WoodMac says Asia needs more US LNG to curb emissions
Coal use and accompanying emissions from power generation in Asia will surge in the coming decades unless there is “significant” new supplies of LNG imported from the US, global consultancy Wood Mackenzie said December 2.
In a study commissioned by the Asia Natural Gas & Energy Association (ANGEA), WoodMac found that continued growth in US LNG production was “essential” to balancing global markets and providing emerging Asian economies with an affordable and available alternative to coal, currently the dominant fuel in the region for power generation.
WoodMac forecasts that Asian LNG demand will increase to 510mn tonnes/year in 2050 from 270mn tonnes/year in 2024, fueling economic growth and supporting greenhouse gas emissions reductions, alongside investments in renewables.
The Wood Mackenzie study models two scenarios: one in which the current pause in LNG export permits to non-FTA countries is lifted in early 2025, as President-elect Donald Trump has promised, and one in which the pause stays in effect for a longer period.
“If the pause is lifted and approvals and development of export facilities resume, then US LNG is expected to comprise a third of global supply by 2035,” ANGEA CEO Paul Everingham said. “But if it remains in place and planned and proposed US LNG projects are not developed, there is a risk that LNG developments in other regions will fail to keep pace with anticipated demand growth.”
The study, he said, demonstrates there is considerable LNG supply poised to hit global markets through the second half of this decade. But beyond 2030, strong uncertainty surrounds what new supply growth will look like and how this might impact energy planning in Asia.
“This aligns with ANGEA’s experience engaging with key energy decision makers around Asia, who are planning to make long-term investments in gas supply and infrastructure worth tens of billions of dollars,” Everingham said. “The most common question they ask us is ‘where is our gas supply for future decades going to come from?’”
If long-term LNG supplies aren’t going to be available from the US or Australia, gas would need to be sourced from less cost-competitive projects elsewhere, with a likely outcome of higher LNG prices than what many emerging economies in Asia and Southeast Asia can afford.
“Nations like Bangladesh, Vietnam, the Philippines, Indonesia and Malaysia will not be able to realise their plans to transition to gas-fired power if LNG prices are high and coal use, which hit record levels in both 2022 and 2023, will keep growing,” Everingham said. “Without certainty of an affordable supply, their fallback position, quite understandably, is to stick with a fuel they are familiar with and which they know is likely to be inexpensive and plentiful: coal.”
Higher LNG prices, WoodMac’s study suggests, would lead to a 30% reduction in its projections for Asian LNG demand in 2035, resulting in 100mn tonnes/year of additional CO2 emissions in that year alone.
“This is roughly equivalent to the annual emissions of 20mn cars and will impact Asia’s progress towards climate objectives,” Everingham said.