Hormuz crisis clouds LNG outlook for Philippines, Asian markets

The Philippines is among the Asian markets where demand for liquefied natural gas (LNG) is plateauing or contracting, analysts said. Six months of disruptions in the Strait of Hormuz have exposed the fuel’s price and supply risks.

In a media statement, Asia Research & Engagement (ARE) said LNG-to-power and terminal projects have been cancelled outright in the Philippines. Energy World Corporation’s Pagbilao project there has been abandoned after 17 years with a USD 285 million impairment.

The Institute for Energy Economics and Financial Analysis (IEEFA) said the Philippines has surpassed Pakistan as Asia’s largest importer of Chinese solar panels. It added that the government does not plan to build new LNG import terminals this decade.

The Philippines is also one of four countries where IEEFA estimates 47 proposed LNG-fired power plants have been cancelled, withdrawn, or shown no progress over the last five years. Those plants are worth USD 52 billion, and the other countries are Bangladesh, Thailand, and Vietnam.

Sam Reynolds is IEEFA Research Lead for LNG/Gas, Asia. He said countries like the Philippines and Vietnam have set in-service dates of 2030 or 2031 for LNG-to-power projects. He added that very few of those projects have secured gas turbines, which now take five to six years to deliver.

The crisis is also straining the economy. Dr. Jayant Menon is Visiting Senior Fellow at ISEAS-Yusof Ishak Institute and former Lead Economist at ADB. He said the Philippines has raised interest rates several times. He said the peso had weakened to 62.5 against the US dollar, a level he said it had never reached before.

The experts spoke at a September 10 media briefing titled “Six Months of Hormuz Disruptions: The New Asian Power Market Realities,” organized by GSCC. It was timed with Gastech 2026, which has put gas and LNG in the spotlight.

In a media statement issued in Singapore, Asia Research & Engagement (ARE) said LNG has been sold to Asian governments and lenders for two decades as secure, reliable, contractible, and insulated from volatility.

ARE said that proposition has been exposed to its “first live stress test” since February 28, 2026.

The Strait of Hormuz remains effectively closed to LNG traffic, and transits are down roughly 95%. More than 25 Gulf energy companies, QatarEnergy among them, have declared force majeure.

ARE said lending must now be re-priced around three risks that are compounding simultaneously for the first time: commercial oversupply, geopolitical chokepoint exposure, and policy-driven demand destruction.

Lenders still underwriting LNG on 20-year take-or-pay assumptions are financing a fuel whose two central promises, price stability and supply security, both broke within the same six-month period, the group said.

Three risks

Citing independent analysis, ARE said USD 379 billion to USD 394 billion of committed global LNG capital is at risk of being stranded. That is set against a projected structural surplus of about 270 to 280 million tonnes per annum by 2030.

The International Energy Agency’s (IEA) own assessment is that up to three-quarters of LNG projects under construction may fail to recover their capital under a 1.5°C-aligned pathway, it added.

“When a banker or an investor evaluates an LNG project, now the risk matrix should include, in addition to the commercial oversupply and the demand destruction, the possibility that there is also a supply disruption through the international choke point,” said Arun Kumar, ARE Strategic Advisor for Power Markets and Technology Innovation.

“Independent estimates say that about $400 billion of that committed capital is likely to be stranded,” Kumar added.

On the second risk, ARE said a corridor carrying approximately 20% of the world’s LNG and a quarter of its seaborne oil has been shut for half a year. Any financing with a 20- to 25-year tenor must now hold that outcome as a base case.

On the third, ARE said LNG demand has been plateauing or contracting, independently of Hormuz, in the markets expected to absorb the coming wave of United States and Qatari supply. It named the Philippines, Pakistan, India, Thailand, and China.

Pakistan has cancelled cargoes under long-term contracts as solar displaces gas from its grid. Its Petroleum Division estimated the associated liability at no less than USD 5.6 billion under the previous take-or-pay contract.

LNG-to-power and terminal projects have also been cancelled outright in Bangladesh and the Philippines. There, Energy World Corporation’s Pagbilao project has been abandoned after 17 years with a USD 285 million impairment.

ARE said bankability now requires a chokepoint stress test and a demand-destruction stress test, run together.

Falling demand, rising costs

Sam Reynolds is Research Lead for LNG/Gas, Asia at the Institute for Energy Economics and Financial Analysis (IEEFA). He said Asian LNG demand is down 3% year-on-year through August, after falling 5% in 2025.

Chinese demand is down 8% year-to-date, and IEEFA expects it to fall to about 63 million tonnes this year from a peak of 79 million tonnes in 2021.

“LNG prices have skyrocketed, particularly in recent weeks. We’re up more than twice where we were prior to the outbreak of the Iran conflict. At $23 per mmBTU, the cost of one LNG cargo would be $84 million,” Reynolds said.

“The annual cost of running 1 gigawatt of LNG power at baseload levels would be over $1 billion for the fuel alone, and that would lead to an average electricity price of $212 per megawatt hour. That’s compared to global average solar costs of $40 per megawatt hour,” he added.

IEEFA’s data put the annual fuel cost for a 1-gigawatt LNG plant at USD 1.12 billion.

Reynolds also cited a global shortage of gas turbines. Lead times now stretch to about six years, and only 20% of planned gas capacity in Southeast Asia by 2030 has secured turbines, according to Wood Mackenzie.

Gas plant capital costs have risen from about USD 800 per kilowatt in 2022 to nearly USD 3,000 per kilowatt today, he said.

Depreciating local currencies are also straining foreign exchange reserves in importing economies. The major LNG growth markets are often those least able to absorb economic shocks, Reynolds said.

Renewables are eating into LNG demand, he added. IEEFA data showed Pakistan imported 36.6 gigawatts of solar from fiscal years 2022 to 2025 and is now the world’s sixth largest solar market.

Vietnam’s solar grew from zero to 21 gigawatts between 2018 and 2023, and its gas generation has fallen 60%.

The Philippines has surpassed Pakistan as Asia’s largest importer of Chinese solar panels, and its government does not plan to build new LNG import terminals this decade, IEEFA said.

Thailand’s draft power development plan targets up to 89% clean power capacity by 2050 and includes no new gas-fired plants in the next 10 years, Reynolds said.

IEEFA estimates that 47 proposed LNG-fired power plants worth USD 52 billion have been cancelled, withdrawn, or shown no progress over the last five years in Bangladesh, the Philippines, Thailand, and Vietnam. That is roughly four times the value of completed projects.

Of 91 projects surveyed in those countries, just 11% of total power capacity was brought online.

“One geopolitical conflict, like the Russia-Ukraine conflict, is a negative incident. A second geopolitical conflict, like the Iran War, is a pattern, and that is fundamentally being recognised by Asian countries and being embedded into their energy sector development plans,” Reynolds said.

“The growth of demand for gas in the power sector is simply going to be too slow and overwhelmed by much cheaper renewable energy alternatives. These are big problems for Gastech to answer,” he added.

Renewables seen as lower risk

ARE said renewables paired with storage are now the lower-risk asset class for institutional capital on cost, build speed, and cash-flow predictability. The crisis has added a fourth dimension, geopolitical insulation.

Solar generation has been benchmarked during the crisis at about USD 30 to USD 40 per megawatt-hour, against USD 80 to USD 120 for LNG-fired power, it said.

The European Union added 65 gigawatts of solar in 2025, nearly a fifth increase in a single year. Solar and wind generated more of its electricity than fossil fuels for the first time, at 30% versus 29%.

The bloc’s gas import bill still rose 16% to EUR 32 billion, ARE noted.

It cited World Economic Forum analysis showing that substituting solar-plus-storage for planned gas capacity could save Southeast Asia up to USD 4 billion by 2030.

Round-the-clock renewable supply, at about 90% availability in its best-case configuration, sits on a declining cost curve, and its residual weather risk is modellable and insurable, ARE said.

“The principal risk factor of one asset class is weather. For the other, it is war,” the statement read.

“The cost of renewable supply on a round-the-clock basis is falling. Each year we discover a lower price. But the price of LNG has been constantly high. We don’t expect that LNG will be able to compete with renewable power,” Kumar said.

What it means for Asia

About 70% of global LNG import terminal capacity under development sits in Asian markets, ARE said, yet Asian buyers are accelerating domestic generation rather than deepening import dependence.

In April 2026, energy ministers of the Association of Southeast Asian Nations (ASEAN) reaffirmed a 30% renewable primary-energy target and a 45% renewable capacity target. Meanwhile, 26 countries and regions have announced new clean-energy and electrification measures citing the crisis.

Kumar said India has reached 50% of power capacity and 25% of supply from renewables, expected to hit 30% to 35% by 2030. China’s renewable share stands at 60% of capacity and 40% of energy generated.

“A major concern for any fossil fuel supplier should be how quickly a climate catastrophe—like the one in Nepal—can shift public opinion, mirroring what happened with nuclear energy. Such shifts can leave fossil assets stranded on a massive scale,” Kumar said.

“Currently, huge financial commitments are pouring into demand-side regasification infrastructure, driven largely by pressure from suppliers in the U.S., Qatar, and beyond. While low extraction costs and elevated prices ensure these suppliers make back their money, the real risk lies on the receiving end,” he said.

“Ultimately, it is the regasification terminals that will end up stranded and losing money, leaving backing banks and insurers holding the bag,” he added.

Kumar also questioned data center demand as a rationale for LNG.

“While data centers certainly require reliable power, they need the cheapest energy available, not the most expensive. The traditional argument against renewables—that intermittency makes them insecure—has been disproven by hybrid models that deliver stable, round-the-clock power,” he said.

“Right now, heavy investments in regasification rely on flawed assumptions that fail to factor in supply disruptions, commercial project risks, or the broader drop in fossil fuel demand,” he added.

Economic fallout

Dr. Jayant Menon, Visiting Senior Fellow at ISEAS-Yusof Ishak Institute and former Lead Economist at ADB, outlined the macroeconomic effects.

“The economic consequences of the Hormuz crisis start with an immediate trade deterioration for net importers of all forms of fossil fuels. That can quickly lead to a balance of payment strain,” Menon said.

“In dealing with that, there is an immediate and structural fiscal drain and impacts. Some of these comes from trying to mitigate the impacts of energy price shocks. The rest comes from an overall increase in the import bill. A lot of these will affect foreign reserves and fiscal position,” he said.

“Just on the fiscal side, we have also seen this contradiction plays out. A lot of governments, while embracing the green transition, are looking to increase subsidies on LNG and other fossil fuels to mitigate the price impacts from this crisis. All of this will result in wider budget deficits, higher interest rates and currency depreciation,” he added.

Menon, who said he was in the Philippines, noted the country has raised interest rates several times. He said the peso had weakened to 62.5 against the US dollar, a level he said it had never reached before.

“We can also see that in the poorest countries, least developed countries, they have to import the most expensive type of refined fuels because they don’t have domestic refining capabilities. This magnified the trade deterioration for these countries,” he said.

“These countries are also highly dependent on agriculture. Impacts on food, fertiliser and fuel have led to farmers rethinking their replanting season. And finally, we can see the potential for the crowding out of development of capital spending operating through the fiscal side. This is where we can see long-term persistent effects flowing through these price shocks,” he added.

Japan’s role

Richard Katz, Special Correspondent at Weekly Toyo Keizai and former Senior Fellow at Carnegie Council, said Japan has not changed its energy policy even though 93% of its crude oil passes through Hormuz.

Japan’s base case still has 54% of electricity coming from fossil fuels in 2050. Its goal of a 20% nuclear share compares with about 10% today, he said.

“Japan is not only emphasizing fossil fuels at home; they’re trying to spread fossil fuels throughout Asia and have other countries join them, so their machinery makers can export them and their gas companies could have stuff to sell,” Katz said.

“They have something called, in a classic case of false advertising, the Asia Zero Emission Community (AZEC), and the ambassador for it from Japan said ‘AZEC’s fundamental aim is to break away from an exclusive focus on renewables’ by Asian countries. Even though they say they’re going to help finance energy, only less than 10% of their deals—with countries mostly in ASEAN—involve solar or wind,” he said.

“Japan’s abdication of its potential role in promoting renewables in Asia has created a vacuum, which is being filled by China. China has become the supplier, so Japan’s policy is actually making these countries more dependent upon China, which is ironic since Japan claims that China is the security danger, and having countries dependent upon solar is a security danger. They’re the ones who are creating this security danger,” he added.

Katz said that by 2030 it is estimated to cost less to build a new solar or wind plant with battery storage than a new gas or coal plant.

 

If prices fall

Reynolds said LNG would struggle to compete even if Hormuz flows resume and prices ease.

“The average break-even cost of producing LNG around the world is typically assumed to be in the $8 range. The IEA and other groups have said that in order for LNG to be competitive with coal and renewable energy, that break-even price would have to fall to as low as $3 to $4. For LNG, even if the price falls back down to that break-even number, it will still remain uncompetitive as a source of power,” he said.

“As a policymaker, am I really going to hitch my country’s energy sector development plans to this absolute rollercoaster of a fuel, not knowing what it’s going to look like in 20 years? Or am I going to make a financially sustainable decision to invest in the lowest cost, cleanest form of power,” Reynolds said.

“If I’m an investor, I better make sure that all of my costs and all of my risks are passed on to the end users, so that I bear none of it. And if I do bear any of it, I’m gonna back out immediately,” he added.

ARE said capital still flowing toward import infrastructure is increasingly “betting against the direction its own customers are moving.”