March 17, 2015 / 6:25 AM / 4 years ago

Cheap gas to take on coal in Asia's power mix -Wood Mackenzie

SINGAPORE, March 17 (Reuters) - Coal faces increasing competition from natural gas in power generation in Asia, as prices for the cleaner-burning fuel are expected to stay depressed, energy consultancy Wood Mackenzie said on Tuesday.

Asian liquefied natural gas (LNG) spot prices have halved in the last six months to multi-year lows near $7 per million British thermal units (mmBtu) due to weak demand LNG-AS.

“We do not forecast any sustained price recovery above $10 per mmBtu with over a 100 million tonnes per annum of new LNG expected to be operational by 2020,” said Graham Tyler, research director for Asia gas and power at Wood Mackenzie.

“This looming supply glut will create an environment where coal versus gas competition in Asia is a real possibility,” he said.

Coal futures dropped to 9-year lows this week after a short-lived rally earlier in the year, forcing many miners to produce at a loss. As such, coal prices are unlikely to fall much further, according to the consultancy.

Thermal coal currently accounts for about half of all power generation across Asia, with natural gas making up only 11 percent, according to Wood Mackenzie.

Environmental concerns and the introduction of carbon trading schemes will favour more gas burning in China and South Korea, while Malaysia is also expected to increasingly turn to gas amid delays to construction of new coal-fired power plants and an oversupply of domestic gas, Wood Mackenzie said.

The consultancy forecasts power demand in Asia to grow 5 percent per year on average to 2030, which will require an additional 2,000 gigawatt of power capacity.

Reporting by Jacob Gronholt-Pedersen; Editing by Joseph Radford

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