Asia's pipeline of new LNG import projects has stalled amid ongoing industry turbulence caused by the coronavirus pandemic. Fundamental assumptions that underpinned the projects — gas supply, power demand and financing — have to be recalibrated, industry experts said.
The projects span the Southeast Asian countries of Vietnam, the Philippines and Myanmar, which were billed as the next batch of LNG importing countries, and existing importers such as Thailand, Malaysia, Indonesia and South Asian nations who have been expanding gas import capacity.
These projects were meant to usher in the next wave of LNG demand, based off economic growth and electricity demand projections in the pre-COVID-19 era. Most of these growth assumptions have either been totally dismantled or delayed by several years.
"It's obvious to expect delays in the short term, and give time for players to figure out and adjust during this time of crisis," Christophe Malet, senior vice president for upstream and midstream LNG at Chinese gas and renewables company Hanas, said. "Developers will need to establish how much of the initial projected demand and bankability plus financing assumptions they can still rely on."
Malet said that financing will become tougher in the short term as lenders sort out their priorities in the current crisis, with the exception of some policy-driven stimulus packages. The banking sector is among the worst hit by low oil prices and COVID-19, and S&P Global Ratings said the credit quality of Asia-Pacific financial institutions has been impacted, with its ratings outlook bias tilted toward negative.
LNG projects in countries like Myanmar and Bangladesh already faced bankability issues, preventing them from backing new producers with long-term off-take agreements. This will worsen as banks reshuffle lending portfolios wary of oil and gas exposure.
(Writing by Becky Du Editing by Tammy Yang)
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