Business

Monday November 16, 2009

Asean needs to invest US$1.1tril to meet energy demands

By IZWAN IDRIS


PETALING JAYA: The Asean region needs to invest an estimated US$1.1 trillion between 2008 and 2030, half of this in the power sector, to meet rising energy demand, according to the International Energy Agency (IEA).

“The 10 countries in Asean are set to play an increasingly important role in global energy markets in decades ahead,’’ the agency said in its executive summary.

The agency released its World Energy Outlook 2009 report last week.

“In the Reference Scenario, Asean primary energy demand expands by 76% between 2007 and 2030, an average annual growth rate of 2.5%. This is much faster than the average rate in the rest of the world,’’ it said.

The Reference Scenario provides a baseline picture of how global energy markets would evolve if governments make no changes to their existing policies and measures.

The IEA also came up with a another situation, called 450 Scenario, which depicts a world in which collective policy action is taken to limit the long-term concentration of greenhouse gases in the atmosphere to 450 parts per million carbon dioxide equivalent.

“In the 450 Scenario, total investment needs will be US$390mil higher’’ for Asean, the IEA said.

With only about 1% of the world proven reserves of oil, the region is heavily dependent on imports and is set to become even more so in the future.

As a country, Malaysia is a net exporter of oil and natural gas.

The IEA estimated that proven gas reserved worldwide at the end of 2008 will last 60 years at current production rate.

“A glut of gas is looming,’’ the IEA warned, but the oversupply situation would be reduced by 2015 driven by Asian demand.

Nuclear option

Last week, the Malaysian Nuclear Agency and the International Atomic Energy Agency organised a seminar on the prospect of nuclear as a new energy source for the country.

In building the case for nuclear power, the country’s limited future power supply option was again highlighted.

Supply of local gas is said to be uncertain post-2019, while coal-fired power plants are associated with supply risk, pricing and enviromental concerns.

Undersea cable is the only electricity transmission option to get power to the peninsula from hydroelectric dams in Sarawak.

“The nuclear option will support the country’s fuel diversification objective, possibility as the sixth source after gas, coal, oil, hydropower and renewable energy,’’ CIMB Research said.

As it is, the nuclear power option is currently in the preliminary stage at the pre-project feasibility study level.

CMB noted that should Malaysia decide to go ahead, the first nuclear power plant would come onstream by 2015 at the earliest.

Energy investment

Over the past one year, energy companies drilled fewer oil and gas wells and cut spending on refineries, pipelines and power stations worldwide.

This was due to tougher financing environment, weak demand and lower cash flow, the EIA said.

In the oil and gas sector, worldwide capital expenditure fell 19% this year compared with 2008 which translates to a drop of over US$90bil.

“Power sector investment is also being severely affected,’’ the IEA said.

The EIA projected global electricity consumption will drop 1.6% in 2009, the first annual contraction since the end of World War II.

And with little prospect of a quick return to the days of cheap and easy credit, financing energy investment will, in most cases, be more difficult and costly than it was before the crisis.

“The financial crisis has made it all the more uncertain whether the full energy investment needed in the longer term to meet growing energy needs can be mobilised,’’ the independent body said.

IEA projected capital investment totalling US$26 trillion (in 2008 US dollar terms), which equals to US$1.1 trillion a year is needed to meet energy demand through to 2030.

“Any prolonged downturn in investment threatens to constrain capacity growth in the medium term, particularly for long lead-time projects, eventually risking a shortfall in supply,’’ it said.

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