Home / Oil & Energy / General Energy News / Asia has already begun coal to gas switch – Kpler

Asia has already begun coal to gas switch – Kpler

Cumulative thermal coal imports into the world’s top two consumers – China and India – began falling from March in line with spreading electricity demand destruction from the coronavirus pandemic, the company said in a webinar on Tuesday.

On an energy content basis, the annualised decline in thermal coal imports in these countries in May was around ten times greater than the relevant fall in LNG imports.

Falling cumulative coal imports since March also contrasted with growing LNG imports since February.

“The LNG price decrease has been the key catalyst in our view,” said senior global energy analyst Alexandre Andlauer. “Many countries have been able to switch from coal to natural gas.”

Spot Asian LNG prices have tumbled almost 80% over the past 15 months to around USD 2/MMbtu.

Gas prices in Asia, Europe and the US have converged towards levels that were making it difficult for US exporters to cover their costs, Kpler said. It put the break-even price of US cargoes to Asia at around USD 5/MMbtu.

European imports slow
The low prices also appear to have begun to deter LNG deliveries to Europe, which has historically functioned as a sink for excess global supply. Import schedules suggested cargoes to Europe would not climb in May, Kpler said.

Qatari volumes to Europe peaked in April and those from the US in February. Both major exporters have been redirecting volumes from Asia to Europe this year due to the collapse in prices.

Some of the change in Asian appetite for coal imports could be attributed to China sourcing more of the fuel domestically, Kpler noted. The extent of Indian lockdown measures had also accelerated a trend away from coal imports in May.

These developments had primarily affected Indonesia as its share of coal imports for China and India fell from 65% to 61%.

Other observers have suggested fuel-switching in Asia was only likely to get underway seriously later this year. Most Asian LNG supply deals are linked to the price of oil.

This year’s slump in oil to some of its cheapest levels in two decades would start to show up in LNG contracts from summer due to the time lag built into oil-indexed deals, according to consultancy Wood Mackenzie.
Source: Montel

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping