Taiwan's CPC seeks 14 LNG cargoes for one year amid worsening drought

Taiwan's state-owned CPC Corp. has issued a tender seeking 14 cargoes of LNG for a one-year period starting from May, as it aims to shore up fuel supply amid worsening drought conditions and take advantage of a slump in spot LNG prices, according to traders and market participants.

The state energy company is expected to attract healthy market interest due to the ongoing shoulder season, traders said, adding that CPC's tender for LNG deliveries from May 2023 to March 2024 closes on March 15.

Meanwhile, local media cited government officials saying that water reservoirs in southern Taiwan were still suffering from dry conditions since they were hit by a severe drought over 2021-22, with the situation likely to worsen in the coming months as forecasts for precipitation remain low.

With some cities not receiving heavy rainfall in almost two years, local governments are drafting plans to implement caps on water usage for some industries amid concerns that water shortages could extend to central and northern parts of Taiwan. This is especially tricky for the critical semiconductors industry which has high-water usage.

Officials said government departments like the disaster response unit will meet in around two weeks to discuss mandatory water conservation efforts and consider the need to take stricter measures, with the situation in central regions becoming concerning too.

Energy mix

Around 40% of Taiwan's electricity generation comes from natural gas and coal, with 10% from nuclear and 8% from renewables, including solar, wind and hydro, while the remaining from oil. Taiwan has been trying to increase its share of natural gas to replace nuclear, which is under a long-term decommissioning plan.

While hydropower's share in Taiwan's electricity mix has been around 2%-3%, its decline in previous years has been a major factor in triggering an uptick in spot LNG demand.

Taiwan's target for the power mix by 2025 is 50%, 30% and 20% from natural gas, coal and renewables, respectively, according to the energy ministry. Power generation accounted for 83.6% of total LNG demand in 2022, up 3.4% year on year.

Over January-December 2022, Taiwan imported 19.96 million mt of LNG, up 2.7% year on year, energy bureau data showed. It consumed 25.12 Bcm of LNG in 2022, up 3.6% year on year, accounting for 94% of total LNG imports.

CPC's two LNG terminals -- Taichung and Yung-an -- have a combined LNG import capacity of 16.5 million mt/year but both have been operating above capacity to meet growing demand. It is currently planning to expand both terminals and build a third LNG terminal in Taoyuan with a capacity of 3 million mt/year.

However, plans to build the Taoyuan terminal have been delayed due to environmental protests, and it remains unclear when the construction would start.