Crude oil production in the SEA region has been falling since 2016. In 2019, the total crude output of ASEAN nations was 2,266 thousand barrels per day (bpd), the lowest recorded since 2016.  The year-over-year reduction in 2019 was about 4 per cent.

Country-wise, the maximum output has come from Indonesia, followed by Malaysia, Thailand, Vietnam and Brunei. Over the past five years, the shares of these countries in the total oil output have remained almost the same.

On the lines of crude oil production, natural gas production in the region has been falling since 2015. In 2019, the natural gas output of the ASEAN region was 222 billion cubic metres, the lowest recorded since 2015 with a year-over-year reduction of 1 per cent.

Country-wise, the maximum output has come from Malaysia, followed by Indonesia, Myanmar, Thailand, Vietnam and Brunei. Over the past five years, the shares of these countries in the total oil output have remained roughly the same.

The consistent fall in output can be attributed to maturing and ageing fields, clubbed with held back expenditures by E&P players to make new discoveries, a move guided by low crude prices.

Currently, SEA countries are going through an economic slowdown/recession, which has caused a further negative impact on oil prices, pushing Brent to its lowest levels in over 30 years. Low oil prices will result in cuts or delays in investment in the oil and gas sector, especially for new projects, which can reduce the number of potential growth opportunities in the region for some time. Further, several oil and gas companies have reported large net losses due to decline in revenues owing to plunged consumption and supply chain constraints.

Price outlook

  • Recovery in oil prices is expected from early 2021 onwards, with Brent oil prices projected to rise to levels above $50 per barrel by end 2021 and peaking at approximately $70 per barrel in 2022.
  • Recovery scenarios in the oil and gas industry are expected to be sluggish rather than following a quick V-shaped path.
  • The sector is expected to witness weaker oil demand and slower growth in the post-pandemic era.

According to the IEA, petrochemicals is set to become the most important growth driver for the global oil demand attributed to its usage across wide applications. Petrochemicals account for more than a third of the growth in global oil demand to 2030. They are also poised to consume an additional 56 bcm of natural gas by 2030.

The sector is facilitated by investment in advantaged assets, such as integrated refining or petrochemical installations that feature distinctive technologies that can enable value creation for investors. Thus, it is expected that the petrochemical industry will emerge as more resilient, followed by the upstream and other segments, once the Covid-19 impact settles.

The impact of the pandemic has been increasingly pushing companies to restructure their supply and production strategies and diversify their supply chains. Mitigation measures range from cutting capital expenses, offering stimulus packages, subsidising supplies and reducing imports. Energy firms are expected to progressively adapt to the evolving new normal while safeguarding their financial sustainability. These companies are likely to leverage a more digitally connected enterprise, across both their plants and corporate functions.

Between 2017 and 2040, the demand for energy in the SEA region is expected to represent one-tenth of the total rise in global demand, as the region’s economy triples in size and the total population grows by one-fifth, with the urban population alone growing by over 150 million people.

Although the share of coal has grown at a steady pace in the primary energy mix of the region, it would not be able to meet the expected increase in demand for energy. As a result, the demand for oil and gas is expected to increase from 4.7 million barrels per day (mb/d) in 2017, to approximately 6.6 mbpd in 2040.

A robust pipeline of projects is reflective of the future opportunities and planned growth trajectories in the region’s oil and gas segment. A significant thrust is expected on bringing in more gas in the energy basket, owing to major ongoing concerns related to air pollution levels.

In sum, the priority for ASEAN governments shall be to build the required infrastructure to maintain the domestic oil and gas output. Investments, greater incentives for exploration and production, greater political cooperation, ease of doing business, as well as addressing policy and regulatory pain points will significantly aid the region’s oil and gas industry to ensure energy security.