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Eastern sunrise: fuelling ASEAN growth

Oilfield Technology,

The full version of this article is available to subscribers in the December 2011 issue of Hydrocarbon Engineering.

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The Association of South East Asian Nations (ASEAN) consists of 10 member countries and is the fourth largest trade entity in the world after the USA, EU and Japan. ASEAN has pursued a unique economic cooperation regional integration agenda that has seen its member countries enjoy an unprecedented era of peace and security.

Economic growth has fuelled a sustained increase in ASEAN’s energy demand even as indigenous oil production wanes. At the same time, downstream demand is forecast to grow strongly, driven by the transport and petrochemical sectors. Therefore, refinery capacity across the region is expected to see considerable investments, in order to scale up capacity and optimise production using heavier crudes. Consequently, ASEAN countries are accelerating domestic oil exploration and production activities, while partnering and encouraging international oil companies to increase development of sources beyond oil, such as LNG and coal.

Rising energy demand

The second ASEAN energy outlook forecasts ASEAN’s primary energy consumption to grow strongly at 4% from 2010 - 2030, as their per capita GDP equalises with their western counterparts. Coal and gas are expected to contribute increasingly to future energy consumption, even as the share of oil remains static at 41.5% of demand in 2030, with increasing dependence on imported oil.

Refined product demand outlook

Refined product demand is expected to grow alongside the increase in primary energy consumption, driven by rising urbanisation and strong transportation/petrochemical demand.

The International Energy Agency (IEA) forecast of the Asian refined product demand until 2015 throws up some interesting insights across ASEAN markets:

Diesel is expected to grow most rapidly, driven by transportation and industrial demand across all countries.

Jet fuel and kerosene demand is expected to grow strongly, with expanding aircraft fleets across Indonesia, Malaysia, Singapore and Thailand, and with Indonesia continuing to subsidise kerosene for the poor.

Petrol demand is expected to continue to grow in line with rising per capita incomes in urban areas, notably in Indonesia and Vietnam.

Fuel oil demand is expected to slow as more power units shift to natural gas, especially in Indonesia, Malaysia and Thailand.

Naphtha consumption is expected to grow significantly in Indonesia, Philippines and Singapore, even as its usage declines in other economies such as India where it is substituted by natural gas as a petrochemical feedstock, especially for fertilisers.

Significant capacity addition

Capacity is expected to grow at a compound annual growth rate (CAGR) of 5.7% in 2010 - 2015. With domestic refining meeting only 70% of demand, Indonesia has been investing in the Banten, Blue Sky Cilacap and East Java refineries to augment capacity. Malaysian refining capacity is set to increase as Petronas invests in an integrated US$ 20 billion refinery and petrochemical complex. Vietnam, which has traditionally exported crude and imported refined products, is looking to expand the Dung Quat facility and commission the Nghi Son refinery. Petron is looking to expand their Phillippines refinery to meet growing demand.

New trends

A key trend is ASEAN countries opening up their oil and gas sectors to international oil companies. In a sector hitherto dominated by national oil companies (in Indonesia, Malaysia, Thailand and Vietnam), international oil companies are playing a greater role in developing hydrocarbon reserves on a participative basis.

However, the exploration of some of the high potential reserves in the region is constrained by territorial disputes, specifically in the South China Sea. This region has witnessed contrasting claims from Brunei, Cambodia, China, Indonesia, Malaysia, the Philippines, Taiwan, Thailand and Vietnam.

Looking beyond oil

With diminishing oil production, ASEAN countries have focused attention on alternatives such as coal, regasified LNG, renewables and nuclear power.

Thailand commissioned its first LNG regasification terminal, with the first cargo arriving from Qatargas in June 2011. Malaysia is expected to follow suit with the Melaka LNG regasification terminal in July 2012, to be supplied by Qatargas (1.5 million tpy) and Gladstone LNG (3.5 million tpy). Petronas estimates that by 2020, as much as 33 million tpy of regasification capacity could come on stream in ASEAN.


ASEAN’s hunger for energy is expected to stay strong in the long term to support its growing prosperity. Yet the decline in domestic production of oil and gas will lead to increased external dependence. This will also lead to a shift towards coal in the primary energy mix. Member countries are reemphasising exploration activities and collaborating with international oil companies, especially with regards to deepwater prospects. The downstream sector will experience significant investments to meet the growing need for refined products.

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The full version of this article is available to subscribers in the December 2011 issue of Hydrocarbon Engineering.

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