6. Remaining a reliable trading partner for LNG and low-emissions gases

Principle 6: Australia is, and will remain, a reliable trading partner for energy, including Liquefied Natural Gas (LNG) and low emission gases. Australia’s ambition to become a renewable energy superpower will involve developing new, low emissions energy exports to support the energy security and decarbonisation efforts of our trade partners.

Summary

Australian gas, exported as LNG, plays a central role in energy security and supports living standards in our region. It supports a reliable electricity supply and provides gas for cooking and cooling or heating homes in cities like Tokyo, Beijing, Seoul, Singapore, and Taipei. It will also support regional electricity grids as they transition from coal-fired power generation towards renewables.

We have seem large scale investment from regional partners in Australia’s LNG industry over recent decades. This has benefits both to our trade partners, who rely on LNG for energy and as an input to many basic goods and services, and to Australia’s economy.

During the transition to net zero, our trade partners’ economies will change and the pathways they take to get there will differ. Ultimately, many of our trade partners will have a harder task compared to Australia because of their limited availability of cheap, reliable energy. Australian LNG will play a vital role in providing a reliable supply of electricity as renewable power sources become a larger part of the energy mix in our region, and as we work together to make low-emission gases like hydrogen more cost effective and readily available.

In all the scenarios considered in this strategy, Australia’s LNG exports decline by 2050 (note this is not a policy setting). However, LNG still has a clear role to play in 2050 and beyond. By remaining a reliable LNG supplier and responsible climate actor, Australia can build new partnerships in emerging energy industries like hydrogen and clean energy exports. These relationships are important to Australia’s national prosperity and to our domestic energy transformation.

While reductions in LNG demand are forecast over time, Australia is acting now to reduce LNG-related emissions. Reducing the emissions intensity of LNG and gas production in Australia advances our region’s climate and energy goals. It also presents opportunities to scale carbon management solutions such as carbon capture and storage.

Continued supply of LNG can reduce the carbon intensity of our region’s energy mix, including by replacing more emissions intensive fuels like coal. It will also support security and stability in energy markets as our trade partners to meet their climate commitments. Our LNG industry understands that this does not mean business as usual. Emissions from the extraction of gas and production of LNG are estimated to account for around 8% of Australia’s total greenhouse gas emissions. These emissions must reduce for Australia to achieve net zero. 

Scenarios are used to help shape forecasts in this section. Learn more about these scenarios in Appendix A.

Read Section 2 of the analytical report for more information about Australia’s gas emissions, and Section 4 for more information about the international demand for natural gas.

How are Australia’s LNG exports consumed today?

Australia accounts for a fifth of the global LNG trade. In 2022–23, Australia exported 81Mt of LNG, which is similar to the volumes exported by the US and Qatar. Australia has been a trusted and reliable energy export partner for many years. This trust is founded on a framework of long-term investments and contracts with Northeast Asian consumers, which provides price and volume security over a long-term time horizon. Between 2010 and 2022, the cumulative investment in Australia’s oil and gas sector was more than $398 billion (DISR 2024).

Nearly 90% of Australian LNG exports go to Japan (36%), China (28%), the Republic of Korea (ROK) (14%) and Taiwan (11%). Japan, the ROK and Taiwan rely on imports to meet most of their energy needs. The lack of energy self-sufficiency in these economies means they must depend on other economies for access to reliable and affordable energy supplies.

Australian LNG meets industrial energy needs and generates electricity for major cities across Asia

Australian LNG ensures a reliable electricity supply in cities like Tokyo, Osaka, Seoul, Singapore and large cities in China, complementing the broader energy mix in each economy. The graph below shows Australia’s share of total gas supply to key international trade partners. To put this into perspective, of the 12 million people live in Tokyo’s metropolitan area, more than half of them are supplied by LNG imported from Australia.

Australian LNG as a share of total gas supply, selected economies, 2022
This figure shows Australian LNG as a share of total gas supply for selected economies in 2022. Australian LNG constitutes just under 40% of Japan and Taiwan’s total gas supply, while the gas supply in Singapore and ROK is comprised just under 30% of Australian LNG. Total gas supply in other countries like China, Thailand and Malaysia is far less dependent on Australian LNG (less than 10%).

Source: Analytical Report, Figure 4.5.

As well as electricity generation, Australia’s LNG is used by trade partners for their industrial sector. The Japanese, ROK and Chinese economies are heavily industrialised with globally significant, export-oriented manufacturing sectors. Australian households and businesses import and benefit from many of these products, made using Australian gas.

Despite the key role that gas plays in our trading partners’ economies, coal dominates energy production in our region. In China and India’s energy mix, coal makes up 61% and 74% respectively. Coal continues to be an affordable and abundant source of energy that has met rapidly expanding demand.

What role will Australian LNG play in 2050?

Demand for Australian LNG beyond 2050 could vary widely. The modelling indicates demand in 2050 could vary as much as 80 billion cubic meters, or about 58 million tonnes between scenarios. The actual amount of LNG needed will depend on a complex combination of choices made by governments, industry, consumers, and investors. In 2022–23, Australia exported 81 million tonnes of LNG. By 2050, this could fall to: 

  • 66 million tonnes in the STEPs scenario (or reduce by 19% based on 2022–23 production) 
  • 20 million tonnes in the APS scenario (or reduce by 75%)
  • 7 million tonnes in the NZE scenario (or reduce by 90%).

In all scenarios we examined, LNG exports decline to 2050. However, LNG still has a clear role to play in 2050. There are crucial differences in demand for Australian LNG in 2050. In all scenarios, Australia maintains a large share of LNG trade with existing trade partners. This is because of existing trade relationships, proximity to Asia and reliability of supply based on Australia’s low sovereign risk compared to other countries. The most notable absence in 2050 is ASEAN demand under more ambitious emissions reduction scenario. This is because of other LNG exporters and local gas production in the region fulfilling demand. However, it remains possible Australian LNG will play a role in ASEAN’s energy mix as southeast Asia transitions away from coal.

LNG demand could be higher than these scenarios for the same reasons that apply to Australia’s economy. Industrial gas demand is expected to remain high if commercial alternatives do not become affordable and available. GPG’s long-term role will be to provide firming and peaking support for an increasing renewable electricity generation system.

In addition, developing nations in our region will experience substantial growth in energy demand to lift the standard of living for their population. 

Although there is variation in how much Australian LNG our partners will need beyond 2050, demand is still expected to be primarily driven by China, Japan, the ROK, and ASEAN. 

Natural gas has a critical role to play in the energy transition pathway. Under all the International Energy Agency’s modelled scenarios, demand for natural gas will remain through to 2050. Across most of its scenarios, additional investments in natural gas production are nonetheless required to meet natural gas demands. … Furthermore, many consultancies have predicted that natural gas demand will increase especially in Asia despite a net zero emission goal by 2050 because operating and sanctioned projects are not enough to satisfy such increasing demands. Therefore, new LNG projects will be required to meet the increasing natural gas demand. 

Japan Australia LNG (MIMI) Pty Ltd

Australian LNG in an orderly energy transition

To support an orderly energy transition in our region, Australia is committed to remaining a reliable supplier of LNG. Honouring long-term LNG contractual obligations is essential to maintaining trusted relationships with our international partners, and to providing the energy security necessary to progress decarbonisation plans. 

At the same time, Australia must reduce emissions associated with the production of LNG while ensuring new developments meet all other necessary approvals. This includes the need to genuinely consult with First Nations groups and other local communities on matters that affect them. 

Most emissions are generated from Australia’s LNG when it is used. While decisions about how to manage these emissions are a matter for our trade partners, Australia is committed to reducing the full value chain emissions associated with LNG production, transport, storage and end-use.

We have a shared responsibility in the Indo-Pacific region to collectively reach net zero while growing our economies.

Australia is committed to meeting our long-term contracts

As of 2024, there are 51 contracts in force for Australian LNG. The volumes of gas exported under these contracts will decline as contracts expire by 2040. Unless Australian producers enter into new contracts, Australia’s share of the global LNG trade will decline as other major producers invest in significant additional export capacity and as LNG facilities reach their end of life. Some contracts are expected to be extended over time.

As well as contracted gas volumes, Australian LNG facilities can also sell gas on to the global spot market. The amount of global spot sales Australia can make is the difference between long-term contracts and total export capacity. As contracts end, the gas industry may move into a different ratio between contracted and uncontracted supply.

Demand for LNG in the medium-term will create sustained interest in Australian LNG

Many Asian economies, including Japan, the ROK and southeast Asian nations, view gas as a crucial component of their pathway towards net zero and their energy security. Even in the most ambitious decarbonisation scenario gas will continue to play a role in economic activity all the way to 2050 and beyond. Demand for LNG is also growing in several Asian countries that have historically produced enough domestic gas to meet their own demand. China, Malaysia and Indonesia are the region’s largest producers, with other economies such as Thailand, India and Vietnam also producing gas for domestic purposes. Declining domestic production and reserves have led these countries to import LNG to maintain their gas supply balance. It is in Australia’s strategic interests that our trading partners have access to secure and reliable energy during the energy transition. Australian gas can play an important role in these economies in supporting economic growth and energy security as they transition to net zero.

The Japanese Ministry of Energy, Trade and Industry (METI) believes that there is a significant risk for Japan—a relatively small country with few natural resources—to immediately give up fossil fuels, including natural gas. METI has therefore positioned natural gas (LNG), which has the lowest GHG emissions among fossil fuels, as an important 'transition energy' and has decided to further promote independent development of oil and natural gas by acquiring overseas interests and promoting domestic resource development... 

INPEX

Global gas demand for the three IEA scenarios is shown in the graph below. All three scenarios show pathways that involve a non-zero level of gas demand, notably even in the scenario where net zero CO2 emissions are successfully achieved by 2050. 

Global natural gas demand by scenario, 2020–2050
This figure shows the difference in global natural gas demand projections from 2022, when demand was 4,159 billion cubic metres. Under the STEPS scenario, global demand is projected to rise slightly to 4,173 billion cubic metres by 2050. Under the APS scenario, it is projected to fall to 2,421 billion cubic metres, and under NZE, to fall to 898 billion cubic metres.

Source: Analytical Report, Figure 4.10

Supporting the potential for higher LNG trade, global LNG import capacity is also in a phase of significant upswing. This has been accelerated by Western European countries switching away from Russian pipeline gas after Russia’s illegal invasion of Ukraine. Import terminals are also being built across the ASEAN region. Many Asian economies view gas as a crucial component of their pathway towards net zero.

Supply from other large LNG exporters is also likely to continue throughout and beyond the climate transition period. In 2022, a large number of contracts (with an average duration of 20 years) were signed by large exporters. These included the United States (39 contracts with annual contract quantities of 64 Mt), Qatar (3 contracts) and Russia (2 contracts). Papua New Guinea and Canada are also developing LNG export capability. Regardless of Australia’s actions, other exporters will continue to increase global supply.

Other suppliers are joining the market as well. For example, Canada is carrying out the Kitimat project, which was described by Canadian Prime Minister Justin Trudeau as ‘the single largest private-sector investment project in Canadian history.’ The Kitimat project is expected to start in 2025 and provide Canada with an annual LNG export capacity of 26 Mt when its second stage is completed. 

Recent movements in LNG contracting reflect the relative maturity of Australia’s LNG industry and available resources compared to other suppliers. This also reflects Australian LNG facilities operating at close to nameplate capacity and the general low levels of domestic exploration and investment in recent years. 

Australia is expected to continue exporting LNG

Projections for Australia’s LNG exports differ. Under low-climate-ambition (STEPS), exports are stable, in contrast to a gradual decline (APS) and a greater decline (NZE) from 2030. In nearly all cases, Australia maintains a large share of LNG trade with existing partners over the medium term (to 2035). Australia’s relative share of the global LNG market will continue to diminish over time.

Australian LNG export volumes to 2050, by scenario
From exports of around 105 billion cubic metres in 2023, under the STEPS scenario, exports are projected to increase slightly until 2030, when they decline to 94 billion cubic metres by 2050. Under both the APS and NZE scenarios, exports are flat until 2030, when exports under the APS scenario decline to around 32 billion cubic metres by 2050. Under the NZE scenario, exports decline more quickly, falling below 20 billion cubic metres in 2041, then declining more slowly to 11 billion cubic metres by 2050.

Note: This is an aggregation of Figures 4.13 and 4.14 in the analytical report. Source: Future Gas Strategy Analytical Report 

Australia can become a low-carbon supplier of LNG and grow clean exports

The Australian Government has an ambition for Australia to become a renewable energy superpower. Low-cost renewable energy will underpin new, internationally competitive, clean industries that can secure Australia’s long‑term prosperity in a decarbonising world. These new industries – such as renewable hydrogen, green metals, critical minerals processing, and manufacturing of power generation and storage technologies offer major economic opportunities and will reduce domestic and global emissions.

Australian LNG remains attractive for Asian buyers because of lower transport costs and non-price factors. These factors include geopolitical relationships, secure trading routes, transparent institutions, and openness to foreign investors taking majority ownership stakes in gas. Australian LNG is, however, characterised by high direct capital costs and an aggregate emissions intensity above the global average. There is uncertainty around the CO2 intensity of future resources because not all Environmental Impact Statements and gas drilling results include this information. 

Low methane emissions may be a potential advantage for Australian gas as countries consider upstream emissions through carbon border adjustment mechanism policies. The uncertainty about emissions intensity may affect the venting emissions that are needed to remove CO2 before liquefaction or refining. This will need to be taken into account as resources are further assessed.

Maintaining trading relationships through continued, reliable exports of LNG may prove valuable in securing incoming investment from these trading partners in the new industries that Australia has ambitions to develop. This could use the expertise and core skills of Australia’s gas industry. For example, several critical minerals and green metals facilities may need gas in the medium term, while renewable hydrogen and direct electrification of processes reach technological maturity or become affordable.