BAKU, Azerbaijan, July 1. Emerging markets in Asia are set to drive the strongest growth in LNG demand over the next decade, according to a new report by BMI, a Fitch Solutions company, Trend reports.
This trend is particularly evident in the power sector, where total power generation in these markets is expected to increase by 6,344 TWh (51.1 percent) over the next ten years, compared to a modest 157 TWh (7.1 percent) increase in developed markets. For natural gas-fired generation, the projected growth is even more striking, with emerging markets anticipated to see an 89 percent rise (706 TWh) versus a 21.3 percent increase (163 TWh) in developed markets.
A significant factor influencing LNG demand is the penetration of renewables. The expected surge in renewable energy output is a primary reason for the projected decline in Japan’s LNG imports. This, along with nuclear capacity restarts and improved energy efficiency, is leading to an LNG surplus in Japan as utilities reduce LNG use for power generation. Consequently, LNG importers in Japan are likely to explore new market outlets for their surplus, either by selling to other domestic industries or reexporting it.
The broader shift in regional LNG demand from developed to emerging markets poses intriguing questions for the future. Emerging markets often have more uncertain demand outlooks, heightened price sensitivity, less creditworthy buyers compared to major Japanese and South Korean utilities, and a general reluctance or inability to commit to large, long-term supply contracts. This dynamic is contributing to a market trend towards increased spot and short-term trading, the rise of portfolio players, and growing contract disputes aimed at loosening contractual terms to facilitate smoother LNG flows.
This evolving landscape is indicative of the LNG market’s gradual transition from rigid end-to-end trading to a fully commoditized, globalized, and liquid marketplace, resembling the European or North American gas hubs or the crude oil and refined fuels markets. The report highlights the importance of closely monitoring these trends as they continue to reshape the global LNG market.
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