January 13, 2023

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South Korea Formalizes Higher Nuclear Target in Latest Power Plan

South Korea is targeting a bigger nuclear share in its long-term power generation at the expense of coal and LNG, according to the country’s latest long-term basic electricity plan through 2036.

The country was the third largest LNG importer in the world in 2022, behind Japan and China, according to Kpler data, so a significant policy shift toward nuclear would be a bearish risk for world LNG markets.

South Korea's basic electricity plan, which is updated every two years and released by the Ministry of Trade, Industry and Energy, would formalize the country’s power policy and add impetus to pro-nuclear efforts which have been made by President Yoon Suk-yeol since he assumed leadership last year.

President Yoon previously promised to increase the share of nuclear in South Korea’s power output to 30% by 2030, reversing former President Moon Jae-in’s policy to shut all reactors when they reach 40 years old.

Nuclear Versus LNG and Coal

Under the latest plan, Seoul envisages boosting nuclear’s share of power supply from 27.4% in 2021 to 32.4% by 2030 and 34.6% by 2036. This would involve starting up reactors which have suspended construction, granting lifetime extensions to existing reactors and building new reactors. The government included nuclear and LNG in its green-taxonomy last year.

Heightened concerns over energy security following the Ukraine war and carbon-neutrality goals have emboldened many governments, including Japan, to take another look at the importance of nuclear power.

South Korea has pledged to reduce its greenhouse emissions by 40% by 2030 from 2017 levels in its upgraded nationally determined contribution (NDC) target.

A bigger share for nuclear has come at the expense of coal and LNG. The government aims to reduce the role of coal from 34.3% in 2021 to 19.7% in 2030 and 14.4% by 2036. LNG’s share would decline from 29.2% in 2021 to 22.9% in 2030 and sink to 9.3% in 2036.

The lower coal share is in line with South Korea’s pledge to phase out coal at the Glasgow climate change meeting in late 2021.

Under the electricity plan, Seoul plans to retire 28 coal-fired power units with a combined capacity of 15.1 gigawatts over the next 15 years and convert them to burn LNG. Total LNG-fired power capacity will reach 65.6 GW in 2036 from 41.3 GW in 2022.

Although LNG’s share in power supply may shrink, its installed power capacity would be increased, which would enable LNG to meet peak demands during summer and winter. The envisaged 22.9% LNG share in 2030 is in fact slightly higher than the 19.5% target which was released following the announcement of South Korea’s revised NDC target at the COP 26 meeting.

The share for renewables was also boosted from 7.5% in 2021 to 21.6% in 2030 and 30.6% in 2036. But the 2030 target is significantly lower than the 30.2% target which was announced in 2021.

Created with Highcharts 9.0.0(million tons)SOUTH KOREAN LNG IMPORTS201320142015201620172018201920202021202201020304050Source: Kpler

Impact on Future LNG Demand

Analysts believe South Korea would still see a marginal increase in LNG in the long term as it looks to switch coal to LNG, and LNG would be a backup for nuclear if targets fail to materialize.

According to Energy Intelligence’s Research & Advisory's latest long-term demand outlook, South Korean LNG demand is forecast to slip from 47 million tons last year to 46.5 million tons in 2025 before rising to 48.3 million tons in 2030, 53.1 million tons in 2035 and 54.5 million tons in 2040.

Consultancy Rystad Energy believes South Korea is targeting more nuclear to replace new renewables as the government calls for a “feasible and reasonable” energy mix.

Rystad analyst Masanori Odaka says the higher nuclear share is “happening at the expense of a diminished renewable power target, which if successful could pose downside risk to LNG demand." However, Odaka points out there would be challenges with increasing nuclear power such as cost overruns and schedule delays. “The track record for nuclear power is that LNG has been making up for its shortfalls, and so we remain conservative on how much reduction in LNG demand will be achieved.”

Rystad sees South Korea’s LNG demand increasing from 46 million tons in 2022 to 51 million tons in 2030. “For 2040, we see LNG demand increasing to 54 million tons as South Korea continues to seek coal-to-gas switching opportunities in the power sector, while their contracted volume for LNG procurement falls to approximately 25 million tons in 2030 and 7 million tons in 2040,” Odaka notes. This suggests South Korea buyers will likely try to seek long-term contracts in the coming years.

Created with Highcharts 9.0.0SOUTH KOREA'S LNG SOURCES (2022)(million tons)AustraliaAustraliaQatarQatarUnited StatesUnited StatesMalaysiaMalaysiaOmanOmanIndonesiaIndonesiaRussiaRussiaPeruPeruEgyptEgyptPapua New GuineaPapua New GuineaNigeriaNigeriaOthersOthersSource: Kpler

Clara Tan, Singapore

Eemshaven LNG Terminal Offline Until Late January

The Eemshaven LNG terminal in the Netherlands will be out of action between Jan. 13-30 and is only expected to run at full capacity at the end of February, a Gasunie spokesperson confirmed with Energy Intelligence on Friday.

Eemshaven was the first of a series of floating LNG terminals launched in Europe in a bid to replace Russian gas flows following the invasion of Ukraine.

The 8 billion cubic meter per year capacity terminal — amounting to about 5.8 million tons of LNG import capacity — is formed by two floating storage and regasification units, the Golar Igloo and the Eemshaven LNG.

Second Outage

The outage is due to an issue with a heat connection, which is required during this time of year as sea water is too cold to run through heat exchangers used for regasification.

“Unfortunately, due to a failure at RWE, we are temporarily unable to use the heat connection. In this period of the year, we need this heat connection (sea water is too cold),” the Gasunie spokesperson said.

RWE confirmed with Energy Intelligence that its Eemshaven power plant is currently unable to deliver heat to the terminal due to a leak in the boiler/kettle.

"Based on our experience/expected damage, we expect this to last for about two weeks. In the current situation only Unit A is delivering heat, and due to the leak, not at all at this moment, unfortunately. We expect Unit B to be ready in the beginning of February," the spokesperson said.

The outage is the second to hit the terminal since its launch in September. The terminal delivered no gas to the grid between November 22 and December 15 amid various works, including on the heat connection.

Mild Impact

The outage is unlikely to lift European gas prices, as it will only impact one or two cargo deliveries, an analysts at a European trader told Energy Intelligence. European gas prices are currently trading at levels last seen in September 2021 amid mild weather and healthy gas storage levels.

Russian pipe gas flows plummeted in the second half of 2022 and have averaged 66 million cubic meters per day over the first two weeks of January, down from an average of 75 MMcm/d seen in the final week of December.

The terminal has received a total of 15 cargoes since its launch, the last of which arrived on Jan. 18 from the Elba Island LNG plant in the US, according to Kpler data.
Eric Thorp, London

Japan's Kishida Talks LNG With US, Canada

Japanese Prime Minister Fumio Kishida met with Canadian Prime Minister Justin Trudeau this week then traveled to Washington, where he met both with US President Joe Biden and Vice President Kamala Harris.

But can the leadership meetings accelerate commercial progress and get more North American LNG to Japan?

Last month, the US and Japan held an energy security dialogue, focusing on the need for diversifying energy supplies both geographically and by type. The two countries released a joint statement that called for increased investment in the US upstream sector and “an enabling regulatory environment to facilitate continued and increasing LNG supplies.”

Heavily Reliant

Japan is heavily reliant on imports of both gas and oil, but it has stuck with other Western nations in trying to hit back at Moscow for the invasion of Ukraine last year. Tokyo is hosting the G7 this year, a group of rich nations that has been the conduit for Western sanctions on Russia in the form of a price cap on Russian oil.

Japan imported only 5.7% of its LNG supplies from the United States in 2022, or about 4 million tons, down from an all-time high of 9.5%, or 7 million tons, in 2021, according to Kpler data, a sharp ramp up from 1% in 2017 as US LNG exports were getting started. In contrast, Japan has imported an average of 8.5% of its LNG from Russia since 2016, or about 6.7 million tons per year.

Japan is yet to receive LNG from Canada, which is still building its Pacific Coast capacity. Japan's Mitsubishi holds a 15% stake in the 18 million ton per year LNG Canada project that is expected to start commercial operations in 2025. A second phase of the same size is already under active consideration. US-based Sempra is building the 3.25 million ton/yr Costa Azul project on Mexico's Pacific Coast which is expected to begin exports in 2024, with a 9 million ton expansion decision the same year.

Meanwhile, geographical factors limit Japan's ability to beef up renewable energy.

Germany Struck Out

PM Trudeau's held a meeting back in August with German Chancellor Olaf Scholz at which he suggested that Canada was willing to consider easing regulations on new Atlantic Canada LNG facilities, but nothing has arguably come from that meeting.

Canada will “explore ways to see if it makes sense to export LNG, and if there’s a business case for it to export LNG directly to Europe,” Trudeau said in August, adding that businesses in Canada and Germany are involved in “economic conversations."

Atlantic Canada has seen a variety of proposals for LNG exports but continues to be hung up by gas supply complications — either complications in getting feed gas across Canada, or via the densely populated and pipe-phobic, US Northeast.

Created with Highcharts 9.0.0(million tons)JAPAN'S DECLINING LNG IMPORTSOthersNigeriaUnited Arab EmiratesOmanIndonesiaQatarBruneiPapua New GuineaUnited StatesRussiaMalaysiaAustralia201820192020202120220255075100Source: Kpler2019 Russia: 6.23

Emily Meredith, Washington and Michael Sultan, Washington

Total, MET Claim Capacity at Germany's Lubmin FSRU

French major TotalEnergies and Switzerland-based energy firm Met Group have booked a total of 3.6 billion cubic meters per year of long-term regasification capacity at the German Lubmin floating LNG terminal, which will be inaugurated on Jan. 14.

Lubmin is the second of an expected six German floating LNG import terminals, in addition to new terminals expected all along the Northern European shoreline in response to the loss of Russian pipeline gas.

Two Bookings

Total booked 2.6 billion cubic meters per year of capacity, while Met reserved 1 Bcm/yr.

The two capacity bookings together representing 80% of annual capacity for the first phase of project. Additional capacities of up to 5.2 Bcm/yr are available for short-term capacity booking.

“Thanks to the start-up of the Lubmin terminal, TotalEnergies will be able to increase its imports to Europe to over 20 million tons per year, or about 15% of the continent’s regasification capacity,” said Stephane Michel, president for gas, renewables and power at Total.

“Contracting capacities in Germany is an immensely important puzzle piece for our integrated European energy market strategy, building bridges across physical imports into and across different regions, between trading competences and sales expertise, between asset operations and economic optimization,” stated Gyorgy Domokos Vargha, CEO of MET International.

Commissioning Starts

Although the Lubmin floating storage and regasification unit (FSRU) has already fed the first regasified volumes into the German gas grid on Jan. 9, the project’s commissioning phase will begin following the inauguration.

The project’s first cargo arrived on Dec. 21, delivered by the 140,500 cubic meter Seapeak Hispania, which was laden with a cargo from Egypt’s Idku plant.

Total has provided the Neptune FSRU for the project, and it will be the terminal’s main supplier.

Project owner Deutsche ReGas will operate the terminal, advised by Spanish LNG terminal operator Reganosa.
Daniel Stemler, Madrid


In Brief

Chinese Gas Buying Slowed in '22

Chinese customs data is providing the latest evidence that China's once robust gas import growth is over for now.

China imported 10.28 millions tons of natural gas in the last month of 2022, down 11.8% from last year, the latest data from the General Administration of Customs showed.

According to the data, the country imported a total of 109.25 million tons of natural gas in 2022, a decrease of 9.9% compared to 2021.

China's gas imports were hit by a 25.7% higher cost in 2022 than in 2021 with many Chinese companies choosing to reduce imports to limit financial losses. Some city gas companies have also experienced operational difficulties.

An official from China’s National Development and Reform Commission (NDRC) explained that with higher international gas prices, the cost for city gas companies went up a lot, but there was no way to transfer that cost to residents due to restrictions on the price of gas sold to residents.

NDRC said that the volume of medium- and long-term natural gas contracts organized by the China government ahead of the heating season exceeded projected demand, and actual consumption is lower than expected since entering the heating season.

Data released by the NDRC in December showed that in November 2022, the country's apparent natural gas consumption was 31.95 Bcm, down 1.5% from a year earlier. From January to November 2022, China’s apparent natural gas consumption was 331.9 Bcm, down 1.2% from a year earlier.
Staff Reports

ACER Unable to Calculate LNG Price in First Assessment

The EU’s Agency for the Cooperation of Energy Regulator’s (ACER) published its first daily LNG price assessment on Friday but was unable to calculate a price due to a lack of trades.

The energy regulator said that by 16:00 CET it had collected nine transaction but only two were eligible for the assessment.

“According to the methodology, the LNG market data reported for the price assessment during the relevant rolling time window is not sufficient. So today it is not possible to calculate a single daily LNG price indication,” ACER said in a statement.

ACER’s LNG price assessment is based on daily data submitted by all companies bidding, offering or buying LNG destined for the EU.

Publication of the assessment comes a month after Brussels passed legislation tasking ACER to develop a complementary LNG benchmark in a bid to replace the widely used Dutch TTF benchmark, which is no longer seen as accurately reflecting the price of LNG imports into Europe.

The price assessment will be used to formulate ACER’s daily LNG benchmark, expected to launch by Mar. 31. The benchmark will be a spread between ACER’s daily LNG price assessment and the daily settled price of the front-month TTF contract traded on the Intercontinental Exchange (ICE).

Brussels hopes ACER’s LNG benchmark will be adopted by market participants as a reference price for spot trades and LNG contracts but the benchmark faces competition from ICE and CME’s recently launched LNG contracts.
Eric Thorp, London


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India19.5719.9919.6019.9819.2019.0620.4518.6820.3719.6518.9018.6218.97
Sodegaura, Japan20.2321.5921.6121.7020.1816.7121.2219.0821.0922.0519.4518.5620.35
Zeebrugge, Belgium17.3715.7815.3915.8516.8717.2216.5215.3616.3915.4016.9916.0817.08
Huelva, Spain20.8619.2818.8919.3520.3420.1320.0118.7819.8918.9020.3919.3920.41
Isle of Grain, UK19.7318.1017.7018.1819.2519.5618.9717.6918.7317.7319.3418.4219.43
Everett, US2.861.341.671.412.562.410.012.131.920.983.06----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec9. Jan10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia22.0022.780.190.78
SW Europe20.3021.510.781.21
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.283.423.703.71
NBP, UK (futures)-0.6019.8920.4820.80
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.3820.0920.4721.05
Zeebrugge (Belgium)--------
German NCG-0.1217.6317.7617.81
NBP (UK)0.7320.5619.8219.39
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.093.433.523.43
Corpus Christi, Texas-0.502.903.403.05
Cove Point, Maryland0.493.673.183.37
Elba Island, Georgia0.083.433.35--
Nymex Henry Hub Futures
Near Month-0.283.423.703.71
Second Mth-0.163.203.363.39
Third Mth-0.143.173.313.31
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaFeb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '230255075100125Energy Intelligence