The Strategist

Total stops investing in US projects, cancels supplies from US

05/06/2020 - 03:24

In the current price conditions on the market, French Total is going to cancel a number of summer deliveries of liquefied natural gas from the United States and will not increase its investments in American LNG projects yet, Total head Patrick Pouyanné said during a conference call for investors.

Laurent Vincenti
Laurent Vincenti
“Indeed, prices are affecting us at Henry Hub. By the way, we are in the process of canceling some LNG supplies during the summer to limit losses,” he commented on the negative margin of LNG supplies from the United States and the company’s wary attitude about the increase in investment in American projects.

“Nevertheless, we continue to work on the ECA project (Energia Costa Azul LNG) in Mexico, because it is located on the Pacific coast. And together with Sempra (Energy) we see great value in this project, for example, save more than $1 per million BTU in shipping goods to Asia. And I think we’ll move forward with Sempra in the coming months.” – he added.

“As for other projects, my answer is no, today it is not our priority to increase investment in new projects in the USA. Now, in fact, we have a Cameron LNG expansion project, we will see with Sempra where we are moving along it. And completely new projects, like the options that we have with Tellurian, I think that for them there is no reason, it will be strange to move along with them,” concluded Head of Total.

The fall in prices in the markets of Europe and Asia makes it unprofitable for traders to supply LNG from the United States, given their economy. The scheme of deliveries from the USA in fact looks like this: the operator of the American plant buys gas at exchange prices in the domestic market and then sells it to the trader with a 15 percent profit, charging a fee for liquefaction. After that, it is still necessary to take into account transportation costs. However, prices at the American hub Henry Hub at the moment even exceed the prices at the spot of the most liquid European hub TTF - $ 1.993 per million BTUs versus $ 1.75.


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