LNG prices in the Asian market continue to soar.
Since March 2021, LNG prices in the Asian market have soared from an average of $6.4/mmBtu to an average of $16.9/mmBtu in August 2021. In the first half of September, the average price reached $21.3/mmBtu, with a daytime price on September 16th hitting $26.0/mmBtu. Going back to mid-January, prices soared to $32.5/mmBtu, marking the highest record. The surge in prices is attributed to increased electricity demand due to severe heatwaves in Europe and Asia, along with the recovery in demand following the easing of the COVID-19 crisis due to vaccination efforts.
According to Bloomberg's forecast, global LNG demand is expected to increase from 29.7 million tons in August 2021 to 34.8 million tons by December 2021, reaching a level of 36.2 million tons by January 2022. Attention is also drawn to the prices of coal and emission rights, which significantly impact the demand for natural gas. Recently, coal prices have reached record highs, further highlighting the advantage of natural gas in this aspect. Additionally, the commencement of the Nord Stream 2 pipeline, transporting natural gas from Russia to Germany with a capacity of 55 billion cubic meters per year, is expected to impact the market. An increase in supply to the market could potentially lead to further price reductions. While pipeline construction is already completed, testing and procedural aspects related to safety and regulations are expected to take at least 4 to 8 months moving forward.
LNG is expected to continue to proliferate in the medium to long term due to its transportation efficiency, low environmental impact, and safety.
LNG (Liquefied Natural Gas) is natural gas that has been liquefied for convenient long-distance transportation, bypassing the need for natural gas pipelines. It is produced by separating impurities and elements such as carbon dioxide, mercury, and sulfur from natural gas, primarily composed of methane. When depressurized to -160°C at atmospheric pressure, it becomes a liquid, reducing its volume to approximately 1/600th.
Due to its minimal environmental impact, LNG demand has significantly grown over the past five years. LNG emits less carbon dioxide during power generation and boasts superior cost competitiveness compared to coal and heavy oil. Furthermore, it garners attention for its higher safety compared to nuclear power. Alongside the recent establishment of normative frameworks for Sustainable Development Goals (SDGs) and sustainable investment, LNG is expected to continue growing as a market.
The Thai government is advocating for Thailand to become an international hub for LNG trading.
Thailand has been importing LNG since 2011, with the quantity reaching between 6 to 7 million tons annually, and it continues to steadily increase. The government is promoting the liberalization of Thailand's gas market and aims to position Thailand as a regional trade hub. In Thailand, the reduced industrial power consumption due to the pandemic, coupled with the absence of winter heating demand, has led to an oversupply of LNG. However, as mentioned earlier, there is a sharp increase in demand in other countries, especially in East Asia, ahead of the winter season.
This year, PTT, Thailand's state-owned and largest energy conglomerate, exported LNG to Japan for the first time to re-export LNG for power generation in energy-intensive countries. The cargo of approximately 145,000 cubic meters, if fully utilized for power generation, would be equivalent to one day's electricity consumption for 50 million households. Currently, PTT owns LNG import facilities of 11.5 million tons and plans to expand to 7.5 million tons by 2022. In the future, leveraging the characteristic of being a major LNG purchaser, not only in Japan but also in countries such as South Korea, China, and Taiwan, PTT plans to explore further opportunities.
While there is a risk of surplus if domestic demand decreases, re-exporting surplus LNG overseas can create a new source of income and reduce LNG storage costs. This initiative by PTT is expected to continue as a long-term national policy rather than a one-time effort.
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