Page 7 - AsiaElec Week 42

AsiaElec COMMENTARY AsiaElec
used to. This is backed up by the International Energy Agency (IEA). Speaking at the LNG Producer-Consumer conference in Tokyo in late September, the IEA’s executive director, Fatih Birol, said the industrial sector was Asia’s biggest driver of LNG growth.
“The biggest growth is coming from China,” Birol said. “In the next five years, about one-third of global LNG demand will come from China alone.”Andconcernsoverarecessionandother headwinds are not stopping LNG suppliers from betting on this demand growth.
The IEA estimates that over 170bn cubic metres of natural gas liquefaction capacity is due to take a final investment decision (FID) this year, far surpassing the previous record of 70 bcm in 2005.
Obstacles
There are certain obstacles to overcome, how- ever, including the fact that LNG spot prices have more than halved since last year. This is causing some buyers to turn to the spot market ahead of signing new long-term contracts.
Most recently, on October 16, Reuters reported, citing sources familiar with the matter, Pakistan cancelled a tender to buy LNG over a 10-year period. Instead, the country may turn to
the spot market, according to the sources, who said there had been inadequate demand during the tender process. This is despite the fact that Italy’s Eni, China’s PetroChina, Azeri state oil company SOCAR and commodities trader Tra- figura had reportedly placed offers into the ten- der, according to other sources cited by Reuters.
This shift away from long-term contracts is causing liquefaction capacity developers to reconsidertheirbusinessmodelsaswell–those speakers at the Oil & Money conference noted that long-term contracts continued to make up a larger proportion of sales.
And as the global economy slows, it will become all the more important for LNG suppli- ers to offer the fuel at the lowest possible cost in order to remain competitive.
Santos’ Gallagher said that in response to these trends, he expected Australia’s LNG future to lie in smaller brownfield projects, with few – if any – new greenfield projects being built after the first wave. These projects can be equity-fi- nanced rather than relying on long-term con- tracts, which he said would allow his company far more flexibility in how it can market its gas across the Asian region. He said he remained confident of Australia as a supplier in this changing market, especially to Asia.™
GAS-FIRED GENERATION
China’s gas demand to slow this year
CHINA
CHINA’Sstate-runSinopecGashasforecastthat the country’s natural gas demand will expand by 10% this year to 307bn cubic metres.
This year’s anticipated growth rate is a marked drop from the roughly 18% jump witnessed in 2018, when the country consumed 280 bcm of gas.
“Due to the macroeconomic situation and the government’s easing [of its] push to the coal- to-gas programme, China’s gas consumption growth is slowing,” Reuters quoted a company spokesperson as saying. The newswire noted that the official was reading prepared comments on behalf of Sinopec Gas’ deputy chief economist, Wu Gangqiang. “We expect the consumption growth for this year is around 10%.”
Sinopec Gas expects national gas demand to climb to 510 bcm by 2030, with the city gas, industrial and gas-powered utility sectors driv- ing consumption.
The official said city gas demand was pre- dicted to grow rapidly over the next 10-15 years driven by the country’s ongoing urbanisation.
Citygasconsumptionstoodat92.5bcmin2018. Sinopec Gas also anticipates industrial demand rising from 110.6 bcm last year as the government introduces more stringent environ-
mental measures.
Gas is unlikely to challenge coal in the power
sector any time soon, with the company point- ing to the high cost of gas as a feedstock as well as shrinking government subsidies. Utilities’ gas demand stood 48.4 bcm.
Domestic production is forecast to amount to about 175 bcm this year, with shale gas account- ing for 15 bcm of that figure, Reuters quoted Ministry of Natural Resources research official Pan Jiping as saying. These figures should lead to a 132 bcm gap in supply, which will have to be filled with imports, up from 124.7 bcm in 2018.
Although the country has been expanding its overland import options, in the short to medium term any expansion in imports will likely be met by increased shipments of liquefied natural gas (LNG), and companies are already looking to take advantage.™
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