The energy crisis in Europe drew LNG away from Asia last year, leading to a reduction in regional LNG imports. This year many analysts forecast a rebound in the key Chinese market as Beijing unwound its restrictive Covid-19 policies. However, the rebound proved short-lived, according to Lynnsey Yuqian Lin, Analyst, Global Fundamentals and Corporate Research, Cheniere Energy.

Weak Chinese industrial gas demand was exacerbated by a slow domestic real estate market and limited export orders from key markets in North America and Europe, she said at the LNG2023 conference in Vancouver, Canada.

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The great majority of factors remain bearish for the Chinese economy, according to Yuqian Lin. The real estate sector is struggling and export order levels remain low. She added that spot LNG prices may have fallen from recent highs, but still remain too steep for gas-fired generators and other domestic Chinese gas buyers, limiting Chinese purchases in the LNG spot market.

However, in the next few years, Chinese LNG demand is likely to return to its pre-pandemic growth trajectory, Yuqian Lin said, pointing to the huge build out of gas infrastructure approved under Beijing’s most recent five-year plan. The government’s desire to increase gas’ share of the energy mix and the likelihood that domestic gas production will grow no quicker than it has in recent years, suggests Chinese LNG import demand will return to its former robust levels of growth.

LNG demand gap to grow in south and southeast Asia

It is not just the Chinese market which underpins high-growth forecasts for Asian LNG demand. Gen Kunihiro of Mitsubishi Corp. points to a major import gap emerging in South and Southeast Asia. The region is expected to see 22% growth in population by 2050, adding some 500mn people. At the same time, domestic gas production across the region is in terminal decline, Kunihiro said.

He forecasts that gas generation capacity in south and southeast Asia will increase two and half times by 2050. Industrial gas use will also expand, leading to a doubling of gas consumption across the region overall. This is being accompanied by a lack of supply-side investment. Spending levels in the upstream oil and gas sector have not returned to pre-pandemic levels, Kunihiro said.

With domestic gas production declining, even increasing levels of investment in renewables will be insufficient to meet the region’s energy demand growth. As a result, LNG imports from outside the region will have to fill the gap, he said.

This feature was originally published in the LNG2023 Daily, produced by NGW during the LNG2023 conference in Vancouver July 10-13.