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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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The Small Asian Nation With Big LNG Plans

A senior official for CPC, Taiwan’s state-run energy firm, said on Tuesday that it could start building its third LNG import terminal by the middle of this year once it obtains all the necessary permits. Jane Liao, chief executive of CPC’s LNG business, said the proposed terminal at Taoyuan, in northwestern Taiwan, could start operations in early 2023 with an initial capacity of 1 million tonnes per annum (mtpa). She made her comments on the sidelines of the CERAWeek conference in Houston, according to a Reuters report.

Liao said that the project’s first phase of 3 mtpa will be used by state utility Taipower. Taiwan is the world’s fifth largest LNG importer, after Japan, China, South Korea, and India, with a total import volume of 16.8 mtpa in 2018. Liao said that Taiwan plans to have import capability of 10 mtpa each in the country’s north, central and south by 2027. She added that CPC will continue to expand existing terminals at Taichung and Yung-An in Kaohsiung, in southern Taiwan.

Nuclear and coal usage

CPC’s disclosure has several significant takeaways. First, it comes as the island nation of some 24 million people phases out not only coal used for power generation but also nuclear power. Taipower was nearing completion of a nuclear power plant, whose construction began in 1999, in Longmen, New Taipei City until severe backlash over the project intensified in the aftermath of the 2011 Fukushima nuclear disaster in neighboring Japan.

Related: Is This A Precursor For Peak Oil Demand?

Massive politically charged protests against the Longmen plant gathered momentum in 2012, 2013, and 2014, with opponents of nuclear energy stressing the numerous risk factors Taiwan shares with Japan. The government responded in 2014 by indefinitely suspending construction of the Longmen plant, though it was more than 90 percent completed and resulted in billions of dollars in lost capex. Due to construction cost overruns, the total price of the project had swelled to NT$283 billion (US$9.3 billion) by the time of its cancellation.

Earlier this year, the Taiwanese government reiterated its plan to phase out its other nuclear power plants, despite citizens voting against the policy in a recent referendum. Taiwan has four operable nuclear power reactors - two each at the Kuosheng and Maanshan plants - which account for around 15 percent of the island's electricity generation. Unit 1 of Taiwan's oldest plant, Chinshan, has already been taken offline and will be decommissioned, while the operating license of unit 2 is due to expire in July.

Coal usage in Taiwan is also reportedly in the process of being phased out. However, in mid-2018, Taiwan’s environmental protection agency gave the green light for a new US$100 million coal-fired power plant at Shen’ao, in what a diplomat report described as a small but picturesque fishing village on the north coast on Taiwan 40 minutes from Taipei. The pant’s approval was seen as a step back from the country’s ambitious plan to increase energy supply from renewable sources to 20 percent by 2025 and a gradual reduction in the proportion of coal-fired power generation within the same timescale.

Increased LNG usage

Taiwan’s push to increase its LNG imports also comes as the current global LNG supply overhang is still at historic levels, which should allow it CPC the opportunity to lock in long-term off-take agreements with suppliers at more favorable prices as long as deals are reached before the glut in LNG markets subsidies. By 2022-2023, there is a possibility that the current LNG supply overhang could subside amid rampant gas and LNG demand coming out of China, as well as both South Asia and Southeast Asia. CPC prefers long term contracts, although spot cargoes accounted for about 15 percent of its annual imports, Liao said

Liao added that CPC is eyeing new supplies from Russia’s Sakhalin island in the Pacific, or the proposed Alaska LNG project and may seek joint purchases with other buyers from Japan and South Korea. “We’ve been waiting for Sakhalin,” Liao said. She added that the project would be ideal to supply north Asian buyers because of its proximity, while LNG shipments from Alaska to Taiwan will avoid potential congestion at the Panama Canal. The Asia-Pacific region represents 72 percent of global LNG demand with that amount projected to increase to 75 percent amid increase Chinese imports of the super-chilled fuel.

By Tim Daiss for Oilprice.com

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