The price of liquefied natural gas (LNG) could remain volatile this year, force buyers to limit spot purchases and seek long-term contracts instead, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
However, Sam Reynolds, IEEFA energy finance analyst, said since there are no available long-term contracts before 2026, incremental LNG demand growth could slow down, including in the Philippines.
“For countries planning to increase the share of LNG in their energy mix, the lessons of 2022 should be a harbinger of challenges to come. If volatile prices and unreliable supplies continue to alienate key Asian markets, the region’s LNG demand is unlikely to grow as rapidly as industry players expect,” said Reynolds, in a statement.
Reynolds said LNG prices in Asian spot markets averaged $34 per million British thermal unit (MMBtu) last year, or more than double the annual average in 2021.
The IEEFA analyst said a recent dip in LNG prices due to warm weather in Europe is welcome news for the sector although prices in Asia are still double the previous five-year average of $14 per MMBtu and expected to stay elevated this year.
“2022 showed clearly that volatility in international fossil fuel markets can have extremely destabilizing impacts on energy security and economic growth. While no one can predict exactly how LNG prices will fluctuate, countries can limit their exposure to uncertain fuel prices by boosting renewables and energy storage technologies,” Reynolds further said.
Earlier, the Department of Energy (DOE) said the forecast completion of LNG terminals this year will support the government’s goal of transitioning to a low-carbon future.
Energy Secretary Raphael Lotilla earlier said of the “need to diversify our power sources, including the use of imported natural gas… Given its scheduled availability at the end of the first quarter of 2023, LNG is considered an important source for fuel diversification.”
Based on progress reports by project proponents to the DOE’s Oil Industry Management Bureau, Linseed Field Power Corp. and AG&P, are seen to complete the integrated import terminal in Ilijan, Batangas set for commissioning by March 2023 and commercial operations by April 2023.
Meanwhile, FGEN LNG Corp. and BWLNG are set to commission the Batangas LNG terminal by March next year and begin commercial operations by June 2023, in line with the arrival of LNG supply fueling its gas-fired power plants that include the 1,000 megawatts (MW) Sta Rita, 500 MW San Lorenzo, 414 MW San Gabriel and the 97 MW Avion.
The DOE said there is a regulatory framework guiding policy makers and stakeholders on the entry of LNG in the country as the commodity’s role is crucial in providing the economy a flexible power supply program.
