Energy demand in Southeast Asia is expected to skyrocket by more than 80% by 2035, with oil imports surpassing 5 MMb/d, according to a recently released report by the International Energy Agency (IEA).

The region could triple the amount spent on oil imports, reaching US $240 billion, as its natural gas surplus declines along with coal exports to meet domestic demand. Thailand and Indonesia – the world’s top steam coal exporter – are predicted to shell out the most at nearly $70 billion apiece.

Increased reliance on oil imports will leave the region more vulnerable to potential disruptions, the IEA said.

“Decline in mature fields and limited large new prospects lead oil production across the region to fall by almost one-third in the period to 2035,” the report said. “As a result, Southeast Asia becomes the world’s fourth-largest oil importer, behind China, India, and the EU. Its oil import dependency almost doubles to 75%, as net imports rise from 1.9 MMb/d to just over 5 MMb/d.”

Southeast Asia’s ability to reduce its reliance on oil imports will depend on recovery rates from discovered oil fields and tapping frontier and underexplored areas, specifically deepwater East Indonesia, IEA said. Oil production is predicted to fall by one-third to 1.7 MMb/d by 2035.

Indonesia already has taken steps to lure investors to its upstream sector. These have included streamlining regulations and launching a new bid round that offers 18 oil and gas blocks, onshore and offshore, in the country’s eastern region. Indonesia’s Geological Agency, a division of the energy ministry, believes the eastern parts of Indonesia potentially hold 5 Tcm (174 Tcf) of gas and 86 Bbbl of oil.

While the IEA’s forecast for oil in the region is bleak, the story is the opposite for gas.

“The outlook for gas production is brighter than that for oil, owing to a richer resource base and growing demand in the Asia-Pacific market,” the report said. “Gas production in Southeast Asia rises from 203 Bcm [7 Tcf] to 260 Bcm [9 Tcf] over the2011 to 2035 [period], with Indonesia, Malaysia, and Myanmar the main contributors. LNG liquefaction and regasification terminals are set to play an expanded role, enabling the development of stranded resources and the receipt of increasing LNG shipments for domestic use.”

Continued growth is predicted in the region for coal production, which could match the current output of Russia by 2035, the IEA said. Output could grow from 348 million tons of coal equivalent (MMtce) in 2011 to approximately 510 MMtce in 2020, nearing 620 MMtce in 2035.

“At year-end 2011, Southeast Asia had 28 billion tonnes in total coal reserves, or 2.7% of the world total. The vast majority of these are located in Indonesia, which contains significant hard and brown coal, and there are some hard coal reserves in Vietnam,” according to the report. “Existing coal reserves in the region would be sufficient to sustain current rates of production for 80 years, though there is large potential for resources to be converted to reserves as E&P expands, particularly in Indonesia.”

However, despite the abundant supplies of gas and coal, the amount exported is predicted to drop as supplies are redirected to domestic markets. Gas exports, mainly from Indonesia, Malaysia, Myanmar, and Brunei Darussalam, are expected to drop from 62 Bcm (2 Tcf) to 14 Bcm (494 Bcf) by 2035, the report said. The region’s coal exports could decline starting in 2020, although Indonesia’s coal production is expected to rise by nearly 90% by 2035. “Regional demand outpaces indigenous production.”

Total primary energy demand is forecast to increase by 83%, going from 549 million tonnes of oil equivalent (MMtoe) in 2011 to 1,004 MMtoe in 2035, according to the IEA. The greatest need will remain in Indonesia, which could see demand grow from 196 MMtoe in 2011 to 358 MMtoe in 2035; followed by Thailand, 118 MMtoe to 206 MMtoe; Malaysia, 74 MMtoe to 128 MMtoe; and the Phillippines, 40 MMtoe to 92 MMtoe.

A cumulative investment of $705 billion will be required in fossil fuel-supply infrastructure during the next two decades. Of that amount, two-thirds will be needed for E&P, LNG infrastructure, and pipelines, according to the IEA, which said, “Attracting investment to support projected levels of oil, gas, and coal production is a major imperative for Southeast Asia. ... Private and foreign investment and expertise will be important to developing the region’s energy sector as many of its state-owned energy companies are limited by the availability of capital and technical capacity.”

Overall, the IEA said around $1.7 trillion will need to be invested in energy-supply infrastructure by 2035.

However, obstacles exist.

“Mobilizing this will be challenging unless existing barriers are overcome: subsidized energy prices; underdeveloped energy transport networks; and the need for greater stability and consistency in the application of energy-related policies,” the report said. “Implementation of long-standing projects to interconnect markets, namely the ASEAN Power Grid and the Trans-ASEAN Gas Pipeline, can underpin more efficient exploitation of the region’s energy resources, while enhancing its collective energy security.”

The IEA urged countries in the region to “take serious action to improve energy efficiency.”

“Doing so would cut projected energy demand by almost 15% in 2035, an amount that exceeds Thailand’s current energy demand,” IEA said. “Net oil imports would fall by around [700,000] b/d, comparable with Malaysia’s current production. And regional GDP would rise by about 2% in 2035, as reduced spending on energy increases disposable income and stimulates economic activity.”

The Southeast Asian countries covered in the report were Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

Contact the author, Velda Addison, at vaddison@hartenergy.com.