Natural gas: The demand war reignites – From LNG and CNG to natural gas vehicles

These days, if you work in the energy sector, you can’t go a day without hearing ‘natural gas’ being talked about. Until last year, this market was relatively quiet, overshadowed by where oil prices were heading – but this year, things have completely flipped. An extended cold snap across the northern hemisphere has sent heating demand soaring, and at the same time, a scramble is underway to secure vessels for liquefied natural gas (LNG) used in power generation. Just a month ago, the dominant view was optimistic – ‘we can manage with stockpiles’ – but now, it’s a whole different story.

The key is short-term spot prices for LNG. It looked like prices were stabilising around US$14 per tonne last week, but then Japan and China announced March import volumes that beat forecasts by 12%, and tensions are rising again. From what I’ve been hearing on the ground, even KOGAS is busy lining up extra supply for April and May beyond its existing long-term contracts. Officials at the big LNG terminals in Tongyeong and Pyeongtaek tell me their unloading schedules are already packed through mid-June.

But here’s something worth noting: the role of compressed natural gas (CNG). Most people are focused on LNG, but for domestic gas transport and smaller industrial complexes, CNG is still an efficient alternative. Especially for inland factories in Yeongdong and Honam that aren’t connected to pipelines, the cost of supply via CNG trailers has actually become cheaper than re-gasifying liquefied gas. One energy manager at an auto parts manufacturer in the central region smiled as he told me: “We’re getting a better deal on CNG right now than when we negotiated the supply price early this year.”

Why natural gas vehicles are back in the spotlight

This trend naturally flows into the transport sector. Enquiries about natural gas vehicles have jumped noticeably lately. With the electric vehicle ‘chasm’ dragging on longer than expected, the logistics industry is refocusing on practicalities like refuelling time and driving range. Did you know that over 30% of city buses in Seoul and Gyeonggi Province are already CNG buses? Add in the large trucks running on LNG, and the presence of natural gas vehicles is nothing to sneer at.

• Environmental regulations: As Europe’s CBAM ramps up, exporters need to verify the carbon footprint of their supply chains. Natural gas vehicles cut CO2 emissions by around 20% compared to diesel.
• Fuel cost stability: With oil prices flirting with US$85 a barrel, the price of CNG per kilogram is only about 40% of petrol. From a business perspective, it’s a no-brainer.
• Infrastructure: There are over 260 CNG refuelling stations across the country, and LNG stations are also expanding, mainly around major logistics hubs.

Of course, there are hurdles. The upfront purchase price is higher than diesel models, and the weight of storage tanks is still an issue. But looking at the pace of technological progress over the past three years, that gap is closing fast. A commercial vehicle development executive at one automaker told me: “For our 2027 model natural gas vehicle, we’ve managed to cut payload loss to under 5%.”

Why oil and gas consulting is suddenly hot

With such a tangled web of pricing structures and supply chain risks, oil and gas consulting has become the go-to service. This used to be the domain of big corporate strategy offices and energy trading houses, but now it’s a must-have for mid-sized manufacturers and logistics firms as well. The reason is simple: there are now too many variables for any one business to predict on its own.

Good consulting doesn’t just hand you data like ‘what LNG is trading at right now’. Instead, it works out the right mix of long-term contracts and spot purchases based on your company’s consumption patterns, storage capacity, and more. One major Korean logistics company recently took advice from oil and gas consulting and switched to a contract structure that cut its annual fuel bill by 15%. An executive there gave a thumbs-up, saying: “They pointed out seasonal spreads and CNG blending options we had no idea about.”

So the market’s big question comes down to one thing: ‘Which form of natural gas, and how do we secure it?’ From global LNG shipping volumes and CNG’s regional strengths, to the future of logistics that natural gas vehicles will unlock – I expect domestic natural gas demand to grow by at least another 8% within the next six months. Even after winter ends, spring and summer cooling demand and industrial operating rates will keep it supported. If you’re a smart player, you’ll read this turbulence as an opportunity – starting now.