Page 4 - GLNG Week 15 2022

GLNG COMMENTARY GLNG

Japan, South Korea and Vietnam

face risky exposure to LNG markets

Japan, South Korea and Vietnam face volatile gas prices and increase investment risk if they
pursue investment in LNG imports and gas generation

ASIA BUILDING a new generation of LNG import White elephants
terminals and gas-fired generating stations The report finds that instead of LNG, investing in
WHAT: would leave Japan, South Korea and Vietnam renewables and battery storage would minimise
Panel no indent exposed to highly volatile gas prices, put up to exposure to commodity price risk, would prove
$70bn of investment in danger and would leave to be cheaper than new gas and would prevent
WHY: them unable to meet their net-zero goals. billions of dollars of LNG infrastructure invest-
Panel no indent Russia’s invasion of Ukraine and the threat of ment from becoming stranded.
the weaponisation of gas supplies would expose The report found that for Japan, 60% of its
WHAT NEXT: the countries to high levels of geopolitical risk LNG projects’ net present value would be nega-
Panel no indent and supply constraints, green think-tank Car- tive in order to meet 2050 net-zero targets, while
bon Tracker found in its recent report, entitled 95% of South Korea’s project would be negative,
Stop Fuelling Uncertainty. and 100% of Vietnam’s. In total, this would leave
Instead, Asian nations, both established LNG 94% of the three countries planned gas genera-
importers and emerging market players, should tion projects, worth 84.7 GW, with negative net
focus on developing renewables in order to avoid present values.
a decades-long reliance on gas imports and to This means that nearly all the gas infrastruc-
minimise investment risk. ture on the drawing board in the three countries
The report stressed that although Japan, Viet- would lose money, and run the risk of becoming
nam and South Korea have made commitments white elephants if they are built.
to reach net-zero emissions by 2050, all three of Up to $70bn could be lost if planned new gas
them still have unabated gas-fired units at the units are developed under this more stringent
centre of their power systems. climate scenario. The vast majority of projects
Asia has been the primary driver of LNG would require extensive government backing to
demand in recent years, accounting for 95% be made viable, the provision of which makes no
of projected growth in 2020-22, with Japan sense when cheaper renewable alternatives are
and South Korea accounting for one-third of available.
global LNG demand. Vietnam, meanwhile, has In practical terms of new gas projects run-
the largest regional pipeline of new gas power ning on imported LNG, typical planning and
infrastructure construction timeframes of at least four years
for new gas mean that any units that move ahead

P4 www. NEWSBASE .com Week 15 15•April•2022