HomeWorld RegionsAsiaAsia demand outpacing supply, imports increasing

Asia demand outpacing supply, imports increasing

Asia demand outpacing supply, imports increasing

Regional resources will not be large enough to meet expanding energy requirements in developing Asia, according to the Asia/Pacific Outlook, recently released by DRI. As a result, the fastest growing energy market in the world is working to slow energy demand growth and striving to secure new sources of funding to expand capacity.

“With strong economic and population growth forecast for the region, energy shortages could be a major bottleneck to growth,” said Silvia Pariente-David, DRI Energy Group director.

With electricity demand projected to increase by 6 percent annually through the end of the decade, 5 percent between 2000 and 2010 and 4 percent through 2020, Asia will need to install 1,380 GW of new capacity to meet projected demand (Table 1).

Total installed capacity is forecast to rise from 740 GW to 2,300 GW by 2020 with most of the capacity needed in non-Organization of Economic Cooperation and Development (OECD) Asia. The addition of 141 GW of new capacity under construction and another 144 GW of nuclear and hydroelectric capacity will more than offset the retirement of 138 GW of existing capacity. The report predicts that 120 GW of new capacity will be oil-fired, 450 GW gas-fired and 810 GW coal-fired capacity (Table 2).

Through 2020, the report projects large improvements in energy efficiency in non-OECD Asia as well as changes in economic structures that will lead to strong reduction of energy intensities. Improvements in energy efficiency are expected to be particularly strong for those countries that are currently energy intensive, such as South Korea and China.

Despite these improvements, energy demand is expected to more than double by 2020, making Asia the largest energy market in the world. China will increasingly dominate the picture accounting for 42 percent of Asia`s total energy demand in 2020. India and Japan will rank second and third respectively.

In line with the liberalization of energy markets, price subsidies are progressively being removed in Asia. Oil product prices have significantly increased in China, India and Pakistan. Malaysia and Indonesia have already implemented price increases to reduce growth in oil product use, and the report anticipates that prices are likely to increase faster in the future.

Natural gas price differences between countries will also be significantly reduced over the next 25 years as subsidies are progressively removed. In addition, natural gas prices are projected to increasingly reflect competing oil product prices. In countries where gas and coal compete in the power generating sector, indexing to coal prices could become more important over the long term.

Coal prices are expected to track the movements of international prices in most Asian countries. In addition to the need to contain growth in coal demand which will encourage governments to remove coal subsidies, there are three other factors that will impact price. Rising oil import requirements will accelerate the shift from heavy fuel oil to coal. Second, the increase in coal consumption linked to power generating will drive up delivery costs as the bulk carrier market tightens.

Click here to enlarge image

Previous articlePEI Volume 5 Issue 5
Next articlePEI Volume 5 Issue 6