South Korea’s plans to expand the share of nuclear power in its long-term power generation could pose downside risks to long-term LNG demand.
This is what analysts at BMI, a unit of Fitch Solutions, said in a new report recently sent to Rigzone, noting that the 10th Basic Plan for the country’s long-term electricity supply and demand envisages increasing the share of nuclear power generation from 27.4 percent in 2021. to 32.4 percent in 2030 and to 34.6 percent in 2036.
“In contrast, the plan cuts LNG’s share from 29.2% in 2021 to 22.9% in 2030 and 9.3% in 2036,” IMC analysts said in the report.
“This is a complete reversal of former President Moon Jae-in’s policy of shutting down all reactors when they reach the retirement age of 40 and expanding the role of LNG in the power sector. The decision to favor the nuclear power appears to be motivated by a desire to reduce the LNG import bill and achieve its goal of reducing emissions by 40 percent by 2030 as part of the long-term decarbonization strategy,” they added the analysts
“We expect the new policy to generate significant implications for LNG demand [the] power sector in the long term, but we do not expect an immediate impact on LNG consumption in the short term due to strong market fundamentals supported by increased LNG imports and a sharp decline in LNG spot prices,” they continued the analysts
Almost medium term
In the short to medium term, the power sector is expected to offer significant potential upside risks to LNG consumption, according to IMC analysts, who noted in the report that “demand growth [is] Much of that is expected to come from policy-driven conversion from coal to LNG in power plants.”
IMC representatives noted in the report that former President Moon Jae-in’s government had already closed 10 aging coal-fired power plants.
“At the beginning of 2022, the government has permanently closed its two oldest coal-fired Honam No. 1 and No. 2 power plants, which will be replaced by new LNG-based ones in line with the previous government’s drive to reduce dependence on coal country. in electricity generation,” the analysts said.
“Therefore, we expect LNG to find support from opportunities to replace coal in the power sector, as the government aims to reduce the role of coal from 34.3% in 2021 to 19.7% in 2030 and 14, 4% in 2036,” the analysts added.
“Gas will remain the fuel of choice to replace more polluting coal-based power generation,” the analysts said.
Despite high spot LNG prices, South Korea’s LNG imports continued to increase in 2022, BMI analysts noted in the report.
“LNG consumption of [the] The power sector remained high at around 11 million tonnes per annum in 2022,” the analysts said.
Surprise in reverse
In the report, IMC analysts predicted that South Korea’s LNG imports could surprise on the upside if nuclear targets fail to materialize.
“Frequent government policy changes signaled the uncertain path to the role of gas in the energy mix and supply and demand trajectories,” the analysts said.
“President Yoon may push his policies to be implemented throughout his term, but we do not rule out that his current energy policies may be reversed when his term in office ends in early 2027. We expect LNG imports from South Korea will increase marginally in the short term – and in the medium term will rise above 61 bcm in 2026 as it aims to replace coal with LNG and expand LNG regasification and storage capacity,” they added.
“However, LNG imports are expected to decline from 2027 onwards, with total imports falling to 54 bcm in 2032 due to the potential loss of demand from the expansion of nuclear power generation “, the analysts said.
LNG import table
According to the latest BP Statistical Review of World Energy, which was published in June 2022, South Korea was the third largest importer of LNG in 2021 with a figure of 64.1 billion cubic meters. China was the top importer, with 109.5 billion cubic meters, and Japan was the second importer, with 101.3 billion cubic meters, the report shows. Total LNG imports in 2021 were 516.2 billion cubic meters, the report revealed.
BP’s latest statistical review, showing LNG import data from 2011 to 2021, lists South Korea as the second largest importer of LNG in 2011, 2012, 2013, 2014, 2015 and 2016. The review includes South Korea as the third largest importer of LNG. in 2017, 2018, 2019 and 2020. Japan was the largest importer of LNG from 2011 to 2020, according to the review.
Total LNG imports in 2020 were 490.1 billion cubic meters, the review revealed. This number stood at 484.2 billion cubic meters in 2019, 430.4 billion cubic meters in 2018, 393.3 billion cubic meters in 2017, 358.3 billion cubic meters in 2016, 337.1 billion cubic meters in 2015, 6.8 billion meters cubic meters, 2015, 6. cubic meters in 2013, 324.9 billion cubic meters in 2012 and 328.3 billion cubic meters in 2011, according to the review.
New President
President Yoon Suk Yeol was inaugurated on May 10, 2022, as the nation’s 20th head of state, an English version of the website of the Office of the President of the Republic of Korea shows.
“I stand before you today, humbled by the trust and responsibility you have placed in me and aware of my solemn duty to rebuild this great nation,” the new president said in his inaugural address, which was published on place
“It is the call of our generation to build a nation that embraces liberal democracy and ensures a prosperous market economy, a nation that fulfills its responsibility as a trusted member of the international community, and a nation that truly belongs to the people.” added. the speech
“It is critical that we achieve rapid growth and this will only be possible through science, technology and innovation,” he continued.
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