U.S. LNG Exports: A Strategic Response to Asia’s Energy Growth

A Wood Mackenzie study reveals that U.S. liquefied natural gas (LNG) could play a strategic role in meeting Asia's energy demands, countering coal growth, and maintaining the economic competitiveness of emerging economies.

Share:

Asia, at the center of global economic growth, faces major challenges in its energy transition. A new study commissioned by the Asia Natural Gas & Energy Association (ANGEA) and conducted by Wood Mackenzie highlights the vital role of U.S. liquefied natural gas (LNG) in addressing the region’s increasing energy needs while reducing dependence on coal.

U.S. LNG: A Vital Market for Asia

According to the study, LNG demand in Asia could nearly double, from 270 million tons in 2024 to 510 million tons annually by 2050. This growth reflects the rising needs of developing countries like India, Vietnam, and Indonesia, where energy is essential for sustaining economic growth and industrial investments.

Asia remains structurally dependent on LNG imports due to insufficient domestic resources to meet internal demand. U.S. LNG, as the world’s leading exporter, is seen as a key solution for meeting these demands. However, its ability to maintain this strategic role largely depends on U.S. policy decisions.

Two Scenarios, Two Trajectories

Wood Mackenzie modeled two scenarios:

1. Lifting of export restrictions: If the U.S. resumes export approvals to non-free trade agreement countries by 2025, it could account for up to one-third of global LNG exports by 2035.
2. Maintaining restrictions: If approvals remain suspended, Asia will turn to alternative, less competitive sources. This could lead to increased LNG prices, making it difficult for several emerging nations to replace coal.

Uncertainty surrounding U.S. supply is currently slowing investments in gas infrastructure in Asia, jeopardizing essential long-term projects.

Crucial Economic Challenges for Asia

For many Asian countries, such as Bangladesh, Vietnam, and the Philippines, coal remains a familiar and economically viable option. However, without access to competitive LNG supplies, these countries risk prolonging their reliance on coal.

The study estimates that in 2035, a 30% drop in LNG demand due to high prices would result in an additional 95 million tons of coal consumed in the region. This scenario highlights the economic and industrial implications for emerging economies, which could face prohibitive energy costs and unstable supplies.

Challenges for U.S. Exporters

To meet Asian demands, U.S. LNG players must address several challenges:

– Infrastructure capacity: The construction of new liquefaction and export terminals is essential to increase global supply.
– Contractual partnerships: Asian importers seek long-term contracts offering stability while demanding flexibility in terms.
– Regulatory pressures: Accelerating approvals is crucial to enable U.S. projects to materialize and compete with other exporters like Australia and Qatar.

Regional Outlook: India and Southeast Asia Driving Demand

The study projects that LNG demand in mature economies like Japan, South Korea, and Taiwan will slow after 2030 due to energy diversification and pipeline projects.

In contrast, South and Southeast Asia, with countries like India, Vietnam, and Indonesia, are expected to see strong growth until 2050. India, in particular, will increase its LNG consumption to meet industrial needs such as petrochemicals, fertilizers, and urban gas.

A More Complex Energy Mix

Wood Mackenzie’s analysis also highlights the limits of renewable energy in meeting Asia’s demands. The ambitious targets of several countries, such as Indonesia and Vietnam, face logistical and financial challenges, including:

– Network constraints and insufficient storage to compensate for intermittent solar and wind energy.
– Unattractive tariff structures for foreign investors.
– Geographic limitations, such as low wind density in Indonesia or high population density in Bangladesh.

LNG, with its flexibility and relatively competitive cost, positions itself as an essential transitional alternative to meet growing energy demands while ensuring the energy security of countries in the region.

The Azule Energy consortium has identified a significant gas and condensate field during Angola’s first exploration drilling dedicated to gas, marking a milestone for the country's energy sector.
Technip Energies has secured a contract to lead preparatory works for a floating liquefied natural gas unit in Africa, confirming its presence in the international gas infrastructure market.
The Slovak government is seeking guarantees from the European Union to secure its supplies as talks continue over ending Russian gas and adopting a new round of sanctions.
ArcLight Capital Partners announces the acquisition of Middletown Energy Center, a combined-cycle natural gas power plant, aimed at meeting the substantial rise in energy demand from data centers and digital infrastructure in Ohio.
The commissioning of LNG Canada, the first major Canadian liquefied natural gas export facility led by Shell, has not yet triggered the anticipated rise in natural gas prices in western Canada, still facing persistent oversupply.
Horizon Petroleum Ltd. is advancing towards the production launch of the Lachowice 7 gas well in Poland, having secured necessary permits and completed preliminary works to commence operations as early as next August.
European Union member states have requested to keep their national strategies for phasing out Russian gas by 2027 confidential, citing security concerns and market disruption risks, according to a document revealed by Reuters.
TotalEnergies becomes a member of PJM Interconnection, expanding its trading capabilities in North America's largest wholesale electricity market. The decision strengthens the company's presence in the United States.
Turkey has connected its gas grid to Syria’s and plans to begin supplying gas for power generation in the coming weeks, according to Turkish Energy Minister Alparslan Bayraktar.
Despite record electricity demand, China sees no significant increase in LNG purchases due to high prices and available alternative supplies.
Naftogaz announces the launch of a natural gas well with a daily output of 383,000 cubic meters, amid a sharp decline in Ukrainian production following several military strikes on its strategic facilities.
Sonatrach and ENI have signed a $1.35 billion production-sharing agreement aiming to extract 415 million barrels of hydrocarbons in Algeria's Berkine basin, strengthening energy ties between Algiers and Rome.
VMOS signs a USD 2 billion loan to finance the construction of the Vaca Muerta South pipeline, aiming to boost Argentina's energy production while reducing costly natural gas imports.
According to a Wood Mackenzie report, Argentina could achieve daily gas production of 180 million cubic metres per day by 2040, aiming to become a key regional supplier and a significant exporter of liquefied natural gas.
Côte d'Ivoire and the Italian group Eni assess progress on the Baleine energy project, whose third phase plans a daily production of 150,000 barrels of oil and 200 million cubic feet of gas for the Ivorian domestic market.
The extreme heatwave in China has led to a dramatic rise in electricity consumption, while Asia records a significant drop in liquefied natural gas imports amid a tight global energy context.
E.ON, together with MM Neuss, commissions Europe’s first fully automated cogeneration plant, capable of achieving a 91 % fuel-use rate and cutting CO₂ emissions by 22 000 t a year.
Facing the lowest temperatures recorded in 30 years, the Argentine government announces reductions in natural gas supply to industries to meet the exceptional rise in residential energy demand across the country.
Solar power generation increased sharply in the United States in June, significantly reducing natural gas consumption in the power sector, despite relatively stable overall electricity demand.
Golden Pass LNG, jointly owned by Exxon Mobil and QatarEnergy, has asked US authorities for permission to re-export liquefied natural gas starting October 1, anticipating the imminent launch of its operations in Texas.