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Expert Commentary - The future of natural gas in Asia Pacific

 Doha

The Asia Pacific region1, with its vast potential for burgeoning demand growth of natural gas, is poised to play a pivotal role in shaping the future of this important energy source, as highlighted by the latest edition of the GECF Global Gas Outlook 2050.

The 7th edition of the Outlook forecasts that the primary energy demand of the world will rise by 22%, reaching 17,865 million tonnes of oil equivalent (Mtoe) by 2050, up from 14,585 Mtoe in 2021. Asia Pacific will contribute to 60% of this increase, given the compounded effects of dynamic economic and population drivers. The region’s GDP will nearly triple in size and its population will increase by 11% to 4.76 billion people by 2050. It is estimated that 954 million additional people will be living in urban sprawls of Asia Pacific.

At the same time, the main trait that unites countries in Asia Pacific is a strong policy push to improve air quality, along with goals for reducing greenhouse emissions. The focus is thus on cutting coal dependence: coal at present accounts for around 46% of the regional energy mix. These priorities will pave the way for a substantial increase in natural gas use. The region’s gas demand is projected to grow by 78%, from 910 billion cubic meters (bcm) in 2021 to 1,620 bcm by 2050. The share of gas in regional energy mix will jump from 12% in 2021 to over 16% by 2050. Electrification, policy measures encouraging oil- and coal-to-gas switching, and significant investments in gas infrastructure, including new regasification capacity, the expansion of transmission and distribution networks, are among the main drivers.

Power generation will take a frontline place, accounting for 46% of the total gas demand increase. Gas-fired generation will be favoured across all markets in Asia Pacific in the context of continued diversification from coal and as a part of the long-term decarbonisation solution. Gas-based power generation will be in demand also to provide dispatchable capacity in support of the integration of growing share of renewables. In addition, there are carbon capture opportunities in power to ensure sizeable carbon emissions reduction. Given strong electricity requirements in the region and large potential for displacing coal, gas demand in the power generation sector will continue to increase during the forecast period.

Figure 1. Asia Pacific power generation by fuel (TWh)


Source: GECF Secretariat, based on data from GECF GGM                Note: Others include oil, bioenergy and hydrogen

Gas demand in the industry (as energy fuel and feedstock) and in the residential and commercial sectors will also rise considerably, recording 20% and 14% of total growth. Asia Pacific is also expected to be a very promising region for gas use in the transport sector. Much of the increase will stem from efforts to promote compressed natural gas (CNG) and LNG-fuelled vehicles amid strengthening pollutant emission standards and strategies to expand refuelling stations.

Figure 2. Asia Pacific natural gas demand by country and sector (bcm) 


Source: GECF Secretariat, based on data from GECF GGM

China, India and Southeast Asia will be the primary growth centres in Asia Pacific. Meanwhile, Japan and South Korea will be the only countries where declines in demand are expected. This will result from nuclear restarts, growing renewable capacity and integration of imported hydrogen in the energy system, although reliance on LNG will continue to be a key component of their decarbonisation strategy and energy security.

China will account for 48% of Asia Pacific’s incremental gas usage between 2021 and 2050. With concerns over air quality, China is targeting to increase the share of natural gas in its energy mix from 8.5% in 2021 to 15% in 2030. To reach this level, the country is conducting a set of market reforms aimed at domestic production growth, boosting investments, and improving third-party access to infrastructure, including LNG terminals. An important step was the launch of midstream operator PipeChina and the provinces have already started to transfer their assets into the national pipeline network. This move will facilitate access to gas supply, leading to greater competition and potentially lower gas prices for end users.

As China continues with its transition to lower-carbon energy system, coal-to-gas switching is expected to play a role during the 14th Five-Year Plan, which emphasises both sustainability and supply security concerns. Eventually, the country’s pledge to become a carbon-neutral economy by 2060, while achieving peak emissions before 2030, will provide a significant boost for natural gas to expand across all consuming sectors.

In absolute volumes, natural gas demand in China is forecast to reach 700 bcm by 2050, from 360 bcm in 2021, underpinned by economic expansion, urbanisation, wealthier households, coal-to-gas conversions, infrastructure buildout, and ongoing market reforms. Power generation will be the main driver for growth due to policy-driven expansion and the need for a flexible power source to facilitate renewables’ deployment. Residential and commercial sectors as well as industry will also represent remarkable components of gas demand growth in China, but trends will stabilise after 2040 amid higher penetration of alternative clean energy options.

In India, gas demand will benefit from drivers similar to China. Air quality has become high in the priority list of policymakers. The country has strengthened its climate ambitions and pledged to achieve carbon neutrality by 2070. The recently adopted Energy Conservation (Amendment) Bill and the Long-Term Low Emission Development Strategy are significant milestones, which are expected to speed up the transition and to be detrimental to the prospects of coal, limiting its rise in the future.

The government’s vision of increasing the share of natural gas in the primary energy mix from the current 6% to 15% by 2030 remains in place, and a huge investment programme for the expansion of gas pipelines and distribution networks is underway. The size of India’s gas transmission network could increase by more than two-third over the coming decade (currently, around 14,000 km of pipelines are under construction). Development of the city gas distribution network is set to continue and accelerate after the completion of 11th and 11th A bidding rounds. In addition, India aims to expand CNG access significantly. There are also firm plans to develop LNG as a fuel for trucks.

In this context, broad policy support, accompanied by the overall projections for India’s economy and urban population, will translate into rapid growth of natural gas demand, which is set to triple, reaching 195 bcm by 2050. In the meantime, a more optimistic forecast will greatly depend on the pace of implementation of infrastructure projects, including new LNG regasification facilities, as LNG supplies will take the bulk of the strain to cater for rising demand. Overall, natural gas use in India is projected to grow mostly in industry and in the transport sector. However, demand increase in power generation is expected to be muted due to competition from renewables and affordable coal, although a reform of the power prices could unlock substantial gas demand potential in this sector.

In contrast, in Southeast Asia2, natural gas demand will be mostly driven by the power generation sector, primarily led by developments in Indonesia, the Philippines, Thailand, and Vietnam with numerous approved or planned gas-fired projects, including LNG-to-power schemes. Policy goals indicate that Southeast Asia’s power sector will go through a profound transformation, particularly with the downward revision to coal-fired project plans due to environmental considerations and difficulty in securing financing.

Figure 3. Southeast Asia power generation by fuel (TWh)


Source: GECF Secretariat, based on data from GECF GGM                Note: Others include oil, bioenergy, nuclear and hydrogen

Accordingly, natural gas and renewables’ capacity will see a greater emphasis to satisfy strong power demand growth, stability, and sustainability commitments. Taking into account projects under construction and an assessment of long-term capacity additions, gas-fired generation, based on indigenous gas production and LNG imports, will become the largest generation source by around 2030, helping to accommodate a higher share of renewables. By 2050, natural gas will command a share of 36% of the total generation mix in Southeast Asia.

In summary, the growth potential for natural gas demand in Asia Pacific is huge, estimated at 710 bcm between 2021 and 2050. The share of this fuel in the regional energy mix will rise in tandem, from 12% to over 16% over the outlook period. Solid estimates for long-term natural gas demand are underpinned by energy policies aimed at improving air quality and replacing coal in industry and in the power generation sector. At the same time, there is an even larger potential for coal-to-gas switching if gas-based infrastructure affordability grows and more favourable policy measures are undertaken. Given Asia Pacific countries’ aspiration to propel energy transition using natural gas, the GECF Member Countries as reliable suppliers are striving to support these efforts and to cater for growing demand in this important region of the world.

Alexander Ermakov, Energy Econometrician, Energy Economics and Forecasting Department


[1] Asia Pacific region: Southeast Asia regional grouping and Australia, Bangladesh, China, India, Japan, Pakistan, South Korea, and other Asia Pacific countries. Please see the GECF regional groupings for more details in Global Gas Outlook 2050

[2] Southeast Asia includes Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor-Leste, and Vietnam.

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Expert Commentary - The future of natural gas in Asia Pacific  Doha
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