Taiwan LNG demand immune to COVID-19; 2021 purchases to grow: CPC

Singapore — Taiwan's LNG demand continues to grow and has not been impacted by COVID-19, while its energy sector was focused on boosting gas-fired capacity under the region's long-term energy plan, Jane Liao, CEO of the natural gas business at state-run CPC Corp., said at the Gastech Virtual Summit.

Taiwan has been an outlier in this pandemic, with just seven deaths and 495 infections reported by its Center for Disease Control as of Sept. 9, limiting the impact on its economy although the breakdown of global supply chains still hurts.

"Our situation here in Taiwan is that the demand of LNG is still moving up," Liao said, attributing the increase to stable power demand. "There's no major negative impact on the energy market here because of COVID-19," she said, adding that CPC still needs to purchase more spot LNG cargoes or short-term strips and it was "enjoying" low spot prices.

"For the year 2021, there will be more and more cargoes that we need in addition to our long-term or mid-term contracts. There's a possibility that the spot price in the market will still be very low, which is good news for the LNG importers, but we still are looking forward to the [global COVID-19] recovery," Liao said.

She said companies like CPC have been busy with the government's energy policy that calls for gas-fired power generation to account for 50% of the electricity mix by 2025, compared with around 35%-36% now.

The targets call for renewable energy to grow to 20% of the energy mix by 2025 from around 5%-6%, and for coal-fired generation to fall to about 30% from around 46%-47% in the same period. Taiwan is shifting its energy mix to phase out nuclear power generation, which currently accounts for 12% of its 50 GW power capacity.

Liao said there were doubts about the 20% that is supposed to come from renewable energy, and this will probably have to be covered by natural gas from time to time due to the intermittency of wind and solar power.

"In addition to power generation, all industrial sectors are also not allowed to use fuel oil or coal but natural gas only," she said. "That's one of the reasons why we've been very busy here, and not affected by the COVID-19."

LONG TERM SUPPLY

To replace its retiring coal and nuclear fleet, and get to 50% of power from gas, Taiwan is adding around 10 GW of gas-fired capacity to its current 15 GW. This will include state utility Taipower's Taichung power plants, totaling 2.6 GW of generation capacity.

Liao highlighted changes in Taiwan's natural gas demand patterns due to growing solar energy, such as daily peak consumption hours shifting to the evening from noon or late morning.

Taipower is currently supplied by CPC, Taiwan's only LNG importer, which is building its own LNG receiving terminals and signing long-term LNG purchase contracts.

Liao raised concerns over whether enough long-term LNG supply can be built at current price levels. The S&P Global Platts JKM for October was assessed at $4.613/MMBtu on Sept. 8 but the market spent much of the year between $2/MMBtu and $3/MMBtu, and most price projections remain bearish.

"For future, we really wonder whether some of the new LNG projects can be smoothly developed. That will affect supply and demand in this market when the price goes down to $2/MMBtu for LNG," she said, adding that developing countries like Vietnam or Myanmar were becoming new LNG buyers.

"For the future as an LNG importer, we are still concerned about where will the long-term suppliers come [from] to the market," Liao said. "We are still seeking. Probably this might become an issue in the coming years."