Asia’s energy supply looks secure — even as Europe scrambles

As Europe struggles with a power shortage, Asia-Pacific’s power supply remains secure mainly because the region still uses a lot of coal, data has shown.

With liquified natural gas supplies in the region redirected to Europe, power generators in Asia not only have less access to LNG but have had to opt out of buying more expensive LNG driven by strong demand in Europe. 

Europe is struggling with a gas shortage as Russia cuts its supplies, forcing many countries into an energy crisis in the lead up to winter. The U.K.’s National Grid has warned of possible power cuts.

On Tuesday, the EU steered away from a proposed price cap on Russian gas as it laid out new measures to tackle high energy prices. Russia had previously said it would halt all fuel supplies to the EU if the bloc imposed these caps, which suppress Russian revenues and price of commodities.

S&P Global chief energy strategist Atul Aryal said while the crunch in Europe and the war in Ukraine have forced up prices of fuel such as oil and gas globally, it has not hurt Asia’s energy generation. 

“In Asia, instead of using gas, countries are using coal because coal is here, coal is domestic and less expensive,” Arya told CNBC.

“The downside is that Asia, which is growing gas consumption, has stopped, at least for now.”

Unlike Europe which relies on gas for energy creation, gas is less relevant to Asia. It only forms 11% of its power mix and imported LNG forms a small part of that with most gas coming from domestic production, Wood Mackenzie head of Asia Pacific power & renewables research Alex Whitworth said.

Coal takes up a larger portion of the mix, although it is falling, Whitworth added. The share of coal in power generation for Asia-Pacific markets is more than 60%, he said.

Separately, Asia’s LNG imports have fallen due to high prices.

According to the International Energy Agency’s latest gas report, Asian spot or short-term LNG imports fell 28% in the first eight months of the year compared with the same time last year. Overall LNG imports fell 7% year-on-year. 

Imports to China — now the biggest global LNG importer — fell the most by 59%. The decrease in LNG imports for Japan, Pakistan and India were 17%, 73% and 22% respectively, the IEA said. 

The agency explained it wasn’t just high prices deterring Chinese buyers, but also the country’s slowing economy, milder winter temperatures and strong domestic production of its own gas and coal.