Asian nations are increasingly looking to the United States for liquefied natural gas (LNG) amid ongoing trade negotiations aimed at easing tensions over trade deficits. This shift, however, could pose significant challenges to their long-term climate goals and energy security, experts caution.
In efforts to address trade imbalances with the U.S., countries such as Vietnam and Japan have placed heightened focus on LNG imports. Vietnam’s government has recently inked a deal with an American company to establish a gas import hub, while Japan’s leading power producer, JERA, has secured new contracts to purchase U.S. gas starting in 2030. These moves are part of broader discussions involving President Donald Trump’s ambitious foreign tariffs policy. Read more about the tariffs here.
The Trump administration has accelerated efforts to boost LNG exports to Asia, eyeing projects like the $44 billion Alaska LNG initiative. This project aims to deliver gas from Alaska’s North Slope to a liquefaction plant in Nikiski, potentially circumventing the Panama Canal. Countries like Thailand and the Philippines are also showing interest in committing to long-term LNG agreements, potentially including the Alaska project. For more details, check the Alaska project and Philippines’ considerations.
Tim Daiss from APAC Energy Consultancy notes, “Trump has put pressure on a seeming plethora of Asian trading partners to buy more U.S. LNG,” highlighting Japan’s decision to increase purchases despite an oversupply. Daiss adds, “Not good for Southeast Asia’s sustainability goals.”
LNG and Renewable Energy: A Potential Conflict
Long-term LNG contracts may hinder the transition to renewable energy sources in Asia. Indra Overland from the Norwegian Institute of International Affairs cautions that such agreements could leave countries with outdated infrastructure as global energy trends shift towards more sustainable solutions.
While LNG is cleaner than coal, it remains a fossil fuel contributing to greenhouse gas emissions. Contracts often feature “take-or-pay” clauses, obligating payment even if the fuel is not used, which could burden countries as renewable energy becomes more prevalent. Christopher Doleman from the Institute for Energy Economics and Financial Analysis warns that countries might pay for surplus LNG if renewables rapidly expand.
Pakistan’s experience demonstrates the financial strain of soaring LNG costs, prompting a pivot to solar power. As LNG supply increases and demand decreases, the country is deferring shipments and attempting to resell excess gas.
Trade Deficits and Economic Challenges
Despite the willingness of Asian countries to import more U.S. LNG, experts argue this may not significantly impact U.S. trade deficits. South Korea and Vietnam would require imports far exceeding previous U.S. export levels to make a notable difference. Additionally, the Alaska LNG project faces economic hurdles, with Asian coal and renewable energy options being more affordable.
Tariffs on Chinese steel and delays in gas turbine construction further complicate the viability of new gas projects. Furthermore, a global LNG surplus could drive prices down, making it challenging to justify long-term deals at current rates.
Energy Security Concerns
Committing to long-term U.S. LNG contracts raises regional energy security issues amid geopolitical uncertainties. Overland points out the unpredictability of the U.S. as a trading partner, adding, “The U.S. is not a very predictable entity. And to rely on energy from there is a very risky proposition.”
Events in Europe, such as potential disruptions in the Strait of Hormuz and the Ukraine conflict, have highlighted the vulnerability of relying on LNG for energy security. Dario Kenner from Zero Carbon Analytics emphasizes that energy security depends on the availability and affordability of LNG, which can be affected by global events.
Kenner suggests expanding renewable energy as a means to enhance energy security and reduce emissions. Southeast Asia, for example, has utilized only about 1% of its solar and wind potential, offering significant room for growth. “There are genuine choices to meet rising electricity demand. It is not just having to build LNG,” he concludes.
Original Story at www.actionnewsjax.com