Asia’s Growing Appetite for LNG

As Asia strives to cut back carbon emissions by reducing its reliance on coal, liquefied natural gas (LNG) has emerged as a leading transition fuel that could pave the way for the United States to play a crucial role in the region’s energy landscape.

LNG represents an important substitute which offers sustainability, diversification and energy security to Asia, home to more than half the world’s population. The region is reliant on LNG imports as growing energy demand outpaces supply. 

LNG is a cleaner burning fuel, producing up to 50% less carbon dioxide than coal and 30% less than oil. A Berkeley Research Group four-year study found U.S. LNG greenhouse gas emissions are 53% lower than coal on average and 63% lower than pipeline gas from Russia and Turkmenistan. The study tracks lifecycle emissions for U.S. LNG, pipeline gas and coal throughout the supply chain from upstream production through liquefication, shipping and then use in power generation in China, India, South Korea, Japan and Taiwan.

Industrial coal-to-gas switching is considered one of the main drivers behind the gas demand growth in Asian countries. Oil company, Shell, stated in its annual report, estimated LNG to be the key gas supply source to meet the strong demand from emerging Asian countries, with volume growing at a compound annual growth rate (CAGR) of 5.1% by the end of 2040.

The shale revolution in the late 2000s/early 2010s fundamentally changed the U.S. natural gas industry. U.S. gas production has since grown rapidly, with annual volume increasing from about 22 trillion cubic feet (Tcf) in 2010 to 41 Tcf in 2023, according to EIA data. At the same time, the U.S. also turned into an important gas exporter with expanding LNG liquefication capacity. In fact, in 2023, the U.S. became the world’s largest LNG exporter, surpassing Qatar and Australia.

A substantial amount of U.S. LNG is now consumed by major economies in the APAC region. EIA data shows that U.S. LNG exports to Asia have grown significantly from being almost nonexistent in 2016 to a peak at 1.68 Tcf in 2021, accounting for almost 50% of total U.S. exports.

Russia’s invasion of Ukraine in February 2022, and the consequent sanctions, changed global gas trade flows. Europe embarked on a mission to reduce dependency on Russia pipeline gas and turned to the global LNG market for alternate supply in competition with Asia. This impacted LNG availability for Asian consumers and as a result U.S. LNG exports to the region have since declined to about 1 Tcf per year. Even so, Asia remains a key destination for U.S. LNG cargoes, representing about a quarter of the market share.