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.