Page 5 - AsianOil Week 03 2021

AsianOil ASIA-PACIFIC AsianOil

The analyst warned that LNG prices were converted more than 10mn households from
likely to trend upwards as volatility gripped coal-generated heat to gas in 2020.
the market, owing to “lower levels of drilling, China has been converting coal-fired heat-
financial instability in the oil and gas industry, ing systems to cleaner burning gas for years as
and low levels of industry investment”. it seeks to reduce air pollution in the country’s
His warning came just days before Reuters cities. Its efforts led to severe supply shortages
reported that both Pakistan and Bangladesh in 2017, which prompted a rethink of the gov-
had begun rationing gas supplies amid the ernment’s conversion strategy of adopting a
price spike. slower, steadier approach to the process.
In the years since, however, the country has
Emergency rationing built additional gas storage facilities as well as
“The current gas crisis being faced by the [Paki- new piped gas and LNG import capacity. This
stani] industry includes disconnection of gas sup- has paved the way for both the central and
ply to industries as well as low gas pressure,” Trade local governments to resume the pace of coal-
and Industry Association of Karachi president Sal- to-gas conversions.
eem Uz Zaman told the newswire on January 18. The problem has been that while the coun-
State-owned distributor Sui Southern Gas try has prepared for harsh winters, temper-
Co. (SSGC) has warned industry associations atures this year fell to their lowest level in
that it faces a supply deficit of around 200mn decades. Gloystein said: “[I]t did get really
cubic feet (5.66mn cubic metres) per day. The cold, and suddenly they had to serve all this
Bangladeshi government, meanwhile, has cut new demand.”
gas supplies to power plants, but has maintained Chinese buyers then re-entered the mar-
industrial supply, according to one unnamed ket in pursuit of additional LNG cargoes to
senior official at state-run Petrobangla. shore up existing supplies that were put under
The general manager of Bangladesh’s intense strain. While the surge in demand has
Rupantarita Prakritik Gas, Rafiqul Islam, said: been welcomed by developers with LNG pro-
“LNG prices have gone crazy... For the last few jects on the backburner, backing future prices
tenders, we didn’t get any response from sup- based on a volatile set of supply and demand
pliers. We are continuing our efforts to buy factors may be unwise.
from the spot market ... But it is very unlikely Gloystein argued that the price spike would
to get competitive prices in this highly volatile not last much longer, as the cold season was
market.” nearing its end, and with it demand would
Australian LNG developer Woodside high- recede. He said: “This is probably the peak of
lighted the extent of the price gains during its the spike.”
fourth-quarter results statement, with com- Regardless, Asian buyers would be well
pany CEO Peter Coleman saying on January advised to treat the current price high as an early
21: “We agreed to our highest ever spot LNG warning of a bigger problem that is on the hori-
price for delivery in the coming quarter, sur- zon. Prior to the pandemic, global LNG supply
passing our previous record set in 2012.” was widely projected to fall short of demand by
Reports have begun to emerge, however, the middle of decade, owing to a growing polit-
that question the long-term viability of such ical focus on carbon emissions, general rates of
price volatility, noting that as winter gives way economic development and a slowdown in FIDs
to spring heating demands will ease, and so for additional liquefaction capacity.
too will prices. Coronavirus (COVID-19) compressed
developer budgets around the world in 2020,
Buyer frenzy making it harder than ever before to finance
The director of energy, climate and resources gas export projects that cannot secure foun-
at political risk consultancy Eurasia, Henning dational offtake agreements. With Asia’s
Gloystein, has argued that the driving factor demand for gas only anticipated to grow in
behind record gas prices is China’s shift from the coming decades, buyers need to prepare
coal to gas. now in order to avoid being caught out by
Gloystein, in an interview with CNBC this future supply shortfalls created by spot market
week, pointed to estimates that China had short-sightedness.™

Week 03 21•January•2021 www. NEWSBASE .com P5