LNG

Rising renewable capacity and cheaper batteries are weakening the investment case for LNG import terminals and gas-fired generation, with Ember signalling out China as the clearest example of that shift.

India’s LNG imports are bound to rise amid higher gas-burn in the summer season and Petronet aims to get the expansion of the 17.5 mtpa Dahaj terminal to 22.5 mtpa completed in the next three months, CEO A.K. Singh said. He indicated Petronet aims to maximise the utilisation of this terminal over the summer.

Electric power generators across India have already been asked by the government to operate underutilised gas-fuelled plant at a higher capacity between May 26 and June 30.

Rain and cooler temperatures have subdued gas demand over the past few weeks but electricity demand is forecast to rise starkly as the summer season approaches. "We expect LNG demand to rise similar to last year's levels. Demand for power is rising in last few days so we are expecting demand for LNG to rise in the third or fourth week of May and in June," the Petronet CEO said.

Dispatch of gas-fuelled power plants has been more expensive than those running on thermal coal, solar or wind energy which results in three-fifth of all gas power stations standing idle. These plants tend to be primarily used for gas peaking power.

Yet the narrowing spread between spot and longterm LNG prices is incentivising buyers like Petronet to step up purchasing, Sing said, indicating Indian offtakers prefer LNG prices at below $10 per million British thermal units. At this level gas-burn for power generation starts to become economic.

Near-fixed price LNG offtake

For long, Petronet used to purchase US LNG at a near-fixed price. In September 2019, it signed a $7.5 billion agreement with Tellurian to take a stake in Driftwood LNG and import 5 mtpa. For American LNG vendors, selling LNG directly to Indian customers is difficult given that utility customers are hesitant to lock in long-term offtake agreements due to a high risk of price volatility at wholesale power markets.

Prime Minister Narenda Modi is pushing to turn India into a gas-based economy, aiming to boost the use of gas from 6.2% to 15% by 2030. To achieve this goal, the PM has set out measures to double city gas networks to 400 districts, set up an independent gas transmission system operator and a trading exchange to allow for transparent operations of pipelines and price discovery.

“Increasing natural gas use will enable India to fuel its impressive economic growth to achieve Prime Minister Modi's goal of a $5 trillion economy," noted Tellurian president and CEO Meg Gentle.

LNG demand in Japan’s power sector is expected to rise by more than 10% to about 74 million tons by 2040, the government forecasts factoring in a slow build-out of renewables. Unless wind and solar power capacity expands substantially, or the cost of hydrogen and ammonia falls sharply – Japan’s gas demand is bound to increase.

Though the Department of Energy (DOE) reckons the Philippines two new LNG terminals will have “no problem in securing supply” once opened in March and April, analysts revised down the country’s LNG imports. High global gas prices are pressuring utilities to use less LNG for power generation, as higher renewables and coal generation suffices to meet demand.

Taiwan is one of the few markets in Asia where LNG demand is rising with a steady and substantial pace. Over 4.4 GW of new gas-fuelled power generation capacity is scheduled to start operations, underpinning LNG imports, while Taiwan’s law-making court is reviewing if the runtime of the final 951 MW unit at Maanshan nuclear power station can be extended.

Europe's latest episode of dark and almost wind-still weather – dubbed Dunkelflaute – has once again highlighted the importance of flexible gas generation. Low wind speeds since early November reduced wind power output by 40% yoy, or nearly 15 TWh compared to November 2024, IEA figures show and that shortfall was largely offset by flexible gas power plants ramping up output by 65% yoy, or 13 TWh.

The Danish Energy Agency said the nation’s consumption of natural gas fell by 10.8 percent in the first nine months of 2023 while the share of bio-natural gas made from waste increased its share of the energy mix.