Myanmar LNG projects overcome pandemic and sceptics
China and Hong Kong-led consortium has started operating first of three planned facilities as Yangon targets nationwide electrification
A Chinese-backed LNG-to-power project that recently started generating electricity for the largest city in Myanmar underlines rising Chinese involvement in the Southeast Asian country’s growing gas and power sectors.
The first phase of an LNG-fired power station in Yangon’s southeastern township of Thaketa went online in mid-June. It was built by a 50/50 joint venture between state-owned China National Technical Import and Export Corporation (CNTIC) and Hong Kong-listed independent power producer VPower Group, together with RGK+Z&A Group as a local partner.
The 477MW project is one of three planned by the Chinese consortium, which will have a combined capacity of 900MW and cost more than $800mn. All three projects were awarded to the consortium in September 2019 after a controversial public tender that was regarded as unappealing for most potential bidders.
Defying the doubters
The launch of the power station was months behind schedule, as all three projects were due to start generating electricity in early April under the terms of the tender. But the Chinese consortium can reasonably point to Covid-19 as a mitigating factor, as the pandemic prevented key equipment and the necessary engineers from reaching Myanmar on time.
Despite the delays, the consortium has defied sceptics, who doubted any of the projects would start up in time to avoid power shortages in the middle of the hot, dry inter-monsoonal season, which peaks from April onwards. Myanmar-watchers had initially questioned the viability of the projects due to the high risks resulting from the combination of tight deadlines and contract terms set by the government.
The first phase of an LNG-fired power station in Yangon’s southern township of Thaketa went online in mid-June
The investments can be seen as a vote of confidence by Chinese companies in the potential of Myanmar’s power market. Myanmar was one of the fastest-growing economies in Southeast Asia before the pandemic, with 2019 GDP growth of 6.8pc behind only Cambodia and Vietnam.
Even after factoring in near-term headwinds arising from Covid-19, Myanmar is still expected to be among the fastest-growing electricity markets in Asia-Pacific.
While just half of all households are connected to the public grid, Myanmar aims to achieve nationwide electrification by 2030 by doubling its current installed power generation capacity over the next five-to-seven years.
Gas-fired power capacity, meanwhile, is expected to rise sharply, from 1.5GW currently to 4GW in 2029 under the National Electrification Plan and the efforts of the Ministry of Electricity and Energy’s to boost development of gas power plants.
The steep increase in the share of gas-fired capacity reflects a push by Myanmar to take advantage of its extensive gas resources. Proven gas reserves stood at 1.2tn m³ in 2019, the majority of which is untapped as production last year reached just 17.1bn m³, according to BP’s annual Statistical Review of World Energy, published in June.
The Thaketa project was built on a fast-track basis as one of the government’s shortlisted critical projects to boost power supply for mid-2020. The successful start-up of the VPower-CNTIC venture’s remaining two LNG-to-power projects amid the pandemic will cement the reputation of Chinese companies and expand the consortium’s early foothold in the burgeoning power market.
The projects have helped create a new LNG market in Southeast Asia that will benefit regional suppliers. Malaysian NOC Petronas became the first company to export LNG to Myanmar when it supplied the maiden cargoes for the Thaketa power station in May and June.
The initial cargoes were delivered to a temporary jetty at the power station. A permanent jetty is under construction and will allow a floating storage and regasification unit (FSRU) to be docked nearby
Steady and growing LNG imports could potentially revive talk of developing a regasification terminal in Myanmar, an idea that has been explored by state-owned China National Petroleum Corporation.
The Chinese NOC, already active in Myanmar’s upstream, has considered building an LNG terminal on Made island off the west coast as an additional source of supply for the China-Myanmar gas pipeline, which starts on the nearby Ramree island.