Thailand Boosts Coal Power as LNG Prices Skyrocket

Thailand intends to boost the lifespans of its coal-burning electrical facilities to deal with record-high LNG natural gas costs, the Energy Regulatory Commission (ERC) stated on Wednesday.

The Energy Regulatory Commission said the country had increased its hunt for more energy sources, ranging from coal to renewables, to reduce liquefied natural gas (LNG) imports amid a spike in LNG costs.

LNG price is growing exponentially, and we need to seek other alternatives, it said.

Because Russia cut the LNG gas supply cuts to Europe over Ukraine sanctions, global LNG gas prices have reached record highs this year.

The area has imported record levels of LNG, which has alleviated some of their supply concerns, but Asian customers are under immense pressure as regional spot prices have reached an all-time high, especially because LNG shipments are being diverted to Europe.

The LNG price instability corresponded with a rise in Thailand’s energy usage, which reached a new high in April as industries ramped up post-Covid, putting pressure on consumers.

Thailand, Southeast Asia’s second-largest economy and a net importer of oil and gas, imported about 75% of its electricity, crude oil, coal, and natural gas last year.

Natural gas generates 55% of Thailand’s electricity and accounts for approximately 30% of the LNG gas consumed in the country.

Thailand is now extending the lifespan of several of its coal-fired power facilities by one or two years, abandoning earlier plans to retire them. The government is also purchasing excess electricity for the grid from local renewable power facilities.

Thailand, which also imports hydropower from neighbouring Laos, may seek additional sources.

Mr. Komkrit Tantravanich, the country’s ERC Secretary-General, told Reuters that certain power facilities would utilize oil to generate electricity to reduce gas demand.

The government is also extending the life of coal power plants and biomass contracts.

Mr. Komkirt stated that the country’s priorities are energy security and keeping electricity prices affordable.

“We strive to keep pricing as cheap as possible. Even if we have to use coal or diesel oil, if it is less expensive than LNG, we must do so, “He stated.

He said that Thailand has been looking for medium- to long-term contracts to reduce spot LNG purchases, but they have been “very challenging” to find and negotiate.

“At this point, no one knows what will happen or how long the high-price situation will persist,” he added.

“The objective is to identify alternatives and lessen our reliance on gas.”

Conservation of Natural Gas Over LNG Prices

Meanwhile, with the chances of colder winter weather and prolonged competition with Europe perpetuate market volatility, Asian countries that traditionally buy enormous volumes of LNG are moving to develop contingencies for obtaining pricey cargoes and conserving extra supplies.

Asian natural gas prices have been slowly falling for more than a week, mirroring the Dutch Title Transfer Facility (TTF) benchmark for gas exported in Europe. Short-term projections of better weather and higher-than-average storage levels on the continent have lowered European prices and hinted at a minor change in market dominance back to Asian off-takers.

However, mounting storage shortages in Europe and skyrocketing vessel prices pressure Asian countries as they prepare for winter projections.

Japan, the world’s top importer of liquefied natural gas, is responding by drafting emergency plans to nationalize LNG procurement for utilities and limit natural gas usage.

A package of laws approved by Japan’s executive cabinet last week would allow the state-owned Japan Oil, Gas, and Metals National Corp. (Jogmec) to buy LNG for the country’s utilities when private enterprises cannot satisfy demand. They would also give regulators the authority to require large industrial natural gas users to limit consumption during a shortage.

Japan’s trade minister, Yasutoshi Nishimura, told reporters at a Friday press conference that the legislation would be forwarded to the country’s legislative body, the National Diet, “as soon as feasible” and might be passed by December.

The measure is the latest in Japan’s efforts to guarantee energy supplies as Europe’s natural gas crisis drives LNG prices to record highs. Earlier this year, Prime Minister Kishida Fumio directed trade officials to develop a plan to restore the country’s nuclear generation capacity by the end of the year.

China, another major LNG customer in Asia, has ordered its state-owned energy merchants to stop reselling LNG shipments to Europe. Previously, the country’s traders had received premiums for some of its spare cargoes from its large volumes under long-term contracts.

According to Bloomberg, China’s top economic authority, the National Development and Reform Commission, has directed enterprises such as PetroChina Co., Sinopec, and Cnooc Ltd. to prioritize domestic demand. Due to lower energy use due to Covid-19 lockdowns and growth in local natural gas and coal production, China relinquished its temporary status as the largest LNG importer to Japan last year.

Evercore Inc. analysts warned in a report that emerging fractures in Europe’s storage situation might be worsened by rising risks of a severe winter in Asia, pushing additional LNG cargoes off the market.

According to brokerage firm Fearnleys AS, vessel rates for LNG tankers to Asia have also climbed well above normal pricing for October and are projected to continue growing next year. The average spot rate for contemporary vessels was over $425,000, up $60,000 weekly and more than $316,000 above the year-to-date average.

“Ultimately, it’s no surprise that charterers are now looking for 2023 tonnage since, while current sentiment is keeping next year’s rates high, this year has reminded us that the most expensive shipping is no shipping,” Fearnleys analysts noted.