LNG macro analysis, page-2084

It’s going to be an intriguing, high stakes, crucial Thursday/ Friday negotiations to gauge where our company stands to reach FID in 2019. Although it is still promising Liu He is coming for trade talks in Washington despite Trump holding a gun to China’s head, I can’t see a deal being struck imminently on Thursday after Trump quoted on twitter, “ The Trade Deal with China continues, but too slowly as they attempt to renegotiate. No! “ I unfortunately believe 25% tariffs on $350B worth of goods is going to be introduced on Friday. Donald is doing his utmost best to sabotage Magnolia’s success but I do agree with what he’s trying to achieve by intensifying pressure on China to urgently sign a trade pact. He certainly has the leverage with how the US economy is booming in comparison to China’s economy slowing to a screeching halt. Even if a deal is not struck, I wouldn’t say its back to square one... would not be able to comprehend how 2 superpowers have come within touching distance of a historic trade pact for it to completely unravel and have negotiations start from scratch. But if China walks away standing its ground, unwilling to make final concessions while Trump continues to flex his muscles and remain defiant, we could be in for a stalemate that could last for a long while to come. Who’s going to flinch first?...

Last week US Treasury Secretary Steven Mnuchin described talks held in Beijing as "productive". But according to reports, in recent days US officials have become frustrated by China's refusal to change its laws as part of the deal - something that had previously been agreed. Other sticking points have included how to enforce a deal, whether and how fast to roll back tariffs already imposed and issues around intellectual property protection. On Monday the 6th of May, US Treasury Secretary Steven Mnuchin told reporters that the negotiations were 90% complete but that Chinese negotiators were trying to " go back on language that had been previously negotiated ". " [This was] very clear language, that had the potential of changing the deal dramatically," he said.

In referencing our latest Quarterly, I was expecting zero to be revealed on the “ finalising “ of SPAs should the trade war be resolved - but we certainly deserve to have a much clearer understanding of how close we are to locking contracts in. Not interested in “ we are emboldened by the advanced engagement by several customers “, shareholders have heard that tone for years. Also not interested in hearing GV address comments from multiple shareholders claiming that our competitors are signing deals, in a Quarterly statement! For me it’s inappropriate because why answer those critics if indeed we’re on the verge of signing SPAs pending a trade pact... this comes across as defensive! He lacks an edge, doesn’t exude confidence in giving forward direction on the company’s prospects to deliver SPAs/ reach FID, which occasionally makes me wonder if he’s the right man for the job.

You have Meg Gentle, CEO of Tellurian, who’s sharp as a tac, very knowledgeable and when being interviewed, has an element of strong conviction about her! Meg has boldly envisaged an FID timeline and the manner in which she speaks makes it very believable. “ We are looking for partners and I would say we are actually to the stage now of concluding documentation with our partners. I think we’ll have a nice portfolio of majors, traders, Asian counterparties and even some from the Middle East. I would say the shortlist right now, although we are working with about 30 companies that have been in the detailed process... so of that, I think the ones that will go forward quickly, probably half a dozen. We are about a couple of months from being able to conclude and start construction. “ March 27 2019 interview with Bloomberg.

2nd May 2019 press release - US independent Anadarko Petroleum and it’s partners are in the final stages of negotiations for a pair of sales and purchase agreements for their Mozambique liquefied natural gas project. If finalised, the deals will bring the total volume contracted to 11 million tonnes. I precisely recall Anadarko releasing similar press statements last year stating SPA signings were close, in which case they delivered!

We’ve been left in the dark and been given no assurances we’re on the right track. My belief still remains firm but our prospects become a little shaky if we are forced to find alternative options outside of China because I don’t believe we have tricks up our sleeve at the moment!

Let’s pray for calming of tensions and a truce!

JK