Southeast Asian Economies Looking at LNG to Meet Their Energy demand

Southeast Asian economies, which rely heavily on coal and fossil fuels to meet its energy demand, will be looking at natural gas as a substitute as more facilities are expected to come up in the region by 2040, Singapore-based Asia Research & Engagement (ARE), said.

Three countries in the Southeast Asia – Thailand, Indonesia, and Singapore – has currently liquified natural gas (LNG) facilities operating at a capacity of 45 million tonnes per annum (MTPA), which release the equivalent greenhouse gas emissions of about 30 coal plants in one year.

This is expected to almost double to a capacity of 80 MTPA by 2040, as proposed projects, mostly in Thailand, the Philippines and Vietnam will be completed by then, ARE said in its latest report entitled “Foot on the Gas: Southeast Asia needs to pump the brakes on LNG.”

The report said that if allowed to continue, expanded LNG use stands to thwart efforts to keep global warming below 1.5 C. “Growing investment in LNG by the Philippines, Vietnam, and other Southeast Asian nations will only help push the world further beyond this critical target,” the report noted.

Thailand has commissioned the $900 million regassification facility with a capacity of 7.5 MTPA last year, the biggest addition to global LNG consumption, the report said.

The Philippines received a shipment in April to fuel its 1,200 MW Ilijan power plant, amid declining reserves from its Malampaya natural gas field off the province of Batangas and after Asian spot LNG prices slid from all-time highs in 2022. The purchase was handled by AGP International Holdings, backed by Osaka Gas and the Japan Bank for International Cooperation.

Vietnam’s first imports of LNG arrived in May with a shipment of 70,000 tonnes of Indonesian LNG purchased by state-run PetroVietnam Gas. The new terminals in both Southeast Asian nations are slated to expand the region’s LNG import capacity by 7.8 MTPA.

The Philippine government too has been promoting renewable energy, but as part of its energy development plan, it continues to approve projects to import LNG as a transitional fuel.

Although Vietnam is trying to reduce its reliance on coal while tackling worsening power shortages that imperil its fast-growing economy, its development plan likewise calls for more than doubling its reliance on natural gas.

Even Malaysia and Singapore began importing LNG in the 2010s, and Myanmar did so in 2020. Cambodia is preparing to start taking shipments, with a three-phase plan to promote the fuel’s adoption at home.

LNG in SE Asia

Indonesia has the most LNG operating in Southeast Asia, as of 2021, but is expected to be overtaken by Thailand, once its facilities that are both under construction and proposed will be operational by 2040.

The report noted how International Energy Agency (IEA) predicts that LNG used globally must peak in 2025 and decline to 150 MTPPA by 2040 to achieve its 2050 net zero target. However, oil major Shell forecasts in its outlook this year that demand will reach almost 700 MTPA by 2040, with projected LNG production and supply rising by 20% to 480 MTPA based on LNG infrastructure currently under construction. Natural gas is considered a cleaner-burning fuel because it releases up to 60% less carbon dioxide than coal.

“Southeast Asia should reconsider its growing reliance on liquefied natural gas as it transitions from coal to renewable energy. While LNG has long been hailed as a cleaner alternative to coal, recent research reveals that LNG is not as environmentally friendly as thought. This growing evidence challenges the notion that LNG is a viable transitional fuel,” the ARE report said.

While LNG carbon intensity is approximately 50% of coal when calculated solely at a power plant, the greenhouse gases that escape during its production, storage, transport, and regasification compound its carbon footprint.

These upstream emissions, which account for almost two-thirds of LNG’s total emissions, put LNG’s overall emissions not far below those from coal—and when properly accounted for could exceed that of coal, the report said.

Geopolitical events have also intensified interest in LNG investment. Supply disruptions caused by the war in Ukraine in 2022 sent global prices soaring, prompting more buyers to seek the kind of long-term purchase contracts required to justify the large-scale investment involved in LNG infrastructure, the report added.