The Institute for Energy Economics and Financial Analysis (IEEFA) reported that since 2021, more than half of the proposed LNG-to-power projects in four key Southeast Asian markets, with a total value of $67.8 billion, have either been canceled or suspended. This situation has arisen due to rising costs and financial risks associated with the projects.
Analysis of LNG Projects in Asia
IEEFA's five-year analysis of proposed LNG projects valued at $109.2 billion, as well as $21 billion related to LNG import terminals in the Philippines, Vietnam, Thailand, and Bangladesh, shows that from 2021 to 2026, 49 LNG power plants and 22 gas regasification terminals have been canceled or made no progress. These halted or canceled projects are valued at approximately $67.8 billion, which is nearly 4.5 times the value of projects completed during the same period.
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Financial Challenges and Project Risks
Sam Reynolds, a co-author of this report and head of LNG/Gas research at IEEFA Asia, stated: "Recent developments in fuel, equipment, and currency markets have intensified the execution risks of LNG-to-power projects in developing Asian countries and weakened the assurance of revenue necessary for project financing." According to him, the expansion of LNG in this region has progressed significantly slower than the expectations of the global gas industry.
Since 2021, the risks associated with LNG projects in Southeast Asia have increased. Rising and volatile LNG prices, the depreciation of Asian currencies against the US dollar, long lead times for securing gas turbines in a very tight equipment market, and higher capital costs are among these challenges. Christopher Dolman, a co-author of this report and LNG/Gas specialist at IEEFA Asia, also stated: "These risks could increase the final cost of electricity generated from LNG power plants by up to 130% compared to baseline assumptions in 2021."
Energy development programs in Asia that were heavily reliant on LNG were typically designed based on assumptions of low fuel prices and acceptable capital costs, but these assumptions are no longer valid. However, due to the increased demand for LNG resulting from the AI boom and the construction of data centers in Asia, the outlook for LNG demand in Southeast Asia is undergoing significant changes, as combined cycle gas turbines (CCGT) remain the most reliable source of 24-hour electricity for large companies in the region.
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