Why US LNG is more important than ever for Asia

– by Paul Everingham

The high-level messaging around US liquefied natural gas (LNG), which emerged from recent meetings between Japanese Prime Minister Fumio Kishida and President Joe Biden, was quite encouraging on face value. 

Set against the backdrop of an ongoing halt to US LNG export approvals, the joint leaders’ statement read: 

The United States remains unwavering in its commitment to support the energy security of Japan and other allies, including its ability to predictably supply LNG while accelerating the global transition to zero-emissions energy and working with other fossil energy importers and producers to minimise methane emissions across the fossil energy value chain to the fullest extent practicable. 

How that pledge plays out will likely become more apparent in the months ahead. Predictability of supply is not necessarily the same thing as sufficiency of supply to meet the energy needs of Japan (and other nations in Asia). 

Reflecting back on the meetings between Prime Minister Kishida and President Biden, it’s worth considering why America’s reliability as an energy ally is of such paramount importance for Asia in the first place.

As the world’s biggest exporter of LNG, US gas is critical to Asia having access to affordable and reliable energy that drives economic growth. 

As a region, Asia is a net importer of energy. Without the resources required for self-sufficiency, it depends on other parts of the world for energy to keep industry going and households powered.  

Much of Asia currently relies on high-emitting coal for electricity generation, particularly fast-growing Southeast and South Asia where lifting people out of poverty is a primary goal. Of the total coal demand worldwide last year, three out of every four tons were consumed in China, India and Southeast Asia. 

In nations where gas is already an established role in the energy system– such as Japan, South Korea, Singapore, Taiwan and Thailand – US LNG ensures ongoing diversity of supply, energy security and economic stability. 

In nations that are currently reliant on coal, US LNG offers an opportunity to affordably meet rising energy demand while also making tangible progress on climate targets.  

Gas has been shown to produce on average 50 per cent fewer emissions than coal when used to generate electricity. Because it can be quickly called into action at times of need, gas-fired power is a perfect complement to renewable energy sources such as solar and wind power, supply from which is often intermittent. 

India, which became the world’s most populous country in 2023, aims to grow the share of gas in its energy mix from six per cent to 15 per cent by 2030. 

Meanwhile, Vietnam and the Philippines are emerging Southeast Asian nations which have identified LNG as a fuel that can help them reduce coal use while expanding investments in renewable energy and continuing strong economic growth. 

Massive volumes of coal must be displaced through the 2030s and beyond across emerging Asia to achieve net zero aspirations, which will necessitate substantial gas imports. 

Therein lies the concerning disconnect between Asia’s energy realities and the US Government’s LNG pause.  

National energy plans and research from regional experts that know Asia best – including The Institute of Energy Economics, Japan – forecast much higher demand for natural gas in the region over the next 30 years than projections used to justify the export pause. These higher forecasts are driven by crucial differences in economic and demographic outlooks and the country-specific feasibility of scaling renewables at speed.  

Optimism is a positive attribute, but reality has no substitute.  

Full US LNG export potential – 52 per cent more than currently approved – must be activated by 2040 to meet Asia’s demand during energy transition, according to a 2023 report by Rystad Energy 

Curiously, the US Government’s current LNG stance is at odds with the self-determination that underpins the Paris Agreement, and which envisioned nations pragmatically evolving energy systems without disadvantaging their people.  

With Asian nations making decisions that will affect energy planning for decades, it is worth examining what would happen if future US LNG exports were restricted or reduced. 

Countries would look for alternative LNG sources, in producing nations which inevitably would have far less stringent environmental and emissions standards than the world-class industry of the US – notably Russia. 

If LNG was to become unaffordable or inaccessible for emerging Asia, cheap coal would take its place, just as we have seen since the invasion of Ukraine. Global coal usage hit records in 2022 and 2023, nearly 10 years after “peak coal” was thought to have passed. 

On the other hand, what happens if the US continues to be the reliable, environmentally responsible LNG trading partner that Asia has come to rely on? 

Japan, South Korea and Taiwan would not only have access to gas required for energy security but additional supply to support industrial electrification, a key mode of decarbonization and one required to expand clean energy technology manufacturing. Asia’s emerging nations could take advantage of gas-fired power, which supports growing renewables adoption and enables a transformation the US has already enjoyed. 

Since 2007, CO2 emissions from the US power sector have declined by 30 per cent, even as energy consumption increased. The biggest factor has been wide-scale switching from coal to gas-fired power, which produces 50 per cent fewer emissions on average. 

It’s been estimated that if gas replaced merely 20 per cent of Asia’s coal-fired power, avoided CO2 emissions would total 680 million tons a year, equivalent to taking 161 million cars off the road 

The US Environmental Protection Agency deserves enormous credit for building one of the world’s most comprehensive methane management frameworks for gas production and LNG exports. The US gas industry itself is strongly committed to ensuring LNG exports have the lowest possible carbon footprint, with major companies achieving methane emissions reductions of up to 70 per cent over the past decade and abatement technology such as carbon capture planned for incorporation in many future projects. 

A recent study by Berkely Research Group, commissioned by LNG Allies, showed that US LNG used in power generation in China, India, Japan, South Korea and Taiwan produced far less lifecycle greenhouse emissions than coal or pipeline gas (sourced from Russia and Turkmenistan). 

The US should maximize responsible LNG production and set a global standard, not constrain it. To do otherwise is to fail friends and allies in Asia, including Japan. 

LNG investment and infrastructure development requires long-term capital commitments and policy certainty. The mood among Asian partners is currently less than confident, no more so than in Tokyo, which has received two negative investment signals from the Biden Administration in recent months. That uncertainty must be addressed. 

Prime Minister Kishida and President Biden’s meetings were a good place to start. But critical conversations about LNG need to continue. 

Parts of this article first appeared in Nikkei Asia on April 8, 2024.

Paul Everingham is the 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.