This summer, the Covid-19 pandemic is driving a global contraction in LNG deliveries – the first seasonal contraction in eight years. US LNG exports are particularly hard hit, with nearly 130 cargo loadings cancelled since April 2020, according to Platts data, including 40 liftings that would have been scheduled for July and around the same number for August. About two dozen of the cargo cancellations are understood to be tied to Cheniere’s Sabine Pass LNG and Corpus Christi LNG plants, and analysts say a return to stronger growth is unlikely until mid-2021.
Poten & Partners, the global ship brokerage firm, expects the global gas and LNG markets to tighten later this year, due to slower construction and commissioning of new liquefaction and exports facilities, and higher gas demand going into the winter heating season. Combined, these effects will lead to growing market volatility.
Calling the world’s emergence from the Covid-19 pandemic “a pivotal moment” for global economies, BP chief executive Bernhard Looney said there are signs that global gas demand is starting to rebound led by the U.S. and China.
Imports of Canadian pipeline gas to the western United States have fallen substantially as spot prices at the NOVA/AECO-C (AECO) trading hub in Alberta reached near parity with Henry Hub. In April and May, imports fell to an average of 6.2 billion cubic feet per day (Bcf/d), according to Genscape pipeline flow estimates.
Spot prices at the NOVA/AECO-C (AECO) trading hub used to be between $1 per million British thermal units (MMBtu) and $2/MMBtu below Henry Hub spot prices from mid-2017 until late 2019. However, from October 2019 through March 2020, there was little difference in spot prices at those two points.
Canadian gas put into storage
In April and May - at the height of the coronavirus lockdowns - AECO natural gas spot prices increased while Henry Hub gas prices plunged.
The narrowing of AECO and Henry Hub prices was first noticeable when the Canadian in September last year, when the Canadian Energy Regulator approved a temporary service protocol (TSP) for the NOVA pipeline system. The TSP increases service flexibility on the pipeline by handling gas flows to storage facilities at times when the system is constrained.
In March and April 2020, Alberta’s natural gas inventories were at multiyear lows of slightly more than 300 billion cubic feet. Hence, most production from Western Canada was put into storage and not exported to the United States.
Imports not seen to recover before 2021
Imports of Canadian gas at the border crossing in Montana and North Dakota were 0.4 Bcf/d and 0.3 Bcf/d less in January through May 2020, compared with the first five months last year, U.S. Government data shows.
Gross imports of Canadian pipeline gas are expected to fall from 7.4 Bcf/d in 2019 to 7.0 Bcf/d in 2020 - the lowest level since the mid-1990s. Demand for Canadian gas is forecast to start recovering with the upcoming winter season and could reach an estimated 7.9 Bcf/d in 2021.
Developers of the Freeport LNG export plant at Quintara Island in Texas have confirmed the Final Investment Decision (FID) on building a fourth train had to be delayed until 2021 due to depressed demand in most markets and record low gas prices.
Edge Gathering Virtual Pipelines 2, better known as Edge LNG, has been selected by EXCO Resources to capture and liquefy gas from a stranded well in the Marcellus Shale. The gas is being trucked to electric utility customers in the Northeast (NE) of the United States.
Glenfarne, a privately held energy infrastructure firm, has agreed to buy Magnolia LNG from its parent, Australia's LNG Ltd, for $2.25 million, according to the voluntary administrators appointed to review the parent company's assets.
The sale to the formerly largely unknown buyer follows the April 13 withdrawal of a takeover offer for LNG Ltd that the parent company had previously said it was “the best chance to save” the 8.8 mtpa export project.”
A deal with London-based Global Energy Megatrend Ltd. fell also through at the last minute and it was finally bought by a Delaware-based entity. The buyer is owned by Glenfarne Group LLC, that company itself disclosed in a statement.
Glenfarne, with offices in London and Lafayette, Louisiana, is a privately held industrial energy developer and operator with plans to complete the Magnolia LNG project. The company is interested in becoming an integrated natural gas firm by acquiring and participating in US gas fields and pipelines and operating liquefaction facilities.
“Magnolia LNG is a well-known and high-quality project,” said Brendan Duval, founder of Glenfarne. The new owner of Magnolia LNG wants to bring funding, marketing, development and construction experience to build and then operate the liquefaction and export plant. The project has not yet reached a final investment decision.
Glenfarne also is the majority owner, through a subsidiary called Alder Midstream, of another LNG project on the US Gulf Coast, Texas LNG Brownsville. The 4 mtpa project has all state and federal permits, though has not yet begun construction.
The Vietnamese government has welcomed ExxonMobil’s plan to invest in the country’s energy infrastructure. The U.S. oil major is looking to set up an LNG-to-Power generation supply chain with a combined capacity of 3,000 MW in the Mekong Delta region, creating an outlet for LNG exports.