LNG-to-power in emerging Asia: A five-year review of project outcomes

Executive summary

In 2021, the Institute for Energy Economics and Financial Analysis (IEEFA) published a regional analysis of liquefied natural gas (LNG)-to-power project developments across seven Asian markets. The report found that despite billions of dollars in proposed investments in both LNG import terminals and power plants, only a small fraction was likely to materialize, due to fundamental constraints related to economics, financial capacity, infrastructure, and policy.

This analysis is an update to the previous report. It examines the pace of progress on LNG developments in Asia, the drivers of success, and the outstanding challenges to getting projects off the ground. Coverage focuses on four prospective gas and LNG demand growth markets in Asia, namely Thailand, the Philippines, Vietnam, and Bangladesh.

In these four markets, IEEFA surveyed 92 proposed LNG-fired power projects worth an estimated USD109.2 billion and 44 LNG import terminals valued at USD21 billion. Key findings include:

• Based on IEEFA’s assessment, over 50% of LNG-fired power projects and LNG import terminals in the four markets surveyed have been canceled, withdrawn, or shown no progress between 2021 and 2026.
• A total of 49 gas plants valued at USD56.1 billion were canceled, withdrawn, or inactive between 2021 and 2026, along with USD11.7 billion of regasification facilities, spanning 22 projects. The total capacity of these projects was 66.2 gigawatts (GW), along with 82 million tonnes per annum (MTPA) of LNG terminal capacity. 
• Out of the 92 LNG-fired power plants surveyed, just 11% of total power capacity was successfully brought online over the last five years. Meanwhile, just 15% of the total capacity of proposed import terminals was completed. This is a substantially lower completion rate than IEEFA assumed in 2021.
• The total value of canceled or inactive LNG-fired power plants and LNG import terminals was nearly 4.5 times the value of completed projects. In all markets surveyed, a higher capacity of LNG-fired power plants and import terminals was canceled or inactive than completed.
• IEEFA estimates that the average completion timeline for LNG-fired power plants across the four markets was over seven years, from the first public development to commissioning. This far exceeds the three- to four-year lead times typically claimed by project developers for LNG-to-power facilities.
• Over the last five years, developments in global LNG markets, as well as equipment and currency markets, have exacerbated execution risks for LNG-to-power projects in emerging economies. Extreme LNG price volatility, higher costs and longer lead times for scarce gas turbines, and local currency depreciation against the United States (US) dollar have all weakened the revenue security on which non-recourse project financing depends.
• As a result of skyrocketing LNG-to-power costs, countries in emerging Asia are reconsidering the role of the fuel in their energy future. Based on IEEFA estimates, surging fuel and equipment costs, along with weaker local currencies, could result in a 2.3-fold increase in the levelized cost of power from LNG-fired power plants compared to 2021 baselines.
• Such a potentially sharp increase in electricity costs undermines the economic rationale for many projects as originally conceived. Across emerging Asia, energy-sector development plans that rely heavily on LNG were often formulated on the assumption of persistently low fuel prices and relatively affordable capital and equipment costs.

Section 1 of this report provides an overview of recent developments affecting LNG demand growth across emerging Asia. It considers how recurring LNG crises, gas turbine shortages, and high currency requirements are impacting the viability of gas power plant projects and power development plans across Asia.

Section 2 begins with an overview of gas project developments since 2021 across the four countries surveyed, detailing the value of projects that were completed, canceled, inactive, or remain under development. It then provides a more detailed analysis of the project data for the four countries surveyed and highlights the country-specific challenges that ongoing projects must navigate to achieve completion.