One of the conundrums we saw in 2017 was the continued shift in policy on power generation away from a coal and nuclear focus to a renewables and gas focus coinciding with significant financial difficulties in the power generation service lines of major gas turbine manufacturers. With policy aiming to exit coal entirely, at least in parts of the world such as the EU, we should be moving into a period when gas-fired generation comes into its own.
New combined-cycle gas turbines (CCGTs) are the most efficient thermal power plants in the world, converting a high proportion of energy inputs into power. Two of the largest turbine manufacturers, Siemens and GE, are both reporting efficiency levels for their new turbines of around 65%, which compares to the existing CCGT average of around 50%. Such high efficiencies mean new CCGTs will use less gas to generate the same level of power as average gas units.
In terms of projects worldwide with a capacity of more than 100 MW, we have been able to verify some 85 GW of gas power plants (predominantly CCGTs) currently under construction. As was our expectation, Asia accounts for the most in terms of capacity (34 GW), followed by North America, where both the US (20 GW) and Mexico (6 GW) have healthy build-out programmes. While new Asian capacity is supportive of additional LNG demand, the North American projects are all likely to be fed by local shale gas.
In Europe and South America, both regions where power capacity margins have significantly eased by the addition of renewables, neither have recently been looking at the need for much new thermal capacity and few units are under construction. However, looking forward, Europe dominates announced gas-fired projects and it could see an acceleration of such projects after 2020 as it increasingly retires nuclear, lignite and coal-fired generation. In the UK alone, there are 17 GW of proposed plants, while across Europe that figure is 51 GW.
Of plants under construction that are most likely to directly impact the LNG market, we have found around 15 GW located in LNG supplier nations (we put Egypt back into this bracket) and 37 GW in nations which are currently net LNG importers. If all 52 GW of these plants run peak load, that is likely to give rise to a net increase in annualised LNG demand of 18 Mtpa, made up of 5 Mtpa of supply lost to domestic consumption (in the LNG suppliers) and 13 Mtpa of incremental import demand. If all those plants run baseload, then net demand goes up by 36 Mtpa—10 Mtpa of supply lost to domestic consumption and 26 Mtpa of additional export demand. Given a likely mix of baseload and peak-load use, we estimate a mean of 27 Mtpa of net incremental demand.