Price-sensitive importing markets for liquefied natural gas in Asia have been described as “virtually locked out” of new supply until 2025 and beyond as European demand fuels a prolonged high-price outlook, sources told Upstream.
Panellists and attendees in conversation with Upstream during the World LNG Summit & Awards event in Athens, Greece, claimed that the price evolution that affected LNG markets, driven by surging European demand, is producing a scenario where a number of Asia-region importers will continue to be priced out of supply in the medium term.
“Emerging markets [will] most likely have no realistic access to LNG in 2023, 2024, 2025,” International Finance Corporation principal industry specialist Alan Townsend said during a panel discussion on Friday.
He added that it will be in the “back half of the 2020s when we’ll see more supply reaching emerging markets”.
As prices surged in 2022 and Europe turned from an LNG sink to a premium market, as Patrick Dugas, vice president of LNG trading at TotalEnergies Gas & Power, described the shift, Asian LNG demand fell off a cliff as a result.
“Europe used to be last resort market. It has switched to a premium market. This will reshuffle all of our industries,” he said.
“You’ll see a kind of beauty contest between Asia and Europe for where the LNG cargo will go.”
Imports in China and India, which are Asia’s largest growth markets for LNG, fell by about one-fifth in 2022 against last year’s levels. Other importers such as Pakistan, Thailand and Bangladesh saw substantial drops.
The degree of exposure to the spot market, as opposed to active long-term agreements, varies between destinations.
Sources stressed that the most price-sensitive destinations tended to have a higher share of supply sourced on spot, which the current high price environment precludes.
“High prices are here to stay for the foreseeable, and it means that many of those markets won’t be able to return to buying spot — probably beyond 2025, some say 2030,” one delegate told Upstream.
“If you are price sensitive, you are virtually locked out of LNG supply for years ahead.”
With fewer LNG cargo reaching Asian buyers, a number of those markets increased coal consumption, as the coal to gas switch that was under way saw an abrupt reversal.
This was, delegates commented, an unwanted but predictable consequence of the underinvestment in fossil fuel supply.
“Insufficient gas supply is pushing people back to lignite, back to coal, which are much dirtier — that is the opposite of what the energy transition is supposed to achieve,” one delegate said.