The LNG crunch triggered by the US-Iran conflict may be forcing major Asian buyers to turn back towards coal and oil, but industry executives expect this shift to be temporary. Demand for liquefied natural gas in China, India and Pakistan could recover once Middle Eastern supply disruptions ease and additional LNG volumes enter the market. The conflict has disrupted LNG exports from Qatar and the United Arab Emirates, with shipments through the Strait of Hormuz severely affected.
The waterway previously carried around one-fifth of global LNG supplies, making the disruption particularly significant for Asian buyers that depend heavily on imported gas.
The resulting supply squeeze has pushed spot LNG prices sharply higher, prompting price-sensitive consumers to reconsider their fuel choices.
Shell, the world’s largest LNG trader, estimates that approximately 36 million tonnes of LNG supply from the Middle East has been lost so far this year, according to President for Integrated Gas Cederic Cremers.
With buyers scrambling to secure alternative cargoes, Asian spot LNG prices have climbed to almost $30 per million British thermal units (MMBtu). That compares with a pre-war range of roughly $10 per MMBtu.
The dramatic increase is putting pressure on industries that depend on natural gas, particularly in countries where consumers can switch between different energy sources.
GAIL Chairman Deepak Gupta said the high prices are “definitely impacting” demand in India, where “a lot of sectors… are price sensitive”.
“There are many industries which switch over to different fuels in case gas is not viable for them,” said Gupta, who heads India’s top natural gas distributor by market share.
India, China Hunt For Alternative LNG Cargoes
The supply disruption has forced major Asian buyers to look beyond their traditional sources.
GAIL and PetroChina, China’s largest LNG importer, have activated their trading operations to secure alternative cargoes and make up for reduced supplies from Qatar and the UAE.
For India, however, availability alone may not be enough to restore consumption. Petronet LNG CEO Akshay Kumar Singh said customers are looking for greater predictability in prices.
“Affordability is a major challenge,” said Akshay Kumar Singh. “There is no doubt there is demand, only it is price-sensitive demand.”
The comments highlight the dilemma facing Asian gas markets: consumers continue to need LNG, but exceptionally high spot prices are making it difficult for several industries to justify continued gas usage.
Pakistan Also Sees Potential For LNG Demand Recovery
Pakistan’s LNG market is facing a similar situation. Masood Nabi, CEO of LNG importer Pakistan LNG, expects consumption could increase if additional supplies become available at competitive prices.
“That could happen with additional volumes coming online,” said Masood Nabi.
Pakistan has expanded its solar capacity in recent years, helping the country manage electricity shortages. However, Nabi noted that gas demand remains across other industries as well as among households.
This suggests that the current decline in LNG consumption should not necessarily be viewed as a permanent loss of demand.
Gas Consumption Could Recover When Prices Normalise
GAIL’s Gupta said India initially had to restrict gas consumption because of the supply crunch. However, the company subsequently restored supplies to almost 90 per cent to 95 per cent as it increased its ability to source LNG from alternative markets.
Executives from GAIL, PetroChina and ExxonMobil expect consumption to recover if international LNG prices retreat from their current elevated levels.
“We are hoping that all this is very short-term, and in the coming days, in mid-term and long-term, things will become normal,” Gupta said, adding that there may be about 150 million to 200 million tons of LNG coming online in the next four to five years.
A large wave of new LNG capacity could therefore ease the supply constraints and bring prices closer to levels that are more manageable for consumers.
China LNG Demand Hinges On Lower Prices
PetroChina International CEO Luo Yizhou expects gas demand from China’s power sector to strengthen once LNG prices return to a “normal” range of $7 to $9 per MMBtu.
He pointed to continued growth in electricity consumption as a key factor supporting future demand from gas-fired power plants.
China’s long-term LNG requirements are also expected to remain significant. ExxonMobil vice president for global LNG marketing Andrew Barry said the company expects substantial demand growth in China, helped by the country’s extensive LNG import infrastructure along its eastern coastline.
ExxonMobil continues to diversify its LNG portfolio, with interests spanning the US, Mozambique, Qatar, Papua New Guinea and Australia. The company is also assessing additional opportunities while maintaining a focus on the cost of supply.
“We still have an extremely bullish demand forecast out through to 2050,” Barry said.
The broader outlook suggests that today’s fuel switching may be driven primarily by economics rather than a permanent decline in appetite for LNG. If Middle Eastern exports recover and new production reaches the market over the next few years, lower prices could once again make natural gas competitive with coal and oil, potentially bringing Asian LNG demand back to stronger growth.
