Voluntary caps to trim South Korean coal burn in 2021
Voluntary restrictions on the use of South Korea's state-owned coal plants this year could cut annual coal-fired power generation by around 3.8TWh or 1.4mn t of NAR 5,800 kcal/kg-equivalent coal, Argus analysis shows.
Much of this decline may have already been recorded in the first four months of 2021 through the government's winter suspension plan, with the outlook for May-December 2021 potentially more stable versus 2020. But rising nuclear availability later this year and potential coal-to-gas fuel switching continue to pose downside risks to South Korean coal demand.
As part of efforts to reduce carbon emissions, Seoul has asked the five state-owned Kepco utilities to voluntarily restrict the use of their coal plants this year. The utilities have been set individual targets to cut their annual coal-fired generation by 18.0-23.8pc compared with the 2017-19 average, according to sources familiar with the matter and documents seen by Argus.
The voluntary cuts would, if enacted by the utilities, reduce Kepco's coal-fired generation by 3.8TWh or 2.2pc on the year to 172.9TWh in 2021, Argus analysis shows. Sources say the voluntary restrictions are likely to be focused in the April-June and September-November periods, meaning utilities could be free to ramp up coal-fired generation to meet any peaks in summer cooling demand.
So far this month, voluntary restrictions have mostly affected operations at Korea East-West Power's 6,040MW Dangjin coal-fired plant and Korea Western Power's 6,100MW Taean plant, KPX data show (see table), with up to 924GWh of output restricted by the measures, Argus estimates.
Argus estimates that Kepco utilities' coal-fired generation has already fallen by 5.5TWh or 9.7pc on the year in January-April, based on the available data for January-February and on estimates based on available capacity and historical average load factors through March-April. This means that Kepco utilities could potentially increase coal-fired generation by 1.4pc on the year in May-December 2021 and still meet the voluntary cuts to annual output from 2017-19 levels.
Coal-fired generation among private utilities — which averaged 2.2GW in 2020 — is not subject to any voluntary cuts, and could grow in 2021 thanks to capacity additions this year. The 1,040MW Goseong 1 coal-fired unit is understood to have commenced operations this month, with the 1,000MW Shin Seocheon 1 and 1,040MW Goseong 2 scheduled to start up in June and October, respectively. As of February 2021, Kepco utilities accounted for 32.8GW of the country's installed coal capacity and private utilities 2.7GW.
Coal burn set for autumn revival?
Based on the seasonal trend in coal-fired generation over May-December in 2019 and 2020, Kepco's coal-fired generation may continue to lag 2020 over May-June, be broadly flat over the peak cooling period in July-September and then grow strongly in October-November (see chart).
Kepco utilities may be incentivised to profile more of their annual coal-fired generation for the autumn shoulder period than the spring, as this is when coal is likely to be most competitive with gas for power generation. The majority of South Korea's LNG import supply is linked to oil with a lag of 3-6 months, which means import costs are set to gradually rise throughout 2021 as the strength in oil prices since November 2020 filters through to contractual prices.
Rising LNG import costs should lift domestic gas prices further above coal-switching prices by the autumn, making coal-fired generation relatively more economical (see chart). This would be in stark contrast to 2020, when oil-linked gas costs were highly competitive with coal for power generation in the autumn, thanks to the collapse in oil prices early in the Covid-19 pandemic in the spring.
The autumn period this year is also expected to be characterised by strong nuclear generation. The latest maintenance schedules suggest that available nuclear capacity will average 19.2GW over July-December, up from actual generation of 16.9GW in the same time last year. And availability could be even higher if the new 1,400MW Shin Hanul 1 reactor starts up as planned around July-August and assuming no changes to the maintenance schedule at other plants.
Coal's potential cost advantage over gas for power this autumn could encourage utilities to pare back gas-fired generation more than coal to accommodate the expected rise in nuclear generation this autumn.
But the potential increase in nuclear generation could also offer utilities a chance to make even deeper cuts to their annual coal-fired output to exceed the voluntary cuts while sustaining gas-fired generation at 2020 levels in the autumn, although this would likely hit the Kepco utilities' bottom line and potentially raise power prices — something the government is often keen to avoid. South Korean president Moon Jae-In last week said that he intends to revise up the country's emissions cut target for 2021-30 during the Leaders' Summit on Climate, hosted by US president Joe Biden.
| South Korean voluntary coal-fired plant restrictions | MW | |||
| Plant | Unit number | Start | Stop | Capacity |
| Voluntary suspensions so far in 2021 | ||||
| Dangjin | 1 | 28 Apr 2021 | 30 Apr 2021 | 500 |
| Dangjin | 3 | 24 Apr 2021 | 30 Apr 2021 | 500 |
| Dangjin | 4 | 10 Apr 2021 | 12 Apr 2021 | 500 |
| Dangjin | 6 | 10 Apr 2021 | 12 Apr 2021 | 500 |
| Dangjin | 7 | 24 Apr 2021 | 30 Apr 2021 | 500 |
| Dangjin | 9 | 7 Apr 2021 | 18 Apr 2021 | 1,020 |
| Taean | 3 | 9 Apr 2021 | 18 Apr 2021 | 500 |
| Taean | 3 | 23 Apr 2021 | 30 Apr 2021 | 500 |
| Taean | 4 | 9 Apr 2021 | 12 Apr 2021 | 500 |
| Taean | 4 | 23 Apr 2021 | 25 Apr 2021 | 500 |
| Taean | 5 | 1 Apr 2021 | 18 Apr 2021 | 500 |
| Taean | 5 | 23 Apr 2021 | 30 Apr 2021 | 500 |
| Taean | 7 | 16 Apr 2021 | 18 Apr 2021 | 500 |
| Taean | 7 | 23 Apr 2021 | 25 Apr 2021 | 500 |
| Taean | 8 | 23 Apr 2021 | 30 Apr 2021 | 500 |
| Boryeong | 6 | 17 Apr 2021 | 18 Apr 2021 | 500 |
| — KPX | ||||
| Table shows voluntary restrictions published so far in April 2021 | ||||
Related news posts
Trump vows to target 'green' spending, EV rules
Trump vows to target 'green' spending, EV rules
Washington, 19 July (Argus) — Former president Donald Trump promised to redirect US green energy spending to other projects, throw out electric vehicle (EV) rules and increase drilling, in a speech Thursday night formally accepting the Republican presidential nomination. Trump's acceptance speech, delivered at the Republican National Convention, offered the clearest hints yet at his potential plans for dismantling the Inflation Reduction Act and the 2021 bipartisan infrastructure law. Without explicitly naming the two laws, Trump said he would claw back unspent funds for the "Green New Scam," a shorthand he has used in the past to criticize spending on wind, solar, EVs, energy infrastructure and climate resilience. "All of the trillions of dollars that are sitting there not yet spent, we will redirect that money for important projects like roads, bridges, dams, and we will not allow it to be spent on the meaningless Green New Scam ideas," Trump said during the final night of the convention in Milwaukee, Wisconsin. Trump and his campaign have yet to clearly detail their plans for the two laws, which collectively provide hundreds of billions of dollars worth of federal tax credits and direct spending for renewable energy, EVs, clean hydrogen, carbon capture, sustainable aviation fuel, biofuels, nuclear and advanced manufacturing. Repealing those programs outright could be politically difficult because a majority of spending from the two laws have flowed to districts represented by Republican lawmakers. The speech was Trump's first public remarks since he was grazed by a bullet in an assassination attempt on 13 July. Trump used the shooting to call for the country to unite, but he repeatedly slipped back into the divisive rhetoric of his campaign and his grievances against President Joe Biden, who he claimed was the worst president in US history. Trump vowed to "end the electric vehicle mandate" on the first day of his administration, in an apparent reference to tailpipe rules that are expected to result in about 54pc of new cars and trucks sales being battery-only EVs by model year 2032. Trump also said that unless automakers put their manufacturing facilities in the US, he would put tariffs of 100-200pc on imported vehicles. To tackle inflation, Trump said he would bring down interest rates, which are controlled by the US Federal Reserve, an agency that historically acts independently from the White House. Trump also said he would bring down prices for energy through a policy of "drill, baby, drill" and cutting regulations. Trump also vowed to pursue tax cuts, tariffs and the "largest deportation in history," all of which independent economists say would add to inflation. The Republican convention unfolded as Biden, who is isolating after testing positive for Covid-19, faces a growing chorus of top Democratic lawmakers pressuring him to drop out of the presidential race. Democrats plan to select their presidential nominee during an early virtual roll-call vote or at the Democratic National Convention on 19-22 August. By Chris Knigh t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Whitehaven hits 2023-24 coal guidance
Australia’s Whitehaven hits 2023-24 coal guidance
Sydney, 19 July (Argus) — Australian coal producer Whitehaven met its production guidance for its New South Wales (NSW) mines in the 2023-24 fiscal year to 30 June, with managed run-of-mine (ROM) output from its newly acquired Queensland mines also meeting their guidance. Saleable coal production at Whitehaven's NSW-based assets totalled 16.7mn t for 2023-24, up by 6pc on the 15.7mn t recorded last fiscal year and within its guidance for 2023-24 of 16mn-17.5mn t. Saleable output from NSW for April-June was 4.3mn t, 11pc higher than January-March's 3.87mn t and above the year earlier figure of 3.83mn t. Saleable production from Queensland totalled 4mn t, Whitehaven's first quarter since acquiring Australian-Japanese joint venture BHP Mitsubishi Alliance's 12mn t/yr Blackwater and 4mn t/yr Daunia coking and thermal coal mines on 2 April. Queensland coal sales of 3.2mn t for the quarter reflected slippage into July-September because of now resolved, transition-related rail constraints from Daunia, Whitehaven said. A selldown of around 20pc of Blackwater to global steel producers is progressing, the firm reported, without providing further details. The first production and sales have been achieved at the 10mn t/yr Vickery mine , while operations ceased during April at the 2.5mn t/yr ROM capacity Werris Creek mine. Whitehaven's overall unaudited unit cost guidance, excluding royalties, for NSW in 2023-24 was A$114/t ($76/t), above the guidance range of A$103-113/t because of lower production at Narrabri and underlying inflation. Capital expenditure was A$380mn, below the 2023-24 guidance of A$400-480mn. The Argus high-grade 6,000 kcal/kg NAR price averaged $133.46/t fob Newcastle and the 5,500 kcal/kg NAR coal price $88.47/t during April-June compared with $126.74/t and $93.85/t respectively for January-March. Whitehaven's full-year results will be published on 22 August. By Tom Major Whitehaven results Apr-Jun '24 Jan-Mar '24 Apr-Jun '23 Volumes (mn t) Managed coal production 8.3 3.9 3.8 Managed coal sales 7.3 3.8 3.9 Managed coal stocks 2.7 1.0 1.5 Coal sales revenue mix (%) Metallurgical coal 59 13 5 Thermal coal 41 87 95 Prices achieved ($/t) NSW average 137 136 177 Queensland average 180 Source: Whitehaven Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US gas producers may struggle to meet LNG demand
US gas producers may struggle to meet LNG demand
New York, 18 July (Argus) — US natural gas producers looking to become the primary suppliers to increasingly dependent overseas markets may still need to overcome tight pipeline capacity, volatility in oil markets and even growing competition from the US power sector. Large producers such as EQT and Chesapeake Energy are banking that the rapid buildout of LNG export capacity will connect the US to higher-priced markets and provide an outlet for a glut of US supply. At the same time, European buyers are depending on US gas to help wean the continent off Russian supplies since the Russia-Ukraine war broke out in 2022. But questions remain about the ability of US producers to feed the rapid expansion. The US already leads the world in LNG exports and is on pace to double that capacity later this decade. US baseload LNG export capacity was forecast to increase to 21.1 Bcf/d by the end of 2027, about one fifth of today's total lower-48 US gas production, according to the US Energy Information Administration (EIA). By 2030, Shell expects US LNG production will meet about 5pc of global gas demand and 30pc of global LNG demand. But to satisfy a world that much more reliant on US shipments of gas, US producers have to significantly grow output and build the pipelines needed to connect subterranean shale basins to the US Gulf coast, where almost all the US liquefaction capacity will be located. East Daley Analytics director Jack Weixel said regulatory challenges to permitting those pipelines threaten the US' ability to rapidly boost its LNG exports regardless of who is elected president in November. Growing pains There are unique challenges to raising production in all three of the US' biggest gas-producing formations — the Appalachian basins, the Permian basin of west Texas and southeast New Mexico, and the Haynesville shale of east Texas and northern Louisiana. In Appalachia, developers have almost entirely lost faith in their ability to secure the permits necessary to build new interstate pipelines, so incremental LNG demand will probably not be met by Appalachian gas. The Permian is the US' most prolific oil field, making it an unreliable associated gas producer; a dim outlook for crude prices would mechanically slash gas output. And in the less mature Haynesville, there are "a lot of open questions on how deep that inventory is and how much (it) can actually grow," Citi equity analyst Paul Diamond said. The threat to building new pipelines is not solely the domain of regulators, either, but can even come from within the industry itself, as US midstream giant Energy Transfer has shown over the past year by trying to block several new pipelines out of the Haynesville. Some of Energy Transfer's opponents have warned the legal dispute could hamper the gas production growth needed in the Haynesville to meet the US' coming LNG boom. Permitting aside, some analysts consulted by Argus expressed concern about the integrity of the US gas pipeline network itself, whether due to accidents or ransomware attacks, such as that which targeted the Colonial oil products pipeline in May 2021, disrupting fuel deliveries into the eastern US. Powerful competition Meeting booming LNG demand could be even harder if domestic gas needs exceed expectations. Gas producers and power generators eager to serve data centers running emergent artificial intelligence software have indicated that might be the case. EQT, the largest US gas producer by volume, in its most aggressive data center build-out scenario envisioned an 18 Bcf/d (510mn m³/d) increase in gas demand to generate electricity through 2030, while US gas pipeline operator Kinder Morgan forecast an increase between 7-10 Bcf/d. Goldman Sachs and consultancy Enverus forecast more modest increases of 3.3 Bcf/d and 2 Bcf/d, respectively. The US power sector consumed a record-high 35.4 Bcf/d of gas in 2023, the EIA said. About 43pc of US utility-scale electricity was generated by gas. EQT may be biased. But if its forecast is accurate, US gas producers may not be able to meet all that new demand while also exporting double what the US is exporting today, FactSet analyst Connor McLean said. In that case, a high-demand scenario like EQT's could leave the US gas market undersupplied, boosting US gas prices and closing the spot price arbitrage between US pipeline gas and global LNG, which has mostly been wide open for years. In response to elevated prices at the US gas benchmark, Henry Hub, overseas buyers might find themselves canceling US cargoes — if their supply contracts allow for it — eating the requisite liquefaction fee and taking delivery of a cargo from Qatar or Russia instead. Not so fast The caveat to risks of an undersupplied US gas market is that official timelines of when LNG export terminals are expected to enter service on the US Gulf coast may be overly optimistic. Texas' planned 18.1mn t/yr Golden Pass LNG delaying first LNG on the heels of its lead contractor going bankrupt is just one recent example of this. "All that does is give producers a little bit more time to get production to where it needs to be," Weixel said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
EU’s von der Leyen re-elected as Commission president
EU’s von der Leyen re-elected as Commission president
Brussels, 18 July (Argus) — The European Parliament today approved Ursula von der Leyen's re-election as president of the European Commission. Nominated by EU states in June, von der Leyen received 401 votes, by secret ballot, from parliament's 720 newly elected members. Von der Leyen called for continuing climate and energy policy in her 2024-29 mandate to achieve greenhouse gas (GHG) cuts of at least 90pc by 2040 from 1990 levels. "I have not forgotten how [Russian president Vladimir] Putin blackmailed us by cutting us off from Russian fossil fuels. We invested massively in homegrown cheap renewables. And this enabled us to break free from dirty Russian fossil fuels," said von der Leyen, promising to end the "era of dependency on Russian fossil fuels". She did not give an end date for this, nor did she specify if this includes a commitment to end Russian LNG imports. Von der Leyen went on to detail political guidelines for 2024-29. In the first 100 days of her new mandate, she pledged to propose a "clean industrial deal", albeit without giving concrete figures about how much investment this would channel to infrastructure and industry, particularly for energy-intensive sectors. The clean industrial deal will help bring down energy bills, she said. Von der Leyen told parliament the commission would propose legislation, under the European Climate Law, establishing a 90pc emission-reduction target for 2040. Her political guidelines also call for scaling up and prioritising clean-tech investment, including in grid infrastructure, storage capacity, transport infrastructure for captured CO2, energy efficiency, power digitalization, and deployment of a hydrogen network. She will also extend aggregate demand mechanisms beyond gas to include hydrogen and critical raw materials. Her political guidelines note the dangers of dependencies or fraying supply chains, from Putin's "energy blackmail" or China's monopoly on battery and chip raw materials. Majority report Passing the necessary legislation to implement her stated policies will now require approval from EU states and from parliament. Unless amplified by Germany's election next year, election victories by far-right parties in France and elsewhere appear not to threaten EU state majorities for specific legislation. Parliament's political centre-left S&D and liberal Renew groups, as well as von der Leyen's own centre-right EPP, have elaborated key policy requests . These broadly call for the continuation of von der Leyen's Green Deal, the set of legislation and policy measures aimed at 55pc GHG emission reduction by 2030, compared with 1990 levels. A symbolic issue for von der Leyen to decide, or compromise on, is the internal combustion engine (ICE). Her EPP group wants to stick to technological neutrality and to revise the phase-out, by 2035, of new ICE cars if they cannot run exclusively on carbon-neutral fuels. The EPP wants an EU e-fuel, biofuel, and low-carbon fuel strategy. Von der Leyen's guidelines reflect the need to gain support from centre-right, centre-left, and greens. For the ICE phase-out, she said the 2035 climate neutrality target for new cars creates investor and manufacturer "predictability" but requires a "technology-neutral approach, in which e-fuels have a role to play." She made no mention of carbon-neutral biofuels. It will be impossible for von der Leyen to satisfy all demands in her second mandate. That includes policy asks put forward by the EPP, ranging from a "pragmatic" definition of low-carbon hydrogen, market rules for carbon capture and storage, postponing the EU's deforestation regulation, to catering more for farmers, even by scrapping EU wildlife protection for wolves and bears. EU member states are expected to propose their candidates for commissioners in August, including those responsible for energy, climate, and trade policies. When parliament has held hearings for candidates in late October, von der Leyen's new commission would then be subject to a final vote. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more