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US exports record LNG volume in May, despite low profits

Denver — US LNG export volumes climbed to a record high in May which came in spite of exceptionally low profit margins on spot cargoes sold into consumer markets in Europe and Asia.

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Last month, the US exported 17 LNG cargoes carrying the liquefied equivalent of 58.3 Bcf of gas, data compiled by Platts Analytics showed. Over roughly the same period, the profit margin for traders selling spot cargoes to West India and Northeast Asia fell to record lows at minus 26 cents/MMBtu and 4 cents/MMBtu, respectively, Platts Analytics data show.

Compounding the puzzling coincidence, at least seven of the cargoes exported last month now appear to be sailing toward destinations in Northeast Asia, West India and the nearby Middle East region.

Historical data collected by Platts Analytics on US export trends show offtakers Shell, Cheniere Marketing, Gas Natural and others having delivered large volumes to India, China, Jordan, Japan, Turkey and South Korea, implying that some of last month's deliveries to the Middle East and Asia were used to fulfill contractual obligations.



Another six cargoes shipped from Sabine Pass in May appear to be en route to destinations in South America and Mexico, where shorter shipping distances may have provided exporters with a more robust margin for profit. In May, Platts' DES Brazil netforward price, which provides a price indication for demand in the South Atlantic, averaged $5.57/MMBtu, roughly on par with the prompt-month JKM price, Platts data show.


EXPORTS TRACK SABINE PASS COMMISSIONING MILESTONES


Record-high export volumes in May come as Cheniere Energy continues to ramp up liquefaction capacity at the Sabine Pass terminal, which currently stands at 2.1 Bcf/d with Trains 1-3 having all reached substantial completion.

Feedgas deliveries to the Louisiana Gulf Coast terminal, which exceed liquefaction capacity due to operational losses, have surpassed 2.4 Bcf/d on two occasions in April and May. Last month, gas deliveries to Sabine Pass averaged just below 2.1 Bcf/d, due in part to lower feedgas volumes from mid-to-late month.

In late May, Cheniere requested authorization from the Federal Energy Regulatory Commission to begin introducing feedgas and refrigerants to Train 4, which is one of the final milestones before bringing a liquefaction facility into commercial operation.

Historical data tracking the time duration from the introduction of feedgas to substantial completion shows the process lasting 190 days for Train 1, 177 days for Train 2 and 133 days for Train 3, suggesting that Train 4 could achieve commercial completion, possibly by late September or early October, according to data compiled by Platts Analytics.


JKM, WEST INDIA PRICES HOVER ABOVE ANNUAL LOWS


Weak profit margins on exports of US LNG to the Middle East, West India and Northeast Asia last month came, in part, as destination market prices remained depressed.

In May, the prompt-month JKM price averaged just $5.59/MMBtu, according to S&P Global Platts data, and was only about 4 cents higher than the average price in April when the index briefly dipped to its lowest this year at $5.35/MMBtu.

The DES West India marker meanwhile saw its monthly average sink to just $5.36/MMBtu, the lowest year to date. In late May, the daily index briefly sank to a 2017 low at just $5.15/MMBtu.

Both the JKM and the DES West India prices climbed to multi-year highs in December and January, when prices in both regions approached the $10/MMBtu level on elevated demand and tight regional supply, Platts data show.

--J. Robinson, jrobinson@spglobal.com

--Edited by Lisa Miller, lisa.miller@spglobal.com