LNG Ltd says it is delaying a final decision on whether to build its US-based Magnolia liquefied natural gas plant, citing problems lining up Chinese customers due to the US-China trade war.
The Australian-listed company is now targeting final approval for Magnolia, located in Louisiana, in the first part of 2019.
‘We remain confident in our ability to reach (final investment decision) on Magnolia whether or not China participates,’ LNG Ltd Chief Executive Officer Greg Vesey said in a tweet, noting ‘multiple opportunities with customers in Europe and Asia exist, and our discussions with them are proceeding well.’
Development of liquefied natural gas terminals to ship the super-cooled fuel around the world has soared due to rising demand, particularly out of Asia, as countries seek more cleaner-burning energy sources as a substitute for dirtier coal.
US President Donald Trump has promoted the growth of US LNG exports around the world as part of his efforts for global energy dominance, but the escalating trade dispute with China has harmed those plans.
LNG Ltd had planned to make a final investment decision by the end of 2018 about Magnolia, which is designed to produce 8 million tonnes of LNG per year.
‘We made that statement prior to the trade tensions that have manifested over the past months, which have caused headwinds for LNG transactions,’ Vesey said in a quarterly report.
China purchased about 103 bcf of LNG from the United States in 2017, or about 15 per cent of all US LNG shipped that year, but is on track to fall short of that level in 2018, according to Thomson Reuters vessel tracking and US Department of Energy data.
LNG Ltd’s delay underscored how China, the world’s fastest-growing LNG market, has shifted its long-term LNG procurement strategies away from the United States in the last few months due in part to the trade dispute.
That has had repercussions for the scale and pace for the next wave of US projects, said Saul Kavonic, oil and gas researcher for Credit Suisse in Sydney.
‘Regardless of how long the trade dispute lasts, the overall risk profile of US LNG will remain heightened in Chinese LNG buyers’ eyes for some time to come,’ Kavonic said.
LNG Ltd shares hit a one-year low on the day, before closing down 23 per cent at 41.5 Australian cents.
The company is developing two plants: Magnolia, where it planned to begin exports in 2022, and Bear Head in Nova Scotia in Canada. Vesey told Reuters in May that the plans have ‘strictly been about marketing to China.’
But that was before Beijing imposed a 10 per cent tariff on US LNG as the trade war escalated. Washington has imposed tariffs across the spectrum on imported Chinese goods.