Cheniere Moderates 2020 U.S. LNG Growth Estimates

(Reuters) — U.S. liquefied natural gas company Cheniere Energy Inc cut its growth estimates for LNG exports and investment in new projects industry-wide due to the slump in energy markets and the COVID-19 pandemic. 

Fuel demand is down 30% worldwide as a result of the coronavirus pandemic, but LNG consumption has been less affected as consumers in Asia and elsewhere use the fuel to heat homes and generate power.

Cheniere, the largest U.S. LNG company, said demand for liquefied natural gas could potentially fall in coming quarters. That would be a reversal from demand that has hit new records for several straight years for the super-cooled fuel.

It also said investments to build new projects worldwide in 2020 and 2021 would be about 65 million tonnes per annum (MTPA), or about half of the company's earlier projections.

Worldwide demand for LNG increased by about 10% during the first quarter of 2020 versus the same period in 2019. Cheniere said it expects potential year-over-year declines in demand "as reduced economic activity affects LNG demand and high storage inventory levels reduce the need for imports." 

Cheniere said in its first-quarter earnings that it recently experienced an increase in the number of LNG cargoes for which customers have notified the company they will not take delivery.

The company, however, said it does not expect the canceled LNG cargoes to have a material impact on its forecasted financial results for 2020, due to the highly contracted nature of its business. 

Cheniere said its customers continue to be obligated to pay fixed fees for the canceled cargoes. During the first quarter, the company said it recognized revenue of approximately $53 million associated with canceled LNG cargoes.

Cheniere also noted that robust LNG supply additions over the past several years, along with warmer winters and strict virus containment measures, have caused global gas prices to drop. Gas contracts in Europe and Asia have plunged to record lows over the past week or so.

Cheniere said total world LNG demand grew by 13% in 2019 to approximately 360 MTPA. IHS Markit, a consultant, this month projected LNG demand in 2020 would reach 363 MTPA, but that is down from a pre-COVID-19 estimate of about 377 MTPA.

Separately, Cheniere said it still expects to complete the third liquefaction train at its Corpus Christi LNG export plant in Texas in the first half of 2021 and the sixth train at its Sabine Pass LNG export plant in Louisiana in the first half of 2023. 

The company also said it expects to start construction of the Stage 3 expansion at Corpus upon entering into an engineering, procurement, and construction contract and additional commercial agreements, and obtaining adequate financing.

Earlier this year, Cheniere said it was targeting a final investment decision later in 2020 to build Corpus Stage 3.

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