Prices of liquefied natural gas (LNG) may remain volatile this year which may force buyers to limit spot purchases and instead look for long-term contracts, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
However, Sam Reynolds IEEFA energy finance analyst, said since there are no available long-term contracts before 2026, incremental LNG demand growth may slow down.
“For countries planning to increase the share of LNG in their energy mix, the lessons of 2022 should be a harbinger of challenges to come. If volatile prices and unreliable supplies continue to alienate key Asian markets, the region’s LNG demand is unlikely to grow as rapidly as industry players expect,” said Reynolds, in a statement.
Reynolds said LNG prices in Asian spot markets averaged $34 per million British thermal unit (MMBtu) last year, which is more than double the annual average in 2021.
The IEEFA analyst added a recent dip in LNG prices due to warm weather in Europe is welcome news but prices in Asia are still double the previous five-year average of $14 per MMBtu and are expected to stay elevated this year.
“2022 showed clearly that volatility in international fossil fuel markets can have extremely destabilizing impacts on energy security and economic growth. While no one can predict exactly how LNG prices will fluctuate, countries can limit their exposure to uncertain fuel prices by boosting renewables and energy storage technologies,” Reynolds said.
The Department of Energy (DOE) earlier said the completion of LNG import terminals in the country this year will support the government’s goal of transitioning to a low-carbon future.
DOE Raphael Lotilla had noted the “need to diversify our power sources including the use of imported natural gas.”
“ Given its scheduled availability at the end of the first quarter of 2023, LNG is considered an important source for fuel diversification,” Lotilla said.
Based on progress reports provided by project proponents to the DOE’s Oil Industry Management Bureau, the partnership between Linseed Field Power Corp. and AG&P is on track to complete its integrated import terminal in Ilijan, Batangas for commissioning by March and commercial operations by April.
FGEN LNG Corp. and partner BWLNG are also scheduled for the commissioning of its Batangas LNG terminal by March next year with commercial operations set by June, in line with the arrival of LNG supply to fuel its existing gas-fired power plants including the 1,000 megawatts (MW) Sta Rita, 500 MW San Lorenzo, 414 MW San Gabriel and the 97 MW Avion.
The DOE said regulatory framework and a downstream natural gas development plan will guide policy makers and stakeholders for the entry of LNG in the country as natural gas’ role is crucial in providing flexible power supply. -Jed Macapagal
