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.

Pakistan’s diverse domestic energy mix – nuclear, coal and hydropower – is cushioning the country from the global energy price shock following Qatar’s suspension of LNG exports. With nearly three-quarters of its electricity now generated from local sources, Pakistan managed to mitigate the immediate fallout of halt in its contracted long-term LNG deliveries from QatarEnergies.

The Egyptian government has signed contracts worth more than $1.8 billion with Norway’s Scatec and China’s Sungrow in a bid to expand clean power generation and reduce LNG import dependency.

Pakistan LNG Ltd (PLL) is looking to resell excess cargoes and considers storing tankers offshore. Excess term LNG deliveries could incur state energy companies nearly $400 million in losses, especially since the rapid solar PV build-out cuts short the need of burning gas for generating electricity.

Global energy investment will reach a record $3.3 trillion this year – despite escalating geopolitical tensions and related economic uncertainty, the International Energy Agency (IEA) finds. China cements its position as the world’s single largest investor in energy.

Singapore is at the heart of an evolving regional power grid which is poised to lower the share of LNG-fuelled power generation. If all proposed interconnections get built, they could unlock up to 25 GW of renewable and energy storage capacity worth over $40 billion, Rystad Energy reckons.

Today, over 96% of Singapore’s electricity is generated by burning natural gas which needs to be imported as LNG. Yet, Rystad analysis finds that importing electricity through the regional grid is cost-effective for the city state and could help reduce CO2 emissions by 13 million tons per year.

Higher load factor helps reduce electricity cost

Though CCGT are flexible and reliable in terms of operation, comparing the levelized cost of electricity (LCOE) reveals that electricity imports via ASEAN interconnectors may offer a more cost-effective alternative to building new domestic CCGT capacity. Singapore’s Electricity Market Authority (EMA) current regulatory framework require projects to reach an annual load factor of at least 60% within five years of commercial operation. For project developers there is a strong economic incentive to exceed this target.

Raising the load factor target from 60% to 100% could lower the overall LCOE, as this helps spread transmission costs more equally. This impact is particularly significant in countries such as Malaysia (Sarawak), Cambodia and Vietnam, where long transmission distances amplify cost optimization benefits particularly for hydropower projects

Solar-plus-storage hybrid systems, with optimized direct current/alternating current (DC/AC) configurations and appropriately sized battery energy storage systems (BESS), can already achieve load factors above 90%. By integrating solar and BESS technologies with the necessary backups, these systems can reach the level of reliability required by Singapore’s EMA and could be comparable to other dispatchable energy sources.

“Hybrid systems could deliver lower LCOEs than many in the industry currently anticipate. Singapore, strategically positioned at the heart of this evolving energy system, stands to gain significantly,” said Rystad’s renewables analysts Nevi Cahya Winofa.

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.