3 ways Canadian LNG can compete in Southeast Asia

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Craig Henderson, Hydrocarbons Sector Lead, SEA & China, Advisian, WorleyParsons Group
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With the global demand for LNG continuing to grow, the window of opportunity is moving closer to Canada’s natural gas and LNG industry. Focused on the assessment of project’s techo-commercial viability and the selection of development concepts, Advisian supports the decision making on critical front-end planning issues which will enhance business objectives.

Keen to learn more about the evolving gas and LNG industry in Canada, Gastech Insights spoke with Craig Henderson, Hydrocarbons Sector Lead, SEA & China from Advisian and confirmed speaker at the Canada Gas & LNG Exhibition and Conference.

Gastech Insights: As Southeast Asia and other developing countries look too meet the rising gas demand and secure affordable and sustainable energy, is there a home for Canadian LNG in Southeast Asia?

Craig Henderson: Given the forecast level of development needed to meet Southeast Asia’s gas demand there is certainly a place for Canadian LNG, however, it will need to compete in three main ways to ensure it can secure its place in the LNG supply mix:

  1. Given that the gas demand is being driven by power demand, it is important to understand the driving price force is the electricity tariff (think $/kWh, not $/MMBtu). The biggest lever to pull to reduce this tariff is fuel cost (responsible for approx. 80% of the tariff), meaning that Canadian LNG will fundamentally need to compete on price with alternate fuel suppliers (not just LNG) to secure a home for itself.
  2. Energy security is another major concern for Southeast Asia’s developing economies; this is another lever Canada can pull on should they demonstrate an appetite to do so. We are witnessing numerous projects and LNG supply contracts being negotiated on a quid pro quo basis support by the government to government deals linked to energy security and supporting infrastructure developments.
  3. The third area to consider is that of teaming for success with other LNG suppliers should it make commercial sense for Canadian LNG producers. We are witnessing a large amount of corporation occurring between interested parties across the LNG to Power value chain in Southeast Asia. The ultimate aim is to transfer risk between parties and work together to creating a commercially attractive project that meets 1 & 2 above. Canadian LNG suppliers need to be willing to explore such corporation and understand the drivers behind a successful project from a developer’s perspective.     

Gastech Insights: The power sector continues to be a key driver for growing global gas demand. Where should project developers be looking to invest in order to aid this growth?

Craig Henderson: A few key areas to consider investing in are as follows:

  1. Supporting economies of scale infrastructure models (i.e. hub and spoke LNG supply terminals or ‘milk run’ terminals). These naturally take a higher development risk profile relating to the supply led demand situation it targets, meaning the developer needs to limited CAPEX exposure while planning for an easily scalable solution to capitalise on any created demand.
  2. Wiliness to invest into the power plant equity and/or wiliness to own a component of the fuel supply risk components of the Power Purchase Agreement (being passed onto the project company more frequently for LNG to Power projects). 

Gastech Insights: How can Canadian LNG become globally competitive and become the ‘go-to’ choice for destinations, especially Asia?

Craig Henderson: By providing attractive landed costs of LNG to Asia and offering contractual and commercial flexibility to meet objectives of developers.

Gastech Insights: Why should industry players attend the Canada Gas and LNG Exhibition and Conference in May?

Craig Henderson: By attending the upcoming event you will be able to get new techo-commercial insights into the fast-evolving 'Power from LNG' market and develop your understanding on the key potentials and challenges for Canada to secure its place within the global market.

If you would like to hear more from Mr Henderson, book your place at the Canada Gas & LNG Exhibition and Conference this May 14-16th in Vancouver to hear his discussion on “Finding a home for Canadian LNG: Understanding the dynamics of the growing gas to power markets in South East Asian and other developing countries.”

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