different story Most LNG demand in South America inversely correlates with hydro o Clearest example: Plummeting demand in Brazil.though economic woes contribute, as well Colombia is a new importer in name only didn t import a single cargo through 1H 2017 New import capacity in Chile, but demand growth shifted to 2018 and beyond In North America, continued shale development squelches any LNG demand upside o Mexico taking a lot of U.S. LNG, but overall demand is flat and expected to fall as pipelines come online and domestic production rampsup In U.S., Everett remains quite active ~45 cargoes/month), but every other terminal quiet SOUTH AMERICA LNG DEMAND: Chile Argentina Brazil Dom. Republic Colombia Jamaica NO. AMERICA LNG DEMAND: (GROSS) Mexico United States Puerto Rico Canada!11