In keeping with its record of bringing online liquefaction capacity ahead of time and on budget, Cheniere Energy Inc. said the third production unit at the Corpus Christi liquefied natural gas (LNG) facility in South Texas is expected to achieve substantial completion in the first half of 2021, several months earlier than its original target.
“There are over 2,000 workers currently on site for Train 3, and the project is over two-thirds complete as of the end of September,” Cheniere CEO Jack Fusco said last Friday on a call to discuss third quarter earnings.
Train 3 construction activities are focused on structural steel, above-ground piping installations, as well as mechanical and instrumentation activities, according to the company chief. In addition, the concrete roof was completed on the third LNG storage tank at the terminal.
The accelerated timeline for the third train follows the substantial completion of Train 2 in late August, which “further reinforces our global reputation for best-in-class project execution,” according to Fusco. Cheniere expects to reach the date for the first commercial delivery (DFCD) from Train 2 next May.
“In 2019, our teams have done a tremendous job of onboarding new sales and purchase agreement (SPA) customers with the DFCD contracts tied to Corpus Christi Train 1 and Sabine Pass Train 5, as well as some of our marketing SPAs, and we expect that performance to continue next year,” Fusco said.
Meanwhile, Cheniere continues development efforts for the Corpus Christi Stage 3 expansion, which would add another 9.5 million metric tons/year to the facility, with a fall 2020 target for reaching a final investment decision. Management is in the process of evaluating engineering, procurement and construction (EPC) bids and intends to have “a cost-competitive, fully ramped lump-sum turnkey EPC contract in place over the next few months.”
EPC contractor Bechtel Corp. continues to progress Train 6 at Cheniere’s Sabine Pass LNG terminal in Louisiana, with the project more than 38% complete at the end of September, according to Fusco. Construction is “ramping up,” with a head count of more than 500 in activities focused on foundation and column work and commencing structural steel. The production unit is expected to achieve substantial completion in the first half of 2023.
South Asian delivered prices have narrowed their discount year/year to Northeast Asian prices in recent weeks, a trend seen continuing amid strong year/year demand growth in South Asia this winter, as lower prices encourage higher consumption and falling production increases the call on imports, according to Energy Aspects.
“South Asian tender activity indicates strong buying interest,” Energy Aspect analysts said. “In contrast, infrastructure constraints are checking Chinese year/year LNG import growth, and South Korean growth will only rise slightly as great nuclear availability mostly offsets the impact of coal-fired restrictions.”
The South Asia price for LNG to be delivered in the second half of November was around a 67-cent/MMBtu discount to physical prices for Northeast Asia delivery in the same period on Oct. 28. This is tighter than the 75-cent/MMBtu discount at the same point a year earlier, and the Energy Aspects analysts expect “the differential to hold or tighten further in the coming weeks.”
Falling production year/year in India in recent months has been driving an increase in LNG imports, according to the firm. “It may be that LNG imports can also compete against some of the higher-cost offshore production in India given that delivered prices have been below the government’s price cap for deepwater and challenging upstream production.”
Indian delivered prices for the second half of November were at $5.70/MMBtu on Oct. 28, while the government’s price cap for deepwater offshore production was set at $8.43/MMBtu for October 2019-March 2020, according to the firm.
A decline in Pakistan’s gas production is also likely boosting its LNG demand. “The higher call on imports has boosted utilization rates at Pakistan’s second GasPort terminal in recent months, but there is still room to take additional volumes on a monthly basis in the coming months. Utilization at the terminal averaged 66% in 3Q2019,” Energy Aspects analysts said.
Tender activity indicates strong spot buying interest from Indian and Pakistani buyers. Indian firms have bid for 31 cargoes for 4Q2019 delivery, although it is unclear how many have been awarded, according to the firm. Pakistani buyers have bid for 18 cargoes, although seven of these were likely unawarded, and Bangladesh is also opting to boost spot supply.
Meanwhile, China’s demand is expected to be capped by regasification infrastructure constraints in November 2019-January 2020, and South Korea’s LNG expected demand growth from its likely move to impose coal-fired capacity constraints this winter would be mostly offset by higher LNG stocks and increased nuclear availability year/year in South Korea this winter.
In Japan, winter demand has been supported by an unusually strong draw on terminal storage in August, boosting 4Q2019 demand for LNG for pre-winter restocking, according to Energy Aspects. That said, the restocking may have since been boosted by a cut in gas demand from the power sector as a result of Typhoon Hagibis in October, which caused widespread power outages for a few days. Additional nuclear shutdowns beyond what was already expected may also boost Japanese LNG imports.
Given the dynamic nature of global gas trade, data intelligence company Kpler and CME Globex have partnered to allow Kpler users to trade a suite of LNG and natural gas futures and options products on CME Globex.
In a deal that went into effect on Monday, Kpler users will be able to directly trade the world's leading natural gas benchmarks, including the CME Group’s new Gulf Coast LNG Export futures contract that launched last month as well as global benchmark Henry Hub Natural Gas futures and options.
"We are pleased to work with Kpler to ensure the world's largest traders of physical LNG cargoes have access to these important global natural gas benchmarks, particularly as export capacity in the United States continues to grow in response to demand for LNG from Asia and Europe," said CME Group’s Peter Keavey, global head of energy. "Along with our Henry Hub global gas benchmark, greater access to our new LNG futures contract will help the gas industry and its end users to better manage their price risk around the globe nearly 24 hours/day."
Kpler, which more than 1,000 LNG professionals use to track fleets of LNG cargoes, monitor trades and follow market trends, is “progressively becoming a comprehensive information terminal giving LNG professionals the transparency tools they desire in the context of increasing market liquidity," according to CEO François Cazor.
“In this perspective, we are glad our users can directly access CME Group's physically delivered LNG export futures contract through Kpler.”