Why North America’s gas is so critical for Asia’s future

– by Paul Everingham

The rise of the United States’ gas export industry has been well-chronicled but the numbers are so vast that it’s worth a second look to let them really sink in. 

As recently as 2016, the US was a net importer of natural gas. In 2015, the most Liquefied Natural Gas (LNG) it exported in any one month was 3172 million cubic feet. 

Fast forward to 2023 and the US officially became the world’s biggest LNG exporter, a stunning feat. Over the course of the year, US LNG exports never dipped below 326,000 million cubic feet for any month and the country overtook Qatar and Australia atop the global rankings.

The “shale revolution” has queen quite remarkable and it has also had an impact at home.  

Over the past 10 years natural gas has overtaken coal as the biggest single source of US electricity generation, coinciding with a consistent decline in power-related CO2 emissions even as overall demand has slightly risen. 

This last piece of the puzzle is one of the major reasons why Asia wants to see the US bring on future gas projects and continue to grow global LNG supply. 

Many nations in Asia are net energy importers. Across the region, economies of all types – from the highly-developed to the still developing – are striving to minimise their use of coal to produce electricity. 

Gas, which emits about half as much as CO2 in electricity generation as coal does, is a well-suited and attractive alternative. It can provide a reliable baseline source of power as more renewables are integrated into national energy systems and support both economic growth and progress on decarbonisation. 

However, for Asian countries without substantial domestic natural gas resources or access to piped gas, importing LNG from other parts of the world is the only way to make this happen.  

The LNG market in which these Asian nations find themselves operating in 2023 is vastly different to what it was five years ago and it’s likely to stay that way for some time. 

Before the invasion of Ukraine, Russian gas made up almost half of Europe’s supply. In the nearly 18 months since, developed European economies have had to look for other solutions to energy security challenges and understandably have turned to LNG, much of it from the US. 

This in turn has led to developing nations in Asia being priced out of an elevated LNG spot market, at a pivotal time when they are also looking to reduce reliance on coal. 

It’s a complex global equation and there are no simple answers. But there are steps gas-producing countries can take to alleviate some of the supply-and-demand pressures. 

The organisation of which I am CEO, the Asia Natural Gas and Energy Association (ANGEA), in 2023 commissioned a study on energy security in Southeast Asia, undertaken by independent experts Rystad Energy. 

The study looked at three countries – Vietnam, Thailand and Indonesia – and assessed their energy options against the variables of availability, affordability and acceptability. The strong conclusion was that natural gas was the best energy source to support credible energy transition in Southeast Asia. 

Indonesia is a significant producer of natural gas, which it currently exports. But for Vietnam and Thailand, where domestic gas resources are declining, significantly increased LNG imports will be necessary to achieve this (The Philippines, although not part of the study, is a Southeast Asian nation that faces a similar situation). 

As the Rystad Study outlines, addressing this situation and ensuring a return to “normality” for the world’s LNG markets will require policy support from governments of gas-producing jurisdictions for new and future projects that increase long-term supply, along with financial support from public investment institutions. 

This is why the pause on pending LNG export approvals recently announced by the US Government is of such concern for Asia.

Access the Rystad Study into energy security

CLICK HERE to see the results of Rystad Energy’s comprehensive study into energy security and transition in Southeast Asia.

Increased supply will give developing nations, in Asia and other parts of the world, the option to consider longer-term LNG contracts rather than being exposed to the volatilities of the spot market. 

Clearly North America, with its vast gas reserves, has a big role to play in this.  

I say North America quite deliberately because of the enormous potential for Canada to also become an LNG exporter of note. Canada is a natural fit to export to Asia from a geographical perspective and hopefully the LNG Canada project, which is set to start exporting in 2025, will be the start of something much bigger for Canada’s gas industry. 

One of the key observations of the Rystad Study was the need for greater international understanding of the benefits greater access to natural gas can deliver for Asia. That’s also a key reason why ANGEA was established in 2021. 

While energy demand will decrease in Europe and North America to 2050, in Asia it will continue to rise markedly. By the middle of the century, half of the world’s energy demand and half of its GDP will come from Asia Pacific. 

For highly developed economies like that of Japan and South Korea, it’s a case of maintaining growth in globally vital industries while progressing lower-carbon energy solutions. 

For still developing economies – the likes of Thailand, Vietnam, Indonesia, the Philippines, India and Bangladesh – increased energy demand must support economic growth that will carry tens of millions of people out of poverty while balancing progress on decarbonisation. Vietnam recently adopted a National Power Development Plan 8, very clearly identifying natural gas as the fuel that will support growing renewables investment and a fast-growing economy. 

None of these countries want to fall back on coal but the lesson of the past two years is that it’s sometimes the only commodity they can afford. 

The world cannot achieve net zero unless Asia does; equally Asia can’t do that unless it lowers the cumulative carbon profile of its energy systems. 

North American gas can support both these outcomes.  

But with major gas projects and export and import infrastructure taking many years to develop, right now is the time for policy decisions that will unlock sufficient affordable supply – for the 2030s and beyond. 

 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.