As the Philippines opens its doors to liquefied natural gas (LNG), investors and developers should take a hard look at the financial and investment risks of the dash for gas.
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While LNG projects in Southeast Asia might seem like lucrative opportunities, investors in the region risk pouring billions into what could soon become stranded assets, leaving banks, developers, and governments exposed to escalating costs and unachievable climate goals.
The latest findings from methane expert Professor Robert Howarth is a wake-up call. His research shows that LNG, over a 20-year period, has a higher carbon intensity than coal. This debunks misleading claims that LNG is a cleaner “bridge fuel” as the supply chains leak methane – a greenhouse gas 84 times more potent than carbon dioxide over short time frames. This potent combination of direct and indirect emissions, backed by latest evidence, not only raises stronger climate concerns of LNG but also suggests an increasingly more financially untenable prospect of LNG business, as global carbon regulations tighten.
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The Philippines’ LNG investments, initially framed as a solution to the country’s growing energy demand, now teeter on the brink of financial disaste
Lately the risk is more evident with the development in the European Union’s Emissions Trading System (EU ETS). Starting next year, importers to the EU market will be responsible for reporting the carbon intensity of LNG cargos, with the highest emitters likely subject to punitive carbon taxes. Following the EU’s formal adoption of new rules on methane emissions, US producers have until January 2027 to meet new EU requirements. Verification systems such as MiQ for methane emissions from the oil and gas industry are growing in demand, with Grain LNG terminal in the UK recently being the first port in the world to receive MiQ’s accreditation.
Asia, as a significant market for LNG imports, could soon find itself burdened with the “dirtiest” LNG shipments, as Europe phases out carbon-heavy imports and US producers are put under increasing pressure to comply with methane emission standards. The financial and environmental costs are bound to rise as global pressure mounts to meet climate targets. This puts countries like the Philippines in the crosshairs of global carbon regulations, increasing the long-term financial risks for energy investors and developers in the region. Banks, too, are starting to reconsider their positions. ING, a global leader in financing, recently announced that it would restrict financing for certain oil and gas companies and could sever ties with those that fail to align with its net-zero ambitions by 2026. This reflects a broader trend in the financial sector: LNG is no longer seen as a safe bet. With growing investor concern over Scope 1 emissions and the financial risks of high-carbon projects, the LNG market is losing its appeal.
In the Philippines, San Miguel Corporation (SMC)’s highly criticised LNG projects are not immune to this trend. In 2023, DWS, a German asset management company publicly announced their divestment from SMC, citing latest environmental, social, and governance data. Meanwhile, Austrian bank Erste, earlier this year, announced divestment from SMC as “risk assessment from both a financial and sustainability perspective has deteriorated”, according to the Center for Energy, Ecology, and Development.
The Philippines’ LNG investments, initially framed as a solution to the country’s growing energy demand, now teeter on the brink of financial disaster. The country’s LNG supply currently relies on costly imports from the UAE and Indonesia, amounting to nearly USD 90 million for just two shipments. Without long-term contracts in place, companies like SMC Global Power are exposed to the volatility of international spot markets. Prices could fluctuate wildly, leaving investors in a precarious position. Moreover, regulatory delays are already putting projects at increasing financial risk. In the Philippines, the A Brown LNG terminal is stalled, and while AG&P has completed its terminal construction, acquisitions are still under government review. One of the country’s biggest LNG buyers, SMC Global Power, does not have a current long-term contract to buy LNG from a global supplier. Without a contract to buy the fuel at predetermined prices, LNG-to-power costs could fluctuate wildly according to volatile prices in international spot markets. After global commodity prices skyrocketed in 2022, SMC Global Power reported PHP 15 billion (US$255 million) in losses.
The absence of clear, long-term strategies for LNG supply and pricing exposes the Philippines to the same financial threats now playing out in Bangladesh, where rapid policy shifts have led to the cancellation of two major LNG projects within the past two years. In recent years, Bangladesh has shifted its energy policy by suspending the Speedy Supply of Power and Energy Act, which previously allowed fast-tracked, non-competitive LNG projects, and cancelling contracts with non-compliant entities like Summit Group. This policy pivot reflects Bangladesh’s growing commitment to renewable energy, phasing out fossil fuels, and addressing transparency concerns, ultimately resulting in the cancellation of major LNG projects.
The only path forward: renewables
The solution is clear: renewable energy. According to the International Energy Agency (IEA), clean energy technologies are now more cost-competitive over their lifespans than conventional fossil fuels like LNG. The Philippines, with its abundant solar and wind resources, is uniquely positioned to pivot to renewables, offering investors a more stable, long-term opportunity. By shifting away from LNG and focusing on renewables, investors can reduce risk, align with global climate goals, and tap into a growing market for clean energy solutions.
The evidence is overwhelming. LNG is not the future – it’s a financial trap. Investors must rethink their strategies, divest from LNG, and embrace renewable energy as the only viable path forward for Southeast Asia’s energy landscape. The stakes are too high to ignore.
Kurt Metzger is director, energy transition platform, Asia Research & Engagement.
