For more than 50 years, Asia has been able to rely on the global LNG market as a source of reliable and affordable energy.
Japan started the ball rolling with a first LNG shipment in 1969 and rapidly expanded its imports in the 1980s at a time of great economic growth.
South Korea, China, Singapore, Taiwan, India and Thailand have since followed suit. Vietnam and the Philippines will soon join them.
The reasons why the LNG market has been so attractive to Asia are simple.
To start with, many Asian nations don’t have significant indigenous resource of natural gas, a fuel that is perfectly suited to the role of underpinning stable electricity supply. In a modern context, it’s a natural partner for renewable energy, its reliability helping offset intermittency issues associated with solar and wind power.
Gas is also the cleanest of fossil fuels, emitting less than half as much CO2 as coal when burned.
It may not be spoken about much these days but when Japan first invested in LNG it was partly because of air pollution concerns associated with the use of oil and coal as fuels.
Many countries in Asia today remain reliant on coal for electricity generation. At the same time they are seeking to significantly reduce emissions in line with the Paris Agreement.
Again, putting a modern lens on it, natural gas can be an extremely effective transition fuel for Asia over the next few decades, allowing countries to move away from coal to lower carbon electricity generation without sacrificing economic growth that improves living standards.
The carbon footprint of the entire gas supply chain will be further reduced by increasing implementation of carbon capture, utilisation and storage (CCUS) technology – an area in which members of the Asia Natural Gas and Energy Association (ANGEA) are at the forefront of cutting edge research and development.
Meanwhile, renewables technology continues to advance and a significant amount of work is being undertaken to develop future low emissions fuels such as hydrogen and ammonia.
But as much as LNG and natural gas can be ideal fits for Asian energy transition, there also challenges to be overcome from a global perspective.
Russia’s invasion of Ukraine was a trigger for European countries to source new gas supplies. This meant that there were suddenly big new European buyers entering the LNG market.
This saw prices rise significantly. Many Asian countries were negatively impacted from both availability and affordability standpoints.
This inevitably caused a pivot back to coal for electricity generation, in turn setting back progress on climate targets.
The simplest answer to these challenges is to bring on more LNG projects around the world – for the US industry to maintain its surge of the past few years, for long-term suppliers like Australia to continue being reliable energy partners and for entrants to the international market such as Canada to seize the opportunity to build industries that will deliver significant benefits at home and abroad.
But what’s simple in theory is often complex in practice, and the right policy and fiscal settings are required for this to this happen.
We witnessed in Australia early in 2023 how gas policy changes – designed to address domestic energy affordability and supply on home soil – can have far-reaching and unintended consequences that potentially put at risk crucial investment and long-term LNG trade relationships.
Elsewhere in the world, some governments are simply wary of fossil fuel developments. And there are banks which will not countenance any form of investment in hydrocarbon activity.
I genuinely feel the global gas supply chain and its value to Asia meeting emissions targets is not fully appreciated.
Just as Japan started importing natural gas in the 1960s to address pollution and fuel economic growth, Asian countries can use it now to reduce emissions while meeting the power needs of communities and industries.
In the case of developing economies, it can help lift many millions of people out of poverty. For Japan, which has very little natural resources of its own, energy security is absolutely paramount to maintaining an economy that is the world’s third largest – and which impacts others around the globe.
Fifty-plus years on from Asia’s first LNG cargo, the stakes are more urgent from the point-of-view of climate change, a subject we now understand far more about.
But much of the equation remains the same.
Asia needs gas. Ands the world can help supply it.
Paul Everingham is the inaugural CEO of the Asia Natural Gas and Energy Association (ANGEA), which works with governments, society and industry throughout Asia to build effective and integrated energy policies that meet each country’s climate objectives. Contact him at [email protected] or on LinkedIn.
Main photo by Chris Chan on Unsplash