‘Asia’s LNG demand growth faces key barriers despite incoming supply’

Sluggish demand growth for liquefied natural gas (LNG), combined with a record increase in global export capacity through 2028, will likely thrust markets into an extended period of oversupply, according to the latest Global LNG Outlook 20242028 from the Institute for Energy Economics and Financial Analysis (IEEFA).

Despite incoming supply, major importing regions – including Japan, South Korea, and Europe – are likely to continue reducing LNG demand through 2030.

As a result, it said, global LNG suppliers and traders will increasingly depend on growth in emerging markets in Asia to both compensate for falling imports elsewhere and absorb a flood of new supply. However, such rapid LNG demand growth in emerging economies is not guaranteed, even in an oversupplied market.

Countries in Southeast Asia, for example, will face distinct barriers to rising demand, including fiscal and credit challenges, extensive infrastructure delays, and contracting issues, among other obstacles.

The global LNG crisis following Russia’s full-scale invasion of Ukraine in 2022 brought these issues to the fore, spurring many markets to reduce the role of LNG in their development plans and accelerate the development of alternative energy sources.

IEEFA Southeast Asia and Asia LNG/Gas research lead Sam Reynolds remarked: “Despite Vietnam’s completion of its first LNG terminal, demand growth faces significant hurdles. LNG-fired power plants have faced delays, LNG prices have been significantly higher than domestic gas, while renewable energy has cut the role of gas in Vietnam’s power mix.

“The Philippines began importing LNG in April 2023. From April 2023 to February 2024, the country paid almost US$600 million for 12 shipments.

“As new LNG-to-power projects grapple with regulatory hurdles, the country is advancing policies to rapidly deploy renewable energy, which could reduce the long-term need for more LNG.”

“LNG imports in Thailand increased by 34 per cent amid declining domestic gas production, lower pipeline imports, and increased gas demand. However, the government plans to minimise LNG imports in 2024 and has emphasized the role of clean energy in mitigating economic crises.”

Meanwhile, it noted that LNG imports to Japan and South Korea fell eight and five per cent, respectively, in 2023.

The two countries have national energy and climate plans which envisioned steep reductions in the role for LNG, turning instead to nuclear and renewable energy. Taiwan, on the other hand, aims to cut nuclear power, which may boost LNG demand.

On the other hand, China reclaimed its position as the world’s largest LNG importer in 2023. However, domestic natural gas production and additional pipeline imports may limit LNG demand growth. Unprecedented increases in renewables capacity are constraining the need for LNG in the power sector.

In Southeast Asia, extensive development timelines, contract negotiations, and repeated project delays for LNG-related infrastructure may continue to inhibit demand while strengthening political incentives to pursue alternative energy sources.