The balance sheets of Asia-Pacific gas utilities may look steady, but the domestic politics behind them matter as much as the numbers a new report shows.

Fitch Ratings’ latest sector review, released this week in Hong Kong, offers up an initially reassuring headline in “Asia-Pacific Gas Utilities’ Financials Remain Strong” with most companies comfortably within rating limits.

However, beneath that supposedly unrippled surface, regional disparities and shifting demand patterns, particularly in North and Southeast Asia tell a more convoluted story.

Many of the region’s gas distributors enjoy the safety net of being government-related entities and are thus ‘protected’ to a large extent. Their credit profiles are, in reality, extensions of sovereign ratings rather than stand-alone assessments according to the report. This implicit guarantee explains why ratings are expected to remain stable in the near term as any potential investor in the region or around the world knows that Beijing, New Delhi, Jakarta and Hanoi will not allow their national power entities to stumble, let alone fall.

Still, one name stands out on the Fitch report. Binhai Investment Company Limited, rated BB+/Stable, has little room to manoeuvre. Falling sales volumes and slower new connections are little-by-little eroding its financial buffer. Without stronger demand, Binhai’s stability depends less on fundamentals than on the willingness of Indian authorities to keep supporting it.

Across the region too, leverage is set to creep higher though. Fitch projects sector debt ratios to rise from 0.9x in 2024 to around 1.0x by 2027.

That increase reflects ambitious capital expenditure across the board, notably at India’s GAIL (currently rated as BBB-/Stable) and PetroVietnam Gas (BB+/Stable).

Governments in both New Delhi and Hanoi want their national utilities to extend infrastructure, secure supply and reduce dependence on dirtier fuels. In Vietnam this is particularly true with LNG related infrastructure projects rarely out of the news of late.

At the same time, purchasing costs reveal the region’s fault lines. Chinese utilities are enjoying an unusual tailwind of late, primarily on the back of an increase in domestic production, expanded storage on the east coast of the country coupled to higher volumes of pipeline imports in the past month that have driven costs down.

India, too, is benefitting to some degree with Brent-linked pricing translating lower crude benchmarks into cheaper gas imports even with the ongoing trade battle with Washington and talk of increased tariffs harming relations with the US making daily headlines.

Indonesia, however, is stuck on the wrong side of the equation according to Fitch. PT Perusahaan Gas Negara, now rated as BBB-/Stable, relies heavily on LNG purchases, and with global LNG markets still tight, its outlays are rising. In time, this will only serve to add to purchasing competitiveness across the region given Indonesia’s status as the biggest economy in Southeast Asia.

With ongoing political issues gripping much of the country and daily protests in major cities, Jakarta may well need to subsidise early to avoid further consumer discontent.

For now across Asia, with gas still seen as a stepping stone between coal and renewables – a position largely echoed by Fitch – it is more than likely that long-term demand will remain strong. But slowing near-term consumption raises questions and analysts need to look deeper at the role domestic politics is playing in regional capitals in propping up highly rated under-performers.