by Reuters November 4, 2015
SINGAPORE – The shine is
coming off once bright prospects for natural gas as the future fossil fuel of choice
in Asia as power companies in India and Southeast Asia tap abundant and cheap
domestic coal resources to generate electricity.
Asian loyalty to coal is
shrinking the space available for natural gas just as supplies are ramping up
after massive investments in US and Australian output. Demand growth for
natural gas is also slowing in top energy consumer China, further dampening the
fuel’s prospects.
While much attention has been given to a potential peak in China’s coal demand
and worries about emissions, in Asia alone this year power companies are
building more than 500 coal-fired plants, with at least a thousand more on
planning boards. Coal is not only cheaper than natural gas, it is often
available locally and has no heavy import costs.
Growth in coal use is
expected to hit liquefied natural gas (LNG) producers hardest, especially with
prices half of year-ago levels as Australia and North America wind up their
spending spree of hundreds of billions of dollars.
“Electricity is increasing
its share in total energy consumption and coal is increasing its share in power
generation,” said Laszlo Varro, head of the gas, coal and power markets
division for the International Energy Agency (IEA).
Some of the biggest growth in
coal use is in India, where it meets 45 percent of total energy demand,
compared with just over 20 percent each for petroleum products and
biomass/waste.
“We’re absolutely sure
India’s coal demand will continue to grow,” Varro said.
At the same time, costs for
solar, wind and other renewables are falling, and countries are stepping up
investments, eating away more of natural gas’ portion of the market.
China, in particular, added
nearly as much wind capacity as the rest of the world in 2014, according to the
latest annual report from the Global Wind Energy Council, and India is also
investing heavily in renewable energy.
Renewables are attractive as
an offset to the carbon emissions and pollution associated with coal, and also
because they help reduce import bills for expensive fossil fuels.
Other emerging Asian
economies are seeing similar growth to India’s in coal-fired generation.
“Coal is still the cheapest
and the fuel that most Asian countries will use,” said Loreta G. Ayson,
undersecretary at the Philippine Department of Energy.
Forty percent of the 400
gigawatts in generation capacity to be added in Southeast Asia by 2040 will be
coal-fired, the IEA says. That will raise coal’s share of the Southeast Asian
power market to 50 percent from 32 percent, while natural gas declines to 26 percent
from 44 percent.
And growth in coal is not
only seen in developing economies. Coal’s share of the energy mix in Japan, top
importer of LNG, will rise to 30 percent by 2030, up from 22 percent in 2010,
according to the nation’s Institute of Energy Economics, while natural gas will
hold at 18 percent.
Helge Lund, chief executive
of LNG major BG Group, said a radical review of how the gas industry is run was
needed as costs have doubled while revenues are being eroded by cheap prices
and competition from other fuels.
Still, there could be a
silver lining for gas as it grows in other sectors such as transportation and
small-scale power units to meet local needs in remote areas.
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