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As 2021 begins, we look at the 10 "big questions" facing the
Asia Pacific (APAC) natural gas market. These questions reflect the
key issues that will shape up regional natural gas and energy
market development with implications on the global market and will
guide the research agenda for the IHS Markit APAC natural gas
coverage for 2021. Aggregately, the region's LNG demand accounts
for 70% of the global trade and growing. How much the growth will
be in 2021 and beyond depends on a variety of factors.
Will the recent spot price volatility decelerate the
region's LNG import growth?
How will other supply sources impact the region's LNG
import demand?
Will APAC LNG pricing hubs gain acceptance among
players?
Carbon-neutral LNG cargoes: A fad or a trend in
APAC?
What pricing mechanisms do Asian buyers prefer for new
LNG contracts?
Will more gas-fired power capacity reach FID in 2021
compared with in 2020?
Will there be more long-term PPAs underpinning gas
plants in Southeast Asia?
How will midstream reform progress increase gas
penetration?
What plans will policymakers pursue to achieve carbon
neutrality commitments?
Will new upstream developments alter regasification
terminal plans in Australia?
Some markets across APAC rely almost entirely on one source of
supply to meet their gas needs; many others have multiple
options—domestic production, pipeline imports, and LNG imports,
and supply side competition is getting fierce. Even within LNG
imports, the recent spot price volatility—below $2/MMBtu in the
2020 summer and surpassing $40/MMBtu in the 2020/21 winter—may
force LNG importers to rethink their procurement strategies for the
years to come.
On the demand side, gas-fired generation growth has been a
crucial factor driving Asian gas and LNG demand over the past few
years. New capacity investment will vary by market, as policymakers
and project developers balance costs against power grid security
and air pollution control efforts. Looking over the longer term,
policies, including those expected in 2021, to address carbon
emissions in markets with existing net-zero carbon pledge may alter
gas market development in the region. Other markets across APAC, if
not considering net-zero carbon goals themselves, will also need to
make changes accordingly as they will be impacted from the global
energy trades or financing availability for their energy
projects.
Market reforms to improve efficiency, increase competition, and
raise gas penetration through cost reduction for end users—is
making progress. However, the speed at which liberalization and
therefore how much more gas penetration is achieved will ultimately
depend on political will and market designs created in each
market.
