Daily Management Review

2020 Could Be A Tough Year For US LNG Exports, Which Soared To Record Highs In 2019


12/30/2019




2020 Could Be A Tough Year For US LNG Exports, Which Soared To Record Highs In 2019
The exports of liquefied natural gas (LNG) of the United States in 2019 saw a record 60 per cent hike with the trend likely in the next year. However analysts have warned that 2020 could also create issues for this sector because of heavy competition and weakened demand globally.
 
This year in the United States, there was addition of four new liquefaction trains - the common term for a shipping facility – in service. Analysts expect that by 2024, the US will become the largest LNG exporter of the world.
 
LNG is viewed to be a viable alternative for the majorly coal-fired power plants in the Asian countries. In recent years, there has been a spike in LNG exports from countries such as of Qatar, Australia, and the United States – the three largest exporters of the fuel.
 
However the global demand for LNG was infrequent this year which was evident early into 2019 with a drop in demand for fuel because of a reduced heating demand due to a warm winter in Asia. That prompted many of the Asian importers to redirect the cargo to European countries. 
 
"It's likely that LNG prices will stay somewhat depressed in 2020, unless we get a cold winter across the pond and in the Far East," said James Mick, managing director and energy portfolio manager at energy investment manager Tortoise.
 
So far in 2019, there has been a 40 per cent drop in prices of the fuel in Europe and Asia with prices reaching record lows in years. There can be temporary shutting down of some LNG export terminals in the US in 2020, according to analysts at Morgan Stanley and Energy Aspects, because of a global lack of demand for the fuel. Further, the myriad of LNG projects still in development in the US could also get threatened because of lower prices and weak demand in 2020.  
 
While some Chinese companies were noted to by making offers of reselling of the LNG cargo already ordered by them because of high investments involved coupled with low demand because of a slowing Chinese economy and a milder than usual winter with the last couple of months, the loading of a US LNG cargo had been cancelled by Singaporean gas importer Pavilion Energy in the same period.
 
This is set to be a challenge for some of the gas producers of the US who are banking on LNG exports for another bumper year in 2020. LNG is the fastest growing gas fuel segment and some analysts feel that it would be a challenge for the US producers of LNG to keep producing the fuel at the record levels in 2020 that they have been doing so far.
 
A record amount of capacity was built by LNG developers of the US in 2019 despite low prices. It is being estimated that the next few years, 10 different developers could decide to go ahead with such projects. However some of the developers are unable to sign enough long-term customer agreements needed to finance export projects because of the headwinds facing the industry.
 
(Source:www.moneycontrol.com)






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