The mid-year coal update released by the International Energy Agency is both a sobering document and a pointer to the contribution natural gas can make to Asia’s energy future.
Global supply, demand and trade of coal reached an all-time high in 2023, levels that are likely to be sustained over the next two years.
Eighty per cent of that coal was used in Asia, where more than 50 per cent of power generation is coal-fired. While much of the growth in Asia’s coal use came from China and India, it’s notable that Vietnam is set to become the world’s fifth biggest importer of coal.
Needless to say, if Asia’s emerging nations keep using high-emitting coal at anything like these rates, global climate goals will not be achieved over the next few decades.
On the other hand, if the likes of India, Vietnam, the Philippines and Indonesia are able to access a lower carbon yet still reliable alternative to coal, emissions can be significantly reduced even as strong economic and population growth continues.
Natural gas would be the best fit for that role and a logical choice for many countries.
Gas produces on average half the CO2 emissions of coal when used in electricity generation and is a much better partner for the growing investments in renewable energy being made across Asia. With the ability to be “switched on” virtually instantaneously, gas-fired power is a perfect fit to counter intermittency issues associated with renewables.
It is easy to understand why Asia has become so reliant on coal over the past 20 years. It offers a reliable and familiar source of power generation and, importantly for emerging economies where energy poverty is a real issue, one that has been both affordable and available.
By contrast, gas has often been much more scarce and sometimes unaffordable. Asia lacks the gas resources to be self-sufficient and many countries have had limited and in some cases no infrastructure to import liquefied natural gas (LNG). The cost of building LNG import terminals has been a significant barrier for emerging Asia.
The remainder of this decade should see progress in coal-to-gas switching in Asia. New LNG supply will come online from the US, Australia and Qatar at a time when India is building out its import infrastructure and the first terminals in the Philippines and Vietnam have recently come online.
But it’s the 2030s and the decades that follow that are in question and on which nations in Asia are currently focusing their energy planning.
If gas is available and affordable they will seek to use it.
Growing use by industry and in transportation is projected to see India’s gas consumption triple by 2050.
The Philippines, which has five more LNG terminals approved for development, could generate as much as 35 per cent of its power from gas by 2050 according to the country’s Energy Plan 2023-2050.
It’s a similar story in Vietnam, where Power Development Plan 8 forecasts gas accounting for nearly a quarter of power by 2030 and playing an important role to 2050 and beyond.
Indonesia and Malaysia are also looking to increase the share of gas in their primary energy mixes as they expand their use of renewable energy.
Some of this increased demand for gas can be met by regional production. There have been very promising (and possibly very significant) recent discoveries off the coast of Indonesia, while Vietnam is set to finally realise its Block B gas project after many years of stalled progress.
However, the majority of Asia’s future gas supply will need to come from LNG produced outside the region. Affordability and availability of this LNG will be heavily dependent on continued production from major gas-exporting nations such as the US, Australia and Qatar.
Policy uncertainty around the gas industries in the US and Australia is a great concern for Asia, given these two countries supplied 38 per cent of LNG imports into the region in 2023. The halt to export approvals in the US is already reported to have slowed final investment decisions for some future projects.
Delayed project starts could add to Asia’s short-term reliance on coal but longer-term constraints or reductions to LNG supply from the US and/or Australia would have an even more worrying impact.
In some ways, we’ve already seen a version of this play out. When Europe was cut off from Russian gas in early 2022, it pivoted quickly to large-scale LNG imports. As global gas supply became much tighter and prices more elevated, Asia fell back on affordable and available coal.
There was no other real option and record coal consumption documented by the IEA in 2022 and then 2023 is a reflection of this.
A lot more gas is going to be required over the next 30 to avoid history being repeated and to allow countries in Asia to realise visions for lower-carbon energy systems.
It’s largely up to the rest of the world to help make that happen.
Paul Everingham was CEO of the Asia Natural Gas and Energy Association (ANGEA) from September 2022 to June 2026. ANGEA works with governments, industries and communities in Asia, providing affordable solutions that promote energy security, economic growth and decarbonisation.
