Asian LNG demand forecast to decline for a second consecutive year as Middle East conflict reshapes regional supply flows

Asian LNG demand is heading for a second consecutive year of decline. Wood Mackenzie forecasts Asia Pacific demand at 257 Mt in 2026, down from 268 Mt in 2025 and a peak of 278 Mt in 2024, as the Middle East conflict tightens global supply and pushes spot prices to levels that are forcing buyers across the region to cut volumes, switch fuels and accelerate supply diversification. 

Asia accounted for nearly 90% of Qatari and UAE LNG shipments transiting the Strait of Hormuz in 2025, according to Wood Mackenzie. Distraction exposure varies significantly depending on exposure to Qatari and UAE supply, spot demand, and fuel-switching flexibility. 

“A tighter global LNG market is doing what it always does. It separates buyers with contracted cover and fuel-switching options from those without,” said Maoping Hu, principal analyst for gas and LNG at Wood Mackenzie. “Japan and China are better insulated. South Asia is absorbing a genuine shock. But even the more resilient markets are making decisions now on nuclear, on coal, on long-term contracting diversification that will shape their LNG demand trajectories well into the next decade.” 

Wood Mackenzie’s Asia Pacific LNG Demand Short Term Tracker covers demand trends, regas utilisation and near-term market drivers across thirteen countries in Asia. The findings identify a region navigating a supply disruption of a scale and duration that is forcing structural responses rather than purely tactical ones. 

Northeast Asia: contracted cover holds, but demand falls across the board 

Northeast Asian demand covering China, Japan, South Korea and Taiwan is forecast to fall to 191 Mt in 2026 from 202 Mt in 2025. Each market is managing the disruption differently, and the divergence in their responses reveals how much contracted position and fuel-switching optionality matter when spot prices spike. 

China: China enters 2026 with the largest inventory buffer in the region and the most diversified supply portfolio of any major Asian LNG buyer. LNG imports are forecast at 62.4 Mt in 2026, down from 66.4 Mt in 2025, with regas utilisation falling to just 29% against a nameplate capacity of 218.3 Mt, an indicator of the demand headwinds facing the world’s second-largest LNG importer. 

Japan: Japan holds term contracts covering over 90% of 2026 LNG demand, a contracted position that insulates it more effectively than almost any other Asian buyer from the volatility of the current spot market. The country’s exposure to Middle East disruption is estimated at up to 0.5 Mt per month, significant in absolute terms, but manageable given the diversifications available. 

South Korea: South Korea faces a sharp contractual exposure to direct supply disruption in Northeast Asia. KOGAS holds two 2 mmtpa contracts tied to Ras Laffan Train 6, damaged in Iran’s missile attacks, with supply potentially interrupted for three to five years. The country’s overall spot exposure exceeds 20%, meaning additional purchases in the current price environment will materially elevate KOGAS costs and ultimately flow through to end consumers. 

Taiwan: Taiwan has moved quickly. A Strait of Hormuz closure could remove up to 0.7 Mt per month of Taiwan-bound LNG, but the shortfall in Qatari supply has largely been offset by increased US LNG imports. Taiwan is expected to replace up more than 75% of any LNG shortfall via spot purchases, a high ratio relative to peers, reflecting both necessity and purchasing capability. 

South Asia: prices are doing the rationing 

The South Asian picture is materially harder. India, Pakistan and Bangladesh are each navigating supply disruption in markets that remain structurally sensitive to price, and spot prices are now at levels that are translating directly into demand curtailment, industrial fuel switching and, in the most acute cases, fertiliser plant shutdowns and power sector load shedding. 

India: India faces potential supply curtailments of up to 1.5 Mt per month, the largest exposure in South Asia region by quantity. Gas allocation has been diverted to essential sectors. Urea output is being squeezed by Qatari LNG curtailments. Energy-intensive industries are cutting run rates and switching to propane, fuel oil and naphtha at pace. The fuel-switching dynamic carries its own geopolitical complexity: India imports 80–85% of its LPG via the Strait of Hormuz, meaning switching fuels trades one supply concentration risk for another. 

Pakistan: Pakistan returned to the spot market in April 2026 after a two-year absence, seeking three cargoes for April–May delivery following a period in which no LNG shipments were received since early March. The country can secure one SOCAR cargo per month from Azerbaijan under its current agreement, and operators previously withholding over 300 mmcfd of domestic production can now begin releasing those volumes. 

Bangladesh: Bangladesh has shown the most resilient spot demand in the subcontinent. Soon after the outbreak of the Middle East conflict, Petrobangla secured two spot cargoes from Gunvor and Vitol at $23–28/mmbtu for March delivery and tendered for three more for early April 2026. Spot demand remains strong despite the elevated price environment. 

Southeast Asia: structural growth intact, cyclical headwinds real 

Aggregate regional demand is forecast to rise from 27 Mt in 2025 to 31 Mt in 2026, reaching 39 Mt by 2028. The region spans markets at very different stages of LNG market development.  

Indonesia: The country’s LNG demand grew by more than 20% in H1 2026, supported by higher power demand and the structural closure of diesel power plants as the country accelerates the decarbonisation of its power sector. Regas utilisation is forecast to reach 57% in 2026 against nameplate capacity of 11.8 Mt, rising steadily toward 63% by 2028. 

Malaysia: Malaysia recorded LNG demand growth of more than 40% in H1 2026, driven by rapid data centre expansion and the phased retirement of coal plants as the country progresses its energy transition. Regas utilisation is forecast at 45% in 2026 against nameplate capacity of 7.4 Mt, rising to 69% by 2028 as structural demand grows. 

Singapore: Singapore has managed Middle East supply disruption through active spot procurement, securing cargoes from Australia, the US and Mozambique to manage gaps in contracted supply. Piped gas supply contracts from Malaysia and Indonesia have been extended to 2028, though the Indonesian volume has been downgraded by approximately 40%. LNG bunkering demand reached 0.57 Mt in 2025, a growing segment whose pace of growth is likely to slow in 2026 as elevated prices weigh on shipping economics. 

Philippines: The Philippines presents a distinct demand profile in Southeast Asia. Malampaya, the country’s sole domestic gas source, has had its licence extended 15 years to 2039. New wells from Phase 4 will start up in Q4 2026 but production from current wells will cease end 2027, resulting in sharp total production drop from 2028 onwards. Unlike other Southeast Asian nations, the Philippines lacks an experienced pool of upstream operators to replace declining domestic supply at scale. 

Thailand: Thailand remains the largest LNG importer in Southeast Asia and the market most exposed to current spot price volatility. Continued reliance on spot purchases leaves the country directly exposed to the elevated prices generated by the Middle East conflict. Coal plants were restarted in March 2026 in direct response to geopolitical uncertainty. 

Vietnam: Vietnam is at the earliest stage of its LNG market development, having received commercial deliveries into Nhon Trach 3 and 4, the country’s first LNG-fired power plants, in January 2026. PVGas signed its first multi-year LNG contract with Shell in January 2026, a 0.4 mtpa DES arrangement to the Thi Vai terminal running from 2027 to 2031.  

Outlook: recovery from 2027, but the supply security question will not go away 

Wood Mackenzie forecasts Asia Pacific LNG demand recovering to 279 Mt in 2027 and reaching 297 Mt by 2028, as geopolitical risk subsides, new regas infrastructure comes online and structural demand growth resumes across Southeast and South Asia. That recovery path implies a net gain of 40 Mt over two years, a significant volume that will require both new supply and a normalisation in spot pricing to materialise. 

The pace and shape of that recovery will depend on several variables that remain genuinely uncertain: the duration and severity of Middle East supply disruption, the trajectory of spot prices and competition from oil products. At a regional level, this includes the rate at which Chinese and South Asian gas demand will rebound when prices fall, nuclear restart timelines in Japan and South Korea, and the speed at which Southeast Asian power gas demand will progress.