Growth and opportunities in Southeast Asian LNG and power

The Association of South East Asian Nations (ASEAN) celebrates its 50th anniversary this year. Since its inception in 1967, ASEAN has grown significantly. It started as a 5-country alliance with a GDP of US$23 billion. It consists of 10 countries, with a combined GDP of US$2.8 trillion in 2017, which makes the block the 6th largest economy in the world.

ASEAN has enjoyed economic growth levels of 5% over the past decade, and the outlook for the region is robust. As the region grows richer, energy demand is booming, leading to buoyant gas, LNG and power markets.

Additional 270 GW of new power capacity needed by 2035

ASEAN is underweight when it comes to electricity consumption. To improve access to and reliability of electricity, international investment is needed. Generation capacity will need to more than double by 2035. Indonesia, Vietnam, Philippines, Myanmar, Laos and Cambodia in particular have low power consumption per capita, between 300-1,800 kWh/person, compared to 8000 kWh/person in Singapore, ASEAN's richest member.

The region has installed power capacity of 210 GW in 2017. We estimate that an additional 270 GW of new capacity is needed by 2035. This translates to an estimated investment of US$500 billion in power assets alone. With the region lacking the internal capital, it becomes a strong magnet for foreign direct investments.

Despite the increasing anti-coal rhetoric, coal will continue to dominate the region's power generation sector in the medium term, particularly in high-growth markets like Indonesia, Vietnam, Malaysia and Philippines.

LNG demand to reach 72 mmtpa in 2035

ASEAN's total gas demand will grow from 15 bcfd today to close to 20 bcfd by 2035. At the same time, existing piped gas supply will decline at 1.9% per year, giving rise to LNG demand. We expect the region's LNG demand to triple from 12 mmtpa today to 35 mmtpa in 2025, and further to above 70 mmtpa in 2035. By 2035, we estimate that more than half of the region's gas demand will be met by LNG.

LNG has changed the regional gas landscape, exposing ASEAN to the global LNG dynamics. The arrival of LNG has partly driven countries like Singapore, Malaysia, Thailand and Indonesia, to evaluate its market structure, making the case for market liberalisation.

With imports on the rise, it is in the regions interest to foster cooperation in the LNG front, which has been relatively untouched so far. I will discuss this in the second part of my blog on ASEAN's new ways of cooperation.