US LNG activity rebound pushes terminal feedgas deliveries to almost 5 Bcf/d

Highlights

Improving netbacks from Gulf Coast to Asia cited

Few if any Oct cargo cancellations expected

• Author Harry Weber    Jack Winters    Piers De Wilde  spglobal.com ·  20 Aug 2020

Houston — Gas deliveries to US liquefaction terminals rose to the highest level in two and a half months Aug. 20 at almost 5 Bcf/d amid improving prices in end-user markets and declining cargo cancellations.

The activity reflects a rebound that has been expected heading into the fall and winter following significant market weakness that was exacerbated by the coronavirus pandemic.

US Gulf Coast LNG netbacks from Northeast Asia have rallied recently, led by a bullish surge on the Platts JKM September assessment, which was up nearly 35% over the previous 10 days. The run appears to be driven by an unplanned outage at the Gorgon LNG facility in Australia, with further safety concerns pointing to the possibility of a larger, extended outage down the road, S&P Global Platts Analytics data showed.

Outside of supply side issues, there remain few bullish fundamental signals in Asia. For the most part, cargo loadings are targeting intra-month spreads, centered around the November contango on the Dutch TTF forward curve. Considerable downside risk remains in the cards should early-winter Asian demand disappoint, which could see a wave of cargoes flow back to Europe mid-winter.

Observable feedgas flows to the six major US LNG export facilities totaled 4.94 Bcf/d on Aug. 20, the highest level since June 4, Platts Analytics data showed. That's still only about half the record total volume set March 31. Cargo cancellations were heaviest for loadings scheduled during June, July and the first half of August, before easing for the second half of August and for September.

The deadline for customers to notify Cheniere Energy, the biggest US LNG exporter, of any cancellations for October was Aug. 20. As of the afternoon in the US, market participants were unable to verify any news on October cancellations. Most believed that few if any cargoes would be cancelled due to improved netbacks.

India's Gail was reported to have issued a tender for an FOB Sabine Pass cargo for Oct. 2 load, closing Aug. 24. Cheniere was heard to have secured the Cadiz Knutsen for a spot voyage loading late August from the US Gulf Coast, for delivery into Escobar. The hire rate heard was in the low-$20,000s/d.

It was not immediately clear how many cargoes, if any, might have been cancelled for October at terminals operated by Freeport LNG, Sempra Energy, Kinder Morgan and Dominion Energy. More details about the overall picture were expected to trickle out Aug. 21.

The market challenges since the beginning of the year have forced developers of additional liquefaction projects being proposed in the US to delay final investment decisions until 2021 or beyond. Some have cut project costs through technology efficiencies or scaling back design plans.

In other moves, Shell pulled out of its equity partnership with Energy Transfer to develop a proposed LNG export project in Louisiana, while Saudi Aramco has yet to finalize a preliminary deal to take an equity stake in Sempra's Port Arthur LNG project in Texas.