Last week Oil prices hit a record low, lowest since late 2015. With a continuing downward trend over the past two years it is unlikely that it will cross the $60 mark in 2017.
Low oil price is mostly good news for APAC countries as they are heavy net importers. Some of them, like Indonesia and India, provide expensive fuel subsidies. This trend will benefit India, a growing economy, which is expected to increase their oil consumption by 0.20 million barrels per day (MMBD). Meanwhile, Japan expended 4 MMBD, showcasing its heavy dependency in oil imports, which is unlikely to decrease anytime soon. Instead, reports suggest this trend will be on the rise.
LNG in Doldrums
APAC has the largest consumer numbers and the demand for LNG in 2016 was close to 240 bcm.
Japan and Korea are the largest importers in APAC for LNG. Infact these two countries together account for almost 50 percent of global LNG imports.
Japan, however, is starting to commission their nuclear reactors. This means that the market for liquefied natural gas (LNG) that it imports will be swayed heavily and Japan’s focus on nuclear reactors will likely stagnate the LNG market.
LNG are believed to be a cleaner and cheaper energy sources and have been consumer favorite in countries like China and India along with South Korea and Japan. Japan’s likely disassociation with LNG may hit the market, but it is estimated that China and India’s development scope will probably balance the demand at the end of this decade. So LNG demand will likely pick up its pace by 2020.
Own Production to Reduce Import Reliance
Few countries in APAC are trying to curb the import by investing and developing their own production units.
Malaysia is a very good example as it is on its way to grow the oil production. It has already started new oil production projects like Gumusut-Kakap oil field and Kebabangan condensate field from 2014.
Australia, too, has invested largely in building LNG projects. It commissioned three facilities – AP LNG, Gorgon, and Gladstone LNG. It added 45 billion cubic meters (bcm) of liquefaction capacity. This year, Australia will start two more projects, including Wheatstone LNG project, for LNG supply.
India and Indonesia, on the other hand, will struggle at home production. India doesn’t have adequate infrastructure to promote gas development in power generation, which will set it back by a few years. But it will give special attention to the refinery construction activity, thanks to the growing domestic fuel demands.
Indonesia’s Banyu Urip field in East Java started in 2015. It reached its peak capacity of 165,000 bbl/d in 2016. It makes a total of 20 percent of the country’s production. However, the overall production is estimated to fall from an average of 0.83 MMBD in 2014 to about 0.72 MMBD by 2020.
Though APAC is gearing up for an activity-fuelled period for oil consumption and production, there will be marginal decrease in global oil production. But this region will mostly stay busy in its own production and consumption game.
Ravi Krishnaswamy is an expert on energy and environment with Frost & Sullivan. Ravi is based out of Singapore and can be reached at firstname.lastname@example.org