Asia needs natural gas, naturally

Global energy markets are shifting faster than ever, giving developing country governments urgent new choices about how to scale up their power generation efficiently and sustainably.

For emerging Asia, none of the changes we have seen over the last decade are more consequential than the emergence of natural gas as an affordable and clean source of electricity.

Natural gas is increasingly available across Asia as a result of technological advances that have made it easier to locate, extract and transport across the globe.

Fifteen years ago, only 10 countries worldwide were importing natural gas.

Today, there are more than 30, with China and Japan among the top global importers. And that number should be closer to 50 by the end of this decade.

Why does this matter?

For Asia, a region that historically had the least access to natural gas and paid the most for it, the scale-up in gas trading has dramatically changed the energy landscape and provided policymakers with an important new choice in how to power their growth.

Specifically, gas offers an opportunity to displace coal-fired power, which remains prolific in Asia despite its climate and health effects.

Meeting Asia's growing energy needs will require enormous investment. More than half of the five terawatts of new power generation that will be added worldwide by 2030 will be in the region, led by China and India.

Renewable energy, including solar and wind, is increasingly becoming part of the solution and will be even more so in the coming decade as energy storage technologies advance.

But coal also features in the region's near-term energy plans - more than 80 per cent of the new coal plants set to start operations globally in the next five years are in just six countries in Asia.

In this context, natural gas has an important role to play supporting the scale-up of renewable energy and as a greener alternative to coal-fired power.

Well-managed gas emits less than half the carbon of coal, with a fraction of the particulate matter linked to respiratory illnesses - already a major preoccupation in China and a growing one in India.

Gas is also an excellent complement to solar and wind power, as it can provide flexible backup power at night and on cloudy and still days.

All of this makes natural gas an important puzzle piece for leaders across Asia to consider as they decide on the best energy mix to meet their growth needs and align with their climate and air quality concerns.

While thermal energy prices can be volatile, we have seen gas prices decline sharply over the past decade and anticipate gas to continue to trade with much lower price volatility than oil and at historically lower premiums to coal in the near term.

RISE OF LNG

This should open opportunities for liquefied natural gas (LNG) storage and trading, as well as avenues for new uses of natural gas as a fuel source, including for vehicles.

Asia is already the primary destination for LNG exports - with countries including Bangladesh, the Philippines and Indonesia investing in import infrastructure and gas-to-power installations to meet growing energy generation needs.

And at the centre of the action is Singapore, as an emerging hub for LNG trading.

The kind of trading infrastructure that Singapore is investing in will have great value as gas continues to grow as a traded commodity, worldwide and especially across Asia.

Governments need to balance a number of factors when considering how to meet growing demand for electricity and improved power services.

For countries across Asia, the decision matrix for the coming years ought to include natural gas as a transition fuel that can green their energy mix and support a dramatic scale-up in renewable energy once battery storage technology advances further.

Energy market watchers have had a dizzying view over the past 10 years - this is not going to change any time soon, particularly as Asian governments set ambitious targets to ramp up electricity generation through the best means possible.

The next decade is likely to be marked by even more pronounced changes in fuel prices and technology - making it a great time to look forward and invest.

The writer is the global director of infrastructure and natural resources at IFC, a member of the World Bank Group. IFC has financed and mobilised more than US$50 billion for emerging market infrastructure over the past decade.

This commentary appeared in The Business Times today.