Singapore — Cambodia broke new ground in January with its first LNG imports in ISO tanks from China, but its plans to ramp up volumes, build a floating regasification terminal and establish a gas pipeline and trucking network have been temporarily delayed because of COVID-19.
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The tiny Southeast Asian country imported around 83 mt of ISO tank LNG from China's national oil company, CNOOC, making it the first new LNG importing country in Asia in 2020, even before Myanmar imported its first cargoes in June.
This was China's first such LNG export to Southeast Asia, the first time state-run CNOOC has attempted a small-scale gas supply business outside the country and one of the few gas projects under Beijing's Belt & Road program.
Cambodian Natural Gas Corp Ltd, or CNGC, the country's primary gas company, has a 15-year plan up to 2034 -- split into three phases of five years each -- to build an LNG receiving terminal, 27 urban supply stations, an LNG trucking fleet, and 2,825 km of pipelines to supply 25 provinces and cities.
The first five ISO tanks, each weighing around 16 mt, arrived at Sihanoukville Port on a container ship in mid-January, but there have been no further deliveries since. In April, CNGC said the pandemic had disrupted its plans to bring in senior technical personnel for the project.
"We expect LNG imports to slow significantly on the back of the coronavirus pandemic, which would result in CNGC falling short of its original target of 0.1 million mt/year LNG ISO tank imports in 2020," Shi Yun Fan, research analyst for gas, power and energy futures at IHS Markit said.
She said the pandemic appears to have also disrupted progress on CNGC's Phase I plan, and consequently, the build-out of pipelines into inland cities like Phnom Penh, from their jetty in Bay of Kompong Som, is likely to be delayed.
"Details on the developers for CNGC's FSRU project are unknown, but since the construction of an associated 1,200 MW LNG-fired power plant has not yet materialized, it is likely that this project will not meet its target of 2021-2023 for its commercial operation," Fan added.
The initial wave of LNG supply was meant for household use at an upmarket residential estate in the heart of Phnom Penh city, where LNG outperformed LPG, according to CNGC.
But CNGC, which holds the licenses for Cambodia's gas supply chain, plans to introduce LNG in commercial sectors like hotels and restaurants, the Phnom Penh and Preah Sihanouk provinces and eventually industrial and power sectors.
Fan said there is potential for gas usage in Cambodia's industrial sector as it currently imports ceramics, glass, and other heat-processed products that require natural gas as fuel.
"From a power mix perspective, Cambodia has been diversifying its energy sources from mostly oil generation and imported electricity to hydropower and coal generation. Although not immediate, we see potential for LNG-to-power to fill in the gaps and act as a source of diversification," she said, adding that Cambodia's power prices were among the highest in Southeast Asia, at close to 20 cents/kWh, which would incentivize the introduction of LNG and gas.
Cambodia's total installed power capacity increased from 231 MW in 2005 to 3,028 MW in 2019, multiplying 14.5 times in 15 years, and energy output increased from 9.77 GWh in 2005 to 12.015 GWh in 2019. More than one-third of electricity comes from hydropower, followed by coal, furnace oil and renewables.
"Looking at how actual [power] generation in recent years has exceeded generation targets set out in the 2016 PDP [Power Developement plan], it is likely that Cambodia will meet its 2025 generation target of 14,951 GWh earlier than planned," she added.
The World Bank says Cambodia's average economic growth was 8% between 1998 and 2018, making it one of the fastest-growing economies in the world. GDP growth reached 7.1% in 2019, leaving significant potential for energy demand growth.
SMALL SCALE BUSINESS
CNOOC, the biggest supplier of trucked LNG in China with plans to deliver ISO tank gas to domestic cities, has opportunity to expand its small-scale business in Cambodia, but may face competition from local rivals like PTT or Petronas.
Fan said CNOOC does not appear to have concrete plans to further commercialize small-scale LNG exports, there are pricing challenges and the trial run with Cambodia will prove whether the venture is commercially viable.
"The containerized LNG was exported to Cambodia at around $11/MMBtu, which is broadly in line with the trucked LNG prices in south China in early January," she said.
"From the perspective of an importer, benchmarking the price paid for an ISO tank containerized LNG against the regional Chinese trucked LNG market would expose Cambodia to region-specific price risk," she added.
Cambodia is ASEAN's second-smallest country by land area, only larger than the city-state of Singapore, and is the seventh-most populated country in the 10-member group with around 16 million people, according to ASEAN data.