The Philippines, including other Southeast Asian countries, are facing global market constraints in securing long-term supply of gas, which may hinder the growth of liquefied natural gas (LNG), a report by the Institute for Energy Economics and Financial Analysis (IEEFA) said.
Citing a recent survey of LNG buyers in Japan, IEEFA said that existing suppliers in the global market have already committed to long-term contracts.
“Long-term LNG contracts with deliveries starting before 2026 are reportedly sold out globally, forcing Southeast Asian countries into expensive spot markets,” IEEF said in a statement.
IEEFA said that Southeast Asia’s LNG industry, which was once projected to be a hotspot for global demand growth, may face “financial challenges amid high prices and difficulty in procuring supplies, as well as currency and inflationary pressures.”
IEEFA stressed that these headwinds “will slow the development of LNG value chains that would support long-term demand growth.”
Before the Russia-Ukraine War, IEEFA projected that Vietnam and the Philippines to increase their LNG demand at “a rapid rate” of around 40% annually, with combined imports reaching 10 million tons per annum by 2030.
However, the said rapid growth is now unlikely at unaffordable spot prices, “without a stable procurement strategy underpinned by long-term contracts and with growing competition from lower-cost energy alternatives.”
With the Philippines’ aggressive push for renewable energy, IEEFA said that the promulgated policies in response to the global energy crisis may limit the role of LNG in power generation.
“In 2022, high spot prices and supply disruptions earned LNG a reputation as an expensive and unreliable fuel source, undermining the prospects for demand growth in key markets,” IEEFA said.
The country currently has seven approved LNG terminal projects, which include those from Samat LNG Corporation, Linseed Field Corporation and Atlantic, Gulf & Pacific International Holdings (AG&P), and First Gen Corporation.