Developing Asian nations rethink LNG after $7B cost surge

The disruption of liquefied natural gas shipments through the Strait of Hormuz since the US-Iran war began in late February has more than doubled LNG costs for developing Asian economies, forcing a broader reckoning with the fuel's future in the region.

India, Pakistan, Bangladesh, Thailand, and Vietnam — the largest non-China emerging-market LNG buyers in Asia — have collectively spent $7.4 billion on spot LNG since the start of the conflict, compared with about $3.1 billion for similar volumes under long-term contracts during the same period in 2025, according to a Bloomberg News analysis published on Sunday.businesstimes+1

Qatari shipments through the Hormuz chokepoint, which carried roughly 20% of global LNG supply before the war, have all but ceased. That has pushed buyers into a spot market where prices have surged — the Asian LNG benchmark Japan-Korea Marker rose to $24.82 per MMBtu, according to The Business Standard.tbsnews

A Fuel's Reputation at Stake

The cost shock threatens to undermine LNG's standing as a dependable bridge fuel for economies transitioning away from coal, particularly because it follows a similar disruption triggered by Russia's invasion of Ukraine in 2022.

"If prices remain at such levels, we think that LNG will have a problem competing with the alternative fuels," Fabian Kor, executive vice president for Asia at SEFE Marketing & Trading, said at a conference in Singapore last week.economictimes+1

At stake are billions of dollars in LNG infrastructure investment. Shell ↗ 0.84%, one of the world's largest producers, said in an August report that it expected global LNG demand to rise 65% by 2050, driven largely by South and Southeast Asia. Whether that projection remains realistic is set to be a central topic at Gastech, the industry's largest conference, taking place in Bangkok this week.businesstimes

Renewables, Coal, and Diversification

The response is already taking shape. Thailand has released a long-term energy plan targeting a minimum of 65% of electricity from renewables by 2050. Pakistan, once viewed as a high-growth LNG market, is expected to increase solar and hydropower generation, while Bangladesh, which has spent over $2 billion replacing lost Qatari volumes, is rolling out incentives for rooftop solar installations.economictimes+1

For Vietnam and the Philippines, the shift may move in a different direction — back toward coal, according to BloombergNEF analyst Akshay Modi. The International Energy Agency projects coal consumption will hit a record high in 2026, bolstered by elevated gas prices and strong El Niño-driven air conditioning demand.businesstimes

About 80% of LNG buyers surveyed by McKinsey & Co expect to change procurement strategies, prioritizing geographical diversification, which could benefit projects in Papua New Guinea from TotalEnergies ↗ 0.72% and ExxonMobil Exxon Mobil Corporation ↗ 0.46%, as well as producers in the US and Canada. Some 47 proposed gas-fired power plants totaling $52 billion in investment have been cancelled or stalled over the past five years across the Philippines, Thailand, and Vietnam, according to the Institute for Energy Economics and Financial Analysis.economictimes+1

"One geopolitical conflict is a really negative thing. A second geopolitical conflict is a pattern. And that is, fundamentally, being recognised by Asian countries," said Sam Reynolds, research lead for LNG and gas in Asia at IEEFA.businesstimes+1