Taiwan has suspended approximately 500,000 metric tons of liquefied natural gas purchases from Papua New Guinea every six months, removing roughly $800 million of spot-market demand after Port Moresby ordered the closure of Taipei’s representative office.
The decision leaves Taiwan’s long-term LNG supply contract untouched. Taipei will continue importing 1.2 million metric tons of PNG LNG annually through 2030, preserving a supply agreement that accounts for roughly one-third of Papua New Guinea’s LNG exports.
Papua New Guinea announced earlier this month that it would close Taiwan’s trade office in recognition of its One China policy. Chinese Foreign Minister Wang Yi welcomed the decision and said it could serve as an example for other countries considering similar moves.
The U.S. State Department said it was “deeply concerned” by the decision, arguing that Taiwan’s unofficial relationships generate “substantial economic, technological, commercial and educational benefits” for partner countries and urged governments to preserve longstanding ties with Taipei, Reuters reported in mid-July.
Taiwan imports about 95% of its energy, with natural gas generating nearly half of its electricity after the retirement of its final nuclear reactor. Spot cargoes provide flexibility during periods of elevated demand, whereas long-term contracts secure baseload supply. Taipei chose to withdraw from the former while maintaining the latter.
Papua New Guinea ships LNG into a market shaped by higher prices and tighter supply following the Iran conflict and continuing security risks around the Strait of Hormuz. Analysts expect producers to redirect cargoes originally intended for Taiwan’s spot purchases to other Asian buyers with limited disruption to export volumes.
LNG generates roughly half of Papua New Guinea’s export earnings. Taiwan purchases about one-third of those exports, although only about 8% of Taiwan’s total LNG imports originate from Papua New Guinea.
Taiwan also warned it is reviewing development assistance and other economic cooperation with PNG following the diplomatic dispute. Government officials confirmed Taiwanese personnel remain in Port Moresby, and Papua New Guinea has not attempted to remove them.
By Charles Kennedy for Oilprice.com
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