There are six factors that will affect the Asia Pacific natural gas and liquefied natural gas (LNG) market in 2020, wood McKenzie, a consultancy, said in a recent report.
Asian LNG spot prices fell further
In 2019, the global LNG market relies heavily on Europe to absorb the excess supply. LNG production from projects in the United States and Australia has surged, and LNG demand in the Asia Pacific region has stagnated. Spot LNG can only be sold to Europe at a discount price.
Robert Smith, director of research at wood Mackenzie, said: “Europe will be asked again in 2020 to save this situation. However, unlike 2019, European gas inventories reached record levels early this year. As a result, Europe will rely more on flexible supply or increased demand in the power sector than it did last year. Both show that gas prices will be lower in 2020 and spot prices in Asia will also fall. However, if tensions between the United States and Iraq escalate in 2020, leading to the disruption of transportation in the Strait of Hormuz, there will be risks in the supply of LNG from Qatar. “.
Market liberalization and lower LNG spot price
Malaysia and Thailand have finally liberalized their natural gas markets. Last year, Malaysia imported a batch of LNG spot from shell, breaking the monopoly position of Petronas for the first time. With the successful entry of third-party companies into the country’s market, TNB’s Procurement Department expects to seek more goods this year.
EGAT recently imported the first LNG cargo. This is the first test of third-party access control after the market is monopolized by PTT.
In South Korea, new energy and industrial consumers are also seeking to bypass kogas to import natural gas independently.
ASLA, chief analyst at wood Mackenzie, said, “the low spot price of LNG provides a reason for emerging buyers to buy. Whether Petronas Malaysia, Petronas Thailand or Korean natural gas companies, they have a series of relatively high price long-term supply contracts. The ability to purchase LNG from the spot market will provide additional profits for end users and improve their competitiveness in the market. After several spot transactions, these new buyers and LNG suppliers will be confident in the commercial operation ability of LNG purchase “.
Declining demand for natural gas and LNG in China
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In 2019, the growth rate of China’s natural gas demand dropped to 9% from 17% in 2018. The slowdown has affected overall energy demand.
“With the operation of the Siberian power pipeline and the first batch of natural gas from Russia to northern China, LNG demand is likely to decline in winter 2020,” said Huang miaolu, senior manager of wood McKenzie. In addition, China’s natural gas production is still growing at a faster rate than in previous years. If this situation continues in 2020, the growth rate of natural gas import will slow down. “.
Although China’s coal to gas process slows down in 2019, natural gas still accounts for a higher share in the energy structure, surpassing coal and oil.
Northeast Asia’s resistance to coal
More and more air quality problems have prompted North East Asian markets such as South Korea to adopt new energy policies to reduce coal power generation.
“The fall in coal use last spring shows that South Korea has had some success in reducing seasonal emissions,” said Lucy Cullen, an analyst at wood Mackenzie. Early reports also showed that South Korea’s carbon emissions fell in December last year. If the winter coal limitation measures in 2020 continue to have a positive impact and avoid power outage, then seasonal coal limitation is likely to become the norm in Northeast Asia and benefit LNG. At present, the Northeast Asian energy market does not support large-scale coal to gas policy. However, in the next few months, we will pay close attention to whether the combination of carbon emissions and sustained low prices can provide impetus for a larger coal to gas policy in 2020. “.
Southeast Asia will launch policies to support natural gas
In 2020, several policy documents that may shake the natural gas market in Southeast Asia will be released. Natural gas is expected to play a more prominent role in the start-up of the master plans for the electricity and gas markets in Thailand and Vietnam. This will provide key strategic signals to market participants in the region.
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Vietnam will increase its gas power generation capacity in the medium term, which will increase the share of natural gas in Vietnam’s power structure. It is expected that in 2020, many integrated gas-fired power generation projects will occupy a place in the forthcoming power development plan.
India regasification receiving terminal put into operation delayed
New regasification capacity is crucial for India to take advantage of low spot prices. However, India’s regasification development project has a history of delays, mainly due to the difficulty in completing the connection with the grid, thus limiting the capacity to a lower level.
Analysts said that Mundra and Jaigarh are the trial operation targets of this year’s regasification project. Two receiving terminals were originally planned to be put into operation in 2019, but have been delayed for various reasons. Another major new capacity project is the expansion of dahej receiving terminal. It is planned to increase the capacity by 2.5 million tons per year, which will be completed in 2020.
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