December 28, 2022

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Taiwan Details Road Map to Carbon Neutrality

Taiwan's energy transition roadmap, for which "core strategic plans' were unveiled this week, is still light on details about LNG's specific future.

However, Taiwanese officials tell Energy Intelligence that the world's sixth largest LNG importer will continue to lean heavily on LNG for several decades. This is thanks in part to the lack of a Taiwanese nuclear revival, and despite a costly effort to boost renewable energy and hydrogen.

Core Strategic Plans

Taiwan's National Development Council (NDC) unveiled this week a set of 12 “core strategic plans” to promote the country's transition to net-zero carbon emissions by 2050 together with a revised carbon reduction commitment and ambitious goals for renewable energy and hydrogen use.

The 12 plans flesh out a roadmap issued by the Cabinet-level council on March 30, in line with Democratic Progressive Party (DPP) President Tsai Ing-wen`s declaration in April 2021 that Taiwan will aim for net-carbon neutrality by 2050

According to the NDC plans, nearly NT$900 billion (US$29.3 billion) will be invested in "250 net-zero" projects between now and 2030, including NT$211 billion in renewable energy and hydrogen and NT$207.8 billion in power grid and storage.

Environmental Protection Administration (EPA) Minister Chang Tzu-ying added that Taiwan will revise its nationally determined contribution from a carbon emissions reduction of 20% by 2030 from the 2005 level of 280 million tons to "24% plus or minus 1%."

But Taiwan isn't jumping onto the nuclear revival bandwagon in contrast to fellow Asian economic power Japan, which also released a draft of its "Green Transformation" plan this week.

The DPP government is keeping to its schedule for the retirement of the last nuclear reactor — in May 2025 — and will be relying on LNG paired up with renewables through at least 2040 while bringing up hydrogen, other renewables (geothermal, biomass, wave/current) and later converting LNG hardware for use with hydrogen.

The Role of LNG

The NDC plans presented this week did not include specific targets for LNG or coal. Back in 2017, the government set energy transition targets of 50% of total power generation in 2025 for LNG, 30% for coal and 20% for renewables.

Deputy Economics Minister Vincent Tseng Wen-sheng told Energy Intelligence that the share of total power generation for LNG in 2030 was likely to remain close to that of 2025, or about 50%, but the shares of coal and renewables would switch places. Going from about 30% for coal and just less than 20% for renewables, to 30% renewables and 20% coal.

By 2050, LNG and "carbon capture, utilization and storage" will account for between 20%-27% of power generation, compared to 60%-70% (between 91 gigawats-151 GW) for renewables and 9%-12% from hydrogen and 1% from pumped storage.

Tseng said that CPC Taiwan and Taipower are "rushing to complete" several LNG projects, including the third receiving terminal at Guantang, Taoyuan City and LNG generators in the Taichung, Tunghsiao and Hsingta power plants.

Taiwan Environment and Planning Association Chairman Chao Chia-wei told Energy Intelligence that “a shortcoming in the planning framework is the lack of a clear linkage for the transition from LNG to hydrogen.”

However, Chao said the announcement by NDC Chairman Kung Ming-hsin this week that future economic development or construction projects would be required to have “zero carbon transition” assessments “is an important step.”

Taiwan has been the sixth largest LNG importer in 2022 with 20.3 million tons imported. The country was ranked 5th for many years, trailing Japan, China, South Korea and India, but was surpassed this year by Spain amid the war-induced European energy crisis.

Created with Highcharts 9.0.0(million tons)TAIWAN'S LNG IMPORTS20132014201520162017201820192020202120220510152025Source: Kpler

Hydrogen, Wind and Solar

A specific strategic plan for hydrogen highlighted plans for its use as a fuel for power generation, industry and transportation as well as construction of a hydrogen supply chain and infrastructure.

According to the road map, Taiwan will expand its use of hydrogen from 0.57 megawatts in 2022 to 91 MW by 2025 through trial demonstration projects and mixed fuel burning projects. It will expand its use to 891 MW by 2030 with trial operation of a hydrogen co-firing power demonstration plant with fuel mixture of 5%. During 2023-24, the central government will budget NT$4.62 billion for hydrogen development plans.

In the longer-term from 2031-50, the NDC plan anticipates large scale introduction of hydrogen into power generation through co-firing with LNG or exclusive use to hike its share of total power generation to 9%-12% by 2050 as well as expanding use in steel production and other industrial processes. The plan is to reach a combined contribution of 7.3 GW-9.5 GW.

The plan for wind and solar energy retains the goals of 5.6 GW for offshore wind power and 20 GW of solar power for 2025 and has set new goals for 2030 of 13.1 GW for offshore wind and 31 GW for solar. By 2050, the NDC aims to install 40 GW-55 GW in offshore wind power and between 40 GW-80 GW in solar power.
Dennis Engbarth, Taipei

Sinopec Forecasts Peak Chinese Natural Gas Consumption

China’s natural gas consumption is expected to peak in 2040, with natural gas replaced by electricity and hydrogen after 2040, Sinopec predicted in its report titled China Energy Outlook 2060.

China has been among the top three LNG importers in the world since 2017.

Long-Term Slowdown

According to the report, the country’s natural gas consumption will be 430 Bcm in 2025, with an average annual growth rate of 5%.

By 2030, the report predicts that China's natural gas consumption will reach 519 Bcm, with the growth rate beginning to decline to an average of 4%.

By 2040, at an average annual growth rate of 1.7%, China's natural gas consumption is expected to reach a peak of 615.5 Bcm.

Near-Term Slowdown

In October this year, China’s apparent natural gas consumption was 30.53 Bcm, an increase of 1.8% year-on-year, National Development and Reform Commission data showed. But in the first 10 months of this year, the country’s apparent natural gas consumption was 299.93 Bcm, down 1.1% compared to the same period last year.

Analysts expect this year will be the first time in China’s history that natural gas consumption will decline, but it's not because China doesn't need more gas.

One reason is that high international spot prices for natural gas have made it unaffordable this year. At the same time, demand for natural gas has been dampened by strict Covid-19 restrictions and the economic slowdown.

In 2022, China's LNG imports will fall for the first time since 2015 (see graph below) and have again fallen behind those of Japan after taking the lead last year.

Created with Highcharts 9.0.0(million tons)CHINA'S LNG IMPORTS2013201420152016201720182019202020212022020406080Source: Kpler

Peak Coal

Sinopec also made predictions for China’s coal consumption, an important source of heating in northern China this year, and a key competitor to natural gas.

Sinopec expects the country’s coal consumption to peak at 4.08 billion tons around 2024, dropping to 50% of the total energy system. It is expected to drop to about 3.87 billion tons by 2030, dropping to 46% of the total.

Coal consumption for power generation peaks around 2025, and coal consumption for petrochemicals peaks around 2030, the report says.

However, according to data from a report released by Peking University's Energy Research Institute, China has approved more than 65 million kilowatts of newly installed coal power capacity in the first 11 months of this year, reaching as much as three times the 21.36 million kilowatts approved for all of 2021.

Sinopec’s report also expects that solar power will become the number one power source in China around 2040.
Staff Reports

Sempra Finalizes Offtake Deal With Germany's RWE

Sempra has entered into a long-term sale and purchase agreement with RWE Supply & Trading, a subsidiary of German utility RWE, for the supply of approximately 2.25 million tons per year of LNG from the proposed Port Arthur LNG, Phase 1.

Port Arthur, Phase 1 is a fully-permitted, two-train, 13.5 million ton/yr greenfield project on the Texas Gulf Coast, where Sempra expects to make a final investment decision in the first quarter of 2023. First cargo deliveries are expected in 2027.

In the deal with RWE, the LNG will be delivered on a free-on-board basis for 15 years.

The deal also "provides a framework to explore ways to lower the carbon intensity of LNG produced from the Port Arthur LNG, Phase 1 project through GHG emission reduction, mitigation strategies and a continuous improvement approach."

The deal finalizes an HOA between the companies reached in May with the same deal parameters.

Port Arthur Progress

"Because of its scale, location and permitting status, Port Arthur LNG is benefitting from a lot of commercial momentum with nearly all the projected off-take capacity for Phase 1 now under long-term agreements with some of the leading global energy companies," said Justin Bird, CEO of Sempra Infrastructure, the Sempra unit that handles the company's rapidly growing LNG project portfolio.

The RWE deal, added to long-term agreements with ConocoPhillips, Ineos and Engie, brings firm offtake to about 9.5 million tons, or about 70% of the 13.5 million ton/yr Phase 1 capacity.

A similar sized Port Arthur LNG, Phase 2 project is already beginning to see commercial interest.

German Security Progress

"We could not be more excited to finalize our agreement with RWE as we continue supporting the energy security and environmental goals of our European customers," said Bird.

"Our partnership with Sempra Infrastructure, one of the leading companies for LNG infrastructure in the US, is another important step to diversify Germany's gas supply and thus contributes to enhancing security of supply in Europe on a long-term basis," said Andree Stracke, CEO of RWE Supply & Trading.

Germany started the year 2022 lacking any LNG import capacity, but has just seen its first two floating storage and regasification units arrive.
Michael Sultan, Washington

Japanese Firms Lock in New Omani LNG Volumes

Japan's Jera and trading houses Mitsui and Itochu have signed binding sheet agreements with Oman LNG for the import of a combined 2.35 million tons per year of the super-cooled fuel, in the latest sign that tight energy markets have led to renewed appetite for longer-term gas supply deals.

Under the five to 10 year deals, Oman LNG will supply 800,000 tons/yr to each of Jera and Itochu, and 750,000 tons/yr to Mitsui, starting from 2025, Oman's state news agency ONA reported, without specifying the length of each company's contract.

Jera, Japan's largest LNG buyer, on Tuesday said that its term sheet with Oman LNG was for the purchase of up to 12 cargoes each year from 2025 over 10 years. Jera said it would be buying the cargoes on a f.o.b. basis — with no destination restrictions.

Itochu's existing LNG supply agreement, which came into force in 2006, expires at the end of 2024, according to Oman LNG.

The latest contracts were signed by Omani Energy and Minerals Minister Salim al-Aufi and Japan’s Minister of Economy, Trade and Industry Nishimura Yasutoshi in Muscat.

Oman LNG is currently in the advanced stage of running a long-term supply tender to seek new buyers, as existing offtake contracts are due to expire in the mid 2020s.

Supply Deals Expiring

According to the state company, its other long-term LNG buyers include Korea Gas, whose 4.1 million ton/yr supply deal expires in December 2024, having started in 2000; Osaka Gas of Japan, with a 700,000 ton/yr supply deal running from April 2000 until December 2024; and BP Singapore, with a 1.1 million ton/yr deal running from January 2018 until December 2025.

Oman LNG operates three liquefaction trains at its site in Qalhat, near the port city of Sur in the sultanate's east, with a nameplate capacity of 10.4 million tons/yr, which is understood to have been increased to 11.6 million tons/yr through debottlenecking works (see graph below).

Oman's location outside the strategic Strait of Hormuz tanker route watched over by Iran makes it less vulnerable to regional conflicts and is thus favored by buyers including those in Japan.

Other Japanese buyers have also moved to secure new LNG volumes.

Japan's Inpex, on Tuesday, said it had signed its first US LNG offtake agreement with US producer Venture Global for 1 million tons/yr over a 20-year period from the proposed CP2 LNG project at Cameron Parish in Louisiana.

The length of the deals suggests that Japanese buyers are prepared to return to the longer-term market at a time when LNG spot price volatility and new LNG demand from Europe are driving buyers to seek supply security from term supplies.

Created with Highcharts 9.0.0(million tons)OMAN LNG EXPORTSSouth KoreaJapanIndiaChinaThailandSpainTaiwanOthers2013201420152016201720182019202020212022024681012Source: Kpler

Oliver Klaus, Dubai


In Brief

Russia May Extend Sakhalin-2 Deadline

Russia may extend a Dec. 30 deadline for bids to acquire Shell's 27.5% stake in the Sakhalin-2 oil, gas and LNG project to give the main candidate — Russian gas and LNG producer Novatek — more time to prepare a bid.

Novatek CEO Leonid Mikhelson had previously said that the company would make a decision on a bid in December after completing due-diligence work, but it now appears likely that the deadline for bids will be pushed back to Mar. 31.

Shell decided to exit Russia shortly after Moscow's invasion of Ukraine on Feb. 24. It subsequently wrote off most of the value associated with its assets in Russia.

In contrast to Shell, Japan's Mitsui and Mitsubishi decided to retain their respective stakes of 12.5% and 10% in Sakhalin-2.

Gazprom is the controlling shareholder in Sakhalin-2 with a stake of 50% plus one share.

The Russian government recently appraised the value of Shell's stake at 94.8 billion rubles ($1.36 billion).
Staff Reports


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India32.6033.0832.5933.0832.1331.9733.6431.4833.5432.6631.7831.4531.85
Sodegaura, Japan33.0734.6834.6934.8232.9628.8134.2131.6234.0735.2332.1131.0433.19
Zeebrugge, Belgium14.4012.6612.2212.7513.8614.2313.4812.2013.3412.2513.9812.9714.08
Huelva, Spain30.4328.5728.0928.6829.8129.5629.4427.9829.3028.1329.8728.6829.88
Isle of Grain, UK17.8916.1115.6516.1917.3617.7117.0715.6416.8015.6917.4616.4317.56
Everett, US3.752.032.392.123.413.230.012.942.701.623.98----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback25. Jul8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia36.00------
SW Europe31.10------
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.574.715.285.33
NBP, UK (futures)-1.4022.6724.0629.09
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF--24.57--29.42
Zeebrugge (Belgium)------20.83
German NCG--21.38--25.83
NBP (UK)--18.73--25.97
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.834.064.896.02
Corpus Christi, Texas----3.93--
Cove Point, Maryland-1.035.016.046.16
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.574.715.285.33
Second Mth-0.434.695.125.24
Third Mth-0.294.194.484.82
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '220255075100125Energy Intelligence