When we look at balancing energy security, energy transition and sustainability drivers, South-East Asia can teach us a lot about the challenges and opportunities we face. As a region, it is tipped to become the fourth-largest economy by 2030, and the Association of South-East Asian Nations – or Asean – has a manufacturing sector expected to swell to $1.2 trillion by 2030. It’s increasingly expected to shape global energy flows, with 70 per cent of the region’s population expected to reach middle-class income levels in the next five years.
Underpinning this meteoric trajectory is a dynamic story of growing energy demand and an evolving energy mix. Analysts anticipate Asean’s power demand could leap by 30 per cent by the end of the decade, while at the same time shifting away from a reliance on legacy fuels. There are several different scenarios in which oil and coal in South-East Asia could be phased down and, in its place, liquefied natural gas will see demand surge by more than 180 per cent by 2035.
That story is being replicated to varying degrees on the global stage. Worldwide oil demand is predicted to fall from 103 million barrels a day to 83 million barrels a day by 2050, and natural gas demand will rise by more than 20 per cent in the same period. As nations continue to balance transition plans with delivering economic security and prosperity, LNG infrastructure has become a vital pillar of many national policy agendas.
That shift is creating new energy trade corridors, especially between Asia and Gulf Co-operation Council states. It also means LNG has become critical to energy security, with the International Energy Agency expecting next year to see the largest increase in that sector’s market size since 2019. But this growth has also raised the potential for oversupply in the market; some models suggest a global excess of 30 million tonnes by 2029.
How then could the energy sector create the right environment to meet growing demand and keep prices affordable while ensuring investors have the stability to invest into the industry?
In LNG specifically, with nations across the Global South integrating it into the heart of their economies, international energy investors have an important role to play in ensuring consistent supply and stabilised pricing.
Yet that ambition can be hard to realise. Much of the global natural gas ecosystem lives and dies on tight margins. The economics must align to enable investment flows into vital gas and LNG projects that provide reliable, lower-carbon energy to consumers – energy that is important to the energy transition.
Given that analysts predict the bill for building transition-enabling infrastructure – including the LNG facilities that bridge nations away from more carbon-intensive fuel sources – has reached $3.5 trillion a year, new models and faster investment are needed more than ever before. A long-term approach, supported by the technical capabilities that underpin deep partnership, is increasingly filling this gap.
The key ingredients enabling this are supportive policy structures and “patient capital” – investments that are not just chasing short-term gains but looking for long-term, sustainable returns. We have seen this first-hand through our recent investment in the US natural gas company Caturus, which includes one of the world’s top 10 LNG projects. The investment works because the infrastructure is well established, but more importantly, there is clarity and progress around regulatory aspects such as permitting and approvals.
Energy investors are familiar with uncertainty. We’ve seen the ups and the downs. But to direct capital in the right way – towards projects that support the transition and energy security – policymakers and regulators have their role to play in providing predictable stability within which capital can be deployed. This is one of the reasons the US has become a global energy leader – particularly in LNG, for which it’s now one of the world’s most important hubs.
In Indonesia, where we are accelerating development plans for our gas discoveries in the South Andaman Sea, policymakers have also helped fast-track development in an effort to secure supply and deliver for their communities.
We are seeing the greatest traction where patient capital, deep partnership and supportive policy come together. This combination is vital to direct the investment required to support – and grow – critical energy infrastructure.
International energy demand will continue to be reshaped for decades to come, driven by the sustained growth ambitions of global markets such as the Asean region. To meet these needs while supporting the energy transition, global energy players that understand these drivers are more relevant than ever before.
