Southeast Asian food for thought

Fatih Birol, chief economist of the International Energy Agency speaks at a lunch session on the World Energy Outlook 2013 Special Report on "Southeast Asia Energy Outlook”

Twenty years from now Southeast Asia’s total oil consumption will have grown to the same level as today’s China. Meanwhile, overall energy demand in the SEA region will have increased by the equivalent of today’s total Japanese energy demand.

These were just two of the statistics put forward by Dr. Fatih Birol, Chief Economist at the International Energy Agency (IEA), as he painted a broad and vivid picture of the opportunities and challenges highlighted in the IEA’s special “Southeast Asia Energy Outlook”.

"Speaking to a luncheon audience on the second day of Singapore International Energy Week, that was co-hosted by EMA and IEA in partnership with KPMG, Dr. Birol said that the energy sector in Southeast Asia required $100bn in investment each year with $60bn of that needed to fund the development of the electricity-generation sector."

Dr. Birol said that based on the current calculations of future energy demand in Southeast Asia, 20 years from now per capita demand would still only be one-third of OECD levels – meaning there is huge room for even higher energy demand than currently estimated.

But he called it a “shame” that in the 21st century, 140 million people among Southeast Asia’s 600 million population still did not have direct access to electricity.

Dr. Birol said that the level of financing required for the future of Southeast Asia’s energy sector’s demanded that governments create policies and a transparent environment that would make the private sector comfortable with investing in the region

In other policy-related commentary Dr. Birol said: “It is becoming more and more difficult for policymakers to find the balance between energy objectives and climate objectives and therefore the policies must be chose very carefully.”

He also made it clear that improved energy efficiency did not always require new technology and that, again, policies were crucial to achieving such efficiencies.

“We need all the different energy sectors of the countries – covering households, buildings, plants, transportation -- to improve efficiency not through new technologies but by putting the right policies in place; this can be building codes, minimum efficiency standards, fuel efficiencies for cars and trucks,” Dr. Birol said.

Indeed, the IEA’s lead economist revealed that while Asia is the key driver of the global oil market, about one-third of that demand was created by the region’s trucks. Though he added that in terms of oil consumption “we automatically think of the transportation sector but another sector becoming slowly, surely a major consumer of oil is the petrochemicals sector.”

Dr. Birol warned that he did not see any prospect of gas prices in Asia returning to pre-2009 levels and that they would continue to be much higher than in Europe or the United States, commenting: “I do not know of any other commodity where you see such a major disparity.”

This would have implications for electricity prices and he pointed to the divergence of electricity prices around the world and “the major implications for competitiveness,” especially for heavy industry,

On a region-wide basis, the IEA outlook does not expect to see future development of new oil power plants but potential for nuclear plants as well as significant growth in gas and renewables; the latter mainly hydropower in markets such as Vietnam, Cambodia and Laos

But he said that “coal is the winner” mainly because of economic considerations: “Coal is going very strong and the reason is mainly because of the economies; gas is two times cleaner than coal but coal is two times cheaper.”

Dr. Birol said that the changes in Southeast Asia’s energy sector will have implications far beyond the region as many companies from other parts of the world will see the potential for growth. “In many European markets and US markets growth is negligible but here there is $100billion in investment opportunities annually.”

BY : EMA staff