Asian LNG faces affordability challenge

AFFORDABILITY remains a key obstacle to the maturing of Asia’s liquified natural gas market, according to energy consultancy Wood Mackenzie.

Global LNG supply is set to surge by 40% by 2030. WoodMac projected Asian LNG demand to rise by 115m tonnes between 2024 and 2030, driven by the power industry’s drive to replace coal and back up renewables.

“Recent years of extraordinarily high LNG prices have curbed demand growth. This is about to change,” WoodMac said.

It said Asian spot LNG prices were expected to decline from $12-$13 per mmbtu today to an average of $8.80 per mmbtu between 2028-2030.

“This marks a significant drop from post-Ukraine invasion peaks above $430 per mmbtu,” WoodMac said.

Current prices mean Asian governments spend billions subsidising LNG imports to cover the gap between regulated electricity tariffs and market realities.

Four markets — Vietnam, Thailand, Bangladesh and China’s Guangdong province — together make up nearly 25% of Asia’s gas-to-power demand and 15% of LNG consumption.

WoodMac said spot prices would fall below the regulated tariffs, meaning less spent on subsidies in Vietnam and Guangdong by 2030, and in Thailand by 2028. This could help get long-term contracts signed, helping affordability.

But subsidies would be unavoidable in Bangladesh, where LNG may still trade $3 per mmbtu above affordable levels by 2030, despite declining spot rates.

“The upcoming wave of new supply will reshape global LNG dynamics,” WoodMac said.

Lower spot prices would reduce governments’ spending burden and pave the way to shift from dependence on subsidies to market-driven demand, in a sign of maturing Asian LNG markets.

This would unlock fresh demand in emerging Asia. But the extent would depend on how far affordability improved across diverse regulatory and market structures.

“For LNG suppliers and investors, the potential for 115m tonnes of new Asian demand offers an unprecedented market expansion opportunity,” WoodMac said.

“But realisation depends on navigating diverse regulatory frameworks and affordability constraints that vary dramatically across the region.

“The potential for growth is clear, but in markets constrained by fiscal and regulatory limitations, the pace at which it materialises remains the key question.”