Reassembling Liquified Natural Gas Production Networks. The globalization of gas markets and the implication for energy development and politics in Southeast Asia

Abstract

The center of gravity of the global energy system has shifted towards Asia. In Southeast Asia, energy demand is expected to increase nearly two-thirds by 2040. There is a large need for the development of affordable and accessible energy systems, but at the same time such services may considerably increase the carbon intensity of energy consumption. Reports from the International Energy Agency and the Oxford Institute for Energy studies claim that liquefied natural gas (LNG) can be an affordable and accessible alternative to coal and fuel oil while slowing the growth of energy-related carbon emissions.

This thesis finds that there are several challenges surrounding the growth of LNG consumption in Southeast Asia. Relationships along global production networks from production, to transportation, to importation have been largely governed under inflexible long-term contracts due to the high-capital intensity of LNG infrastructure. Furthermore, natural gas markets have been strongly regulated by nation-states due to monopolization propensities in the private sector. Consequentially, unlike other commodities such as oil which are traded through relatively liquid and global markets, LNG markets have largely been exclusive to high-income nations with regulated monopolies with the ability to commit to long-term LNG supply despite considerable market risks. While the political-economy of natural gas markets has been evolving due to market and pricing reforms in Europe and the United States, these reforms have been unevenly implemented in Asia. Natural gas market reforms can be characterized by reregulation instead of deregulation as nation-states must be prevalent in enabling these reforms. The issue is that natural gas market reforms may contradict the internal-politics surrounding energy development and security in emerging economies in Southeast Asia. As the transformation of the political-economy of natural gas markets is constrained, long-term LNG contracts may remain prevalent in the future which subsequently poses considerable energy security and market risk for emerging economies.

The empirical material for this thesis is based on three extended case studies on the various challenges related to the development of an LNG trading hub in Singapore, the liberalization of natural gas markets in Thailand, and public-private partnerships for LNG supply in Indonesia. The cases are based on qualitative methodologies including event participation, document analysis, and interview with industry executives and government officials.