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The increasing demand for energy in ASEAN

Hydrocarbon Engineering,

Economies that are members of ASEAN have been growing at an annual average rate of 5 - 6% since 2000. The volume of trade in the region recorded an 18% increase annually, with US$ 7 billion annual trade balance, before the current global economic crisis. Investment in ASEAN has surged at an annual average rate of 37% since 2003.
Global recession had cast a shadow over the region's trade balance and FDI, putting the region at the risk of a downturn. However, ASEAN economies appear to have emerged from the crisis quicker than expected, with Singapore and Indonesia growing at 21% and 5% respectively for the second quarter of 2009 over the previous quarter. If favourable conditions continue to prevail, the region can grow at a healthy rate going forward.
Energy dynamics in a growing region
The current energy mix in the region is dominated by oil, which accounts for more than half of primary energy consumption in top energy consuming nations. A recent study carried out by Asian Development Bank (ADB) analysed the energy mix of four countries, namely, Indonesia, Thailand, Philippines, and Vietnam, pointed towards a rise in energy consumption. Going forward, the role of coal and gas is expected to increase at a fast rate. Use of alternative energy sources like nuclear and biomass is also expected to increase over time. However, while share of oil consumption in total energy mix is expected to decline, it is still expected to remain a large contributor. The ADB report forecasts oil's share in energy at above 40% by 2020 for the four countries analysed.
Declining oil in ASEAN
The fast paced growth seen by the ASEAN countries in the last decade has led to a huge demand for oil products. According to APERC's Energy Demand and Supply Outlook 2006, rising demand for oil in the region is expected to increase oil imports significantly in the long term future as domestic production becomes stagnant in most economies. From a net exporter of oil in 1990s, ASEAN has now become a net importer of oil and its dependency on these imports is predicted to increase at a fast rate (65% by 2010).
Alternatives to oil and gas are expected to grow
Low prices of coal and its abundance in the region is likely to push ASEAN members towards using the resource increasingly for power generation. According to the ADB report, the share of coal consumption in total primary energy consumption is likely to rise from 16% in 2000 to 27% by 2050 for the four countries analysed by ADB team (Indonesia, Thailand, Philippines, and Vietnam).
Biofuels could play a small but important role in the transportation fuel supply going forward. ASEAN members see biofuels as a way to stimulate domestic agriculture while also improving the fuel security, besides reducing greenhouse gas emissions.

ASEAN countries are expected to grow at a healthy pace over the medium term resulting in an expanding appetite for energy. However, the traditionally resource rich region is now facing a challenge of declining oil reserves. Energy consumption is increasingly shifting towards coal and gas. Member countries are working towards energy security through regional cooperation, increased participation of foreign companies in E&P activity, investing in oil and gas infrastructure, and increased use of coal and renewable energy.

Written by Girish Shirodkar and Kunal Rana, Strategic Decisions Group, India

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