TOKYO — Southeast Asian countries’ transition to liquefied natural gas and the expected surge in demand for the fuel is spurring Japanese companies to expand their LNG business in the region as their home market’s needs shrink.
Natural gas is becoming an important resource for ASEAN’s 10 members. Vietnam and the Philippines began importing LNG in 2023 to fuel their gas-fired power plants.
In Southeast Asia, “a realistic energy solution for lower carbon emission is to reduce coal-fired power generation and shift to gas-fired [power plants] along with renewable energy,” Michiaki Hirose, former president of Tokyo Gas, told Nikkei Asia in an interview.
Hirose, a leading figure in Japan’s energy industry, spoke up as the country deepens its involvement in the region’s energy transition.
Tokyo Gas and Philippine energy company First Gen are expected to start jointly operating an LNG terminal in the Philippines as soon as they get government approval. The LNG terminal provides gas to a local gas-fired power plant.
Philippine Secretary of Energy Raphael Lotilla, who met with Japanese government officials and private sector executives in Manila on April 1, said he welcomed Japanese investments in LNG as a transition fuel.
In December, Japan, Australia and ASEAN member states held the first summit of the Asia Zero Emission Community in Tokyo. The AZEC framework is meant to facilitate financial and technical support to help members transition to less-polluting energy sources.
Tokyo Gas has been importing LNG and operating terminals in Japan since 1969. “Japan became an LNG powerhouse over half a century,” said Hirose, formerly the chairman of the Japan Gas Association. “The ‘LNG era’ will also come to Southeast Asia via [each country’s] renewable energy strategies.”
Hirose projects that the transition from fossil fuels to renewables will last until 2050 or 2060. Tokyo Gas, which handles around 19 million tonnes of LNG annually, is seeking to expand its business in Southeast Asia, including Vietnam and Indonesia.
According to an International Energy Agency projection, natural gas demand in Southeast Asia will increase to 332.73 billion cubic meters, or bcm, in 2050 from 163.7 bcm in 2020. Shell LNG Outlook 2024 estimates global LNG demand to rise by more than 50% by 2040 due to growing demand in Asia and industrial coal-to-gas switching.
“Having an advantage in economies of scale is the key to LNG procurement,” Hirose said. “It is crucial to foster win-win relationships to reduce the price. Japanese energy companies will look for partnerships with foreign companies.”
The notion that gas is key to the globe’s energy transition has gained traction over the past few years, according to Hitoshi Kaguchi, representative director at Mitsubishi Heavy Industries, which holds the top share in the market for gas turbines used in power plants.
Orders for the company’s gas turbines from Southeast Asia increased by more than 50% in megawatt terms in 2023 compared to 2022, with especially robust demand coming from Singapore. The company is also eyeing developments in neighboring countries.
“The upstream oil and gas companies, who were previously worried about how to survive in the green era, seem to have gained confidence that fossil fuels will still continue to be a business from an energy security perspective,” Kaguchi told Nikkei. “The most major part [of Asia’s decarbonization effort] is the shift from coal to gas power, and eventually renewables will follow.”
Kagushi also noted that geography is working against Asia’s efforts to harness solar and wind power.
“To boost demand abroad, Japanese companies are investing heavily in new gas and LNG infrastructure in prospective markets like the Philippines,” Sam Reynolds, head of Asia LNG/gas research at U.S.-based think tank Institute for Energy Economics and Financial Analysis, said in a report.
According to the think tank, Japan’s LNG imports have fallen since 2018 by 20% to 67 million tonnes, the lowest level in a decade, and the country’s large consuming companies will have a growing surplus of contracted LNG supplies through 2030.
Reynolds said Japanese companies are eager to “shore up LNG supplies for resales and trading, in pursuit of overseas expansion opportunities.”
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