OPINION : “Lessons in Gas and LNG Governance: ‘Business Model’"

The LNG industry is entering a new chapter. The question is no longer simply whether the world still needs natural gas and LNG. An increasingly important question is: how can LNG projects, which are becoming more expensive, complex, and exposed to greater risks, be financed and remain bankable amid the energy transition and geopolitical uncertainty?

This question emerged at The 5th IndoPACIFIC LNG Summit 2026 in Bali, particularly during Panel Discussion 4, titled "New Financing Models and Risk Management for LNG Projects in an Era of Supply Disruption and Energy Transition."

Two presentations, delivered by Khairulanwar Zakaria, Secretary General of the Malaysian Gas Association (MGA), and Richard Guit, Partner-in-Charge Singapore at Baker Botts, offered interesting perspectives: the future of LNG is not merely about discovering gas and building liquefaction plants, but also about redesigning risk allocation, project structures, infrastructure, contracts, and financing sources.

LNG Amid the Energy Trilemma

Khairulanwar began by addressing a fundamental issue: the "energy trilemma."

Energy policy must ultimately strike a balance among security/flexibility, accessibility-affordability-equity, and sustainability.

However, this balance does not exist in isolation.

Geopolitics, economic strength, the availability of domestic energy resources, infrastructure readiness and flexibility, and technology all determine the pathways available to each country.

Because every country faces different circumstances, no single energy transition pathway can be universally applied. Each country or region requires a customized pathway.

This message is important for Indonesia.

We often discuss the energy transition as though it were simply a matter of replacing fossil fuels with renewable energy.

In reality, energy systems must continue to provide energy whenever people and industries need it, at acceptable prices, while gradually reducing emissions.

This is where natural gas, particularly LNG, occupies a unique position.

LNG Projects Are Not Merely Technical Undertakings

Interestingly, Khairulanwar's presentation described LNG projects as the intersection of three major interests: investors, government/society, and the environment.

The projects themselves must connect supply and demand while addressing technical/technology and commercial/regulatory considerations.

Therefore, an LNG project must answer at least three questions.

First, "doability": Is the project technically feasible and commercially and financially viable?

Second, "clarity and predictability": Do investors have sufficient certainty regarding regulations, contracts, markets, and the project's economic structure?

Third, "long-term sustainability": Can the project remain viable amid changes in markets and energy policies over several decades?

On the supply side alone, numerous variables must be considered: the availability and size of gas resources, LNG plant and CCUS technologies, commercial arrangements including Production Sharing Contracts (PSCs), price signals, and domestic obligations.

On the demand side, considerations include regasification plants, transportation and logistics, pipeline capacity, system integrity and flexibility, contractual terms, diversification, pricing, and competition with other energy sources.

This means that substantial gas reserves do not automatically translate into a "bankable" LNG project.

Gas beneath the ground must still undergo a long journey before it becomes LNG molecules that generate cash flow.

ASEAN: Gas Is Needed, but Domestic Production Is Declining

This is where Southeast Asia's challenges become increasingly interesting.

Khairulanwar projected that gas would continue to play a significant role in ASEAN.

However, the region faces three simultaneous conditions: the energy transition must continue, domestic gas production is declining, and gas demand remains strong.

The implications are relatively clear: LNG will become increasingly critical, whether sourced domestically or through imports.

ASEAN therefore needs greater upstream activity alongside investment in gas infrastructure.

In other words, ASEAN may gradually shift from a region long recognized as a major LNG production and export center toward one that increasingly requires a cross-border gas and LNG ecosystem.

Indonesia must certainly interpret this shift strategically.

We have gas resources.

We also have a very large domestic market.

Around us are countries whose LNG requirements continue to grow.

The question is:

"Can we transform these resources into competitive and financeable projects?"

From Point-to-Point to Nodal LNG

One of the most interesting aspects of Khairulanwar's presentation concerned how project economics and business models are changing.

Traditional LNG models have generally been built around three characteristics: "point-to-point," "long-term," and "fully guaranteed" arrangements, both in terms of capacity and financing, as seen in Independent Power Producer (IPP) projects or regasification capacity arrangements.

However, future models are moving toward greater flexibility: "nodal" systems, "short-to-medium-term contracts of approximately 5–10 years," "partial offtake agreements with a merchant approach," and "partial financing/blended financing."

In my view, the transition from point-to-point to nodal systems deserves particular attention.

The traditional LNG model can be illustrated simply as:

Gas Field → LNG Plant → LNG Carrier → Dedicated Buyer.

A nodal system, meanwhile, allows an LNG hub to receive gas from multiple sources, connect with multiple markets, utilize shared facilities, and provide greater commercial flexibility.

LNG infrastructure is therefore no longer merely a "pipeline" connecting one seller to one buyer.

It can evolve into a business platform.

And when infrastructure becomes a platform, its revenue streams can also become more diversified.

There Is No Longer a Single Formula for LNG Financing

Khairulanwar's conclusion was simple but highly important:

"There is no universal financing model."

The most appropriate financing model depends on how effectively risks can be allocated among the parties involved.

This has given rise to various financing alternatives, including public-private partnerships, blended finance, sustainability-linked financing, strategic partnerships between governments and industry, and regional collaboration.

The financing paradigm is therefore changing.

Previously, the primary question may have been:

"Who will finance this project?"

Now, the question should be:

"Who is best positioned to bear each of the project's risks?"

Upstream risks may be allocated to parties with the greatest understanding of the reservoir.

Facility construction risks can be assigned to those with expertise in infrastructure development.

Market risks can be shared through a combination of long-term contracts and merchant exposure.

Meanwhile, certain country or regulatory risks can be mitigated through government support, Export Credit Agencies (ECAs), Multilateral Development Banks (MDBs), or sovereign mechanisms.

This is the philosophy of "risk allocation," rather than merely "fundraising."

The United States Is Playing a Different Game

Richard Guit offered another perspective that complemented Khairulanwar's presentation.

According to his presentation, LNG project structures in developing countries differ from those in the United States.

In many developing markets, financing structures involve National Oil Companies (NOCs), International Oil Companies (IOCs), Export Credit Agencies (ECAs), commercial lenders, and integrated projects spanning upstream development through liquefaction.

In contrast, many LNG projects in the United States do not face upstream challenges in the same way because gas can be obtained through existing gas infrastructure.

Liquefaction facilities can therefore operate under a "tolling model."

Third-party equity participation has also expanded, investor appetite has increased, and the regulatory environment, according to the presentation, supports project development.

The distinction is fundamental.

In an integrated LNG project, investors bear risks across a lengthy chain:

reservoir → gas production → pipeline → liquefaction → shipping → market.

Under a tolling model, however, some of these risks can be separated.

An LNG plant essentially generates revenue from providing liquefaction services, rather than having to bear the risks of the entire commodity chain.

This is one reason why the financing structures used for US LNG projects cannot simply be copied and applied to Asia.

Shared Infrastructure: Not Every Project Needs to Build Its Own

There is one concept from Richard Guit that I consider particularly relevant to Indonesia's gas development: shared infrastructure.

His presentation provided several interesting examples.

Woodside undertook capital recycling to support Scarborough through Pluto I and II while also utilizing ullage capacity at the North West Shelf.

Papua LNG also benefits from utilizing ullage capacity at PNG LNG.

More interestingly, shared infrastructure creates opportunities for third-party capital.

Gas from other projects can utilize the same facilities through tolling arrangements, generating revenue streams from tolling services that can subsequently become investable assets.

This is a paradigm worth considering for Indonesia.

We often treat every new gas discovery as a potential project that must have its own facilities.

Its own field.

Its own pipeline.

Its own processing facilities.

Its own LNG plant.

Yet this is not necessarily the most economical solution.

Sometimes, the value of a gas reserve can be unlocked simply by asking:

"Whose infrastructure can we use?"

Or conversely:

"Who can use our infrastructure?"

The concept shifts from a "stand-alone asset" to a "shared infrastructure ecosystem."

FLNG: Turning Gas Reserves into Projects More Quickly

Richard also highlighted the increasing use of Floating LNG (FLNG).

According to the presentation, FLNG can offer a cost-competitive alternative, potentially even a lower-cost solution under certain circumstances, while also enabling faster development compared with onshore LNG facilities.

The presentation noted that four of the nine LNG projects approved in Africa between 2015 and 2024 were FLNG projects, with PETRONAS and Genting also mentioned in relation to these developments.

Of course, FLNG is not the answer for every gas field.

However, the underlying philosophy is important: do not impose a single project architecture on every resource.

Large gas fields may be well suited to large-scale onshore LNG development.

Certain offshore fields may be more competitive using FLNG.

Fields located near existing LNG infrastructure may instead be most economically developed through tie-ins and tolling arrangements.

The objective should not be to identify the most advanced technology, but rather the configuration most capable of transforming a "resource" into an "economic reserve."

Government Is More Than Just a Regulator

Another important point concerns the changing role of government.

Richard Guit demonstrated that government support for projects does not necessarily mean providing direct funding.

In terms of "equity and debt support," available instruments may include ECAs supporting security of supply, co-investment by sovereign wealth funds, and guarantees from governments and multilateral development banks.

There is also equally important "non-funding support," including demand aggregation, fiscal regime certainty, tax concessions, and support from NOCs.

This is a point that is often overlooked.

Sometimes, a project does not need subsidies.

It needs certainty.

Certainty regarding fiscal arrangements, regulations, markets, pricing mechanisms, and assurance that the rules of the game will not change after billions of dollars have already been invested.

For LNG projects with economic lifespans extending over several decades, "predictability itself has economic value."

When Energy Security Returns to Center Stage

The final part of Richard's presentation was even more interesting.

In what he described as a "Global Reset," energy developments over approximately the past year have demonstrated renewed attention to energy security, changes in US policies, and pressure on carbon pricing in Europe.

At the same time, gas, particularly LNG, is still considered a transition fuel.

The presentation highlighted challenges associated with hydrogen transportation, the premium costs of ammonia conversion, and the continued high costs of CCS.

This does not mean that the decarbonization agenda has stopped.

Rather, we are entering a more realistic phase of the energy transition.

The world is beginning to recognize that energy systems cannot focus on a single variable—emissions—while overlooking security of supply and affordability.

The energy transition must still keep the lights on, industries operating, fertilizers being produced, electricity available, and energy affordable for the public.

So, What Are the Lessons for Indonesia?

When these two presentations are considered together, a broader message emerges that I believe is highly relevant to Indonesia's gas governance.

Our challenge in gas development may not simply be a lack of resources.

The challenge is how to make those resources "bankable," "deliverable," and "marketable."

We have many options to consider.

Not every project needs to be vertically integrated.

Not every LNG plant needs to have a dedicated gas field.

Not every gas field needs to develop its own LNG plant.

Not all capacity needs to be secured under 20-year contracts.

Not all infrastructure needs to be owned by producers.

And not all risks need to be borne by the same investor.

Indonesia can begin pursuing more serious development of shared gas infrastructure, LNG hubs, tolling arrangements, third-party access, FLNG, partial merchant exposure, blended finance, and cooperation among governments, NOCs, IOCs, sovereign wealth funds (SWFs), ECAs, MDBs, and private infrastructure investors.

This approach could become even more important when considering the development of Indonesia's geographically dispersed gas resources, which vary in size and characteristics.

From Project Financing to Risk Sharing

Ultimately, this may be the most significant paradigm shift now taking place.

For years, we have asked:

"Is this LNG project financially viable?"

Going forward, the question needs to be expanded:

"How should this project be structured so that each risk is borne by the party best equipped to manage it?"

Once the question changes, the range of possible solutions also changes.

We are no longer discussing only debt and equity.

We begin discussing tolling, shared infrastructure, merchant capacity, ECAs, sovereign support, blended finance, demand aggregation, fiscal certainty, regional collaboration, and various forms of partnership.

And perhaps this is the most important lesson from the IndoPACIFIC LNG Summit 2026:

"The future of LNG will be determined not only by who possesses the most gas, but by who is most capable of managing and sharing its risks intelligently."

Because ultimately, gas in a reservoir is merely a resource.

It only gains economic value when there is technology capable of producing it, infrastructure capable of transporting it, a market willing to purchase it, and a business and financing model capable of bringing all these elements together.

That is the challenge facing our gas and LNG governance in the years ahead.

(End of the Learning Session)