LNG projects seen to grapple with gas supply constraints
The Philippines and other Southeast Asian countries face global market constraints in securing long-term gas supply, which may hamper the proliferation of liquefied natural gas (LNG) projects, the Institute for Energy Economics and Financial Analysis (Ieefa) said.
In a report, the Ieefa said existing suppliers in the global market had already committed to long-term contracts, citing a recent survey of LNG buyers in Japan.
“Long-term contracts with deliveries before 2026 are reportedly sold out globally, meaning price-sensitive Southeast Asian buyers risk high exposure to volatile, expensive spot markets,” it said.
Ieefa said the region’s LNG industry, once projected to be a hot spot for global demand growth, would grapple with “financial challenges due to high prices and difficulty in procuring supplies, as well as currency and inflationary pressures.”
“These headwinds will slow the development of LNG value chains that would support long-term demand growth,” it added.
Prior to Russia’s invasion of Ukraine in February last year, the Ieefa had projected Vietnam and the Philippines to increase LNG demand “at a rapid rate” of more than 40 percent annually, with combined imports reaching 10 million tons per annum by 2030.
“Now, however, such rapid growth appears unlikely at unaffordable spot prices, without a stable procurement strategy underpinned by long-term contracts and with growing competition from lower-cost energy alternatives,” it added.
Currently, both countries do not import LNG and have not secured a long-term supply contract as of November 2021.
Amid the push to incorporate more gas-fired power projects in the energy mix, the Ieefa said promulgated policies in response to global energy crisis may limit the role of LNG in power generation. It particularly noted the Philippines’ aggressive push for renewable energy.
Ieefa noted that Russia’s invasion of Ukraine had “upended” LNG markets worldwide.
“High prices and supply disruptions have consequences. In many Asian nations, LNG has now acquired a reputation as a costly and unreliable fuel,” the report read.
“Proposed LNG import projects in the region now face increased delay and cancellation risks, while governments in key LNG growth markets have announced new policies designed to limit dependence on global gas imports,” it added.
The Department of Energy has approved seven LNG terminal projects undertaken by Samat LNG Corp., Linseed Field Corp., FGEN LNG Corp., Luzon LNG Terminal Inc., Energy World Gas Operations Philippines Inc.; Shell Energy Philippines Inc. and Vires Energy Corp. INQ
