Australia eyes emerging LNG markets like India, Vietnam

Australia plans to target emerging LNG markets India, Malaysia, Indonesia, Thailand, Vietnam, the Philippines and Bangladesh over the next 30 years and sees scope for more spot sales to European buyers seeking to diversify gas supply sources.

"We have identified seven emerging markets where Australia has the greatest opportunity to strengthen LNG trade," the Australian government's Department of Industry, Science, Energy and Resources said in its new Global Resources Strategy Commodity Report: LNG.

"Combined, these markets are expected to grow their LNG demand from 40mn t in 2020 to 255mn t in 2050," the report said. As well as increased LNG exports, there are opportunities for Australian participation along the entire LNG value chain in these markets. Opportunities include designing and constructing LNG import terminals and domestic gas distribution network, financing emerging LNG industries, operating gas production and LNG import facilities, and decommissioning retiring gas production facilities and restoring the environment, the report added.

Australia and Qatar vie for the title as world's largest LNG exporter, and the overwhelming majority of the more than 81mn t of LNG that Australia shipped last year went to four countries — China, Japan, South Korea and Taiwan.

"We are equally well placed to maintain our four established markets, which will remain large sources of regional demand," it said. Australia has existing engagement channels with its established markets China, Japan, South Korea and Taiwan. "These should be maintained, but additional engagement efforts are likely not required," it added.

In contrast, Australia should step up its engagement efforts with emerging LNG markets. "This is especially true for emerging markets with high demand potential in the future India, Indonesia and Bangladesh," the report said.

Australia's traditional LNG buyers have largely purchased cargoes through long-term contracts, but emerging markets in the Asia-Pacific region are less inclined to strike long-term sales and purchase agreements. Medium- and long-term contracts continue to dominate global LNG trade. But the global LNG market is evolving into a more liquid spot market with shorter-term contracts, the report said.

LNG spot market trades now account for more than 30pc of total LNG trade, compared with less than 20pc in 2010, the report said. Increasing demand volatility and uncertainty in established LNG import markets are driving demand for more flexible supply options like LNG spot cargoes, it said.

India's LNG demand is forecast to increase to 36mn t/yr by 2030 to 63mn t/yr by 2040 and to 78mn t/yr by 2050, representing a near threefold increase from present levels, the report said. At this rate of growth, India is expected to overtake South Korea as the third-largest Asian LNG market by mid-2030s and to consume as much LNG as Japan by 2040, it said.

Indian state-controlled LNG importer Petronet has a sales and purchase agreement with ExxonMobil to secure 1.44mn t/yr of LNG from the Chevron-operated 15.6mn t/yr Gorgon LNG venture offshore Western Australia.

Bangladesh's LNG demand is forecast to reach 18mn t in 2030, 30mn t in 2040 and more than 36mn t by 2050, a nine-fold increase from 2020 levels, the report said.

Gas demand in Malaysia is expected to rise from 26.7mn t in 2021 to around 37mn t/yr in the late 2040s, before slowly dropping off, it said. The majority of this demand will be met by LNG imports in future because of declining gas reserves in Malaysia. Malaysia's use of LNG will grow from 17pc in 2020 to 42pc in 2030, it said.

Australia ships LNG cargoes to Malaysia through the 2mn t/yr sales and purchase agreement that Malaysia's state-owned Petronas has with the 7.8mn t/yr Gladstone LNG (GLNG) venture in Queensland, eastern Australia. Petronas owns 27.5pc of GLNG.

By Kevin Morrison