Page 4 - AsianOil Week 40 2022

AsianOil COMMENTARY AsianOil

How Asia is responding to

sky-high LNG prices

How countries fare depends on how exposed they are to the spot market and

their ability to pay higher prices or switch fuels

ASIA SOARING global LNG prices have triggered Fuel-switching options
significant cuts in Asian LNG imports over Limited gas storage options in Asia mean LNG
WHAT: recent months, with the extent of these largely buyers cannot simply use stored gas at times
Soaring LNG prices have dependent on countries’ levels of spot market when spot prices are considered too high. They
led to significant cuts in exposure, fuel-switching options and their eco- must therefore resort to alternative fuels such as
purchases in Asia. nomic responses. Countries in southeast Asia coal and oil. In Northeast Asia, buyers have tra-
have been hardest hit, while the likes of India, ditionally been incentivised to switch from coal
WHY: China, Japan and South Korea benefit from hav- to gas for cost reasons, as well as environmental
Europe has been driving ing more fuel-switching options, and the ability considerations, but this is no longer the case.
away cargoes by offering to pay higher prices. LNG now faces increased competition from
higher prices, while China Since Russia’s invasion of Ukraine, the Asian domestic coal and gas producers, and the coun-
is seeing a slowdown and European LNG markets have essentially try has also seen a rapid expansion in renewables
and some buyers simply switched places. Asia is now the LNG market capacity. This said, China has now seen a huge
cannot afford the fuel. balancer, while Europe now offers a premium resurgence in coal use as had been anticipated.
price, in light of its need to replace substantial Instead, the country has opted for more pipeline
WHAT NEXT: losses in Russian gas flow. Another important gas supply from the likes of Russia and Turk-
The ability of countries factor has been China’s zero-COVID policy, as menistan, as well as Russian LNG, which trades
to switch fuels varies, well as a slowdown in the country’s housing sec- at a discount nowadays.
and the extent that they tor. China is on track to see a record decline in In India, fuel oil, LPG and domestic gas have
can support consumers LNG imports this year — a 14% decline accord- helped offset the reduction in LNG imports, and
depends on their fiscal ing to Wood Mackenzie. This compares with a high prices could mean some new regasification
situation. 18.3% climb in imports in 2021. In the year up projects are delayed. Oil-fired power generation
to the end of September, Asian LNG imports fell has seen a significant increase across South Asia,
by over 7% and are likely to remain subdued, as but some markets still face blackouts – most
Europe still needs more LNG and China’s eco- notably Pakistan – as demand-side solutions
nomic slowdown continues. have been inadequate.

P4 www. NEWSBASE .com Week 40 10•October•2022