Though Asian LNG prices for November delivery rebounded slightly over the past ten days, the oversupply persists and helps open new markets: Indonesia and Jamaica have chartered floating storage units (FSUs) to underpin power plant projects. Puerto Rico, Ghana, Bahrain and Bangladesh are tipped as the ‘next round of new importers.’
Seeking to source cheap spot cargoes of supercooled gas for power generation, several small importers are cautiously comparing costs of either floating storage and regasification units (FSRUs) or FSUs with land-based LNG import terminals. Most new market entrants are opting for FRSU – that way investors can moor the vessel in a perceived high-demand location and simply move it elsewhere, if things do not go well.
Quick decisions over securing a FSRU charter, vessel deployment and supply contracts would be advisable – LNG supply-demand balances are tightening as the winter season approaches and most nuclear power stations remain offline in Japan and South Korea. Kyushu Electric just shut down its 890 MW Sendai unit-1 for a two-month maintenance, so it will have to ramp up gas generators to deliver on its electricity supply obligations.
Focus turns towards niche markets
A shift in mind set is emerging, according to Wood Mackenzie’s Frank Harris who sees nice markets catch the attention of gas portfolio players and international oil companies. “There’s probably a whole raft of emerging markets that three years ago the big players would have said they could leave to others,” he commented.
Wood Mackenzie’s latest report on proposed LNG-to-power projects found more than 30, clustered in the Caribbean, Southeast Asia, west and southern Africa, as well as a few southern Europe and the eastern Mediterranean.
‘New LNG importers’ are forecast to account for 40 million tons of additional annual demand, expanding the global market by 16%.
Africa – promising, yet prone to delays
Focussing on sub-Saharan Africa, BMI Research sees drought and dwindling hydroelectric output as the key driver of surge in gas-fired power project. It singled out sub-Saharan Africa as “a niche LNG destination”, notably Ghana, Ivory Coast and Tanzania. Yet projects are prone to delays in that region, even in politically stable environments.
Ghana has voiced plans for two FSRUs, however, there are questions about the exact location. Deployment of the 170,000 cbm Golar Tundra FSRU has been delayed – the vessel is still at anchor outside Tema harbour and has not started operating. West African Gas (WAGL) chartered the vessel from Golar LNG and had been seeking to get it enter into service this summer.
WAGL’s hick-ups with Golar Tundra have cast a shadow over plans for a second FSRU in Tema. Quantum Power and Ghana National Petroleum (GNPC) are pushing to move the project Takoradi instead, to underpin power projects in the west of the country.