How Natural Gas Is Produced & Why It’s So Important For Asia
Natural gas – often simply described as ‘gas’ – is a fossil fuel that is widely used around the world for a range of essential purposes. Its primary uses include as a domestic fuel for cooking and heating, as a fuel that provides reliable power generation and as a key ingredient in chemical manufacturing processes, like fertiliser production. Natural gas is valued for power generation as the cleanest burning fossil fuel, particularly in Asia where more than 50 per cent of electricity still comes from coal.
What Is Natural Gas?
Natural gas is a mix of gaseous hydrocarbons, formed when layers of organic matter decompose and are subjected to intense heat and pressure underground over millions of years. It is literally a fuel made from fossils and is found in rock formations below the Earth’s surface and under the ocean.
The hydrocarbon that makes up the biggest part of natural gas is methane (CH4), ahead of ethane, propane, butane, and pentane. Traces of carbon dioxide (CO2), nitrogen, hydrogen sulfide and helium are also often found in natural gas. Both methane and natural gas are odorless and an additive like mercaptan (which smells like rotten eggs) is introduced so that leaks can be detected.
What is LNG?
Aside from its gaseous state, natural gas is transported and used in a liquefied form. Liquefied natural gas is created by cooling gas to -162C, which reduces it to about 1/600th of its original volume and makes it safer and more convenient for transport (usually by ship). After shipping, LNG is usually regasified at a receiving terminal before being used.
Natural Gas Production
Extraction
Traditional methods for extracting natural gas are quite similar to oil production. Conventional gas resources are located deep underground in rock formations known as reservoirs. By drilling a well into rocks that have previously been trapping the natural gas in the reservoir, it is possible to unlock a controlled gas flow. While doing this is generally more complex and expensive in a marine environment, the general principle remains the same whether gas is being produced on or offshore.
The other major method of extracting natural gas onshore is hydraulic fracturing – or fracking. It involves drilling into shale rock formations which are not permeable enough for gas to flow through using more traditional methods. The injection of fracking fluid into the shale formations at high pressure creates cracks in the rocks through which gas (or oil) can then flow. The development of fracking technology has helped the United States become one of the world’s biggest gas producers and exporters.
Processing
Gas extracted from a well is often described as ‘wet’ natural gas, because of the natural gas liquids (ethane, propane, butanes, and pentanes) and water vapor that are present. This vapor, along with most of the non-hydrocarbons (CO2, nitrogen etc) are removed at a processing plant, while many of the natural gas liquids are separated out and sold for their own use. The purifying process leaves a ‘dry’ natural gas that can be sent via pipeline directly to customers or put through liquefication to be become LNG.
Transportation
The liquefication process for purified natural gas involves circulating the gas through aluminium tube coils under exposure to a compressed refrigerant. Conversion to LNG adds flexibility to the ways and locations in which natural gas can be used because it provides for simpler and safer non-pressurised storage and transport. LNG can be transported by truck to meet domestic use requirements but is better known for being shipped on large, double-hulled boats with capacity for storage at ultra-low temperatures. These LNG carriers provide access to markets thousands of kilometres from the source of natural gas extraction.
Natural Gas In Energy Production
What Is LNG Used For?
Natural gas is highly valued as a fuel for reliable power generation that results in far fewer CO2 emissions than alternatives such as coal and oil. Gas produces on average half the emissions of coal when used to generate electricity and about 30 per cent less emissions than oil. It also offers air quality benefits when replacing coal in power production. Generation of electricity from natural gas involves gas and compressed air being combusted, creating a high-pressure and high-temperature mixture that is then used to spin the blades of a turbine. The spinning blades drive a generator that converts energy into electricity.
A 2025 study by S&P Global Commodity Insights found that LNG from Australia, the US and Qatar, used in power generation in Japan, the Philippines and Vietnam, had 47 per cent lower average lifecycle carbon intensity than coal.
LNG In Asia
In addition to nations in Asia that already rely on natural gas for energy security – such as Japan, South Korea and Singapore – its comparatively clean-burning properties are attractive to emerging nations looking to move away from a reliance on high-emitting coal-fired power. Countries like Vietnam, the Philippines, Malaysia and Indonesia have all published energy plans that feature a strong increase in generation from gas to support growing investments in renewable energy.
One of the challenges for Asia is that it lacks the regional gas resources to be self-sufficient. Countries such as Thailand and the Philippines have domestic gas fields that are in decline, while Vietnam has experienced difficulties developing its domestic offshore fields. This means that Asia’s ability to access gas is strongly dependent on enough LNG being produced elsewhere in the world and then being made available at a price the region’s emerging economies can afford to pay.
Countries Producing Natural Gas
What Countries In Asia Produce Natural Gas
Within Asia, Malaysia and Indonesia – both of which have established gas industries – remain a likely source of increased natural gas production. Significant discoveries off Sumatra have boosted hopes of an uptick in Indonesian production, while exploration offshore of Malaysia has also been promising. Thailand continues to look for new gas deposits and both Vietnam and the Philippines are actively seeking to extend the life of existing gas resources and identify new ones.
Even if such in-region developments do proceed, it’s likely that most of Asia’s future gas needs will be met by LNG production from other parts of the world. Currently, the vast majority of LNG imports in Asia come from three countries: Australia, the United States and Qatar.
A recent study by Wood Mackenzie found that LNG demand from Asia would nearly double to 2050, driven primarily by strong demand increase from South and Southeast Asia through the 2030s and beyond.
Where does Asia’s LNG come from?
The 2025 Annual Report of the International Group of Liquefied Natural Gas Importers (GIIGNL) showed that Asia received 18% of its LNG from the Pacific Basin, with 28% coming from the Middle East and 54% coming from the Pacific Basin. The three biggest single sources of LNG imports for Asia in 2024 were Australia (28%), Qatar (22%) and the United States (10%).
Australia has long been the biggest source of LNG for countries like Japan, China and Taiwan and a major supplier to South Korea. The US LNG industry continues to expand rapidly, with growing supply roles across Japan, South Korea, Taiwan, Thailand and India.
In Summary
The opportunity for natural gas in Asia is very clear. Asia is currently the world’s most coal-dependent region and switching to gas offers nations the chance to maintain reliable electricity supply while also achieving emissions reductions.
However, recent years have seen policy uncertainty around LNG production in the US and Australia – two key suppliers for Asia. It’s critical for the success of the energy transition in Asia that major export nations continue to invest in new gas and LNG projects. This will give decision makers in emerging Asia the confidence to invest billions of dollars and years of construction in LNG import terminals and gas-fired power facilities.
Wood Mackenzie’s study found that if planned and proposed LNG export facilities in the United States were not built, Asia could use an additional 95 million tonnes of coal per year by 2035. This would be the annual emissions equivalent of putting an extra 20 million cars on the road.
