LNG macro analysis, page-1757

A few positive passages of interest from the Nikkei Asian Review on Feb 18...

NEW YORK -- U.S. President Donald Trump tweeted Sunday that meetings with his trade team continued toward reaching a deal with China, the day after he received an update from U.S. Trade Representative Robert Lighthizer on the recent negotiations in Beijing.

The consultations came ahead of a crucial week of trade talks, with a Chinese delegation expected to arrive in Washington once more.

" Important meetings and calls on China Trade Deal, and more, today with my staff. Big progress being made on soooo many different fronts! " Trump wrote in the Sunday morning tweet. " Our Country has such fantastic potential for future growth and greatness on an even higher level! "

Michael Pillsbury, a leading adviser to Trump on China issues, said on Fox News that " this coming week is going to be awfully important, when the Chinese come here at the working level."

" We're going to try to find out, I think, what will be in this memorandum of understanding," he said: whether it will " have enforcement and time limits and ... be tough" or just " be a cosmetic agreement."

The memorandum of understanding is the document the two sides agreed to formulate at the just-concluded talks in Beijing. It is expected to form the outline of a trade deal that will be finalized through a yet-to-be-scheduled summit between Trump and Chinese President Xi Jinping.

It is my belief that a comprehensive trade deal won't be reached before the March 1 deadline but real soon after! Reason being The National Peoples Congress will vote on March 5 on a new foreign investment law (to replace 3 existing laws) to ban such practices as IP theft & IP transfer, a move that will see Beijing pass the law in 3 months when it typically takes a year (the first draft was drawn up on Dec 25).
Concessions might be made by March 1 from the Chinese showing goodwill in appeasing Mr Donald by promising to buy a substantial amount of agriculture + LNG. 

We are very, very fortunate IDG signed on as a partner, bringing Foxconn & JUSDA along for the ride because i feel we would of been in a susceptible position to sign up customers in 2019. It's common knowledge our company was strictly marketing to China, as GV stated to Bloomberg in May 2018. GV was in damage control in the aftermath of that comment when suggesting Magnolia could absolutely be sold out by European customers" at the November 18 AGM. That's a bluff for the time being IMO. There's been a lack of transparency and mixed signals coming from management... March 18 Quarterly, " we believe the progress we made toward selling LNG capacity at Magnolia LNG during the third quarter of Liquefied Natural Gas Limited’s (LNGL or the Company) fiscal year will prove to be extremely valuable toward finalizing sale agreements ". Fast forward to last AGM... word for word extract from CEO " In our marketing conversations with china we were working with all the key firms at a very low level. What IDG does for us is immediately elevates us to the highest levels of those companies ". My interpretation from all these messages = we had made little progress towards banking SPAs before IDG arrived on the scene.

So... we know IDG/ Foxconn have strong connections within China and with IDG forming a joint venture with JUSDA last Sept, that adds a special dimension to form a very powerful 3-way partnership! JUSDA Energy has helped buyers in China to buy LNG directly from Canada - Changfeng Energy, a Chinese energy provider, completed its trial run of a LNG shipment on November 8 2018 from Vancouver Port arriving in Shanghai Port via use of ISO tanks. The LNG was sold to Hebei Riheng Energy which in turn distributed to the city of Shijiazhuang, the largest city in China's 6th most populous province (23 provinces overall)  of Hebei (75 Million people) with a population of 10.5 million people.

There's no guarantee Chinese off takers will secure BTAs soon after the trade war abates. I've been informed, " it's a possibility but definitely not assured "... that remark is consistent with others that have kept us in darkness in trying to gauge how close we are from clinching SPAs. We have deserved better - a touch of reassurance we're on the right track would of been appreciated in past quarterly reports/ recent AGM but then again, 

Much has been written on the dominant position Shell has created in the LNG industry, following its acquisition of BG. Its LNG sales in the first nine months of 2018 totalled 53.82 mt, equivalent to approximately 23% of the global LNG market. Of all the major LNG portfolio players, Shell was also the only one to secure additional long-term LNG supply in 2018, with its decision to take FID on LNG Canada adding 5.6 mtpa to its portfolio in the early to mid-2020s. Any project that can take FID on their balance sheet has the advantage and we are up against some IOCs, notably Total, Exxon Mobil who will have a big impact on the market in 2019 through being a project sponsor or LNG off-taker for 9 projects; 

1) Golden Pass 15.6mt (Exxon Mobil) FID reached.
2) Cameron Expansion 4.5mt (Total)
3) Driftwood 27.6mt (Total)
4) Arctic LNG 15mt (Total)
5) QatarGas Expansion 33mt (Exxon Mobil, Total)
6) Costa Azul 2.4mt (Total)
7) Mozambique Area 4 15.6mt (Exxon Mobil)
8) PNG Expansion 10.35mt (Exxon Mobil, Total)
9) Lake Charles 15mt (Shell)

Following the acquisition of Engie’s LNG business in 2018, Total became the second largest LNG player among the majors, with an overall LNG portfolio of around 40 mtpa by 2020 and a worldwide market share of 10%. Total looks well positioned to expand its portfolio beyond 2020. With half of its planned project involvements being in North America, it could be that Total has a bullish long-term view on US gas prices. For its part, ExxonMobil’s decisions seem to be largely driven by the monetisation of its upstream gas resources. To speed this process up in Mozambique, ExxonMobil has publicly stated its intention to lift LNG and take market risk itself rather than market volumes through the project on a long-term basis. Is this the start of an LNG portfolio for ExxonMobil? Total and ExxonMobil look like they will commit to purchasing substantial LNG volumes from the projects they are involved in over the next couple of years – a major boost to the industry. But how many supply projects can these two companies make happen over a short period? The impact of Total and ExxonMobil’s decisions in the next 12 months (over 2019) and beyond is likely to have a significant impact on the market.

Doctor - Anadarko have absolutely  kicked goals in nearly selling out capacity but we can't compare our current plight to the successes of LNG Canada (Shell, CNPC, Kogas, Petronas, Mitsubishi), Golden Pass (QatarGas/ Exxon Mobil), Greater Tortue (BP), Corpus Christi Train 3 or Venture Global - the latter has been cutting deals at bargain basement prices. Their first deal with Shell for 1mt was signed @ $1.75 per mmbtu while remaining customers purportedly bought between $2-2.25. 
We are a minnow in consideration of being dwarfed by IOC giants and although Magnolia is fully de-risked in terms of regulatory certainty, EPC contract locked in, equity financing secured etc, there's still a reasonable amount of risk (in securing BTAs) being a greenfield project, to see us through to the finish line. The notion that Chinese customers will scoop up our 8.8mt capacity in one foul swoop is highly doubtful as they will want to spread risk across a plethora of projects. But I'm happy to dream! 

Although in certain respects I occasionally feel our company has bumbled along while the strength of our marketing team to close deals can be questioned... I remind myself that A) We're up against powerful IOCs who can take FID on their balance sheets/ provide equity financing + guarantee substantial anchor off take B) Brownfield projects have an advantage but C) We have an amazing location, KMLP pipeline running through our patch, USA provides an abundance of low cost, reliable & consistently priced HH linked LNG, strong major shareholders and projected demand needed by 2025 160mt. 

For all the illusive smoke signals that have been made by our top brass, my unwavering belief in one remains... " when " not if! We will be forever grateful IDG, our saviour, came knocking on our door! 

Someone is sitting in the shade from a a tree that was planted a long time ago!

Just one domino needs to fall!

JK