Although Asia is rich in crude oil and natural gas in general, many Asian countries are net energy importers as the continent is home to some of the world’s fastest-growing oil and gas demand centres.
Asia’s emerging markets import growing volumes of oil and liquefied natural gas (LNG) as their own resources are unable to meet soaring demand.
As a result, countries like China and India and their respective oil and gas needs have become one of the most important factors for analysts to estimate global demand growth for crude and natural gas.
At the same time, the upstream industry in Asia has emerged from the downturn and confidence is returning to the sector.
Yet, some major international oil companies are starting to see their operations in Asia and South East Asia as non-core areas and have begun to offload stakes in oil and gas fields in the region. The buyers have mostly been companies based in Asian countries, who look to strengthen their domestic operations.
State-held oil and gas giants in China, the world’s top oil and natural gas importer, have started to increase their production, as per government orders, and have managed in recent months to stop the decline in Chinese oil production over the past three years.
In March 2019, China’s crude oil production increased by 2.1 percent on the year, while output between January and March inched up by 0.6 percent, the latest available data from the National Bureau of Statistics of China showed. Natural gas production jumped by 9.8 percent annually in March and rose by 9.4 percent yearly in Q1 2019.
But even with increased efforts to boost oil and gas production, China will continue to need large import volumes of oil and natural gas to meet its demand going forward.
Despite an expected 146-percent surge in Chinese gas production between 2017 and 2040, gas import dependence will rise from 38 percent to 43 percent in 2040. Oil import dependence, on the other hand, is expected to grow to 76 percent in 2040 from 67 percent in 2017, according to BP’s closely watched annual outlook.
In the near term, China and other countries in Asia will drive the rise in global LNG demand.
Asia’s total natural gas demand is expected to rise to 884 Bcm by 2019 from 862 Bcm in 2018, driven by higher consumption in China and selected other countries, Rystad Energy said in a report earlier this year.
“China, already the world’s largest gas importer, is expected to import around 87 Bcm of LNG this year, an increase of 21% from last year,” according to the energy research firm.
“South East Asian demand tends to be more sensitive to prices, but could be supported by a low-price environment helping absorb some of the new supply. As for Japan and South Korea, declining demand due to some nuclear restarts and milder weather may lead to lower LNG imports this year, which would compensate for the overall Asian increase,” Rystad Energy’s head of gas market research Carlos Torres Diaz said.
Rystad Energy also estimates that China’s efforts to boost gas production will hold back the decline in Asia’s total oil and gas production. New projects will not be enough to offset declining production from mature fields, so oil and gas output from Southeast and East Asia is forecast to fall by 17 percent between 2018 and 2025. However, China is expected to grow its gas production to around 2.6 million boe/d by the early 2020s and keep it at that level until 2025. “China’s gas projects will be especially key for the region’s supply going forward,” Rystad Energy reckons.
In terms of investments, capital expenditure in the region has been growing since 2017 and reached almost US$48 billion in 2018. Capex is expected to stay on a positive track and exceed US$50 billion by 2025, thanks to projects under development and discoveries yet to be sanctioned, Rystad says.
According to the BP Energy Outlook 2019, China’s demand for oil will grow by 19 percent by 2040, while demand for gas will surge by 166 percent as the share of natural gas in the Chinese energy mix is set to double to 14 percent.
Confidence is returning to the Asia Pacific oil and gas industry, and spending is set to increase in 2019, according to research by DNV GL, a technical advisor to the oil and gas industry, published in January.
Three quarters, or 76 percent, of senior oil and gas professionals in Asia Pacific are optimistic about the industry’s growth in 2019, compared with 58 percent in 2018, while a third—34 percent—expect higher capex this year, DNV GL’s research showed.
“Increasing expectations for capital spending and recruitment in Asia Pacific are welcome news for the oil and gas supply chain. It has had to adapt after new developments were put on ice within the region and across the world during the market downturn, reducing demand for services, assets and equipment from Asia Pacific’s manufacturers and service providers. Despite fluctuations in the oil price at the end of 2018, the industry is entering 2019 with a greater sense of resilience to volatile market conditions,” said Brice Le Gallo, Regional Manager, South East Asia & Australia, DNV GL - Oil & Gas.
This year, Asia Pacific’s upstream mergers and acquisitions (M&A) were off to a strong start with a total of US$2.8 billion worth of deals announced in Q1 2019, according to Wood Mackenzie. The deal value includes Murphy Oil’s US$2.1 billion sale of its Malaysia business to Thailand’s national oil company PTTEP.
While last year’s upstream M&A deal making in Asia Pacific hit US$8.7 billion led by Australia and New Zealand, this year Southeast Asia is expected to take centre stage, with more than 5.4 billion barrels of oil equivalent (boe) of predominantly gas assets potentially coming to market, WoodMac reckons. Up to US$14 billion worth of assets in Southeast Asia could switch hands this year, according to the consultancy.
Shell Workers Could Have Lost Pay For Missing Trump Speech
Shrieve appoints new general manager
Petrofac and SOCAR JV secures engineering and technical services contract in Azerbaijan
Selected high-end diesel car model sales down 95% in Norway as EVs gain momentum