The outlook for LNG exports into the Indo-Pacific region is "very positive" even after a bumpy 2020, but the success of trade between U.S. exporters and their customers in the region will depend on policy support and infrastructure investment, market analysts said.
One reason the LNG trade outlook is so good post-2020 is that "fast-growing developing countries in Asia see natural gas as an integral and growing part of their energy mix," even beyond power generation, and as a key to reducing greenhouse gas emissions, American Petroleum Institute policy adviser Riley Smith said Feb. 10.
Gas demand is widely expected to accelerate in China and India as infrastructure comes online in both nations, but it will also grow in smaller countries, Smith said at the National Association of Regulatory Utility Commissioners Winter Policy Summit.
Emerging Asian countries that started importing LNG only within the last decade could be just as important in aggregate to LNG import growth as China and India are individually, Smith said. The International Energy Agency expected that emerging Asia will be the second-biggest contributor to global gas demand after China over at least the next several years, adding about 35 billion cubic meters per year of added gas demand from 2019 to 2025, he said.
"What's really underpinning this growth in these countries is a combination of 15 GW of new gas-fired generation along with increasing urbanization and — what's more and more important over time — a demand for cooling," Smith said.
In China and India, the industrial sector is more important than power generation in growing gas demand, he said.
China and India
John Kemp, a senior Reuters market analyst for commodities and energy, pointed to China's outsized role in driving rising Asian gas consumption, with its gas use growing 13% per year, though starting from a low base relative to coal use.
Smith highlighted IEA projections that India's LNG imports will grow to about 55 million tonnes per year by around 2030 before jumping about another 60% to about 90 Mt/y by 2040.
Kemp pointed to the high level of geographical concentration in the global LNG market as a source of risk for importers and exporters, with policy implications. In 2019, the five top importers in Asia accounted for 62% of the world's LNG imports, and the top four exporters — Qatar, Australia, the U.S. and Russia, in descending order of volumes — accounted for 62% of the world's total LNG exports, according to one of Kemp's slides.
In Asia's large gas-consuming countries, policy responses to the risks of import dependence could resemble those seen in North America and Western Europe during the 1970s and early 2000s amid concerns over oil import reliance, Kemp said.
"The obvious response is to try to diversify LNG suppliers" and domestic energy sources, Kemp said. He also anticipated steps to protect maritime transit routes and attend to diplomatic relations and alliances.
Methane policies
Kemp downplayed the potential that concerns about methane emissions might dampen the prospects of LNG in Asia to the same degree as in Europe. North America-based exporters have faced pressure from some European counterparties that have strict carbon emissions-reduction goals.
Some European utilities have shied away from new long-term commitments to import LNG produced from shale gas. This has added to the contracting challenges for some U.S. LNG export developers that are trying to build enough commercial support to advance their projects to construction.
But the overriding interest of buyers in energy-thirsty Asian markets will likely be securing large quantities of LNG. These customers are unlikely to show the same level of hesitation over supply chain emissions, Kemp said.
"For them, their import needs are so huge that their focus will be on price and reliability," Kemp said.
Maya Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.
