The immediate loss of future liquefied natural gas (LNG) supplies from the Middle East—and the implications of the blockade of the Strait of Hormuz, and attacks on Qatar’s LNG facilities—expose an obvious structural flaw in the Asian energy market that is built upon high dependence on imports, tenuous supply chains and limited ability or desire to diversify.
In this case, the loss of an estimated 28 million metric tons (MT) of LNG from the Middle East (for 2026) results in almost 100% of projected growth in global LNG supply for that year being eliminated.
The fact that Asia consumes approximately 75-80% of the total global volume of LNG exports means that this is more than just a temporary shock for the system; it will serve as a systemic stress test of the ability of the Asian energy system to adapt.
Almost 90% of the LNG that imports to Asia comes from the Middle East, and the key economies in Asia (Japan, China, India and South Korea) rely heavily on LNG for electricity generation and industrial output.
In Japan alone, approximately 35% of total electricity generation comes from LNG, and South Korea depends on LNG for approximately 27% of its power.
While India is more dependent on coal for power generation, it still imports over 25 million MT of LNG annually that is primarily tied to long-term contracts with Middle Eastern suppliers.
With the decline in LNG shipments, countries across Asia will ramp up their use of coal to meet immediate energy needs. Given that coal is responsible for the highest levels of greenhouse gas emissions (approximately 2x12), compared to natural gas, it poses a significant short-term problem for Asia.
South Korea can fill its entire winter LNG shortfall with coal until summer, while Japan can rely on coal for approximately 70% of the gas-fired generation it will lose.
The Indian government already issued an order for all coal-fired plants to operate at full capacity for the next three months, as the security of energy supply is currently being prioritized over any remaining commitments to climate change issues.
The ramifications of these decisions to shift back to coal will be significant and long-lasting to the environment and economies of the Asian countries involved.
With over 50% of global CO₂ emissions from Asia, and if half of the displaced LNG across Asia (approximately 14 million MT) is replaced by coal, the net result will be an additional 40–60 million MT of CO₂ emissions added to global totals on an annual basis.
The current crisis also demonstrates the disparity between the wealthier and poorer areas of Asia. Due to their wealthier status in comparison to other countries in Asia, Japan’s ability to access the current spot market for LNG—which has risen to over $20-$25 MMBtu compared to long-term contracts at $8-$12 MMBtu—will significantly impact their competitive advantage over less developed countries in Asia,
such as Vietnam or Bangladesh, as the longer-term effect of this continues to cost them considerably higher prices for LNG, as well as placed an increased demand on those countries to shut down factories and imposition of electric power rationing, etc., within their economies.
While diversification efforts have had some success, the current crisis shows limitations on those efforts. For example, while China has significant quantities of natural gas delivered via pipelines from Russia,
and a large base of renewable energy developed (over 1,200 steady gigawatts (GW) of combined wind and solar power plants) to offset LNG shortfalls will assist China in weathering this current LNG crisis,
Taiwan—a region that has begun to phase out both nuclear and clean-coal power generation plants—will now be forced to absorb the costs and challenges associated with restarting both types of clean energy sources.
Ultimately, the current LNG crisis demonstrates a very valuable lesson: that transitions of energy systems that rely solely on one “bridge fuel” for the transition will always represent an unstable transition until new (or additional) sources of energy come online and/or changes in energy consumption behavior occur within the respective countries of the Asian region.
If new supplies of LNG from the U.S. do not become available until 2028, then the overall Asian markets will continue to experience at least two or three years of tight markets, high prices and trade-offs between maintaining economic stability and environmental sustainability.