{"id":77986,"date":"2022-04-19T15:12:39","date_gmt":"2022-04-19T15:12:39","guid":{"rendered":"https:\/\/chinadialogue.net\/?p=77986"},"modified":"2022-04-28T13:55:12","modified_gmt":"2022-04-28T13:55:12","slug":"asias-bet-on-gas-looks-increasingly-risky","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/energy\/asias-bet-on-gas-looks-increasingly-risky\/","title":{"rendered":"Asia\u2019s bet on gas looks increasingly risky"},"content":{"rendered":"\n<p>Across Asia, there are plans for more than 285 gigawatts of new gas-fired power plants, an expansion that would nearly double the region\u2019s gas power capacity, according to <a href=\"https:\/\/globalenergymonitor.org\/wp-content\/uploads\/2021\/12\/Asia-CoalBustGasBoom-Briefing_final.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Global Energy Monitor<\/a>.&nbsp;<\/p>\n\n\n\n<p>Southeast Asian countries are planning about half of the additional capacity in response to an expected surge in post-pandemic demand, while dwindling domestic gas production drives a rush to scale up imports of LNG.&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-cd-did-you-know alignleft block--did-you-know\"><p class=\"block--did-you-know__title\">What is LNG?<\/p><div class=\"block--did-you-know__content\"><p>Liquefied natural gas (LNG) is gas that has been cooled to -162C until it becomes a liquid that is about 600 times smaller than its original form, making it easier to transport<\/p><\/div><\/div>\n\n\n\n<p>This year, the Philippines and Vietnam are anticipated to import their first LNG cargoes. Two new LNG terminals are expected to come online in Vietnam and one in the Philippines, while another is set to open in Thailand, which is the region\u2019s top gas consumer, Abhishek Rohatgi, Asia gas demand specialist at BloombergNEF, told China Dialogue.&nbsp;&nbsp;<\/p>\n\n\n\n<p>In the period up to 2025, the International Energy Agency has <a href=\"https:\/\/www.iea.org\/reports\/gas-2020\/2021-2025-rebound-and-beyond\" target=\"_blank\" rel=\"noreferrer noopener\">forecast<\/a> Asia\u2019s emerging economies to be the second-largest growth market for LNG demand after China. (China and India were excluded from the emerging category for the purposes of the analysis.)&nbsp;<\/p>\n\n\n\n<p>\u201cThat has sparked this huge frenzy of multibillion-dollar projects,\u201d said Sam Reynolds of the Institute for Energy Economics and Financial Analysis (IEEFA), a US-based thinktank. \u201cMany developers are seeing opportunities where they haven\u2019t seen them before\u201d.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-myth-of-the-bridging-fuel\">The myth of the \u2018bridging fuel\u2019<\/h2>\n\n\n\n<p>Oil majors and LNG exporters have pitched gas as a \u201cbridging fuel\u201d for Asia\u2019s emerging economies. They argue it is a reliable and cleaner alternative to coal that can support decarbonisation efforts by supplementing intermittent renewable energy, without compromising economic growth.&nbsp;&nbsp;<\/p>\n\n\n\n<p>But the expansive pipeline of new projects is a risky bet given record-high gas prices. Meanwhile, the cost of renewable energy and storage technologies continues to fall, meaning investments in gas may only pay off in an overheated world, analysts told China Dialogue.&nbsp;&nbsp;<\/p>\n\n\n\n<p>\u201cRenewable energy with storage is, or soon will be, cheaper than gas across the region, far sooner than the end date of 20-year LNG contracts,\u201d said Robert Rozansky, an LNG research analyst at Global Energy Monitor.&nbsp;<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"72319\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>Recent experience in Vietnam has shown that a rapid, large-scale deployment of solar and wind can meet electricity demand growth and even reduce the share of fossil fuels in the generation mix, according to the Ember <a href=\"https:\/\/ember-climate.org\/insights\/research\/global-electricity-review-2022\/\" target=\"_blank\" rel=\"noreferrer noopener\">Global Electricity Review<\/a>. The country increased its solar generation by 337% in 2021, which helped to drive down both coal and gas usage.&nbsp;<\/p>\n\n\n\n<p>The International Renewable Energy Agency <a href=\"https:\/\/www.irena.org\/publications\/2021\/Jun\/Renewable-Power-Costs-in-2020\" target=\"_blank\" rel=\"noreferrer noopener\">found<\/a> that renewable projects built by emerging economies in 2020 will save up to\u202fUS$156 billion over their lifespans. Scaling up renewables now will provide a cheaper and faster route to decarbonise power systems than building and eventually retiring fossil fuel infrastructure.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Tightening climate policies could \u201ccause gas facilities to close before the end of their intended lifespans, harming economies and workforces that have grown to rely on them,\u201d Rozansky said.&nbsp;&nbsp;<\/p>\n\n\n\n<p>But major gas producers, seeking to create new consumption markets, have continued to promote gas as an effective climate and development strategy for low and middle-income countries.&nbsp;&nbsp;<\/p>\n\n\n\n<p>\u201cCoal-to-gas switching is a dominant theme in Asian gas in the medium-term,\u201d Wood Mackenzie\u2019s vice president Valery Chow <a href=\"https:\/\/www.woodmac.com\/press-releases\/nea-gas-forum---the-future-of-gas-is-asia-and-the-prize-is-large\/\" target=\"_blank\" rel=\"noreferrer noopener\">told a conference<\/a> in June.&nbsp;&nbsp;<\/p>\n\n\n\n<p>\u201cWith coal currently accounting for more than 50% of the energy supply mix, there are significant opportunities for increased gas consumption as a means of supporting carbon reduction targets.\u201d&nbsp;<\/p>\n\n\n\n<p>Producers were quick to spot the opportunities: last year, the Russian energy ministry <a href=\"https:\/\/www.russia-asean.com\/en\/news\/1063\" target=\"_blank\" rel=\"noreferrer noopener\">marketed<\/a> gas as an \u201cecological-friendly fuel\u201d to help Southeast Asian nations shift from polluting coal and diesel. In 2020, Japan \u2013 an LNG importer \u2013 tried to <a href=\"https:\/\/www.spglobal.com\/platts\/en\/market-insights\/latest-news\/natural-gas\/101220-japan-urges-greater-lng-trade-flexibility-cleaner-use-meti-minister\" target=\"_blank\" rel=\"noreferrer noopener\">stabilise the volatile global LNG market<\/a> by encouraging its consumption in other countries, similarly promoting the fuel as a cleaner alternative.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Meanwhile, in the US, the Trump administration billed LNG as \u201c<a href=\"https:\/\/www.theguardian.com\/business\/2019\/may\/29\/energy-department-molecules-freedom-fossil-fuel-rebranding\" target=\"_blank\" rel=\"noreferrer noopener\">freedom gas<\/a>\u201d that could give its allies \u201ca diverse and affordable source of clean energy\u201d while creating destinations for US exports.&nbsp;&nbsp;<\/p>\n\n\n\n<p>In <a href=\"https:\/\/pdf.usaid.gov\/pdf_docs\/PA00XQNC.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">a memo<\/a> dated July 2021, the US Agency for International Development encouraged the Philippines to import US LNG as a cost-competitive and effective climate strategy \u201cto complement and supplement variable renewable energy\u201d.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Months later, at the COP26 climate talks in Glasgow, the US and European nations <a href=\"https:\/\/ukcop26.org\/statement-on-international-public-support-for-the-clean-energy-transition\/\" target=\"_blank\" rel=\"noreferrer noopener\">committed<\/a> to end international financing of fossil fuels, including gas, by the end of 2022 and to prioritise clean energy, challenging the narrative that gas was necessary to emerging countries\u2019 decarbonisation efforts.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-locking-asia-into-high-emissions\">Locking Asia into high emissions<\/h2>\n\n\n\n<p>Opponents argue that using gas as a transition fuel to replace coal will lock in costly and carbon-intensive infrastructure.&nbsp;<\/p>\n\n\n\n<p>The notion that gas is cleaner than other fossil fuels, particularly coal, has come under growing scrutiny. The Natural Resources Defense Council <a href=\"https:\/\/www.nrdc.org\/sites\/default\/files\/sailing-nowhere-liquefied-natural-gas-report.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">found<\/a> that the near-term climate impact of US LNG is 67\u201374% that of coal.&nbsp;&nbsp;<\/p>\n\n\n\n<p>As such, there is no place for additional gas capacity in a carbon-neutral world. New investments in fossil fuels, including gas, needed to stop by the end of 2021 to align with a 1.5C limit on global heating \u2013 the Paris Agreement\u2019s more ambitious goal, according to the <a href=\"https:\/\/www.iea.org\/reports\/world-energy-outlook-2021\/keeping-the-door-to-15-0c-open\" target=\"_blank\" rel=\"noreferrer noopener\">International Energy Agency<\/a>.&nbsp;&nbsp;<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"76881\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>Analysis by Global Energy Monitor <a href=\"https:\/\/globalenergymonitor.org\/wp-content\/uploads\/2021\/10\/GEM_AsiaGas2021_FINAL.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">found<\/a> that if planned LNG import terminals and gas pipelines in Asia were built and run at full capacity, they would enable enough consumption of imported gas to use up a quarter of the world\u2019s remaining carbon budget for a 50% chance of limiting warming to 1.5C.&nbsp;&nbsp;<\/p>\n\n\n\n<p>It is unlikely that every project in the pipeline will be built, but the region\u2019s gas rush threatens its climate goals and could \u201cmake it more difficult for the world to avoid the worst impacts of climate change,\u201d Rozansky said.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Gas-fired power plants also emit nitrogen oxides, which contribute to air pollution in the form of PM2.5, nitrogen dioxide and ozone.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Yet, the perception of fossil gas as clean has seen gas-fired power plants \u201cbuilt in densely populated areas where a coal plant would not be accepted\u201d, Lauri Myllyvirta, of the Centre for Research on Energy and Clean Air, told China Dialogue.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-bloated-pipeline-volatile-market\">Bloated pipeline, volatile market<\/h2>\n\n\n\n<p>Traditionally, Asian countries have planned their electricity provision around large, centralised power plants for baseload power. \u201cGas is an opportunity to continue that same electricity sector philosophy, just using a different fossil fuel,\u201d Reynolds, of IEEFA, explained. Emerging Asia will need some LNG to compensate for the decline in domestic production, but there is a clear \u201cmismatch\u201d between investors\u2019 expectations and what demand will actually look like, he warned.&nbsp;&nbsp;<\/p>\n\n\n\n<p>A granular <a href=\"http:\/\/ieefa.org\/wp-content\/uploads\/2021\/12\/Examining-Cracks-in-Emerging-Asias-LNG-to-Power-Value-Chain_December-2021.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">project-by-project analysis by IEEFA<\/a> in seven of Asia\u2019s emerging markets found that the scale of the gas pipeline was \u201cunrealistic\u201d.&nbsp;&nbsp;<\/p>\n\n\n\n<p>It concluded that 62% of the proposed LNG import terminal capacity and 66% of gas-fired power capacity are unlikely to be built.&nbsp;&nbsp;<\/p>\n\n\n\n<p>In the Philippines, 66% of planned LNG import terminal capacity and 73% of planned gas-fired power capacity were deemed unviable and unlikely to be realised.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Current gas demand in the archipelago is concentrated among five gas-fired power plants that rely on domestic production from the Malampaya gas fields, expected to run dry this decade.&nbsp;&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-cd-pull-quote block--pull-quote\"><div class=\"block--pull-quote__wrapper\"><blockquote class=\"block--pull-quote__quote\">Coal was once touted as clean, and we confronted this major myth. Gas as clean and as a transition fuel is another myth tailored to the interest of the industry<\/blockquote><cite class=\"block--pull-quote__cite\">Gerry Arances, executive director of the Center for Energy, Ecology and Development (CEED)<\/cite><\/div><\/div>\n\n\n\n<p>Officials estimate that the plants will require up to <a href=\"http:\/\/ieefa.org\/wp-content\/uploads\/2021\/05\/No-Guaranteed-Future-for-Imported-Gas-in-the-Philippines_May-2021.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">5 million tonnes of LNG per year<\/a> to continue operating. Yet, more than 20 million tonnes of annual LNG import capacity is being planned, according to IEEFA.&nbsp;&nbsp;<\/p>\n\n\n\n<p>By swapping one fossil fuel addiction for another, the Philippines is replicating the same issues that plagued the coal-dependent power sector: an over-reliance on imported fuel that sparked concerns of energy security and affordability, said Gerry Arances, executive director of the Center for Energy, Ecology and Development (CEED) in Quezon City.<\/p>\n\n\n\n<p>\u201cThe same companies that deepened the Philippines\u2019 coal dependence are now putting in place this massive pipeline of LNG-related projects. Coal was once touted as clean, and we confronted this major myth. Gas as clean and as a transition fuel is another myth tailored to the interest of the industry,\u201d he said.&nbsp;&nbsp;<\/p>\n\n\n\n<p>With gas prices surging to record highs in recent months, and <a href=\"https:\/\/dialogue.earth\/en\/energy\/can-germany-wean-itself-off-russian-oil-and-gas-2\/\" target=\"_blank\" rel=\"noreferrer noopener\">Europe scrambling to wean itself from Russian gas imports<\/a>, the promise of cheap fuel is elusive.&nbsp;&nbsp;<\/p>\n\n\n\n<p>The high volatility of the gas market has left price-sensitive importers in emerging Asia faced with a choice between \u201cpaying for economically harmful fuels or imposing energy and power shortages on households and businesses,\u201d said Reynolds of IEEFA. \u201cThat\u2019s kind of being stuck between a rock and a hard place.\u201d&nbsp;<\/p>\n\n\n\n<p>In the Philippines and Thailand, where price hikes are passed on to consumers, rocketing LNG imports could exacerbate high electricity costs.&nbsp;&nbsp;<\/p>\n\n\n\n<p>For Bert Dalusung, energy transition advisor at the Institute for Climate and Sustainable Cities in Manila, the volatility of the gas market could help curtail its role in the energy transition.&nbsp;&nbsp;<\/p>\n\n\n\n<p>\u201cThis role of flexible gas is not to replace baseload coal power plants,\u201d he said, but to provide residual load that renewable sources cannot meet.&nbsp;&nbsp;<\/p>\n\n\n\n<p>\u201cThe fuel price volatility that is killing off coal here will eventually kill fossil gas as well,\u201d preventing the lock-in of polluting infrastructure, he said.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Hengky, a Singapore-based senior analyst for LNG research at Refinitiv, agrees that while gas may still be used as a transition fuel, the market\u2019s volatility could prove its demise. \u201cLNG was seen as abundant. It was seen as a cheap source of fuel, but I think recent events are proving otherwise.\u201d&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The region\u2019s bloated pipeline of gas projects could lock in decades of high emissions, but recent price volatility may soon force a rethink <\/p>\n","protected":false},"author":3907,"featured_media":77994,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[757],"tags":[513,17073,547],"hashtags":[],"country":[50040715,20029326,20028207],"class_list":["post-77986","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-carbon-emissions","tag-energy-transition","tag-fossil-fuels","country-philippines","country-thailand","country-vietnam"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - 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