Ten big questions facing the Asia Pacific natural gas market in 2022
With the start of 2022, IHS Markit considers the 10 "big questions" on the Asia Pacific natural gas market. These questions reflect the key issues that will shape up the regional natural gas and energy market development with implications on the global market and will guide the research agenda for the IHS Markit Asia Pacific natural gas coverage this year.
- How will the regional economy affect gas demand growth in 2022?
- How will the follow-up measures by governments to achieve carbon commitments impact gas demand growth?
- What guidance and targets will be included in China's 14th Five-Year Plan for energy and natural gas?
- How will gas market reform proceed?
- Will LNG importers continue their term contracts shopping spree or risk supply shortages and price volatility from the spot market?
- Will the recent high LNG procurement cost push up end users' prices and reduce gas demand growth?
- How will power market dynamics impact gas-fired power generation?
- How will piped gas supply affect the region's LNG demand?
- Can Asia Pacific supply maintain the record LNG export levels reached in 2021?
- Will ISO containers help accelerate gas consumption in emerging markets?
Strong economic growth has been a crucial factor driving natural gas demand in Asia Pacific over the past few years. Fueled by a 6.0% growth in real GDP, the region's natural gas demand reached 899 Bcm in 2021, an increase of 57 Bcm, or 6.7% up from 2020. In the current IHS Markit outlook, the regional real GDP growth will accelerate in 2022 but may be hampered from the precautionary measures taken by some governments considering the threat of the highly transmissible Omicron variant. Economic growth will impact not only total energy demand but also the energy mix as policies are adjusted in each market to balance economic growth, supply security, and sustainability.
A series of energy policies are expected in 2022 across Asia Pacific, including carbon emissions related policies, the next steps in natural gas midstream and price reform in various markets, and China's 14th Five-Year Plans for energy and natural gas. High spot LNG prices, piped supply uncertainty in several markets, and power market fundamentals, coupled with long-term carbon commitments, will impact energy and natural gas policies, which in turn will set framework for the region's natural gas market development.
Given the limited new capacity and gas demand expectation, the global LNG market will remain tight in the next few years. Faced with high and volatile spot prices, buyers in Asia in 2021 signed term contracts totaling at least 35 million metric tons per annum of LNG, reversing the trend of relying on spot purchases. In 2022, this trend is likely to continue as buyers seek volumes and price stability. However, term contracts with deliveries starting soon are already becoming more expensive. In addition, term contracts can help reduce spot market risk but require more time to finalize and may not be as flexible as spot supply, especially when the region's gas demand growth is facing uncertainty from economic development and carbon emissions policies. On the supply side, amid plant maintenance and feedstock availability, the region may struggle in 2022 to maintain record export levels achieved in 2021.
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Learn more about our coverage of the Asia Pacific gas and power market through our Asia-Pacific Regional Integrated Service.
Jenny Yang is a Senior Director covering Greater China gas market at IHS Markit.
Zhi Xin Chong is a Senior Director covering South and Southeast Asia gas market at IHS Markit.
Logan Reese is a Director covering Australia gas and power market at IHS Markit.
Posted 3 February 2022
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