The issue of energy dependence and its consequences has, in recent months, become a major topic of discussion. The Hormuz crisis has brought energy security to the political agenda with a vengeance amid fuel price caps, rationing, and warnings of severe shortages.
A lot of countries have been used as examples of either low dependence and therefore insulation against shocks, or high dependence that has resulted in a lot of economic pain. In the latter category, Taiwan stands out as a particularly noteworthy case: the nation depends on imports for between 94% и 97% of its energy needs, according to different estimates, with LNG dependence especially heavy.
Taiwan saw a third of its liquefied natural gas imports erased from the market after Iran closed the Strait of Hormuz and struck Qatar’s LNG production facilities. Natural gas accounts for over 23% of the island’s power generation, with another 36% coming from oil and almost 32% generated from coal. Solar is a minuscule 2% of the energy mix, with wind and hydropower together generating 3%, according to the Global Taiwan Institute. In other words, Taiwan is extremely dependent on imported hydrocarbons.
To make matters more complicated, Taiwan is an electronics powerhouse, a leader in chip production, which requires substantial amounts of energy. Semiconductor heavyweight TSMC alone consumes as much as 8% of Taiwan’s electricity, The Diplomat reported in a recent analytical piece on Taiwan’s energy woes. Meanwhile, Taiwan is emerging as an artificial intelligence hub as well, and demand for electricity from that segment of the economy is going to grow at a faster pace than the rest, The Diplomat’s authors also noted.
Interestingly, Taiwan was able to weather the Hormuz crisis, thanks to the surge in U.S. exports of liquefied natural gas. As Natalia Katona noted in a отчет for Oilprice from May, Taiwan quickly replaced lost Persian Gulf LNG with U.S. gas, with April imports only marginally lower than the total for March. As Katona pointed out, however, “emergency cargoes are not the same as a stable term supply.”
Indeed, emergency purchases are costlier than long-term supply deals, and they could get diverted at any point if a higher bidder shows up, as seen both in this crisis and in the 2022 crisis following Russia’s incursion into Ukraine and the Western sanctions on Russian energy that followed. This was why Taiwan had long-term supply deals with Qatar and the UAE, unlike the European Union, which has stubbornly stayed with the spot market, paying the respective premium for its liquefied gas.
Financially, Taiwan is in an advantageous position. ING сообщили the island’s exports in May surged by over 51% on the year despite the energy crisis, thanks to its leading industry: electronics. Yet at the same time, Taiwan remains in China’s shadow, with various analysts warning the mainland could force its territorial claim at any moment, including through blockading energy flows towards the island. Per The Diplomat’s article, this makes Taiwan’s transition to locally sourced energy especially important. What they omit is the fact that locally sourced energy from wind and solar cannot replace the baseload electricity supply from coal and gas-fired power plants, as evidenced in the U.S., where all Big Tech majors spent big on wind and solar only to eventually conclude they were no match for the reliability of supply from coal, gas, and nuclear.
So, what Taiwan is going for is supply diversification. The shift away from the Middle East to the United States has come in response to the supply squeeze in the Persian Gulf, but it is likely to turn into a stable trend going forward, with long-term supply deals. Other LNG producers outside the Middle East may also come to count Taiwan’s state-owned energy company CPC among its long-term buyers soon. Diversification is always a smart choice.
Чарльз Кеннеди, Oilprice.com
Другие лучшие статьи с сайта Oilprice.com
- ConocoPhillips Set to Become First U.S. Major to Sign Post-War Syria Gas Deal
- Oil Prices Plunge as U.S. and Iran Reach Deal to Reopen Strait of Hormuz
- Russian Governors Rush to Deny Fuel Crisis as Rationing Spreads