Page 4 - AsiaElec Week 23

AsiaElec COMMENTARY AsiaElec

Asian LNG prices

slump once more

Spot market prices are struggling to gain traction in the face
of diminished global demand and increasing supply

P THE global oversupply of LNG and the destruc- to continue for the near future, as industries and
tion of Asian demand owing to the coronavirus businesses instil new health and safety regula-
WHAT: (COVID-19) pandemic have sent spot prices tions and stricter operations brought about by
Spot cargoes for July spiralling for a second week. the global pandemic,” Reuters quoted the com-
delivery into East Asia fell Spot cargoes for July delivery into East Asia pany as saying in an email.
to $1.85 per mmBtu. fell to $1.85 per mmBtu ($52.39 per 1,000 Petronas added that it would continue to
cubic metres), Reuters reported on June 1. The meet its ongoing contracts as planned and that
WHY: newswire pointed to the number of cargoes on these “will not be affected by any changes in the
Warmer winter weather, the market this week, coupled with depressed gas production output”.
global oversupply and industrial demand for gas around the world, as The news comes after Petronas announced
finally the pandemic have behind the $0.07 per mmBtu ($1.98 per 1,000 last month that it would cut its 2020 capital
wreaked havoc on prices cubic metre) decline. expenditure budget by 21% from an initial esti-
The weakening of LNG prices is a function mate of MYR50bn ($11.46bn) and its operating
WHAT NEXT: of more than just the pandemic, however, with expenditure by 12% from 2019’s MYR20.2bn
What next: Demand warmer than anticipated northern hemisphere ($4.64bn).
may not bounce back to winter temperatures in Europe and Asia exacer- The spending cuts were revealed at the
pre-COVID-19 levels until bating the global supply glut. same time the company reported a 68% yea-
2022 The International Gas Union (IGU) noted in ron-year collapse in its first-quarter net profit to
April that 2019 had been “another record year MYR4.5bn ($1.03bn).
of low prices”, which it attributed to increasing With the international gas market tanking,
gas production, the addition on new liquefaction the region’s largest gas exporter – Australia – has
capacity and limited demand from Asia. begun turning its attention to ways it can prop up
Even as Asia’s economies come back online domestic producers.
after prolonged periods of lockdown, there is no
clear sign that this will translate into a resurgent Domestic focus
demand for the fuel. Spot prices tumbled below Australian Energy Minister Angus Taylor said
$4 per mmBtu ($113.28 per 1,000 cubic metres) last week that it was essential for the country to
in January, marking a 10-year low for the fuel as lean on gas-fired power generation as it transi-
capacity that had received final investment deci- tions to a greener economy.
sions (FIDs) when energy prices were higher Taylor’s comments came following an
came on stream. update to the Australian Energy Statistics,
which showed that renewable energy sources
Production optimisation accounted for 21% of the country’s power gen-
Malaysia’s state-owned Petronas has said it is eration in 2019.
“optimising” its LNG production in response to Gas-fired power generation represented
weaker prices and demand. 20.5% of the national total.
The company told Reuters this week that Taylor said: “Gas is flexible and provides the
challenges relating to the ongoing COVID19 dispatchable capacity we increasingly need to
pandemic meant that it needed to optimise balance intermittent renewables and deliver a
production volume in line with the market secure, reliable and affordable electricity system
slowdown. to power our homes, businesses and industries.”
Malaysia’s exports of LNG are expected to He added: “This has never been more important
drop to 1.5-1.64mn tonnes in May, the newswire – particularly as we begin our recovery from the
quoted unnamed industry sources as saying last impact of the COVID-19 pandemic. This is why
week. This would represent a nearly two-year the Australian government believes a gasfired
low in terms of monthly export volumes, down recovery will drive jobs and economic growth.”
from the 1.92mn tonnes the country exported To this end, he encouraged state and territory
in April. governments to do more to help developers
“The current measures in place are expected bring fields into production.

P4 www. NEWSBASE .com Week 23 10•June•2020