LNG pro­vides a tran­si­tion into Asia’s Greener fu­ture.

Norway-Asia Business Review - - Contents - HENRI VIIRALT PHOTO: BW LNG

Liq­uid­nat­u­ral gas could fa­cil­i­tate the en­ergy tran­si­tion in de­vel­op­ing coun­tries and de­crease green­house gas emis­sions com­pared to coal in the mean­time ar­gues Mr Alexan­der Dodge. Mr Dodge is a PhD stu­dent of Ge­og­ra­phy at Nor­we­gian Univer­sity of Science and Tech­nol­ogy. He is half way into a 4-year re­search and al­ready con­ducted re­search in Sin­ga­pore, In­done­sia, Myan­mar and Thai­land. His study is mainly qual­i­ta­tive and he in­ter­viewed around 50 com­pa­nies so far.

“I look at how coun­tries in South­east Asia can best en­hance their so­cial and eco­nomic de­vel­op­ments and how the right en­ergy sys­tems can sup­port this de­vel­op­ment. We lived in a world of cheap elec­tric­ity where we could just burn and burn with­out ac­count­abil­ity. That’s over.

Still coal is grow­ing quite quickly in South­east Asia de­spite con­se­quences for health and en­vi­ron­ment. Could liq­uid nat­u­ral gas be an al­ter­na­tive? It has around 50% less car­bon emis­sions, a smaller en­vi­ron­men­tal foot­print, does not re­quire as much fresh wa­ter in the pro­duc­tion and does not re­lease mer­cury into the en­vi­ron­ment.”

The Ox­ford In­sti­tute for En­ergy Stud­ies con­cluded last year that the coal ca­pac­ity of South­east Asia will in­crease 139% by 2025 com­pared with 2015 if the tar­gets of power plants are met (Sylvie Cornot-Gan­dolfe, The role of coal in South­east Asia’s power sec­tor, De­cem­ber 2016).

In Mr Dodge’s opin­ion, liq­uid nat­u­ral gas should not be seen as com­pet­ing with re­new­ables, but as com­pat­i­ble. “So­lar and wind power are be­com­ing a lot cheaper and will make up large parts of the en­ergy fu­ture, but sup­ply is in­ter­mit­tent and en­ergy stor­age is a large chal­lenge. En­ergy sup­ply from Hy­dropower, for ex­am­ple, is less re­li­able in dry sea­sons.

Liq­uid nat­u­ral gas power plants could sta­bilise elec­tric­ity sup­ply from re­new­ables. It only takes liq­uid nat­u­ral gas power plants 15 min­utes to sync with the power grid. Coal power plants take 300 min­utes to sync with the en­ergy grid mak­ing it much more dif­fi­cult to mix with re­new­able en­ergy.”

Re­cently Mr Dodge con­ducted re­search in Thai­land com­mis­sioned and sup­ported by the Royal Nor­we­gian Em­bassy in Thai­land. The re­search find­ings about op­por­tu­ni­ties for Nor­we­gian com­pa­nies in the liq­uid nat­u­ral gas sec­tor were just pub­lished and can be down­loaded from the Nor­we­gian Em­bassy in Thai­land’s web­site. The re­search in­cluded the so­cial, po­lit­i­cal and geo­graph­i­cal frame­work of the Thai liq­uid nat­u­ral gas sec­tor.

“Pri­vati­sa­tion of en­ergy sec­tor in Thai­land is highly po­lit­i­cal, this is why it’s im­por­tant to in­clude the so­cial and po­lit­i­cal de­vel­op­ments in mar­ket re­search,” Mr Dodge ex­plains. “There

has been talk of pri­vati­sa­tion since the 1990s when the World Bank ini­ti­ated the dis­cus­sion. At this time, state-owned PTT still has an ef­fec­tive mo­nop­oly in the en­ergy sec­tor.

At the same time, there are new op­por­tu­ni­ties. The coal fired power plant in Krabi, South Thai­land was dis­puted quite heav­ily. As a re­sult, the plant was de­layed an ad­di­tional two years await­ing a new as­sess­ment of the health and en­vi­ron­men­tal im­pact.

There is a lot of un­cer­tainty, but liq­uid nat­u­ral gas could be a more en­vi­ron­men­tal friendly al­ter­na­tive to coal. The chal­lenge for Thai­land is that do­mes­tic gas re­serves are wan­ing. The ques­tion now is how to bet­ter utilise the re­serves to achieve de­vel­op­ment goals. Thai­land has a lot of ca­pac­ity and ca­pa­bil­ity to im­port liq­uid nat­u­ral gas, but prices will in­crease if gas has to be im­ported so ef­fi­ciency of do­mes­tic re­serves is very im­por­tant.”

Thai­land is by far the only coun­try in South­east Asia con­sid­er­ing the pos­si­bil­i­ties of liq­uid nat­u­ral gas. “Pres­i­dent Joko Wi­dodo wants to de­velop the pe­riph­eral is­lands of In­done­sia. The gross re­gional do­mes­tic prod­uct of Java is much higher than the other is­lands. 62% of elec­tric­ity gen­er­a­tion out­side of Java re­lies on fuel oils.

28% of en­ergy costs go to fuel oils, but only 11% of In­done­sia’s elec­tric­ity gen­er­a­tion comes from fuel oils. This sys­tem is too ex­pen­sive to build up suf­fi­cient ca­pac­ity for all is­lands of the coun­try. Dif­fer­ent small-scale liq­uid nat­u­ral gas plants could of­fer the much­needed elec­tric­ity to the is­lands.

An­other ex­am­ple is Myan­mar which just opened up to the out­side world and des­per­ately needs power. While Myan­mar has a large up­stream po­ten­tial in do­mes­tic gas re­serves, these projects won’t come online for a num­ber of years. The medium term solution could be im­port­ing liq­uid nat­u­ral gas to meet the power de­mand.”

Nor­we­gian com­pa­nies could sup­port coun­tries in South­east Asia to meet their power de­mand, par­tic­u­larly in pe­riph­eral re­gions. “The tech­nol­ogy needed for small-scale liq­uid nat­u­ral gas dis­tri­bu­tion was de­vel­oped in the 1990s for the Nor­we­gian mar­itime in­dus­try. Nor­we­gian com­pa­nies have the most ad­vanced and cost-ef­fec­tive tech­nol­ogy for Small-Scale liq­uid nat­u­ral gas value chains, and these so­lu­tions can help sup­port en­ergy de­vel­op­ment in pe­riph­eral re­gions in South­east Asia.

The real chal­lenges lie in the po­lit­i­cal land­scape of these coun­tries and specif­i­cally in the gov­er­nance of pub­licpri­vate part­ner­ships or lack thereof. The tech­nol­ogy is avail­able, but still small scale liq­uid nat­u­ral gas projects strug­gled to de­vel­oped. The crash­ing oil price also didn’t help to main­tain ur­gency for new forms of en­ergy sup­ply.

In Tai­land specif­i­cally the pos­si­bil­i­ties for for­eign com­pa­nies are lim­ited by sev­eral chal­lenges. First of all, Petroleum Author­ity of Thai­land (PTT) still owns all the long term con­tracts with gas power plants. These con­tracts last the en­tire life­time of the power plant, so there re­ally is no room for a third party to come in. Sec­ond, PTT still owns the lower-priced do­mes­tic gas sup­ply, and third par­ties will strug­gle to com­pete. Third, most LNG ter­mi­nal and Pipe­line Ca­pac­ity is fully booked by PTT, de­spite Third Party Ac­cess im­ple­men­ta­tion”

De­spite these chal­lenges, Mr Dodge iden­ti­fied three op­por­tu­ni­ties for Nor­we­gian com­pa­nies in the liq­uid nat­u­ral gas sec­tor in Thai­land. “Op­por­tu­ni­ties for Nor­we­gian com­pa­nies lie with pos­si­ble new LNG fu­elled power plants if coal-fired power plant plans are shelved.

Se­condly, the Elec­tric­ity Gen­er­a­tion Author­ity of Thai­land (EGAT) is plan­ning to en­ter the LNG sec­tor by procur­ing a Float­ing Stor­age and Re­gasi­fi­ca­tion Units (FSRU). Three out of four com­pa­nies around the world that make FSRUs are Nor­we­gian. And lastly, the un­der­util­i­sa­tion of ex­ist­ing LNG ter­mi­nals is ex­pen­sive for Thai­land, and Nor­we­gian firms can help in­crease util­i­sa­tion by part­ner­ing to de­velop a small-scale LNG dis­tri­bu­tion chain along coastal Thai­land. This would help sup­port in­dus­trial de­vel­op­ment in South­ern Thai­land.

With all these op­por­tu­ni­ties, the ques­tion re­mains if PTT would be in­ter­ested in ex­pand­ing LNG ter­mi­nal util­i­sa­tion, since they cur­rently con­trol the ca­pac­ity. In ev­ery case, Nor­we­gian com­pa­nies in­ter­ested in the Thai gas sec­tor have to be very re­flex­ive. They have to be aware of the de­vel­op­ments in the Thai gas sec­tor, make quick de­ci­sions and fol­low up with the po­lit­i­cal and so­cial sphere. Nor­way can not just sup­ply tech­nol­ogy, but needs to en­gage in part­ner­ships and help solve po­lit­i­cal and so­cial chal­lenges.

This is the gen­eral ap­proach Nor­we­gian com­pa­nies need to take and the Nor­we­gian em­bassy can sup­port com­pa­nies with this. More specif­i­cally, com­pa­nies should de­velop a roadmap to LNG de­vel­op­ment that in­cludes iden­ti­fy­ing the stake­hold­ers of the Thai en­ergy in­dus­try. This roadmap should in­clude in­dus­trial stake­hold­ers, mar­itime stake­hold­ers, in­de­pen­dent power pro­duc­ers that need or want liq­uid nat­u­ral gas projects to­gether with the needed dis­tri­bu­tion tech­nol­ogy to do so. This way com­pa­nies can iden­tify where they can help out.”

Mr Dodge’s pos­si­ble next step re­gard­ing Thai­land is con­duct­ing a spe­cific case study that could high­light the ben­e­fits of liq­uid nat­u­ral gas. “There is a lot of un­cer­tainty, but also a large op­por­tu­nity for liq­uid nat­u­ral gas. It’s cost-ef­fec­tive and a rea­son­able al­ter­na­tive to coal with a lot less en­vi­ron­men­tal im­pact.” He again makes the case for an all-in­clu­sive ap­proach to study­ing the liq­uid nat­u­ral gas mar­ket. “You re­ally need to un­der­stand global, na­tional and po­lit­i­cal de­vel­op­ments in these cases, and a geog­ra­pher can study just that.”

PHOTO: KANFER SHIP­PING

Above left: BW LNG’s FSRU “Sin­ga­pore” plow­ing the seas for its next as­sign­ment in Asia. Above: Nor­way has de­vel­oped many novel LNG so­lu­tions to re­duce in­fra­struc­ture cost. Here Kanfer Ship­ping’s ar­tic­u­lated tug barge sys­tem.

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