nice comprehensive post jkerr. One interesting development in...

nice comprehensive post jkerr.

One interesting development in demand forecasts is how quickly will we transition away from coal to LNG and renewables- LNG providing the baseload generation needed before they solve the intermittency problem for renewables.

In this regard the new South Korean president has announced policies to tax coal and nuclear in order to reduce air pollution, and to increase LNG share of energy production from 18 to 27% by 2030- this equates to roughly additional 49mt a year in LNG demand in the worlds No.2 LNG buyer.  US gas clearly will play a role in meeting this supply- given Trumps rhetoric it seems a no brainer to buy US LNG to reduce the $26bn trade surplus Korea has with the US.  All of this also applies to China- the air pollution caused by coal is clearly becoming a no.1 policy agenda item with LNG and renewables seen as the solutions- we all know Trumps trade deal with China is giving china a green light to procure US LNG.  Hopefully GVs meetings in Hong Kong were fruitful.

I just cant see the worlds insatiable desire for coal to remain unabated particularly as the rich nations impose climate change policies on the poorer nations.  the EU, Japan, Korea, Australia and the US burn so much coal but yet we can tell poor countries still developing their economies to go green? Hopefully those that are thinking about LNG supply and demand imbalances are thinking all of this through.

https://newsbase.com/commentary/south-korea’s-policy-shift-poses-lng-procurement-questions

South Korea’s Policy Shift Poses LNG Procurement Questions

26 June 2017
GLNG - Global LNG
26 June 2017 Week 24 Issue 474
South Korea’s new interest in gas could see new mid-term contracts with US suppliers, although price competition from Australian exporters will be fierce, writes Tim Daiss.



What: South Korea’s new preference for renewables and gas could offer new supply opportunities for US LNG exporters
Why: US suppliers could seal new mid-term deals, although they must compete with falling Asian prices
What next: US exporters need more details about South Korea’s energy policy in order to forge a new export policy
South Korea’s newly elected president Moon Jae-in took office last month after a period of political turmoil within the country.
He replaced former South Korean President Park Geun-hye, who was forced out of office amid a corruption scandal that shook the nation.
During the campaign, Moon pledged to revamp the country’s energy sector, in effect going against the trend of nine years of conservative administrations that preceded him by promising to replace coal-fired power plants and nuclear power with renewables and gas.
He also promised to review existing plans to build nine new coal-powered plants and eight new nuclear reactors.
South Korea’s efforts to go green
Moon has already started implementing some of his new so-called greener agenda by ordering a temporary shutdown of ten-older coal-fired power plants.
Though the closures are only for one month, another temporary shutdown of these same plants is also planned. Their permanent closure is set for 2022, the end of Moon’s term in office.
By 2030, as part this new energy agenda, South Korea is earmarked to increase its use of natural gas as part of its energy mix from 18% to 27%, while raising renewables (now consisting of mostly hydro power) from 5% to 20%.
Moon’s shift from coal is a marked difference from the country’s decades-old reliance on the fuel source.
In fact, coal usage in South Korea has risen over the past few years amid forced shutdowns of several of the country’s NPPs in late 2012 because of safety issues.
Coal consumption in South Korea increased by 56% between 2005 and 2015, driven primarily by growing demand from the electric power sector, according to the US Energy Information Administration’s (EIA) most recent analysis of the country’s energy sector.
In 2015, South Korea was the world’s fourth largest coal importer, behind China, India and Japan, consuming 146 million tonnes for the year, according to the EIA. Coal also represents around one-third of the country’s total primary energy consumption.
Moon’s plan to shift away from nuclear for electricity power generation is also a surprising move. For decades, South Korea’s energy policy included increasing nuclear power generation to help offset the country’s growing LNG imports and foreign oil dependency.
As of late 2016, South Korea ranked sixth highest in the world for nuclear generation capacity. It was surpassed by China in 2015.
Moreover, South Korea relies on hydrocarbon imports to meet 98% of its fossil fuel consumption, consuming 2.4 million bpd of gasoline and other liquids in 2015, making it the eight largest oil consumer in the world.
The country, Asia’s fourth largest economy, also relies on LNG imports to satisfy almost all of its natural gas demand, which has nearly doubled over the past decade.
Now several questions remain, ranging from doubt within the country that Moon’s ambitious energy shift can be implemented fully, while others are asking whether or not he can stand up to entrenched power groups in the country’s coal and nuclear power sectors.
While those dynamics are still being played out, according to local media reports, another prominent question is how could Moon’s energy policy shift affect South Korea’s LNG imports?
Raising LNG imports
South Korea remains the world’s second largest LNG importer. In 2016, the country imported 33.7 million tonnes, second only to Japan, which imported 83.3 million tonnes, according to the International Gas Union’s (IGU) 2017 World LNG Report.
South Korea currently has five regasification facilities, four of them operated by KOGAS, with a total capacity of 4.7 tcf (133 bcm) per year.
KOGAS buys most of its LNG through long-term supply contracts and usually uses spot cargo procurement to correct small market imbalances.
In 2015, over one-third of the country’s LNG imports came from Qatar (37%), with the balance from Oman (12%), Indonesia (11%) and Malaysia (11%). Russian imports for that year accounted for 8% of South Korean LNG imports, while 6% came from Australia.
If Moon’s policy shift away from coal and nuclear succeeds, the country’s LNG imports could spike as much as 50% by 2030, some analysts are already claiming.
However, it is still far from clear what kind of LNG procurement deals South Korea would need to import this extra LNG.
Where will the gas come from?
One possible scenario is that South Korea will cut more LNG procurement deals (likely mid-term instead of traditional 20-year long-term deals owing to current supply dynamics) with US-based producers. If South Korea signs more mid or even 20-year long-term LNG supply deals with US producers it would come at an optimum time from the US energy sector.
By 2020, the US will have as many as five major LNG export terminals on stream for a total liquefaction capacity of 64 million tpy.
However, there are dozens of other US-based LNG projects of various sizes that will now have an easier time, with the federal review process under Trump’s pro-energy administration that will add to this total in the next decade.
American LNG projects could offer favourable deals for KOGAS (the world’s second largest buyer of LNG) and other South Korean companies.
Cutting more LNG supply deals with the US could also offer geopolitical benefits for Seoul, including offsetting disagreement over the country’s US$28 billion trade imbalance with the US.
It could also offer common ground for co-operation amid growing criticism in South Korea over the US military’s recent deployment of the THAAD missile system set up as a precaution against North Korea’s nuclear weapons ambitions.
However, as a counter to this argument it should be noted that US-sourced LNG, largely based on Henry Hub prices, could continue to lose its pricing advantage to Asian sourced gas amid the more than three-year-long drop in LNG prices in the Asia-Pacific region.
Owing to an historic supply overhang, coming mostly from new Australian projects, LNG spot prices have tumbled from breaching US$20 per mmBtu in February 2014 to around US$5.50 per mmBtu for June deliveries. More downward pricing pressure could ensue.
While it is too early to project where South Korea would actually source most of its new LNG supply from, unfolding pricing dynamics could shift demand back to Australia and other Asia-Pacific LNG producers, such as Indonesia and Malaysia.
However, for now President Moon will have his hands full pressing ahead with South Korea’s new and greener energy policy shift.