SINGAPORE, Sept 22 (Reuters): Natural gas producers have long yearned for a price spike in coal that would allow them to compete in Asian power generation.
Yet even a 50 per cent jump in thermal coal prices this year has not been enough for liquefied natural gas (LNG) to gain an advantage over its dirtier fossil-fuel cousin.
The use of natural gas - when not supported by government policies - has typically been hampered in countries such as China, Indonesia and Vietnam by cheap coal as they seek the cheapest means possible to energize their emerging economies.
This year, things started to look different: an ongoing slump in oil and gas coincided with coal prices surging to nearly $75 per tonne from $49 in January, leading many to believe there would finally be a chance for gas to compete.
But even with Goldman Sachs calling coal one of this year's "hottest commodities", and LNG prices not that far above a multi-year low of $4 per million British thermal units (mmBtu) touched in April, gas has not become competitive.
"I don't think (the coal price gains) are large enough to incentivize people to switch from coal to LNG, especially in Asia," said Mangesh Patankar, Asia-Pacific head of business development for energy advisory Galway Group.
"We need to see LNG prices falling further or coal prices rising further for that change to actually take place," Patankar told Reuters on the sidelines of an industry event in Singapore.
Asian spot LNG prices have fallen to less than $6 per mmBtu, from $20 per mmBtu in early 2014, even as coal markets have soared.
Asian benchmark coal prices have risen this year to $73.60 per tonne, the highest since March 2015, driven by mining capacity limits in China that resulted in a surge in imports.
Reuters calculations show coal would need to rise to $100 per tonne, or LNG to fall by another third, for the two main fossil fuels for power generation to achieve price parity.
Despite more LNG capacity coming online over the next few years, especially from Australia and the United States, Patankar said LNG would continue to struggle versus coal on a cost basis.