Five LNG Trends to Watch in 2019
Growth in gas demand has received some “headroom” stemming from coal-to-gas switching in China and recent coal power retrials in Europe, said Farrer. Also, he cited the following as further evidence of a backlash against coal:
- A new electricity plan in South Korea this year that could lead to higher taxes on imported coal and even more onerous restrictions on old coal-fired power plants
- Possible increased scrutiny by the Japanese government on 8 gigawatts (GW) of coal-fired power under construction and 8 GW at the planning stage, thanks to tougher lending criteria for new coal projects by the country’s financial institutions
- Efforts to reduce airborne particulate matter concentrations in India by 20 to 30 percent over the next five years that could prompt the closure of old coal-fired plants
- A coal phase-out in Germany that could start as soon as 2022
“Wood Mackenzie already forecast declining coal usage in these countries,” said Farrer. “But the scale of what is at stake in those decisions could well exceed our assumptions.”
Softening Chinese Demand
Thanks to an economic slowdown, a “more considered” coal-to-gas switching approach and more widespread availability of domestic LNG infrastructure, LNG demand growth in China will decrease from the 40 to 45-percent growth rate in the past two years, Farrer said. He added, however, that China will still boast LNG demand growth at approximately 20 percent – “by far the largest source of LNG demand growth in the global market.”
Farrer also pointed out that a series of new gas policies that China implemented in 2018 aim to relieve supply tightness and import dependency.
“In 2019 there will be more clarity on the level of ambition of Chinese domestic supply growth and the ramp-up of Power of Siberia,” Farrer said, referring to the Gazprom pipeline project that will link gas supplies from Russia’s Far East to China.
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