Asia set for LNG surge

Even as the European gas crisis upends the global liquefied natural gas (LNG) trade, Asia is still positioned to build the majority of new terminals to import LNG, according to a Global Energy Monitor (GEM) survey. 

In its annual survey of LNG terminals first analysed in the Gas Bubble 2022 report, GEM finds that LNG projects totalling 442 million tonnes per annum (mtpa) of new import capacity are at various stages of development in Asia, enough to theoretically absorb the entire global LNG trade of 2021. It suggests that this US$119 billion investment could lock Asian economies into reliance on a volatile, insecure energy commodity and challenge global efforts to address the climate crisis. 

According to GEM, Asia’s LNG plans form part of an estimated US$797 billion global buildout of LNG terminals, which is occurring even as the international community recently reaffirmed its commitment to limiting global warming to 1.5°C at the 2022 United Nations Climate Change Conference (COP 27). 

Over the past year, it adds, Asia’s LNG market has been roiled by supply shortages, above all due to Europe’s energy crisis. Asia’s LNG plans have reached a fork in the road—pulled different directions by growing energy demand and painfully high costs—and how projects proceed will shape the region’s energy trajectory for decades to come. On the basis of cost, energy security, and the climate, Asian economies would benefit from leapfrogging new gas developments directly to sustainable, clean energy. 

Asia’s LNG plans 

Already the largest LNG importing region in the world, Asia is home to 65% of the world’s new LNG import terminals under development. Where terminals are being planned and built illuminates Asia’s and other regions’ roles in the LNG market. According to GEM, the countries leading the development of new exporting facilities are in oil-and-gas-rich regions and seeking to cash in on growing demand: the United States (322.5 mtpa), Russia (133 mtpa), Canada (75.6 mtpa), Mexico (62.5 mtpa), and Qatar (49 mtpa). These countries comprise a mix of historical LNG exporters (i.e., the United States, Russia, and Qatar) along with relative newcomers to LNG exports (i.e., Canada and Mexico). 

New LNG import projects are primarily concentrated in Asia (442 mtpa) and Europe (165 mtpa), which together account for almost 90% of all such projects in development globally. In Asia, plans for new LNG infrastructure are driven by growing energy demand, especially in the power and industrial sectors. In Europe, new import terminals are being  built to ease its current shortfall of gas, above all for use in the building heating sector. 

By far the largest LNG buildout is planned in China, as the country seeks to expand its industrial sector, increase gas’s role in building heating, and fuel a new fleet of gas-fired power plants. China’s LNG import projects total 214.9 mtpa, estimated to cost US$72.1 billion, and amount to almost half of all such capacity in development in Asia. Other leading countries developing LNG import terminals include India, Vietnam, Thailand, the Philippines, and Pakistan. 

A Fork in the Road 

GEM says it has been a turbulent year in the LNG market: “Following Russia’s invasion of Ukraine, European countries reliant on Russian gas imports strained an already tight market by struggling to secure alternative supplies, including LNG. Spot prices for LNG in Asia reached their highest levels ever in August. In recent months, countries like Japan have purchased LNG at extraordinary cost (eg $130 million for one cargo); major LNG consumers like China and India have decreased imports by 20 and 18%, respectively; and developing economies in Bangladesh and Pakistan have been priced out, failing to secure LNG shipments and resulting in rolling blackouts.”

The report adds that Asia’s plans to build new LNG terminals have reached a fork in the road, pulled in different directions by market forces: “Anticipating rising energy demand, Asia has enough LNG import projects in development to boost global LNG import capacity by nearly 50%, and a third of these projects (145 mtpa) are already in construction.

It also says that LNG’s adoption thus far has been motivated, in part, by its reputation as a ‘clean bridge fuel’ from coal for Asia, despite the fact that its greenhouse gas emissions rival those of coal and that emissions from LNG-fired power contribute to poor air quality and premature deaths. And a report from the Intergovernmental Panel on Climate Change (IPCC) released in early 2022 states that new investments in fossil fuels, including LNG, will make it difficult, if not impossible, to avoid dangerous climate change.”

At the same time, according to GEM, growing evidence suggests today’s high LNG costs are wearing on the region’s LNG ambitions. Forecasting agencies such as the International Energy Agency (IEA) and Rystad Energy have downgraded their estimates for Asia’s future gas demand; and reports in countries like the Philippines and Bangladesh suggest that new LNG projects are being dropped or delayed due to poor economics. 

Floating terminals

According to the IEA’s latest outlook report for the fourth quarter of 2022, “with Europe and a handful of projects [elsewhere] absorbing the entire fleet of FSRUs until 2025, the outlook for South and Southeast Asia’s floating terminal projects—which were already beset by a host of project and country-specific challenges—has further deteriorated”. Since the beginning of 2022, just two 1-mtpa LNG import projects in Asia have been commissioned, and only 17.1 mtpa of new import capacity came online the year before that. GEM suggests that the global gas supply crunch is not expected to ease for years. 

By far the largest LNG buildout is planned in China, as the country seeks to expand its industrial sector, increase gas’s role in building heating, and fuel a new fleet of gas-fired power plants.