FACTS: Taiwan's power industry looking toward LNG

July 27, 2005
Taiwan's gas demand is growing as power generators turn away from nuclear sources in favor of LNG, said Fesharaki Associates Consulting & Technical Services Inc.

By OGJ editors
HOUSTON, July 27 -- Taiwan's gas demand is growing as power generators turn away from nuclear sources in favor of LNG, said Fesharaki Associates Consulting & Technical Services Inc. (FACTS).

In 2004, gas-fired power plants accounted for 10% of Taiwan's electric generation. Gas demand growth will come from the new Tatan power plant and also from new independent power producers (IPPs), FACTS analysts Douglas Chun and Alexis Aik said in a July research report.

Taiwan Power Co.'s 4,272-Mw Tatan plant is expected to require 1.68 million tonnes/year of LNG. Smaller IPPs also will increase gas demand. A government mandate requires that Taiwan's IPPs build gas-fired combined cycle plants.

Taiwan infrastructure
Pipelines are being built to link southern and northern Taiwan, Chun and Aik said.

Taiwan's southern LNG terminal, Yung An near Kaohsiung, is being expanded. Yung An is linked with the northern port of Tuangsiao via a 238-km subsea pipeline.

To encourage a northern terminal at Taichung, Taiwan's government imposed a 1% penalty for gas moved from Yung An to supply the Tatan power plant. Taiwan's state-owned Chinese Petroleum Corp. has started building the Taichung terminal, the FACTS analysts said.

The Taichung terminal is expected to supply gas to Tatan power plant in 2008 via a 135-km offshore pipeline currently under construction.

Meanwhile, the Tatan power plant's two generators are expected to be operational in 2006, and diesel will be used in a combined-cycle system until gas can be acquired through the Taichung terminal. Gas supplies are expected to come from Qatar.

World LNG demand
With an increasing number of gas power plants, Taiwan needs to secure greater amounts of LNG from overseas.

Asia's regional demand for LNG is expected to rise dramatically, led by India and China. Increased competition also will come from other parts of the world, with the US and Western Europe at the forefront.

"All of this means that the era of the LNG buyer's market is coming to an end. The sellers are aware of the situation and will no longer accept the low bids of the past," the FACTS report said.

More countries are seeking LNG for power generation and petrochemical production.

"Given the projected future needs of the Asia-Pacific region in general, and Taiwan in particular, it would be best if Taiwan finalized long-term LNG contracts sooner than later to lock in current prices before the suppliers realize that it is once again a seller's market," Chun and Aik said.