Southeast Asia needs $1.7T to boost energy security through 2035

EA predicts coal will be crucial for power generation replacing natural gas as the dominant fuel.

KUALA LUMPUR, Malaysia — Southeast Asia will require $1.7 trillion of investment in energy infrastructure over the next two decades to cope with a sharp surge in demand and counter growing reliance on oil imports, the International Energy Agency said. It predicted coal will become increasingly crucial for power generation in the region.

The region’s current energy use per person is still low at just half of the global average but demand is likely to increase by more than 80% through to 2035, the agency said in an outlook report on Southeast Asia. The 10 countries that make up Southeast Asia are home to about 600 million people and a combined annual GDP of $2.1 trillion.

By 2035, the agency projected Southeast Asia’s oil imports to rise to just over 5 million barrels a day, double its current consumption and making it the world’s fourth-largest importer after China, India and the EU. Over the same period, oil production in the region will fall by almost a third due to a decline in mature fields and limited new prospects.

It said spending on oil imports is expected to surge to $240 billion in 2035, equivalent to almost 4 per cent of the region’s gross domestic product. Oil import bills in Thailand and Indonesia are projected to be the highest in the region, tripling to nearly $70 billion each in 2035, it said.

“Increasing reliance on oil imports will impose high costs on Southeast Asian economies and leave them more vulnerable to potential disruptions,” the agency said. As such, it said massive investment will be needed to boost energy security, affordability and sustainability.

“Around $1.7 trillion of cumulative investment in energy supply infrastructure to 2035 is required in Southeast Asia, with almost 60% of the total in the power sector,” it said.

Securing the investment however, could be tough.

Underdeveloped energy distribution systems, inconsistency in government policies and sky-high fossil fuel subsidies – which totalled $51 billion in the region last year – deter investment in infrastructure and efficient technologies, it said.

The report said Southeast Asia’s 10 countries are also expected to reduce natural gas and coal exports as production is diverted to meet domestic demand in a region where some 134 million people, or over a fifth of its population, still lack access to electricity.

Despite coal’s reputation as a dirty polluting fuel, the IEA said it will become increasingly important, accounting for half of fuel use in power generation by 2035 from about a third now and replacing natural gas as the dominant fuel.

IEA urged the region to adopt more energy efficiency measures, saying this could help cut energy demand in the region by almost 15% by 2035. At the same time, reduced spending on energy increases disposable income and stimulates economic activity, it said.