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LNG market expansion needs South Asian demand
LNG’s penetration into South Asian markets is significant, but nowhere near its potential. India, Pakistan and Bangladesh represent combined markets of some 1.7bn people. These countries are characterised by static or falling domestic gas production combined with high rates of energy demand growth and a desire to increase the use of gas within their economies to supplant costlier and/or higher emissions fuels.
However, South Asian markets are what is known in LNG analyst parlance as ‘price-sensitive.’ What this means in practice is that typically state-owned buyers have low levels of creditworthiness and entrenched debt, the product of being on the wrong side of energy and industrial subsidies.
The sale price of electricity and other gas-based products, such as fertilisers, are often below the cost of production in the domestic market, creating a vicious circle of indebtedness.
Retreat from the spot market In 2022, as LNG prices rose to record levels, India, Pakistan and Bangladesh all retreated from the spot market, and relied on long-term contracts, which in the case of the latter two at least were insufficient in volume to meet demand for imported gas.
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