More than half of proposed LNG-to-power projects, worth a total of $67.8 billion, in four key Southeast Asian markets have been either scrapped or stalled since 2021, amid rising costs that raise risks for project financing, the Institute for Energy Economics and Financial Analysis (IEEFA) said in a report on Thursday.
The five-year analysis of $109.2 billion worth of proposed LNG-fired power projects and another $21 billion worth of planned LNG import terminals in the Philippines, Vietnam, Thailand, and Bangladesh showed that as many as 49 proposed LNG-fired power plants and 22 regasification terminals were canceled or showed no notable progress between 2021 and 2026. These stalled or cancelled projects have an estimated total value of $67.8 billion— nearly 4.5 times the value of projects completed during the same period, IEEFA said.
“Recent developments in fuel, equipment, and currency markets have exacerbated execution risks for LNG-to-power projects in emerging Asian economies while weakening the revenue certainty needed to secure project financing,” commented Sam Reynolds, co-author of the report and IEEFA Asia’s LNG/Gas Research Lead.
“As a result, the region’s LNG expansion has progressed far more slowly than the global gas industry expected.”
Risks to LNG projects in Southeast Asia have multiplied since 2021, with spikes and volatility in LNG prices, depreciation in Asian currencies against the U.S. dollar, long lead times for gas turbines in a very tight equipment market, and higher capital costs.
“Taken together, these risks could increase the total levelized cost of electricity from LNG-fired power plants by up to 130% relative to baseline assumptions in 2021,” said report co-author Christopher Doleman, IEEFA Asia’s LNG/Gas Specialist.
“Across emerging Asia, energy-sector development plans that rely heavily on LNG were often formulated on assumptions of lower fuel prices and affordable capital costs. Those assumptions no longer hold,” Doleman added.
Yet, the AI boom and the data center construction in Asia are set to materially change Southeast Asia’s LNG demand outlook with a significant upside, as combined-cycle gas turbines (CCGT) remain the most reliable 24/7 power provider for hyperscalers amid relatively immature renewable energy-plus-batteries across the region, analysts at Wood Mackenzie said in September.
By Michael Kern for Oilprice.com
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