The Institute for Energy Economics and Financial Analysis (IEEFA) released a report on December 2, 2024, which pointed out the difficulties that LNG import terminals used offshore in South and Southeast Asian countries are facing. These rigs are expected to be the most significant gas markets for liquefied natural gas in the next twenty years, yet the unwelcome project delays and operational difficulties have led to concerns about the success of marine LNG terminals in such areas.
For years, the LNG industry has been advertising floating import terminals as cheaper and faster alternatives to bulk terminals. Thus, growth would be much easier here. Nevertheless, the IEEFA report brings to light some previously missed disadvantages that can affect the response of these terminals to growth opportunities. While transportation-based solutions are more common onshore, one of the main advantages of offshore types is their lower initial capital costs. However, the units become more expensive in the course of seven years due to higher operating costs.
The other paramount concern related to floating LNG terminals is their sensitivity to slight changes in weather conditions. This poses a threat to the demand for LNG imports from South and Southeast Asian countries, which already suffer enough from frequent periodical and extreme weather conditions caused by climate change. The lack of energy availability during a storm or any disturbing events takes LNG offshore project reliability out of the equation, and therefore, energy safety in such countries will be put at risk.
Recent indolence in floating projects in Bangladesh and the Philippines, together with delays in the cases of Vietnam, highlights the difficulties involved in bringing these projects to completion. These struggles might reduce the industry’s ambitions for the LNG market to flourish in the coming years. The IEEFA report explains that none of Asia’s most important natural gas importers, such as Japan, China, South Korea, Taiwan, India, or Thailand, have floating import terminals, explaining that fair-weather technology is too risky for the prominent vendors.
The floating LNG terminals experienced an extreme weather catastrophe that revealed its drawbacks in Bangladesh at the latest. A powerful storm has been allegedly responsible for US$600 million worth of economic losses and damages to the country, besides the claim of US$22 million by the Summit LNG Terminal Company for contractual payments during the shutdown. This episode reveals the potential monetary and functional risks of depending on floating LNG infrastructure in areas that are highly affected by severe weather.
Meanwhile, the natural gas sector is in a constant struggle for supremacy in South and Southeast Asia; hence, floating import terminals must see it from the other side of the risks vs. benefits issue. The IEEFA report has brought an instant message that policymakers need to pause and rethink the way they have been expanding LNG all over Asia. The future of LNG market development in these rapidly growing regions will depend on striking a balance between economic viability combined with environmental sustainability and energy security.
