Southeast Asia is playing an increasingly prominent role as a market for liquefied natural gas (LNG). The region’s LNG demand is set to more than double from 12.1 million metric tonnes per annum (mtpa) in 2018 to more than 25 mtpa by 2025, driven by the decline in domestic gas production, limited pipeline connectivity and growing consumption from the power and industrial sectors. It is projected to become a net gas importer in the late 2020s, a turnaround for a region that is home to some of the major traditional names in LNG export – Malaysia, Indonesia and Brunei.
Current LNG scenario
According to the BP Statistical Review of World Energy 2019, Southeast Asia accounted for 15 per cent of the global LNG exports in 2018. The region’s share in the total LNG exports has declined from around 20 per cent in 2014. Rising energy demand and declining domestic gas production are the major factors responsible for plummeting LNG supplies.
Malaysia is the largest LNG exporter in the region followed by Indonesia and Brunei. In 2018, the country’s LNG exports stood at 33 billion cubic metres (bcm), making it the world’s third largest LNG exporter after Qatar and Australia. However, in 2019, US overtook Malaysia to become the world’s third largest LNG seller. The country’s exports recorded a negative compound annual growth rate (CAGR) of 0.74 per cent during the period 2014-18. Malaysia mainly exports LNG to Japan, South Korea and China. State-run Petronas is a significant LNG producer in the country. Petronas along with its joint venture companies owns and operates the Petronas LNG Complex, an integrated LNG production complex with a capacity of around 30 million tonnes. Further, the company’s first floating LNG facility, PFLNG Satu, has a capacity of 1.2 mtpa.
Indonesia exported 20.8 bcm of LNG in 2018, its lowest supply in two decades. During the period 2014-18, the country’s exports witnessed a decline of 1.05 per cent. The decline underscores Indonesia’s diminishing role as an LNG exporter to Asian markets despite having one of the world’s largest gas reserves. However, Indonesia is optimistic about its long-term outlook and recently reversed projections that it would need to import LNG by 2025 with new projects coming online in the next five years. The country’s existing LNG facilities are based in Bontang, Tangguh and Donggi Senoro. The major consumers of Indonesia’s LNG are Japan, China and South Korea. Meanwhile, Brunei exported 8.8 bcm of LNG in 2018. The country’s LNG exports grew at a CAGR of 0.58 per cent from 2014 to 2018. It has been a long-term exporter to Japan and South Korea from its Lumut LNG liquefaction plant.
On the other hand, Thailand is the biggest LNG consumer in Southeast Asia followed by Singapore. In 2018, Thailand imported 6.2 bcm of LNG to meet its natural gas demands. During the period 2014-18, the country’s imports increased at a high CAGR of 34.4 per cent. Further, it is expected that Thailand’s LNG demand will triple by 2025 due to the rising demand from gas-fired power plants and the petrochemical industry in the country. PTT Public Company Limited, the national oil and gas conglomerate, is the sole LNG operator since 2011. It runs the LNG receiving terminal in Map Ta Phut, Rayong, with a capacity of 11.5 mtpa. Besides, LNG imports are also expected to rise in Singapore on the back of increased use in the power sector and shipping industry. In 2018, the country imported 4.5 bcm of LNG as compared to 2.6 bcm in 2014, recording a CAGR of 14.7 per cent. The share of pipeline gas imports from Malaysia and Indonesia has also been declining since Singapore started importing LNG in 2013.
Countries such as the Philippines and Vietnam that are currently self-sufficient are expected to start importing LNG by the year 2021 to meet their burgeoning energy demands. The Malampaya gas field, which accounts for 15 per cent of electricity generation in the Philippines and is the country’s only source of natural gas, is expected to be depleted latest by 2027. Meanwhile, to meet its growing electricity demand, Vietnam is likely to import 1-4 bcm of LNG during the period 2021-25. The imports are expected to rise to 6-10 bcm from 2026. Further, Myanmar which used to be an exporter of natural gas could transition into an importer as its gas resources continue to deplete.
LNG infrastructure development across the region
In the past few years, Southeast Asia has witnessed increased investments in development of LNG infrastructure. New onshore and floating regasification terminals are fast being built in the region in a bid to increase the flexibility of gas procurement as well as to create sustainable LNG supplies. Several projects are also under way in countries like Malaysia and Indonesia to expand the LNG production capacity. Southeast Asia Infrastructure looks at some of the key upcoming LNG projects in the region.
Indonesia: The country is developing two new LNG facilities to enable higher exports. It has entered into an agreement with Japan’s Inpex Corporation for development of the Abadi LNG project. The LNG plant which involves an investment of $20 billion will have a capacity of 9.5 mtpa. The project is expected to start operations in 2027. Moreover, British Petroleum Company Limited is working towards the expansion of the Tangguh LNG project. The project will add a liquefaction unit of 3.8 mtpa production capacity to its existing facility in the West Papua area.
Malaysia: Petronas’s second floating LNG facility, PFLNG Dua, which is currently under construction, will enable production, liquefaction and offloading of natural gas in the Rotan field, located 240 km off the east Malaysian state of Sabah. The facility which is expected to be completed by mid-2020 will have capacity of 1.5 mtpa.
Myanmar: A consortium of domestic and Japanese companies will construct a power plant and LNG import terminal at the Thilawa special economic zone in Myanmar. The Myanmar companies involved include MAPCO, the Eden Group, Myanmar Edible Oil Industrial Public Corporation Limited and Myanmar Agriculture and General Public Development Public Limited. The firms will work with Japan’s Marubeni Corporation, Sumitomo Group and Mitsui Limited to jointly implement the $2 billion projects. Construction is expected to begin in March 2020 and will take 30 months to complete. The LNG will be imported from Singapore, Malaysia and Indonesia.
Philippines: In the Philippines, US-based firm Excelerate Energy is working on the Luzon LNG project, a floating LNG regasification terminal in the Bay of Batangas. The facility, which will have a storage capacity of 150,000 cubic metres, is expected to begin commercial operations by the third quarter of 2021. Further, the Philippines’ First Gen Corporation is working along with Japan’s Tokyo Gas Limited to implement the $1 billion Batangas LNG terminal project. Construction on the project is expected to be started in May 2020. Besides, Australia-listed Energy World Corporation’s LNG hub project in Pagbilao province is almost complete. The $2 billion Tanglawan LNG project, however, has been put on hold by backers CNOOC Gas and Power of China and Phoenix Petroleum Philippines, Inc. after the latter’s parent company Udenna Corporation acquired a 45 per cent stake in the Malampaya natural gas consortium.
Singapore: The country’s first LNG import terminal began operations in 2013 with an initial throughput capacity of 3.5 mtpa. The terminal will eventually be expanded to seven storage tanks with a capacity of 15 mtpa. The excess capacity will be used to replace the declining pipeline supply. Singapore has also been looking to build a second terminal on the country’s east coast to diversify its supply sources.
Thailand: Thailand’s Gulf PTT Tank Consortium has signed a contract with the Industrial Estate Authority of Thailand (IEAT) for the Phase III expansion of the country’s only LNG import facility – the Map Ta Phut LNG terminal. The expansion would add at least 5 mtpa of import capacity by the year 2025. Two other LNG facilities are in the pipeline. PTT Public Company is developing an LNG receiving terminal in Nong Fab, Rayon with an annual capacity of 7.5 million tonnes. Further, the IEAT has signed an agreement worth $1.33 billion with the Gulf MPT LNG Terminal Company to build the country’s third LNG import terminal. Commercial operations on the project are expected to be started in 2025.
Vietnam: In Vietnam, state-run PetroVietnam and its partners started construction on the Thi Vai LNG import terminal in October 2019. The terminal will have a capacity of 1 mtpa when the first phase of development is completed in 2022. The approval for construction of the Son My terminal, the country’s second LNG terminal, was received in August 2019. The country plans to have 10 LNG import terminals operating by 2029.
Conclusion
Southeast Asia has emerged as the world’s fastest growing LNG demand centre in the last few years. Rising energy consumption, dwindling gas resources along with environmental concerns are transforming the region into a net importer of LNG. This represents an interesting trend for Southeast Asia which has traditionally enjoyed the position of a major producer and exporter of natural gas. Increasing demand has pushed the development of LNG infrastructure in the region with several countries investing huge amounts in import or regasification terminals.
