Geopolitical tensions in the Middle East have reshaped energy procurement strategies across the Asia-Pacific, with Australia emerging as an increasingly important supplier of liquefied natural gas (LNG) as buyers prioritise supply security over price, according to a new report from Moody’s Ratings.
Authored by Kenny Lo, AVP-Analyst at Moody’s Ratings, the report reveals that disruptions to shipping through the Strait of Hormuz have reinforced Australia’s strategic position as Asia-Pacific’s largest LNG producer and the world’s second-largest LNG exporter.
However, it warns that growing domestic policy intervention could limit the industry’s ability to fully capitalise on stronger market conditions.
Around 20 percent of global LNG trade passes through the Strait of Hormuz, with 80 to 85 percent of that volume destined for Asian markets, making the region particularly vulnerable to any prolonged disruption.
Moody’s Ratings said it expects shipping through the Strait of Hormuz to remain disrupted through the third quarter of 2026, with only a gradual return to normal conditions.
The disruption has already had a significant impact on regional markets, with Asian spot LNG prices (Platts JKM) climbing to around US$20.7/MMBtu in March – their highest monthly average since January 2023 – while price volatility reached its highest level since early 2022.
Governments across Asia have responded with emergency measures ranging from restarting coal-fired power stations to introducing gas rationing and energy conservation initiatives.
According to the report, these developments are accelerating Asian buyers’ efforts to diversify towards suppliers less exposed to geopolitical conflict, including Australia, Canada and the United States.
Australia is particularly well positioned to benefit, with the country accounting for around 20 percent of global LNG supply and remaining the dominant exporter to North Asia, with China, Japan, South Korea and Taiwan collectively receiving more than 70 percent of Australian LNG exports.
Its shorter shipping distances, lower freight costs, diversified export routes and comparatively stable institutional environment further strengthen its appeal when compared to suppliers in more geopolitically exposed regions.
The report also points to Australia’s expanding LNG development pipeline, including Woodside’s Scarborough Pluto Train 2 expansion and Santos’ Barossa project, as supporting the country’s long-term role as a reliable supplier to Asian markets where energy security is becoming an increasingly important procurement priority.
While Australia’s LNG producers stand to benefit from higher realised prices as global supply security is repriced, Moody’s Ratings warns that increasing government intervention in the domestic gas market is likely to offset some of those gains.
The Federal Government’s proposed gas reservation scheme, due to commence on 1 July 2027, would require LNG exporters to supply gas equivalent to 20 percent of their exports to the domestic market.
Moody’s Ratings says the policy would divert volumes away from higher-margin export markets, limiting long-term export growth and constraining improvements in producers’ credit strength.
However, the ratings agency does not expect the policy to significantly diminish Australia’s attractiveness to foreign investors.
Instead, Moody’s Ratings argues Australia’s LNG industry has become a strategic policy asset, allowing the country to strengthen reciprocal energy security arrangements with key trading partners.
It cites recent agreements with Singapore and Taiwan, aimed at maintaining uninterrupted energy flows, as evidence that Australia’s export position is shifting from a commercial advantage to a geopolitical one.
The report reinforces a broader shift already underway across global supply chains, where geopolitical resilience is becoming as important as price competitiveness.
As buyers seek to reduce exposure to conflict-affected supply routes, Australia’s combination of geographic proximity, stable operating environment and established LNG infrastructure is likely to make it an increasingly strategic partner for energy procurement across the Asia-Pacific.
