Sam Reynolds, IEEFA’s (The Institute for Energy Economics and Financial Analysis) Energy Finance Analyst has warned that new LNG projects may face delays and cancellations due to unaffordable fuel prices.
According to the analysis, the demand for LNG, once heralded as “the champagne of fuels,” keeps decreasing, and IEA (the International Energy Agency) has already warned of the gas market remaining tight well into 2023.
Asian countries keep searching for less expensive energy supplies, making other fuel choices, shifting policies, and underutilising existing LNG terminals, which in effect is causing delays and cancellations of proposed new LNG import projects.
According to the International Gas Union, in India, for example, six new terminals were anticipated online this year but none have been commissioned. Recurring delays at the Jaighar LNG project prompted floating terminal provider, Hoegh LNG, to cancel its 10-year charter and reroute the vessel to Europe. Moreover, from April to June, three of India’s six operational LNG terminals were running at below 20% capacity.
In China, only two out of eight new terminals expected online this year have been commissioned. In addition, the 8 GW of new gas-fired power capacity added this year was dwarfed by the 158 GW of new wind and solar capacity. The IEA said that it expects Chinese gas demand to grow at just 2% through 2030, compared to the 12% average annual growth over the previous decade.
In China and India, LNG demand has plummeted 21% and 18% year on year, and Pakistan and Bangladesh have slashed imports by 16% and 15%, respectively. As a result, the average utilisation of existing LNG terminals in all four countries has fallen compared to the third quarter of last year.
In August, the government of Bangladesh withdrew from a 3.6 GW LNG-fired power plant and terminal project, citing eye-watering fuel prices in the global market.
The Philippines and Vietnam have delayed plans to commission their first LNG terminals until next year, and San Miguel Corporation, a gas-fired power plant developer in the Philippines, reportedly faces delays with eight proposed power projects.
The LNG supplies are limited and its price is reaching a record-breaking rise. In Asia, in October, LNG prices were up 300% compared to last year.
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IEEFA: High LNG prices affect demand growth in Asia
LNG markets are expected to remain tight until significant new supply capacity comes online, which according to analysis, is unlikely until 2026.
Projected global gas demand is also shrinking, with the IEA’s most recent World Energy Outlook cutting expectations of gas demand in 2050 by 750 billion cubic meters, which is 15% less than last year’s forecast.
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