Asian liquefied natural gas (LNG) demand is projected to increase by 5% at 12 million tons (Mt) in 2024, following a 2% at 5 Mt growth in 2023, according to the most recent report by Wood Mackenzie.
China, the world’s largest LNG import market, is expected to see a 5% at 4 Mt growth in LNG imports, it is stated in ‘Asia Pacific Gas and LNG: 5 things to look out for in 2024’ report.
Despite anticipated growth in LNG demand, incremental demand in 2024 may be limited due to gas-on-gas competition and stable coal supplies amid uncertain demand for industrial energy.
“2023 presented a mixed bag for Asia Pacific’s gas markets. While softening LNG prices supported LNG demand, economic headwinds, fiercer inter-fuel competitions, and a mild winter at the beginning of the year hindered the strength of the recovery.
“Geopolitical events and near-term price volatility added to the challenges faced by policymakers in balancing energy security, energy equity, and environmental sustainability. As we move into 2024, the role of gas in the region will be shaped significantly,” said Miaoru Huang, Research Director, Asia Pacific Gas and LNG at Wood Mackenzie.
Contractual rights will be under the microscope in 2024, as spot prices remain volatile. Industry players will closely monitor price arbitrage between spot prices and long-term contracts (Brent-linked) on individual cargoes to maximize short-term profits.
This may lead to an increase in the number of disputes between buyers and sellers in 2024, according to Wood Mackenzie.
Risks with regas underutilization and shipping canal transits
Record regasification capacity additions in 2024 will position Asia for future LNG demand growth.
However, according to Wood Mackenzie, more severe underutilization as LNG demand growth lags capacity expansion.
China alone will add over 50 mmtpa regas capacity in 2024. That includes Chinese inland waterway terminals, which will be the first of their kind.
More regas terminals in northern China may adopt bonded storage and transfer businesses to mitigate the financial risks due to predicted low usage.
“The Asia Pacific region is expected to add 75 mmtpa of regasification capacity by 2024, which may result in the highest level of underutilization in 10 years on average,” said Huang.
Long-lasting impacts on gas markets by elections and policy reviews
Alongside election-driven change, several periodic energy policy reviews and market liberalization developments are on the horizon.
Japan is expected to release its 7th Strategic Energy Plan in 2024, which may include revisions to the 2030 power mix targets.
The existing plan aims to significantly reduce the use of fossil fuel power by 2030 in favor of nuclear, renewable, and hydrogen. In Singapore, energy security concerns have led to a retreat from market liberalization. A new single buyer for the power sector will be introduced in 2024, resulting in a major change in Singapore’s LNG contracting and competitive landscape.
Energy security concerns, however, are not stalling liberalization progress everywhere. In Malaysia and South Korea, decisions on regulated pricing and commissioning new independent regas infrastructure will open more opportunities for third-party participation next year.
With key elections in 2024, approvals and decision-making in the Asia Pacific region are expected to be slow, and significant changes in policy direction will be limited until new regimes come into office.
“We expect LNG demand to continue recovering, with investments in infrastructure and new supply moving forward. The stage is also set for carbon capture and storage (CCS) developments. Additionally, several regional markets will see elections this year, which could have long-lasting impacts on gas markets,” Huang concluded.
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