The energy crisis in Europe has not only forced the local population to face a harsh winter, but has also affected the emerging economies of Asia.
Bloomberg posted a few days ago that the financially stronger Europe has not only replaced LNG from these countries, but has also initiated their energy transition efforts. “The battle for LNG is painful for emerging Asian economies,” the article reads.
Europe’s warming season is approaching and some are optimistic that even in the worst-case scenario, complete without Russian gas, Europe can survive its coldest winter in 30 years.
First, the higher energy prices can reduce demand for natural gas, assuming the government provides protection only to the most vulnerable. For now, the fruits of the weakening demand for gas come mainly from industry, while European households still have a role to play.
Second, in the liquefied natural gas market, continental Europe is more competitive than some Asian countries: the article describes it as “a battle for competition” and cruise prices and taxes have been significantly increased.
The article believes that some East Asian countries do not have cold winters and their demand for natural gas is not as strong as that in Europe. For emerging Asian economies, the European market is more attractive to natural gas sellers at a time of high inflation and weak currencies, which is one reason for the uncertainty over energy imports in emerging Asian economies. In the first eight months of 2022, spot LNG imports into Asia fell by more than a quarter from the previous year.
The article also cites some examples from Asian countries.
On Monday, Pakistan closed a six-year LNG tender starting next year, but received no response. Pakistan was hoping for a long-term energy supply agreement to address spot energy market problems and alleviate domestic blackouts. However, at least so far, Pakistan has not achieved results, which will lead to Pakistan’s energy shortage for several years. The situation in Bangladesh is similar.
Generally, buyers will try to enter into long-term contracts to lower prices. But in fact, traders point out that there will be a lack of sufficient supply of LNG on the market until 2026. Only when gas prices return to low prices will it be possible to see new export projects.
As for the Philippines, the country had pinned its hopes on importing LNG to reduce its over-reliance on coal. However, faced with the current uncontrolled prices of natural gas, the Philippines delayed the construction of the receiving terminal and delayed the first purchase contracts.
The article concludes that LNG demand in Europe is expected to peak in the late 1920s and for many it is a long way off. “Although emerging economies are using gas as a low-cost means to drive the energy transition, they will all suffer the pain of the European energy crisis in the years to come.”
