LNG Industry - January 2020

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16 January 2020
Richards Bay port, home of its coal export industry (first gas
expected in 2024).13 There is imperative to act. Given the long
and painful history of power shortages, LNG could transform
the South African economy, supporting industrialisation,
reducing reliance on inefficient, ageing coal plants, and
contributing to regional trade. Gas-to-power is a big growth
play with South Africa intent on scaling up industrial gas usage.
South Africa’s neighbour Namibia also has a proposed LNG
import terminal in Walvis Bay. This is a project with a long
development history and a good illustration of the risks at
stake. Initially set up as a pure domestic LNG-to-power import
facility, instead, LNG will be resold to private players elsewhere
in Southern Africa.
Investing in Africa is not for the faint hearted. There are
several challenges (the poor state of infrastructure, ‘resource
nationalism’, endemic corruption, and uncertainty regarding tax
rules) complicating the business case for investment.
Côte D’Ivoire is a stern reminder of the risks. A consortium led
by oil major Total is still waiting to reach a final investment
decision (FID) on its Ivory Coast LNG terminal project more than
two years after an initial deal was signed with the government.
Intense negotiations with the Ivorian energy ministry over the
price of the LNG continually pushed back project timescales.
The project is due online in 2020, at the earliest.14
Central America/Caribbean
Underlying demand dynamics in Central America and the
Caribbean echo those seen elsewhere in the world with a
growing population looking to access a reliable, secure, flexible
and clean energy source.
The Caribbean nations have historically been dependent on
diesel and fuel oil for power generation. This makes the cost of
producing electricity high, with fuel costs accounting for more
than half of the operating costs of service. Customers face
serious energy affordability challenges due to high electricity
tariffs. With low per capita incomes, there is a strong motivation
to reduce exposure to expensive oil imports. LNG offers a
cleaner, cheaper and more efficient alternative.
There is also a geographic premium with proximity to
regional LNG supply hubs in Trinidad & Tobago and the
US Gulf Coast. The emergence of small scale liquefaction and
low capital intensity FSRU import solutions is a potential boon
to these economically disadvantaged island states.
One such country looking to embrace LNG is El Salvador,
the smallest and most densely populated country in
Central America. Like many emerging markets, El Salvador
wants a more diversified, flexible energy mix that reduces the
impact on the environment. LNG meets these requirements.
Finnish technology group Wärtsilä has started building a
378 MW LNG-to-power project in El Salvador. The project
involves an FLNG terminal and gas plant.
Panama imported its first LNG shipment in 2018. Rather
like the hub role Singapore plays in Asia, there are plans for
Panama to be the centre for LNG trade across Central America.
It has the location and investment commitment. In 2017, Engie
and AES formed a joint venture to market and sell LNG to third
parties in Central America, using the 1.5 million tpy Costa Norte
integrated LNG-to-power facility in Colon as a distribution hub.
Global energy infrastructure business New Fortress Energy
is looking at introducing LNG in the Dominican Republic and
other emerging markets in the region. This follows its
successful Jamaican small scale LNG investment. New Fortress
uses FSRUs, storage vessels and small scale LNG carriers as
startup solutions for supplying LNG to niche markets.
Concluding thoughts
While still in its infancy, the emerging market LNG story
is already spinning a rich tapestry. Emerging markets are
increasingly looking to LNG for their energy needs. More
countries will follow, evidenced by the growing number of
downstream infrastructure projects including pipelines, import
terminals and power generation plants in the planning pipeline.
The journey ahead will be exciting as the emerging
economies lead the way to the energy future and the transition
to a lower carbon economy.
References
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