After years of fluctuating liquefied natural gas (LNG) prices, the market’s recent instability has raised concerns across ASEAN.
From the low prices of 2020 to the soaring highs of 2022, this volatility has left its mark, disrupting growth and threatening the region’s energy security.
Though prices softened in early 2023, they remain elevated, with the risk of another spike ever-present.
In light of these developments, a recent study by the Economic Research Institute for ASEAN and East Asia (ERIA) sheds light on the issue.
Titled ‘Study on Different Impacts of LNG Market Shifts on ASEAN’, it examines the forces behind these price swings and suggests strategies to stabilise the market.
The article dives into the study’s findings, offering insights into how ASEAN can navigate this complex landscape and secure a more resilient energy future.
Since its establishment in 2007, ERIA has prioritised energy security, with natural gas and LNG playing pivotal roles in its research.
Over the past six years, LNG has been a key focus, reflecting its importance in ASEAN’s energy mix and economic growth.
In support of expanding Asian LNG markets, the Institute of Energy Economics, Japan (IEEJ), has conducted workshops, research, and policy assessments since 2017.
The demand for natural gas in ASEAN is projected to grow faster than the total energy requirement.
According to the IEEJ Outlook 2024, natural gas’s share in ASEAN’s energy mix is expected to increase from 20 per cent in 2021 to 25 per cent by 2050.
This growth, coupled with modest domestic production, implies a rise in import dependency from around 30 per cent to nearly 50 per cent by 2050.
To meet this growing demand, ASEAN needs stable investment in upstream and infrastructure projects, such as LNG receiving terminals, pipelines, and gas-fired power generation facilities.
Both domestic production and LNG imports will be crucial. Traditional exporters like Brunei, Indonesia, and Malaysia are now joined by emerging importers such as Thailand, Singapore,Myanmar, the Philippines and Vietnam.
The global LNG market has seen significant expansions in liquefaction capacity, with many new projects competing for customers and contract renewals.
This creates opportunities for ASEAN players to enhance market flexibility and attractiveness.
Japanese LNG importers and other international players are actively involved in developing ASEAN’s LNG markets, leveraging their expertise and forming collaborations.
The ASEAN LNG market however faces several challenges, including the balance between vertical integration and increased transaction flexibility, credit ratings of diversified parties and varying technical standards.
The global LNG industry has been affected by events such as the COVID-19 pandemic which led to extreme price volatility.
These events highlighted LNG’s versatility as an energy source and underscored the need for a balanced approach to economic prosperity and energy transition.
ASEAN’s energy demand continues to grow, driven by economic and population growth.
Natural gas is expected to play a crucial role in the region’s energy transition, especially in the power and industrial sectors.
To ensure a stable and sustainable LNG market, ASEAN must address infrastructure development, regulatory frameworks, and regional collaboration.
The ASEAN region’s LNG market is at a critical juncture. By adopting volatility preventative measures and fostering collaboration among stakeholders, ASEAN can achieve a more stable and healthy LNG market.
This will not only support the region’s energy needs but also contribute to its economic growth and energy transition goals.
Innovation also plays a crucial role in mitigating the effects of market volatility.
ERIA suggests that ASEAN should embrace new technologies in LNG storage, transportation, and utilisation. Developing floating storage and regasification units (FSRUs) and expanding LNG bunkering facilities can enhance flexibility and responsiveness to market changes.
Moreover, digitalisation in energy management could allow for more efficient use of resources and better forecasting of energy needs, helping to balance supply and demand more effectively.
With the sanctioning of 240 million tonnes per year of LNG capacity from 2017 to the first half of 2024, new projects and technological advancements will be essential to ensure market stability.
As ASEAN moves forward, the lessons from the recent market upheavals are clear. A more resilient and stable LNG market is achievable through strategic investments, regional cooperation, and embracing innovation.
By implementing the recommendations outlined in the ERIA study, ASEAN can position itself as a leader in the global LNG market, securing energy stability and supporting sustainable economic development for years to come. – Features Desk
