popular articles

Future LNG adoption in Asia: Regulations and non-energy needs

Asia is taking strategic steps to diversify its fuel sources, reducing its dependence on liquefied natural gas (LNG) despite falling prices. Asian governments and utilities have favored nuclear power, renewables, coal and fuel oil, helping to stabilize power grids while enhancing energy security in the region.

Please share:

When signs appeared in early 2022 that Russia’s gas supply to Europe could disappear, Asian LNG (liquefied natural gas) importers were forced to fight for every molecule.

Asian energy strategy: Diversification of alternative fuel sources.

Asian governments and power utilities have made a strategic decision to increase all other available alternative fuel sources.

This included nuclear power, renewables, coal and fuel oil, and prioritizing domestic coal and natural gas production. Fuel supplies were strengthened by restarting power plants, postponing the decommissioning of old facilities and, in some cases, eliminating demand from non-critical sectors.

Over a year later, the collective result of these measures has been to reduce Asian utilities’ dependence on LNG, mainly in the power sector, and to keep LNG spot prices stable. Most importantly, these measures help regional utilities maintain network stability amid the sporadic heat waves that have swept across various parts of Asia in recent months.

Cheaper, more viable fuel sources have also reinforced emerging market claims that LNG remains an expensive energy source in regions such as South Asia and Southeast Asia, despite lower prices in 2023. And that replacing coal with gas in the long term is not just a price issue, but also a wider energy security issue.

Analysis of the low use of LNG in Asia despite falling prices.

To date, LNG traders and importers still expect winter peak demand to be both the sweet spot and the starting point for LNG demand and prices, while other fuel sources will be insufficient to meet rising demand. Regional variations The lack of greater use of LNG in Asia, despite falling prices, also needs to be analyzed in the local context.

In North Asia, mainly Japan, Taiwan and South Korea, LNG is not unaffordable, and buyers like Japan have been willing to pay exorbitant prices for fuel during national emergencies, such as the Fukushima crisis, to keep the lights on. However, Japan and South Korea have embarked on a major expansion of renewable and nuclear energies. According to data from S&P Global Commodity Insights, Japan’s share of electricity generation from renewables has doubled from 6% in 2017 to around 12%, and is set to rise further.

Malaysia, Indonesia and Brunei are grappling with declining gas production, but must also contend with LNG exports and growing domestic demand. For the power sector in Peninsular Malaysia, from March to May, the conversion from gas to coal of around 1 aGW per year brought coal-fired generation closer to capacity, said Andre Lambine, senior analyst at S&P Global, in a recent analysis.

Opportunities for transitioning from gas to coal in the face of rising gas prices.

For new LNG importers like Vietnam and the Philippines, price is a decisive factor. In Vietnam, cheaper thermal coal is needed in 2023 to compensate for declining hydroelectric output, led by lower water levels, which have fallen by 30% to 40% year on year at hydroelectric dams in northern Vietnam, said a PV Gas representative.

India and China India and China are two economies with much greater potential to switch from gas to coal, although much of India’s gas-fired power generation capacity remains under-utilized due to high prices. Both countries have also responded to the Russian-Ukrainian crisis by significantly increasing domestic coal production to manage fuel security, in addition to coal imports.

“In Asia, the two largest coal importers, India and China, are better prepared for this year’s heat wave to avoid a repeat of the 2022 crisis,” according to S&P Global. “In addition to robust domestic coal supplies in India and China, both countries have been rapidly sourcing imported thermal coal as Indonesia’s production has been healthy and China has reopened the door to Australian thermal coal imports,” S&P Global reported in its July edition of International Thermal Coal Market Forecast.

“China has doubled its thermal coal imports, while India’s imports rose by around 5% in the first five months of 2023,” according to S&P Global. “With poor economic performance in China this year, it’s more economical to use coal for power generation to keep costs lower,” said a China-based analyst from a power utility.

LNG use in Asia: driven by coal replacement regulations and non-energy needs.

One trader said that Chinese buyers would be interested in purchasing LNG at around $10/MMBtu, and the current price of LNG was twice that of thermal coal in China, making coal a much more affordable option. Recent government announcements also indicate that China intends to rely on surplus coal to meet electricity demand this summer, while hydropower recovers.

Future uptake of LNG Some of the fuel supply safeguards in the current energy crisis will be temporary and may disappear once Europe’s LNG supply normalizes, but others, such as the rise of nuclear power in Japan and South Korea, and renewables will be maintained.

According to market participants, this has several repercussions on the use of LNG (liquefied natural gas) in Asia, even at normalized prices. LNG demand in the power sector will need to be stimulated by regulations to replace coal, such as the Just Energy Transition Partnership funding for Indonesia and Vietnam, and where gas-based power can support demand reduction at peak times and as a base load for renewables. The other key variable in LNG demand is non-energy, non-heating demand, where it doesn’t have to compete with coal, such as fertilizers, urban gas distribution and transportation.

Register free of charge for uninterrupted access.

Publicite

Recently published in

Physical and derivatives trading of liquefied natural gas in Asia reached unprecedented levels during the June pricing period, with a significant increase in bids and transactions amid the shoulder season.
Mexico could eliminate imports of 384 billion cubic feet of gas per year by reaching 45% clean electricity by 2030, according to Ember.
Mexico could eliminate imports of 384 billion cubic feet of gas per year by reaching 45% clean electricity by 2030, according to Ember.
Energean transfers its offshore stakes in Morocco to Chariot just one year after entering the market, following below-expectation outcomes from the Anchois-3 gas well.
Energean transfers its offshore stakes in Morocco to Chariot just one year after entering the market, following below-expectation outcomes from the Anchois-3 gas well.
Ankara announces the discovery of a new Black Sea gas reserve worth $30bn as part of its strategy to boost public investment in the energy sector.
Ankara announces the discovery of a new Black Sea gas reserve worth $30bn as part of its strategy to boost public investment in the energy sector.
Two new oil and gas sites in the Natuna Sea are expected to produce 20,000 barrels of oil and 60 million cubic metres of gas per day.
A CAD715mn ($524mn) partnership enables First Nations to co-own the Westcoast system, backed by a federal loan guarantee of CAD400mn ($293mn).
A CAD715mn ($524mn) partnership enables First Nations to co-own the Westcoast system, backed by a federal loan guarantee of CAD400mn ($293mn).
Tallgrass Energy announces plans for a pipeline directly connecting the Permian Basin to the Rockies Express network, scheduled to start operations in late 2028 after securing initial commercial agreements with key shippers.
Tallgrass Energy announces plans for a pipeline directly connecting the Permian Basin to the Rockies Express network, scheduled to start operations in late 2028 after securing initial commercial agreements with key shippers.
Woodside Energy has announced a collaboration agreement with Saudi Aramco for a potential stake in its $17.5bn liquefied natural gas project in Louisiana, scheduled to begin production in 2029.
Woodside Energy has announced a collaboration agreement with Saudi Aramco for a potential stake in its $17.5bn liquefied natural gas project in Louisiana, scheduled to begin production in 2029.
Sinopec announced a new vertical depth record with its Tiebei 1HF well, reaching 5,300 metres and producing over 314,000 cubic metres of gas per day in the Sichuan Basin.
McDermott has completed the offshore installation of the Scarborough floating platform for Woodside Energy, marking a key step in the preparatory maintenance phase of the gas project in Western Australia.
McDermott has completed the offshore installation of the Scarborough floating platform for Woodside Energy, marking a key step in the preparatory maintenance phase of the gas project in Western Australia.
The fund managed by ArcLight Capital Partners has acquired 25% of Natural Gas Pipeline Company of America, bringing its total stake to 62.5% alongside Kinder Morgan.
The fund managed by ArcLight Capital Partners has acquired 25% of Natural Gas Pipeline Company of America, bringing its total stake to 62.5% alongside Kinder Morgan.
The Ontario Securities Commission has imposed a trading suspension on LNG Energy Group due to the non-filing of its annual financial statements for fiscal year 2024.
The Ontario Securities Commission has imposed a trading suspension on LNG Energy Group due to the non-filing of its annual financial statements for fiscal year 2024.
NRG Energy acquires energy assets from LS Power, including 18 natural gas power plants, to strengthen its portfolio amid expected growth in U.S. electricity demand.
Diaco Aviki succeeds Thomas King at the helm of Woodway Energy Infrastructure amid expansion of its natural gas infrastructure in Texas.
Diaco Aviki succeeds Thomas King at the helm of Woodway Energy Infrastructure amid expansion of its natural gas infrastructure in Texas.
Brussels announces a full exit from Russian gas by the end of 2027, despite a remaining 9% dependency and pressure on the global liquefied natural gas market.
Brussels announces a full exit from Russian gas by the end of 2027, despite a remaining 9% dependency and pressure on the global liquefied natural gas market.
US-based SiEnergy strengthens its footprint around Houston by acquiring Hughes Gas Resources, an EPCOR subsidiary, for $60mn, expanding its natural gas asset portfolio.
US-based SiEnergy strengthens its footprint around Houston by acquiring Hughes Gas Resources, an EPCOR subsidiary, for $60mn, expanding its natural gas asset portfolio.
US-based Commonwealth LNG has secured a 20-year supply agreement for 1 million tonnes of LNG per year with a major Asian company, reinforcing the development of its Louisiana terminal.
Driven by economic growth and renewable energy limitations, natural gas consumption in Southeast Asia is expected to nearly double by 2050, according to Wood Mackenzie.
Driven by economic growth and renewable energy limitations, natural gas consumption in Southeast Asia is expected to nearly double by 2050, according to Wood Mackenzie.
Egypt signed a memorandum with ExxonMobil to restart natural gas exploration in the Mediterranean on the Cairo and Masry blocks amid a sharp decline in domestic production.
Egypt signed a memorandum with ExxonMobil to restart natural gas exploration in the Mediterranean on the Cairo and Masry blocks amid a sharp decline in domestic production.
Golar LNG finalised long-term charter agreements with Southern Energy S.A. for two FLNG units offshore Argentina, generating a projected order backlog of $13.7bn.
Golar LNG finalised long-term charter agreements with Southern Energy S.A. for two FLNG units offshore Argentina, generating a projected order backlog of $13.7bn.
Ukraine will receive a €270 million loan from the European Bank for Reconstruction and Development, backed by a Norwegian grant, to secure gas imports over two winters.
The natural gas-to-electricity project led by CH4 Systems with several partners has been recognised by the Export-Import Bank of the United States for its energy and economic impact in Guyana.
The natural gas-to-electricity project led by CH4 Systems with several partners has been recognised by the Export-Import Bank of the United States for its energy and economic impact in Guyana.
Bp awards a contract valued between $150mn and $300mn to Subsea Integration Alliance to develop the offshore Ginger field under a new global framework agreement.
Bp awards a contract valued between $150mn and $300mn to Subsea Integration Alliance to develop the offshore Ginger field under a new global framework agreement.
OQ Trading has signed a long-term sales agreement with Amigo LNG in Mexico to purchase 0.6 million tonnes of liquefied natural gas annually, with deliveries scheduled to begin in 2028.
OQ Trading has signed a long-term sales agreement with Amigo LNG in Mexico to purchase 0.6 million tonnes of liquefied natural gas annually, with deliveries scheduled to begin in 2028.

Advertising