Wingchunlion
@HeYiyong
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Selling LNG to the Masses
Singapore
Joined December 2021
I was prompted to give my 2 cents by a graph that @Peter__Wood shared - which indicates the coal demand in Asia is equivalent to 3,000 mtpa of LNG so plenty to coal to be displaced. We all know that the success of coal-to-gas conversion in the US which reduced billions of tons of emissions, so one can easily transplant this success to countries importing LNG. Right? In 2020, my company LNG Easy contributed an floating LNG jetty (we call it MFP) with LNG offloading equipment to a 750mw LNG-to-Power project in Myanmar undertaken by Vpower / CNTIC. Stock-listed Vpower has since then been taken over by CNTIC. We started negotiating end of 2019, awarded the contract in Feb 2020 and first LNG-to-shore was June 2020. It was a world record in lowest cost and fastest time-to-market and the only LNG-to-power project that materialised in 2020 - others being the project in Ghana/Senegal and South Africa. The project ran successfully for about one year and had to be curtailed because LNG price went to a level which made it impossible for power generation to continue under the terms of the PPA (the agreed tariff was 12.3 US cents/5 years). Before and after that project, we spent time to look at LNG-to-power projects in emergent Asia. So our perspective comes from experience so I am hopeful that the readers consider the opinion here "grounded". Fast forward to 2024, prices have fallen and the world has once again entered a period where LNG project development is becoming "hot" for developing countries, under the headlines of "energy security" and "energy transition", with coal-to-LNG conversion said to play a key role. What we need to keep in mind is that rich countries (I include China here - which is not that rich but has exceptional governance and organisational abilities) can do whatever they want because they can afford it, for developing countries, the situation is very different. Pragmatism and realism are needed to guide our worldview and actions. So can LNG displace coal in emergent Asia? The most obvious obstacle is cost. The current price for 5500kcal coal is usd 102/ton, which is equivalent to usd 3.7/mmbtu. USD 10/mmbtu LNG is not cheap in comparison (HH hub is usd 2+/mmbtu). What are the other obstacles? If one puts oneself into the shoes of a coal-fired power plant developer, then it should be obvious that: (1) scale the average size of coal fired power plants are about 350mw or smaller (again, I am focusing on average situation in developing countries, not the ultra super critical plants that China and Taiwan have built and operating). This is not the optimal size for LNG-to-power plants (one can study the power plants shortlisted in PDP8 of Vietnam to understand more. Why? because LNG infrastructure is expensive, it needs bigger installed capacity to spread the cost (1 GW is minimum especially one uses the standard instruments to land LNG (FSRU). bigger upfront capex is not easy for developing countries. (2) players coal fired power plants can be developed by small commercial player, large CCGT LNG-to-power needs national gas or large power utility to underwrite the project. Some people said that the reason the CNTIC Myanmar 750mw project became stranded was that the project owners did not secure long-term LNG contracts. Well, this is not for the lack of trying. That at time prices were low - JKM was usd 2/mmbtu in Feb 2020, Vpower had a market cap of usd 1.4b. Yet that was not sufficient to secure a 5 year contract. (3) fuel procurement Procurement for coal is a combination of term and spot contracts. The term contracts are 2-5 years long, offering flexibility and a natural hedge against big swings in prics. On the contrary, the LNG supply chain for LNG-to-Power CCGT need long-term commitments hence 15-20 year TUA/LNG SPA/PPA. That was suitable when Japan bought LNG for baseload power generation in the early 70's. Is that suitable for today's flexible consumption patterns? If governments of developing countries agree to fuel-pass through for 15 years, what would happen to these poor countries during market dislocations (we just experienced a few of them in the past 2/3 years). The curent LNG pricing system is complex - there are four mechanisms - two regional gas hub price (HH/TTF), oil indexation, and JKM with lots of room to arbitrage amongst these four. Coal pricing on the other hand is a fool proof, straight forward system. (4) Supply Chain (including storage) Expensive and difficult compared to coal (5) Lead time Time-to-market for dedicated LNG-to-Power project is longer compared to coal-fired power plants (6) Energy security LNG has been a "just-in-time" fuel, without third party, interim storage, whilst the "reserve margin" for coal supply is huge. Long-term contracts brings some security "alledgedly" but there are plenty of reasons to suspect the sanctity of some of these LNG SPAs (outage, wilful default etc.) In Conclusion - dedicated LNG-to-power projects in emergent Asia need many elements to fal in place at the same time: price, the right scale, the right players and the right LNG procurement strategy. Some will succeed, let us cross fingers. The above does not mean that we are advocating the continued use of coal. Distributed use of coal is terrible in terms of non-CO2 pollution (which people often don't talk about enough but not any less important than GHG emissions). Even at the most efficient super critical plants, how to deal with the coal ash is a big factor. We firmly believe that climate change is real. But energy transition plan need to be realistic. China and India, respectively the most successful and most populous/fastest rising developing country, rarely use LNG for power generation except for peak shaving. The vast potential lies somewhere else in our opinion, which will be topic for another day. @ira_joseph @SStapczynski @AllthingsLNG @VandanaHari_SG
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@MarioNawfal obviously a lot easier than reshoring manufacturing jobs right? One can dominate by being clever, instead of by way of putting in hardwork. I wonder what Steve Bannon thinks about Crypto
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@baoshaoshan @leckie_cameron @abcnews @LewisWiseman1 and the stupidity of Europe in terms of wanting to shut off pipeline gas import in favour of LNG import has deep impact on developing countries which desperately need more LNG. It is really a shame how un-self-aware Europeans are. @seb_kennedy @AsimRiaz1978 @ira_joseph
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@leckie_cameron @abcnews @LewisWiseman1 how come we see some few your kind of Europeans on X. Most are cheering economic suicide. Where did common sense go in Europe?
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RT @RealAlexJones: BREAKING: Federal Documents Prove Obama Ordered The Creation Of COVID-19 In 2015 Renowned Lawyer Tom Renz & Alex Jones…
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