Upswing reflects European delivered price strength
Chinese snapping up new term US FOB deals
The export value for LNG cargoes loading on the US Gulf Coast 30-60 days forward jumped more than $16/MMBtu to new highs during the week of Dec. 14-21, reflecting the strength of European delivered prices.
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To justify the high prices for US Gulf Coast FOB cargoes, suppliers would need slot availability to land in Europe, traders said. That was being made more challenging with so many LNG tankers in the Atlantic trying to get there to take advantage of the arbitrage.
The volatile market fundamentals, meanwhile, were continuing to spur new commercial activity for US exporters and liquefaction terminal developers as buyers seek out term deals that carry a lower fixed-price. Cheap feadgas costs and destination flexibility have made US contracts more appealing in a high spot price environment.
“There is a change of mood already where it is understood the US is a critical component of providing affordable gas to the rest of the world,” Charif Souki, co-founder and executive chairman of Driftwood LNG developer Tellurian, said during a podcast posted on the company’s website Dec. 21. He said the US was in an increasingly enviable position, with Europe “suffering very, very high prices and all of the consequences of that.”
Driftwood continued to be on target to begin construction by the end of the first quarter of 2022, Souki said. He did not announce the group of banks Tellurian needs to finance the terminal, suggesting that arrangement would be pushed into early next year.
The S&P Global Platts-assessed Gulf Coast Marker for February ended the week at $54.95/MMBtu on Dec. 21, up $9.80/MMBtu from the day before and $16.15/MMBtu from Dec. 14.
Total US feedgas demand rose to a new high of around 13 Bcf/d on Dec. 21, amid the ongoing surge in production from Cheniere Energy’s Sabine Pass Train 6 in Louisiana. Small feedgas deliveries to Venture Global LNG’s Calcasieu Pass continued to register during the week as commissioning toward startup was ongoing. According to Venture Global, all 18 liquefaction modules have been received at the Louisiana terminal from Italy and set on foundations.
Panama Canal congestion was modest during the week, with the maximum wait on Dec. 21 for unreserved LNG tankers at five days northbound and four days southbound, according to the Panama Canal Authority. Shipping day rates in the Atlantic and Pacific continued to fall, widening netbacks to the US Gulf Coast.
On the commercial front, an affiliate of China’s largest LNG importer, CNOOC, agreed to buy 3.5 million mt/year of supplies from Venture Global, the two companies said Dec. 20.
Under one 20-year deal, CNOOC Gas & Power Group will take 2 million mt/year of LNG on a free-on-board basis from Venture Global’s proposed Plaquemines LNG facility that is planned to be built south of New Orleans. Under a second deal, which will last for a shorter duration that the companies did not disclose, state-owned CNOOC, or China National Offshore Oil Corp, will take 1.5 million mt/year of LNG from Venture Global’s Calcasieu Pass facility that is under construction in southwest Louisiana. Production could begin within weeks at Calcasieu Pass. The basis of the shorter deal and pricing terms for both deals were not disclosed.
The agreements added to a flurry of commercial activity between Chinese LNG buyers and US exporters over the last year amid the high end-user prices in Asia and Europe. Venture Global and Cheniere have been the beneficiaries of all the Chinese deals with US exporters that have been disclosed so far in 2021, though other US developers are said to be in talks with Chinese buyers.