Project sponsors fashion different business models to mitigate project risks and obtain financing. In India, pipeline connectivity has been a challenge while in Vietnam, concluding power purchase agreements have been elusive. Consequently, few regasification proposals have been successfully executed in South and Southeast Asia.

Both regions have enormous growth potential for LNG. In South Asia, IHS Markit forecast LNG imports to double within this decade. In Southeast Asia, the outlook is just as bright and LNG demand is forecast to quadruple. To feed growing LNG demand, a total investment of US$4-7 billion is required in South Asia, and US$3-6 billion in Southeast Asia to fund the infrastructure build out.

The LNG value chain varies from country to country owing to the lack of clear policies and each project faces its unique bottleneck. Therefore, to mitigate project risks, project sponsors have adopted these business models to fit the environment. The following cases illustrate the approaches taken so far.

• In Myanmar, VPower relied on balance sheet financing. TTCL looked towards capital recycling for the Ahlone LNG project.
• In India, a capital grant from the government solved the issue of pipeline connectivity to the Dhamra LNG terminal.
• Finally, in Vietnam, the Bac Lieu LNG project has sought to hasten development under an IPP scheme.

Project financing continues to be the most difficult hurdle to achieve a final investment decision. New companies that are willing to take on more risk to move projects along will outshine the competition to gain an early foothold. But with weaker balance sheets, a range of measures will need to be adopted such as raising equity through capital recycling, financing via balance sheets, or taking on merchant risk. A combination of these methods can reduce the time taken to reach the final stage of financial close.

Content taken from our recent insight report, "An alternate approach to develop regasification terminals in South and Southeast Asia."

Learn more about our coverage of the Asia Pacific energy market from our Asia Pacific Regional Integrated Energy Service.

Huyen Trang Vu is an Analyst covering the Southeast Asia gas market at IHS Markit.

Chong Zhi Xin is a Director covering the South and Southeast Asia gas market at IHS Markit.

Posted on 25 March 2021

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.