In this briefing:
- Another US LNG Project Goes Ahead: Positive for the Contractors; Negative for Others Looking to FID
- 2019 Asia Casino Forecast: Highlights by Country and Performance
- BBTN: Indonesia Has Special Mention Problems Too
- NextDecade’s Oil-Linked Contract Offering Signals More Hurdles Ahead for US LNG Project Developers
- UK Trip – Wake up to Deflation Risk
1. Another US LNG Project Goes Ahead: Positive for the Contractors; Negative for Others Looking to FID
US private LNG company Venture Global is starting construction on its 10 million ton per annum (mtpa) US LNG export facility in Louisiana after gaining approval from the US Federal Energy Regulatory Commission (FERC). This is positive for the LNG contractor market and we discuss the companies involved in the project.
This follows final investment decision taken on Golden Pass (Exxon and Qatar Proceed with US$10bn Golden Pass LNG Terminal: Positive for Chiyoda and MDR US) and supports our thesis of a large wave of new projects that will be sanctioned in the coming months (A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies). This was viewed as a relatively speculative project and with aggressively low cost and timing estimates.
![](https://static-prod.smartkarma.com/images/media/000/079/969/original/cp-pipeline_illustration_1E-1.jpg?1551058066)
2. 2019 Asia Casino Forecast: Highlights by Country and Performance
- Headwinds linger, but are beginning to lose velocity as consumers defy macro fears.
- VIP slowdown should peak by Q3 and begin northward creep as bankrolls replenish.
- Valuations today do not yet fully reflect the beginnings of a sector recovery.
3. BBTN: Indonesia Has Special Mention Problems Too
Bank Tabungan Negara Persero (BBTN IJ) appears to have a nasty combination of high Special Mention Loans (SMLs) and elevated “past due but unimpaired Loans”.
The implication is that provisioning levels are insufficient in an environment of eroding asset quality.
But the bank continues to grow credit by around 20% YoY.
The bank is hugely exposed to the retail real estate market (91% of Loans).
In fact, the Indonesian Banking Sector is rife with high SMLs and in some cases elevated “past due but unimpaired Loans”.
SMLs are traditionally associated with Chinese under-reporting of underlying bad loans, and hence the production of a somewhat flattering Asset Quality picture.
Maybe, the health and valuation of the Indonesian Banking Sector needs to be reassessed with implications for IDR.
4. NextDecade’s Oil-Linked Contract Offering Signals More Hurdles Ahead for US LNG Project Developers
NextDecade Corp (NEXT US) recently announced that it started offering long-term contracts indexed to the crude Brent in order to attract more LNG buyers. This follows the agreement reached by Tellurian Inc (TELL US) with Vitol back in December to index a long term contract with the Asian LNG price benchmark JKM. While typically US LNG projects are indexed to the Henry Hub, declining crude oil and LNG prices seem to have diminished the appeal of the Henry Hub pricing compared to the oil indexation. This insight takes a look at the latest trends in the LNG markets to assess which companies are taking the lead in the race to bring to FID in 2019 their proposed LNG projects.
Exhibit 1: NextDecade adds Brent indexation to its commercial offering
![](https://static-prod.smartkarma.com/images/media/000/079/853/original/Picture1.png?1550843678)
5. UK Trip – Wake up to Deflation Risk
By Bo Zhuang, Chief China Economist
- London-based investors are turning cautiously optimistic on China’s growth outlook amid the latest easing measures in January
- There is still little awareness about the rising deflation risk
- Interest in the trade war has subsided
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