The Association of South East Asian Nations (ASEAN) celebrates its 50th anniversary this year. It consists of 10 countries, with a combined GDP of US$2.8 trillion, making it the 6th largest economy in the world.
Individually, countries within ASEAN have achieved a lot in terms of economic and energy development. However, collectively ASEAN has a lot of space to fill. Two of the key initiatives in ASEAN are the Trans ASEAN gas pipeline (TAGP) and ASEAN power grid. While there are existing bilateral gas pipeline interconnections, the full realisation of TAGP depends heavily on the monetisation of the Natuna D-Alpha field, which is uncertain due to its high CO2 content. This has dragged out the initiative for years.
At the same time, the arrival of LNG into the region since 2011 has changed the regional gas landscape. By 2035, countries like Thailand, Indonesia, Malaysia, Singapore and Philippines will have at least 50% LNG dependency in their gas markets. To stay relevant, ASEAN needs to shift its focus more toward LNG cooperation. Several things the region could do on this front:
1. Fostering intra-regional LNG trade
With the established FTA, non-tariff trade barrier removal and cross-border transportation agreement, it makes a lot of sense for ASEAN to promote intra-regional LNG trade. Distant-wise, it's more competitive too. The author learned from ASCOPE that the organisation is assessing the possibility to have destination flexibility for LNG delivery within the region. Having 'ASEAN' as a generic LNG destination is a great way to improve trade and flexibility
2. Infrastructure sharing
Importing LNG from other countries' terminals can be considered. Countries like Singapore and Thailand have oversized LNG imports facilities, while others are still trying to make a case for LNG imports. Facility sharing can avoid the need to spend additional investments on infrastructure, particularly in areas where demand is still too small or uncertain. Myanmar for instance can import LNG via Thailand, supported by swap arrangements. Similarly, Vietnam can import LNG through Malaysia's terminal for its south-west gas market.
3. Market-based LNG pricing
Based on Wood Mackenzie's forecast, ASEAN's LNG demand is set to grow, from 12 mmtpa today, to 35 mmtpa in 2025, and further to 74 mmtpa in 2035. With imports on the rise, it is in the region's interest to support the development of more transparent market reflective LNG pricing. This will go well with the recent trend toward market liberalisation in Singapore, Malaysia and Thailand, as well as TPA implementation in these countries. While Singapore has gone ahead with its SLiNG index, capturing the ASEAN market could add the needed scale and improve the liquidity.
4. Small-scale LNG and distributed generation
Another key energy initiative in the region is the ASEAN power grid, which is essential to provide balancing and added security across countries. However, if the objective is to improve electrification rate, the deployment of small-scale LNG with distributed generation could be a quicker & more effective way to do it. Particularly for islands and remote areas which are distant from high-voltage transmission lines. This could be further combined with renewable energy projects such as wind and solar PV going forward.
Take a look at the infographic Wood Mackenzie has put together to show the ASEAN gas supply mix:
The role of LNG in ASEAN will continue to grow as the existing piped gas supply declines. By 2035, around half of the region's gas demand will have to be met by LNG volumes.
If you are would like to share your views on 'Emerging Customer Markets Spotlights' including 'Future Forecasts & Projections for New Markets', submit your abstract for Gastech 2018 by 23rd February 2018.
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