Discuss your challenges with our solutions experts

For details on how your data is used and stored, see our Privacy Notice.

ASEAN at 50: new ways to foster LNG and power cooperation

We explore how members can work together to facilitate change.

1 minute read

The Association of Southeast Asia Nations (ASEAN) is 50 years old. In my previous blog, I discussed the gas and power opportunities in the region. Here I offer some ideas that members need to consider to move ahead.

While there are a lot of plans and aspirations for energy cooperation within ASEAN, progress has been limited. It has not achieved real success in terms of energy policy when compared to the EU, for instance.

This is partly due to a lack of joint regulations and enforcement authority of the organisation upon its members. Moving towards a more authoritative structure may not be desirable either, as ASEAN has always relied on consensus building and voluntary adoption which has worked well so far in maintaining cohesion.

However, to stay relevant, ASEAN has to explore new ways of energy cooperation among its members, instead of relying on individual efforts..

Two of the key initiatives in ASEAN are the Trans ASEAN gas pipeline (TAGP) and ASEAN power grid. While there are some existing bilateral gas pipeline interconnections, the full realisation of TAGP depends heavily on the monetisation of the giant Natuna D-Alpha field, which is uncertain due to its high costs, among other factors.

The initiative seems to be dated. At the same time, the arrival of LNG to the region in 2011 has changed the landscape. By 2035, countries like Thailand, Indonesia, Malaysia, Singapore and Philippines will have at least 50% LNG dependency in their gas markets.

Similarly, in the power sector, the region needs to explore cooperation in clean energy, instead of dwelling on coal. While the ASEAN power grid could provide added security and power balancing hence needs to be expanded, distributed power generation is a quicker way to improve the electrification rate in the region.

ASEAN needs to move on from the old initiatives and embrace a new reality. Here are some suggestions:

1. Intra-regional LNG trade

With the establishment of the ASEAN Economic Community (AEC) in 2015 - together with the ASEAN FTA, non-tariffs barrier removal and cross-border transportation agreement - trading LNG within the region will be more competitive.

This is aided by close proximity resulting in low shipping costs. Some countries are long — due to their domestic production or long-term contracting position, and some need to purchase greater volumes. Yet this has not been exploited optimally so far.

2. Facility sharing

There are at least 70 different proposals to build new regas terminals across ASEAN, comprising 25 large-scale and 45 small-scale projects. Not all of those projects will materialise, due to diverse challenges such as bankability, demand uncertainty, pricing and affordability issues. Regas facility sharing could help resolve some of those issues, helping areas with smaller demand to import LNG in a more cost efficient way.

It could also support the creation of regional hubs and development of greater gas interconnection. The agreement between Pavilion, Keppel and PLN to utilise SLNG's facility to provide break-bulk service for PLN's small-scale demand in the western part of Indonesia is a good start, and could provide a model for future facility sharing arrangement within ASEAN.

3. Regional price benchmarking

With LNG demand expected to grow from 12 mmtpa today to 35 mmtpa in 2025 and then 72 mmtpa in 2035, ASEAN is taking a bigger share of the global LNG trade. It is in the region's interest to support the development of more transparent market-reflective LNG pricing.

The two areas of cooperation above — facility sharing and intra-regional trade — will support regional price discovery. Improved liquidity in gas and LNG markets is slowly happening across the region, with countries such as Singapore, Malaysia and Thailand progressing further with market liberalisation.

Singapore is now home to more than 40 companies involved in LNG supply and trade. This corporate presence, combined with SGX's aspiration to be the Asian LNG trading hub, mean that Singapore could work to foster improved cooperation in ASEAN's LNG sector.

4. Renewable and island power systems

Some areas in the region still suffer from low electricity supply. For instance, the electrification rate in Myanmar currently stands at only 52%. Indonesia has been quite successful in developing distributed power generation, recently deploying some ship-mounted power plants, which could provide a quick relief for the power constraints in some remote areas.

The plan is to combine this with the small-scale LNG projects across the country which could be implemented in other parts of the region. In the longer term, a combination of renewable such as solar or wind and small-scale LNG will be a feasible solution for an island power system in line with the declining renewable costs. And possibly battery storage at a later stage.


ASEAN: strong economic growth and a robust outlook

ASEAN 50: Growth and opportunities in South East Asian gas and power markets

ASEAN celebrates its 50th anniversary this year. We discuss the growth and opportunities in the region's buoyant gas, LNG and power markets.
Buy this report
Gas processing plant