Southeast Asia’s recent heatwave is leading to a jump in power demand for air conditioning, increasing demand and competition for May and June spot LNG cargoes in the region.
Southeast Asia has been suffering a repeat of last summer’s scorching weather as temperatures in Cambodia, Thailand and India soared above 105 F and are expected to continue through June.
“We definitely see some upside potential in southeast Asia for liquefied natural gas demand if the current heat waves persist into May and June,” EnergyAspects Min Na, head of Asia LNG, told NGI.
“But the upside is limited in countries like Bangladesh, as the country may curb gas supply to non-power sectors to prioritize power sector gas burn.”
Bangladesh recorded the hottest April on record, with temperatures reaching 108 F. Bangladesh’s state-run Rupantarita Prakritik Gas Company Ltd, better known as RPGCL, is looking for five cargoes for May and June delivery to either of the country's two floating storage and regasification units (FSRUs).
The government reportedly plans to import 34 spot LNG cargoes during 2024 versus the 23 cargoes it imported last year.
In Thailand, as temperatures late last month exceeded 100 F degrees in Bangkok, the government urged people to stay indoors. Although EnergyAspects does not view the country as a price-sensitive market, based on the country's tendering history, Thai oil and gas company PTT LNG Co. Ltd. has been active in the market.
PTT recently bought seven cargoes, including one for April delivery, three cargoes for May and June delivery, and three cargoes for delivery in July, according to Kpler data.
Temperatures in Vietnam hit 111 F last month, another record high. PetroVietnam Gas, part of state-owned PetroVietnam, bought one cargo for May delivery around $10.30/MMBtu, according to Kpler data. This is the fourth cargo purchased since the launch of Vietnam’s Thi Vai LNG terminal last year.
Nebula Energy’s AG&P LNG plans to launch a tender in June for a commissioning cargo for its 3 million metric ton/year Cai Mep LNG import terminal in Vietnam.
Slow Growth In India
Despite the heatwave that’s also impacting South Asia, India’s demand for LNG is not expected to increase as spot prices are currently uneconomical against current power prices, according to Rystad Energy’s Lu Ming Pang, senior analyst for Gas and LNG Market Research.
India’s power demand jumped to 224 GW in April compared to about 221 GW in March, according to government data.
With Prime Minister Narendra Modi’s target to more than double India’s share of natural gas in its power generation mix to 15% by 2030, versus the current share of 7%, the government mandated in April for generating companies to operate gas-fired plants from May 1 to June 30.
“India’s gas-fired power was utilized in 2023 to meet peak demand and the same is expected this year as well,” said Purva Jain, an analyst at the Institute for Energy Economics and Financial Analysis (IEEFA).
Higher temperatures boosted a 50% year-over-year increase in gas-fired power generation last month, according to IEEFA data.
In March, the power sector’s natural gas consumption had already increased by about 4% year/year in March as buyers in India purchased more spot cargoes amid a three-year low in prices.
However, Asian LNG prices have increased this month as demand has strengthened amid geopolitical tensions, once again forcing India out of the market. The super-chilled fuel is unable to compete with coal, oil and renewables in the country.
The country imported 1.97 million tons (Mt) of LNG in April, according to Kpler, which is down from 2.59 Mt in March, and also below the 2.24 Mt imported in April last year.
Despite government mandates to promote natural gas, consumption of the fuel in the power sector remains low. The power sector accounts for about 13% of total natural gas consumption in India, while the fertilizer and industrial sectors account for the rest, according to Rystad Energy.
India depends on imports to meet nearly 50% of its gas demand, but the country’s LNG terminals are operating at less than 50% capacity. With nearly 48 Mt of annual import capacity, India’s utilization rates may improve this year if spot prices continue to ease, Jain told NGI.
Domestic gas production is forecast to nearly triple in India to 9.1 Bcf/d in 2050 from 3.3 Bcf/d in 2022, at an average annual increase rate of 3.7%. Gas imports are expected to ramp up faster than domestic production to meet demand growth, increasing from to 13.7 Bcf/d in 2050 from 3.6 Bcf/d in 2022, a 4.9% average annual increase, according to the U.S. Energy Information Administration.
