LNG

South Korea’s ruling Democratic Party today announced the abolition of spring caps limiting coal-fired plants to 80% capacity, alongside boosting nuclear utilization to over 80% from late-60s levels. “We aim to lift coal power caps to ease reliance on LNG for electricity generation,” an official from the Ministry of Trade, Industry and Resources said, pointing at government strategy to stabilize baseload power.

The Philippine government is regulating electricity rates to counter the risk of LNG-linked price inflation of up to 16 percent, amid Middle East shipping disruptions. Energy Secretary Sharon Garin is negotiating stable coal supplies from Indonesia to facilitate fuel switching and wants to temporarily cap spot power prices.

The European Commission is considering introducing gas price caps, enhanced power purchase agreements (PPA) or contracts for difference (CfD) to shield industry and households from soaring energy costs caused by the halt in Middle Eastern LNG deliveries.

Gazprom’s latest cooperation push with CNPC is accelerating the ramp-up of Russian pipeline gas exports to China, capping the country’s LNG demand. Gazprom aims to increase exports via additional pipeline routes such as the Power of Siberia 2 pipeline.

Shortfalls in Australia’s East Coast gas markets force regulators to make tough choices. Price caps, while offering short-term consumer relief, risk to undermine project economics and deter investment in future supply.

“Recent exemptions have effectively set a floor price as market participants anchor prices to the cap, making the market less responsive to supply-demand signals,” said Daniel Toleman, Wood Mackenzie’s research director of global LNG.

Export diversion is another option to help boost domestic supply but risks damaging Australia’s reputation as a reliable LNG supplier. “Queensland LNG projects were approved without domestic obligations and rely on long-term contracts,” Toleman said, explaining: “Diverting exports would require major infrastructure upgrades, as southern markets face the brunt of the shortfall.”

Imports 'commercially challenging'

Importing LNG through floating storage and regasification units (FSRUs) is “technically feasible but commercially challenging,” analysts warn. Global demand for FSRUs has surged since the Russia-Ukraine conflict, making units scarce and costly. The government may need to underwrite the commercial risk of such infrastructure.

Moreover, importing LNG would expose Australia to volatile global prices. Domestic gas prices would align with international LNG costs plus regasification and transport charges — potentially far exceeding current netback pricing.

Analysts pledge investors to come forward. Unlocking new domestic gas supply is the most effective way to reduce emissions and lower energy prices in Australia, Wood Mackenzie argues. But this would require a shift in government policy and a willingness to make politically difficult decisions.

Egyptian Natural Gas Holding Company (EGAS) is understood to have set a $14/MMBtu cap on spot LNG purchases this summer in response to rising prices in the Atlantic Basin. An additional $2/MMBtu premium is being offered if vendors agree to get payment deferred by one year.