Asian LNG demand seen rebounding

Asian LNG demand seen rebounding

Demand for liquefied natural gas (LNG) in China, India and Pakistan could recover from multi-year lows once the Middle East supply crunch eases and new LNG supplies enter the market, industry executives said.

The ongoing US-Iran conflict has disrupted LNG exports from Qatar and the United Arab Emirates, as restrictions on shipping through the Strait of Hormuz have sharply reduced supplies. The strategic waterway previously carried around one-fifth of global LNG shipments.

Cederic Cremers, president of Integrated Gas at Shell, said the disruption has removed around 36 million tonnes of LNG from Middle Eastern supplies so far this year.

The supply squeeze has pushed Asian spot LNG prices close to $30 per million British thermal units (MMBtu), compared with around $10 per MMBtu before the conflict. The sharp increase has encouraged several Asian markets to rely more heavily on coal and oil as alternatives to gas.

India has already seen the impact of higher LNG prices. GAIL Chairman Deepak Gupta said expensive gas is affecting demand, particularly among industries and other sectors that remain highly sensitive to energy costs.

Pakistan could also increase LNG purchases if prices fall to more affordable levels. Pakistan LNG CEO Masood Nabi said additional supply coming into the market could support a recovery in demand.

Although rapid solar expansion has helped Pakistan reduce pressure on its power system in recent years, Nabi noted that gas remains important for households and several other sectors of the economy.

Industry executives expect LNG demand across the three major Asian markets to strengthen once Middle Eastern supply flows improve and new production capacity becomes available, potentially reducing the need for costly coal and oil substitution.