Covid-19 has hit the pause button on the record growth seen in the LNG trade over the last six years and will have a knock-on effect that will last into 2021
Case in point, FIDs on many of the LNG mega-projects slated this year will be delayed as a result of the market uncertainty caused by the Covid-19 pandemic, softening demand and the oil price plunge. International oil companies are tightening their belts and cutting their capex by 20% or more on record low natural gas and oil prices.
As a result, LNG export projects that were set for FID in 2020 will be delayed, all but a handful pushed to 2021 and beyond. A Poten & Partners analysis says of the 20 projects with a total capacity of 228 mta, only three will come to FID this year – Qatar’s six-train expansion, Mexico’s Energia Costa Azul and Russia’s Obskiy LNG. Those three projects have a total capacity of 56.4 mta or slightly less than 25% of the original capacity set for FID in 2020.
Of the projects that have already taken FID, it is likely that their timelines will extended as a result of the pandemic. Such is the case for Greater Tortue Ahmeyim as BP has declared a force majeure on the West African project as a result of the Covid-19 pandemic. In a notice to a subsidiary to Golar LNG, BP says it will not be ready to receive the floating LNG vessel Gimi on the target connection date in 2022.
The Moss-type LNG carrier Gimi is currently under conversion at Singapore’s Keppel Offshore & Marine shipyard in Singapore.
Kosmos Energy, a shareholder in the Greater Tortue Ahmeyim, is cutting US$75M from its 2020 spending budget for the project.
Some good news is that China’s factories have restarted, as the country begins to reopen and gas demand has begun to recover. China took delivery of its first American LNG cargo in more than a year, with the Chinese Government waiving tariffs imposed during its trade war with the US.
However, with Europe and the US still in lockdown demand in China will be slow to recover. Meanwhile, it is not clear how quickly the economies of Europe, the US and India will recover once they reopen from their lockdowns. It would appear that the recoveries might be prolonged and painful.
With so much economic uncertainty injected into the market by Covid-19, global trade in LNG will be hard pressed to surpass the record level of 354.7M tonnes in 2019.
Riviera will host a week of free to attend 45-minute webinars focused on gas carrier tankers and terminals commencing 15 June. Register your interest now