My suspicions were correct when I made the prediction our marketing efforts were solely targeting the Chinese! A Reuters interview with GV back in May being confirmation, " for us, it's strictly been about marketing to China ". To a degree, this is understandable given their exponential growth rate of natural gas demand, unparalleled to anywhere else in the world! China will become the world's No 1. importer of LNG within the next 5 years... has deep pockets and can certainly provide important equity financing for US hopefuls! The Chinese typically buy volume in large parcels, between 2mt - 3.5mt, the following being conclusive proof with their current, worldwide SPA contracts in place; * Volume amount, contract length, start year, importing company, exporter *
2mt 25yrs 2011 CNOOC QatarGas 2
3.4 22yrs 2018 CNPC QatarGas 2
3mt 25yrs 2011 CNPC QatarGas 4
7.6 20yrs 2016 Sinopec Australia Pacific
3.3 25yrs 2004 Guangdong Dapeng Australia NWS
2.3 20yrs 2016 CNPC Australia Gorgon
3.6 20yrs 2014 CNOOC Australia Curtis Island
3mt 20yrs 2009 CNOOC Malaysia Petronas
.7mt 6yrs 2007 JOVO Malaysia Petronas
2.6 25yrs 2009 CNOOC Indonesia Tangghu
3mt 20yrs 2018 CNPC Russia Yamal
2mt 20yrs 2014 Sinopec PNG
1.2 20yrs 2023 CNPC USA Sabine Pass
5mt 20yrs 2015 CNOOC Shell
2mt 20yrs 2016 CNPC Shell
3.6 20yrs 2014 CNOOC Shell
1.5 20yrs 2010 CNOOC Total
In light of knowing these contracts, one can entertain the thought that IF we secure 2 contracts with NOCs that could mean we're " home and hosed " with FID!
You've got to give a wry smile that Trump created this circus through initiating his trade war right around a critical time of probable finalisation of contracts with dream partners! Totally uncontrollable! But... all along this epic journey of hunting down Chinese customers, wining & dining them, there's been very little talk about alternative Asian or European customers. Yes, GV went to Poland and did a live news interview and yes, we paraded the Poles/ Lithuanians at our Houston HQ, after that though... silence followed! So i have reservations about the released statement from the company's September quarterly, " while trade issues with the Chinese market impact our discussions, our negotiations with customers in other parts of the world remain strong ". Don't want to burst the (optimistic) bubble but unfortunately I don't buy that... if those negotiations were strong, why have we been banging on about courting the Chinese all year with practically zero talk of alternate buyers? From my perspective, GV's tweet on Oct 29, " multiple buyer opportunities with customers in Europe and Asia exist, and our discussions with them are proceeding well ", is not overly convincing or inspiring confidence! How bout instead say something along the lines of, " We're attacking an array of alternative buyer oppourtunites in Europe/ Asia and we've got a couple of keen parties cornered ". Does that not sound more promising?!
The positive news... a plethora of oppourtunites are available with the following major candidates;
South Korea - Not looking to expand capacity until after 2025/ have contract re-negotiations up for grabs, those being... 7mt 25yr deal with Qatar that began in 2000 & 4.1mt 25yr deal with Oman that began in 2000. In the Platts report on 1 March 2018, it said that Kogas will seek to diversify its LNG supply sources to include Russia and the US to ease its dependence on the Middle East and SouthEast Asia. "Kogas has started preparations for new term contracts and seeks to sign new deals at least 5 years before existing contracts expire" , the company official said.
Japan - Not looking to expand capacity for the foreseeable future/ we would be targeting their contract re-negotiations with; Qatar 5mt expiring in 22/23', Australia NWS 2.5mt expiring 24', Australia Darwin 3mt expiring 23', Malaysia 3.62mt expiring 24/25', Brunei 3.4mt expiring 23'.
India - 15 terminals proposed for a total of 58.5mt and if all were to go to construction, the country would require 43.8mt when taking into account their terminal Utilisation Rate of 75%. Currently has 28mt under construction, meaning once commissioned will require 21mt (75% Util Rate) minus 8.7mt if they keep importing that amount from the spot market, which was recorded in 2017. There's a question mark, concern though about demand for imported gas in India - Shell and Engie gave that very reason for exiting a 5mt project partnered with Gail/ AP&G at Kakinada in Andhra Pradesh. Plus their coal production and consumption has increased each year for the past 5; Production 236.8mt (2017), 229.3mt (2016), 226.2mt (2015), 216.9mt (2014), 205.8mt (2013)... Consumption 341.3mt (2017), 326.5mt (16'), 318.2mt (15'), 311.9mt (14'), 282mt (13').
Taiwan - 3 terminals proposed totalling 12.5mt (Taoyuan 6mt, Keelung Xiehe 2.4mt, Taichung 4.1mt). The last 2 years their Utilisation Rates have been a crazy 118% (2017), 113% (2016) so you can ascertain their future requirements would be 14.3mt if say @ 115%.
Myanmar- 5 terminals proposed for 15.5mt. Would be a new entrant in the import market in which case I always give a worst case Utilisation Rate of 35% (Global Utilisation Rate average in 2016 was 41%). Requirements could be 5.4mt.
Germany - 2 terminals proposed in Wilhelmshaven 8mt, developer Uniper + one in Brunsbuttel 3mt, developers Vopak/ Gasunie/ Oiltanking. Utilisation rates are really low in Europe with Italy being the highest 40%, followed by France 35%, Spain 21%. If Germanys usage is at 35% = 3.85mt.
Thailand - 9mt Nong Fab terminal developed by PTT. Construction will begin shortly. 2017 Utilisation Rate 50% = 4.5mt requiring.
Italy - 3 terminals have received full authorisation and are priorities for Italy's government; Enel's Porto Empedocle terminal in Sicily 5.9mt, Medgas's Gioia Tauro terminal in Calabria 8.8mt, Api Nova Energia's Falconara Marittima terminal 2.9mt. 2017 Utilisation Rate 40% = 7mt required.
Pakistan - Currently has 2 terminals online, 1 under construction totalling 14mt capacity. Utilisation Rate is unknown but already has contracted 9.6mt which would equal 69%. In July 2017, Petroleum Minister Shahid Abbasi quoted, " within 5 years I don't see any reason why we should not be beyond 30mt in annual imports. We will be one of the top 5 markets in the world." Mitsubishi, Total/ Vitol, Trafigura & Exxon/ Energas 5.6mt have all proposed terminals.
Summing up Magnolia's fate from our current position... I feel the market sell off preceding the September quarterly was a drastic measure! Would also not say we now only have a glimmer of hope. Without Chinese investment, life for LNG LTD is definitely going to get a lot more challenging and the telling factor is going to be how the upcoming G20 summit talks in Buenos Aires go between Trump and Xi Jinping. If resolutions fail to materialise with both countries continuing down the war path, it looks set to be a long, drawn out battle which will hurt the prospects of future US projects. However... talks are clearly going on behind the scenes between the 2 superpowers in preparation for that important meeting, nutting out one another's needs/ compromises/ objectives and truly believe both Presidents will be smoking the peace pipe by the end of it!
" We remain confident in our ability to reach FID on Magnolia LNG whether or not China participates ", GV says. The wording in bold has come way to late in the game to have merit! " We stay involved with all customers because this could change at a moments notice (trade war) ", I've been told recently... the reality is, we're still banking on the Chinese to pull through for us!
The fight goes on! We'll get there... we'll still be standing at the end of the 12th Round, arms held in the air!
