MEDIA STATEMENT | September, 2026, Singapore
For two decades, liquefied natural gas has been sold to Asian governments and lenders on the proposition that it is secure, reliable, contractible, and insulated from the volatility that supposedly looms over alternatives.
Since 28 February 2026, that proposition has been exposed to its first live stress test. Six months later, the Strait of Hormuz remains effectively closed to LNG traffic, transits are down roughly 95%, and more than 25 Gulf energy companies — QatarEnergy among them — have declared force majeure.
The test has been run. The results are in. They are not what industry marketing predicted. Consequently, lending must now be re-priced around three risks that were historically modelled in separate silos but are now compounding simultaneously for the first time: commercial oversupply, geopolitical chokepoint exposure, and policy-driven demand destruction. Lenders that are 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 inside the same six-month period.
- The oversupply problem predates this crisis but has been magnified by it. According to independent analysis, USD379-394 billion of committed global LNG capital is at risk of being stranded, set against a projected structural surplus of about 270 to 280 million tonnes per annum by 2030. The International Energy Agency’s own assessment is that up to three-quarters of LNG projects currently under construction may fail to recover their capital under a 1.5°C-aligned pathway. This is not an advocacy position; it is the central case of the sector’s most cited forecaster.
- Hormuz changed the status of the second risk. Until February, a chokepoint closure was a scenario in an appendix, a tail risk that credit committees acknowledged and then set aside. It is now a realised loss event. A corridor carrying approximately 20% of the world’s LNG and a quarter of its seaborne oil has been shut for half a year. The resulting force majeure declarations have already flowed through to contracts, revenues, and counterparty performance. Any financing with a 20- to 25-year tenor must now hold that outcome as a base case, not a footnote.
- The third simultaneous risk is what should most concern a credit committee. Independently of Hormuz, LNG demand has been plateauing or contracting in exactly those markets that were expected to absorb the coming wave of US and Qatari supply: the Philippines, Pakistan, India, Thailand, and China.
Pakistan has cancelled cargoes under long-term contracts as solar deployment displaces gas from the national grid. Pakistan’s Petroleum Division estimated the associated liability to be at least USD5.6 billion, under the previous take or pay contract. LNG-to-power and terminal projects have been cancelled outright in Bangladesh and the Philippines, where Energy World Corporation’s Pagbilao project has been abandoned after 17 years with a USD285 million impairment. A financing model that assumes intact supply and demand is now facing serious doubt.
The diligence question has therefore changed. It is no longer sufficient to ask what the offtake contract says. The question is whether the counterparty has the willingness and the balance-sheet capacity to keep taking cargoes at spot-adjacent prices for 20 years, through both a chokepoint closure and a renewables cost curve that continues to fall beneath it. Bankability now requires a chokepoint stress test and a demand-destruction stress test, run together.
Renewables-plus-storage is the lower-risk asset class
On conventional financial grounds — cost, build speed, and cash-flow predictability — renewables paired with storage is now the lower-risk asset class for institutional capital. The past six months have added a fourth dimension that gas cannot match: geopolitical insulation. The fuel from a solar or wind asset arrives without crossing a contested waterway, without a shipping insurance premium, and without a counterparty that can declare force majeure.
On cost, the spread has widened at precisely the moment gas needed to prove itself. Solar generation has been benchmarked during the crisis at about USD30 to 40 per MWh, against LNG-fired power at USD80 to 120.
The European comparison is starker still. EU added 65GW of solar in 2025, nearly a fifth increase in a single year. Solar and wind together generated more of the EU’s electricity than fossil fuels for the first time in 2025 (30% versus 29%), even as the EU’s gas import bill still rose 16% to €32 billion. That is the shape of the trade Europe is making: paying more for a shrinking share of fossil generation.
Build speed should be understood as a risk-management metric, not merely a deployment statistic. Solar-plus-storage can be permitted, financed, and energised in a fraction of the time required for an LNG terminal or a combined-cycle plant. Once built, it carries no fuel-price line item and no shipping-lane exposure. Analysis published during this crisis by the World Economic Forum found that substituting solar-plus-storage for currently planned gas capacity across Southeast Asia could save the region up to USD4 billion by 2030 — even before accounting for any avoided fuel-security premium.
Cash-flow predictability offers the final, decisive argument. Round-the-clock renewable supply (RE RTC) is defined differently across markets, but in its best-case configuration – about 90% availability, combining solar, wind, battery storage, and locally available renewable resources – it sits on a declining cost curve. Its residual weather risk is modellable, insurable, and free of external actors, and its implementation timeline is a fraction of the LNG alternative.
In contrast, LNG-based supply has a materially higher and increasing cost, with an exceptionally high risk of supply disruption.
For an institutional allocator matching long-duration liabilities, that comparison is the whole argument. The principal risk factor of one asset class is weather. For the other, it is war.
What this means for Asia
Almost the entire looming LNG wave was built to serve Asia. About 70% of global LNG import terminal capacity under development sits in Asian markets, and the supply now under construction in the United States and Qatar was sanctioned on the assumption that Asia would absorb it.
That assumption is being tested in real time and the early evidence is that Asian buyers are responding to the crisis by accelerating domestic generation rather than deepening import dependence. In April 2026, ASEAN energy ministers reaffirmed a 30% renewable primary-energy and 45% renewable capacity target, explicitly framed as a security response, while 26 countries and regions have announced new clean-energy and electrification measures, citing this crisis as the trigger.
The capital that continues to flow toward import infrastructure is, increasingly, betting against the direction its own customers are moving.
Spokesperson
Arun Kumar
Asia Research & Engagement (ARE)
Strategic Advisor – Power Markets and Technology Innovation
About Asia Research & Engagement (ARE)
ARE brings leading investors into dialogue with Asian-listed companies to address sustainable development challenges and help companies align with investor priorities. With decades of Asia experience, our cross-cultural team understands the region’s unique needs. Our high-quality independent research, robust investor network, and engagement expertise, provide corporate leaders and financial decision makers with insights leading to concrete action.
