Page 6 - NorthAmOil Week 08

NorthAmOil COMMENTARY NorthAmOil
Cheniere’s profits balanced by demand concerns
LNG exporter Cheniere Energy has reported rising profits, but has also issued a warning about slowing demand for the fuel in Asia
US
WHAT:
Cheniere has reported earnings of $648mn in 2019, up 38% on $471mn in 2018.
WHY:
The company has continued to ramp up LNG exports, recently shipping its 1,000th cargo.
WHAT NEXT:
Cheniere has warned that Asian LNG demand is slowing owing to a mild winter and the coronavirus outbreak, among other factors.
THE US’ largest LNG exporter, Cheniere Energy, continues to hit new milestones as it expands its operations on the Gulf Coast. However, even as it reported soaring profits and revenues this week, the company warned about a number of factors that are expected to weigh on future demand.
The Houston-based company reported on February 25 that its net income had grown 38% year on year to $648mn in 2019, up from $471mn in 2018. Over the same period, the com- pany’s revenues rose 22% to $9.7bn.
“2019 was an incredible year for Cheniere as we achieved significant milestones in securing our growth, exhibiting execution and operating excellence, demonstrating capital discipline, and further solidifying our position as a global leader in LNG,” said Cheniere’s president and CEO, Jack Fusco, in a statement. “2019 was highlighted by reaching a positive final investment decision (FID) on Train 6 at Sabine Pass, achieving major commercial and regulatory milestones for the Corpus Christi Stage 3 project, launching our capital allocation plan, and placing three trains into service within budget and on average more than nine months ahead of schedule.”
However, the company, which marked the shipment of its 1,000th cargo in late January, faces some headwinds, primarily related to Asian demand for LNG.
Headwinds
For the LNG industry, late 2019 and early 2020 have been characterised by concerns over the impact of global oversupply. New liquefaction projects coming online over the past year – including one train at Cheniere’s Sabine Pass ter- minal and two at its Corpus Christi plant – have taken global capacity above 400mn tonnes per year (tpy). In addition, FIDs on a further 71mn tpy of new liquefaction capacity were made last year.
On the demand side, the market was hurt by signs of an economic slowdown, notably in China. While there are generally expecta- tions that LNG demand in Asia will expand in the winter, mild temperatures this year have depressed this demand, taking spot prices to record lows at the start of this year. The LNG industry was also affected by a rise in nuclear generation capacity in China, Japan and South Korea. Now, the situation is being exacerbated by the coronavirus outbreak, which has led to parts of China going into shutdown, and economic activity being curtailed. The epidemic helped push LNG spot prices below $3 per million Brit- ish thermal units ($82.98 per 1,000 cubic metres) earlier this month.
For Cheniere and other US LNG exporters, a further challenge is posed by their country’s
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w w w . N E W S B A S E . c o m Week 08 27•February•2020