Energy security concerns rising for South-east Asia: IEA
Singapore
ENERGY security will become more of a concern for South-east Asia in the coming decades as the region's oil production falls and its energy imports increase.
The International Energy Agency (IEA) flagged this on Tuesday as it also urged South-east Asian countries to reform electricity subsidies in order to prevent wasteful consumption, incentivise investments in efficiency and avoid a drain on fiscal resources.
The agency, an energy watchdog for OECD nations, released the third edition of its Southeast Asia Energy Outlook at the inaugural Singapore-IEA Forum, part of the Singapore International Energy Week (SIEW).
It is expecting oil demand in the region to expand from 4.7 million barrels per day (mbd) currently to about 6.6 mbd in 2040. This projection for 2040 is lower compared to the 6.8 mbd figure it cited in its last Southeast Asia outlook two years ago.
Oil demand is expected to come from rising demand for mobility, which will result in the number of vehicles on the road rising by two-thirds to around 62 million.
"In the absence, for the moment, of supportive policies, electric mobility does not gain much of a foothold in our projections," it said in the report. Energy use in the transport sector remains dominated by oil products, with policy efforts to diversify the mix focusing on biofuels from palm oil, it added.
Overall, energy demand in the region will grow by almost two thirds in the period to 2040, according to IEA's estimates.
Coal alone will account for almost 40 per cent of the growth, while demand for natural gas will also grow by about 60 per cent to 2040 due to rising consumption in power generation and industrial production.
65 million in region without electricity
Though countries in the region have made significant progress in boosting access to electricity by 28 percentage points since 2000 to 90 per cent now, there are still 65 million people living without electricity, said the IEA. Some 95 per cent of these live in four countries: Indonesia, Philippines, Myanmar and Cambodia.
Still, all countries in South-east Asia will achieve universal access to electricity by the early 2030s, it added.
While Cambodia and the Philippines will do so mainly through new grid connections, Myanmar will rely significantly on renewables, and Indonesia on micro-grid and off-grid energy systems.
Meanwhile, South-east Asia's oil production, which has been on the decline in recent years, will continue to fall from 2.5 mbd today to 1.7 mbd in 2040.
The region, however, will maintain natural gas production around the same level as today. The lower oil production, coupled with increasing demand, will push the region's annual net import bill to over US$300 billion in 2040 - about 4 per cent of the region's gross domestic product.
"Apart from the mounting import bill, the region's increasing dependence on imported energy raises significant energy security concerns," said IEA. It added that rising electricity demand makes the reform of electricity subsidies imperative.
If countries fail to achieve the subsidy reforms anticipated in its main scenario, they would face a cumulative electricity subsidy bill of more than US$350 billion through to 2040, said IEA.
In all, South-east Asia will need cumulative energy investment of US$2.7 trillion up till 2040 - an amount so large that the participation of private sector and international financial institutions will be crucial, it added.
"Attracting investment will be contingent on the incentives available to investors, which may be dampened by the presence of electricity price controls or fossil-fuel consumption subsidies, or terms that are unfavourable compared with other investment opportunities worldwide."
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