Can LNG fill Myanmar’s power gap?
INSUFFICIENT electricity is one of the major problems Myanmar faces when it comes to attracting investment. As the economy expands, demand for power is rising rapidly. However, the lack of it has impeded the progress of many businesses in the country.
As such, the government has identified electricity as its top priority. Under the Myanmar National Electrification Plan (NEP), it aims to achieve 100 percent electrification by 2030. This will involve achieving a total of 24,000 MW of electricity generating capacity, which, in turn, requires vast infrastructure investments in power sector.
That’s because the 24,000 MW target is almost five times the current capacity installed. In the meantime, the need for electricity is increasing by the day. This year, demand for electricity during summer hit a peak of 3,000 MW.
Can Myanmar achieve its power generation target? Are its goals realistic?
Although coal is recommended as one of the generators of power for the country, so far, no coal-fired projects have been approved. Meanwhile, nearly all the hydro-power projects in the country have been delayed owing to social and environmental concerns.
LNG option That leaves the government with gas as the main source of power. Yet, production at Myanmar’s gas fields has also been declining. To be sure, there have been several gas discoveries off the coast of southern Rakhine in recent years, but it will take ten years or more before those fields are developed and ready to produce.
Some industry insiders have suggested using liquefied natural gas (LNG) to fill the gap. “We can buy LNG to power up the infrastructure here and do this for ten years, and once domestic gas production is up again, we can just stop buying LNG and switch to the natural gas that we have produced,” said Edwin Vanderbruggen, Senior Partner of VDB Loi, during a panel discussion at the 2017 Global Investment Forum held in Nay Pyi Taw recently.
In fact, Myanma Oil and Gas Enterprise last year created an LNG business committee to explore interest in the importation and regasification of LNG.
The way Mr Vanderbruggen tells it, major oil companies like PTT, Shell, Total and many others have initiated negotiations with the government with regards to several LNG tenders. Yet, nothing has been announced so far.
Speaking on the same panel, Andrew Lee, chief country representative of GE Myanmar, said even LNG will take some time to kick-off. “When we talk about LNG and potential discoveries of new gas, were talking mid-to-long term.”
Over the short term, he believes optimising the existing power plants located near the urban areas to generate gas is a more viable option. “Yangon now consumes 2.1 giga watts of power. Next year, it will probably be 3.1GW. There is more demand at the commercial areas in Yangon,” he said.
During the panel, Daw Mi Mi Khaing, Director General, Department of Electric Power Planning, Ministry of Electricity and Energy said the ministry needs to consider the increasing amount of the power needed across the whole country. He said the ministry has to think about a proper generation mix and the least costly one to supply the national grid.
“There are two options for LNG. The first is importing the LNG. The second option is converting gas to power. TOTAL and other very reputable companies submitted a very favorable package for the gas to power solution, including the power transmission line. It will be beneficial to improving power generation,” she said.
The discussions come as losses from subsidising power tariffs by the government rose to US$400 million during the 2016-17 fiscal year, despite higher contributions from the private sector.
According to ministry data, in the 2014-15 fiscal year, state-owned power generation was 65 percent and private sector generated 35pc. By 2016-17 that ratio was 50-50.
Contributions by the private sector are expected to rise in the future. “As you know, the lower tariff rate for consumer cannot cover the overall cost of generation, transmission and distribution of power . But in order to achieve 100pc electrification, over 10,000-15,000 of MW of energy may be needed,” Daw Mi Mi Khaing said.
“The problem is how to balance between power coming from the private sector and government investment and how to limit the financial liability in the whole sector to avoid further government losses.”