Growing pains ahead for Taiwan’s LNG market

Taiwan’s state-run utility Taiwan Power may soon join the ranks of global LNG buyers, but not without growing pains, market sources said.

Taipower has won government approval to import its own LNG after years of depending on Taiwan’s state-run energy company CPC to do its buying. It has also started consulting with existing LNG market participants – including at least one from Japan – on how to optimise purchases for its LNG-fired power plants.

The incoming Taiwanese government sees greater gas use as a way to bridge the energy gap as it plans to phase out nuclear power starting in 2018. It is also planning to decrease coal usage to bring down the country’s carbon emissions.

“The next government is focusing on increasing LNG,” a source at the country’s energy bureau told ICIS.

To that end, Taipower is being pushed to have a greater role in importing LNG. Taipower consumed 8.9m tonnes of LNG in 2015, a figure the company expects to grow by 28% in the next decade.

But that push is also putting Taipower in conflict with CPC, the energy company that has served as Taiwan’s sole importer. CPC operates Taiwan’s two existing LNG terminals in Taichung and Yung An.

Taiwan’s government has charged CPC with building a new 3mtpa terminal that Taipower can use to import LNG. The government hopes the terminal will be completed in 2023, but CPC has not yet bought land for the project and is still negotiating property prices, a source close to the project told ICIS.

The Taiwanese government is now considering allowing Taipower to use CPC’s two existing terminals pending CPC’s permission on each arrival. CPC is currently studying the proposal and is expected to issue its findings in June.

That system would face the sort of headwinds already seen in China, where independent LNG buyers are on paper allowed to import cargoes into terminals operated by PetroChina and other state-owned companies. In practice, however, the state-owned companies do not always give permission.

But it has become clear that Taipower is already preparing to enter the LNG market. The company consulted with one Japanese utility on how to navigate gas purchases, sources told ICIS.

“[Taipower] is trying to get more market information,” the source said. ben.lefebvre@icis.com