BloombergNEF
Japan and Korea: LNG demand recovery is dampened by higher nuclear generation
LNG demand growth in Japan and Korea for 2021 is modest. Upside from Covid-19 recovery and a colder winter is countered by higher nuclear generation in 2H 2021. Japan will see LNG imports rise 7% year-on-year* (see note on top chart), but Korean growth will only be 2%.
Japan’s nuclear generation will rise 25% in 2021 compared to 2020 levels, as BNEF expects two reactors to restart: Mihama No. 3 and Takahama No. 1. Korea’s nuclear generation is set to rise 12% in 2021 as new reactors Shinhanul No. 1 and No. 2 start. As such these restarts, new builds and higher availability of nuclear capacity will limit the consumption of LNG as a substitute fuel in power for both countries.
China: PipeChina to further consolidate gas midstream and provide third-party access
PipeChina is beginning to consolidate midstream gas markets across various provinces after a major asset spinoff exercise from national oil companies (NOCs) in 2020. China also has 24 provincial natural gas pipeline companies. The ones in Guangdong, Hainan and Hubei were transferred to PipeChina. Now NOCs have ownership in ten provincial companies, the other eleven are owned by local state owned enterprises or are listed. In 2021, PipeChina is expected to merge more provincial pipeline firms to be better equipped to provide third-party access.
PipeChina has already laid out its 2021 third-party access plans. Storage sites Wen 23, Jintan and Liuzhuang have 2.8 billion cubic meters of withdrawal capacity (mostly in May-November) and 4.5Bcm of injection capacity (mostly in the heating season). PipeChina’s six LNG terminals have a total 5.7 million tons/year capacity available to third parties. The previous NOC owners will have priority use, and hence terminals near consumption centers like Tianjin, Shenzhen and Yuedong have little spare capacity, especially in winter. Moreover, the firm has three LNG terminals under construction, and the Dalian terminal is in the process of being transferred. Less asset spinoffs are anticipated this year.
As the first year of China’s 14th Five Year Plan, 2021 is expected to see more gas market reforms, infrastructure expansion and a push for domestic gas production. PipeChina will play a critical role in liberalizing the gas market and constructing pipelines and storage.
Emerging markets: India LNG demand growth to slow; four new markets in 2021
Indian LNG imports could grow 3.1% in 2021 from last year. The slower growth rate is due to an anticipated increase in domestic gas output as Reliance’s R-cluster gas fields in the Krishna Godavari Basin began producing in December. As LNG prices climb, less opportunistic spot purchases are likely to happen this year. In support of 2021 demand, commissioning of the Kochi-Mangalore pipeline will help increase Kochi LNG terminal utilization and H-energy could commission Jaigarh terminal after it secured an FSRU charter with Hoegh LNG in November.
Vietnam is set to release a new power development plan in early 2021. The draft plan mentions some 108.5GW of potential LNG-to-power projects. The country is unlikely to need all of these potential projects and the final plan will provide a sense of scale. Still, for the foreseeable future it will be the biggest market for new large LNG-fired CCGT projects in Southeast Asia. Progress on third-party access offerings at LNG import terminals in Thailand and Pakistan are other thing to watch for in Asia this year.
Four new markets will join the club of LNG importers. Croatia just commissioned its FSRU at Krk with the arrival of its first commercial cargo on Jan. 1 from the U.S. Ghana’s Tema LNG received its floating regasification unit on Jan. 6 and aims to start operations in 1Q. El Salvador is building the 378MW Acajutla LNG-to-power plant and targets commissioning this year. Hong Kong’s CLP Power and Hong Kong Electric are working on the jetty and connecting pipelines for its FSRU which could start by year-end. Shell will be supplying the latter three markets.
