Fuel for Thought – 8 Jul 2011

08 Jul, 2011

China’s explosive gas import demand growth: China will increase its gas imports to 90 bcm by 2015, more than six times current import volumes according to a Bernstein Research report. LNG imports are projected to increase to 40 bcm by 2015. If China manages import growth of this scale accompanied by continuing robust growth in Japanese, South Korean and Indian imports, an increasingly LNG dependent Europe will be competing head on with the Asia Pacific region for available LNG cargoes. The impact of Asian LNG demand is explored in more detail in a recent article.

RWE considering sale of Npower: The fact that RWE is considering selling Npower, potentially at a value less than its 2002 acquisition price, is not a vote of confidence in the investment landscape of the UK electricity market. RWE may be obliged to sell assets to pay down debt, but the UK business has been part of its core European growth strategy. The UK government faces an uphill challenge in delivering an electricity market reform package that will deliver the £110b of investment in new generation capacity it says is required over the next decade.

RWE and EON to shelve UK nuclear plans? The UK power market badly needs the commitment of large balance sheet utilities to deliver new power plants. Delivery of new nuclear capacity is a cornerstone of the Coalition’s vision for an orderly transition to decarbonisation of the power market. However recent reports from the German press suggest hesitation of the two German giants RWE and EON in committing to nuclear investments in the UK. Capital constrained investors face the combined challenges of regulatory uncertainty post Fukushima, technology risk and an increasingly uncertain UK energy policy environment.

Opportunities for CCS technology in China ? Chris Huhne, the UK energy secretary, was promoting the potential of CCS technology development this week. But the response of China Light and Power (CLP), one of the Asian generation investment giants was unequivocal. CLP sees no role for CCS in China in the next 10 or 15 years. If this is the case then a rapid transition to gas fired generation in China has to be a key focus in constraining global emissions.

Picture of the week:

Jellyfish responsible for the shutdown of the Torness nuclear plant this week. The reactors were shutdown as a safety precaution after huge volumes of jellyfish clogged the seawater intakes to the plant’s cooling system.