Controlling greenhouse gas (GHG) emissions and other environmental impacts while ensuring safe and affordable energy for all are the major challenges faced by Southeast Asia. To respond to these challenges, the Association of Southeast Asian Nations (ASEAN) is increasing the share of renewable energy sources in its energy mix and implements measures to reduce its energy and carbon intensity. Surging energy and electricity needs mean that fossil fuels will continue to dominate the energy and electricity mix by 2040. While natural gas is an ideal fuel to reduce the environmental footprint of power generation, competition with coal, stagnation in gas production, lack of adequate infrastructure, have been major barriers to its increased use so far. Southeast Asia has turned to coal instead, which has been the fuel of choice for power generation in the past ten years due to its low cost and ample availability in the region. But as electricity demand is expected to continue surging, and with a growing concern over air pollution and CO2 emissions, the dominance of coal in the Southeast Asian power sector is increasingly called into question.
The report aims to identify the main drivers and challenges that will influence the expansion of natural gas in the ASEAN power sector, and how the weak outlook for natural gas relative to coal may be reassessed in the future in view of recent initiatives to move to a more sustainable energy mix. The second section, after this introduction, reviews Southeast Asian historical energy supply and demand trends and outlook to 2040 based on the World Energy Outlook 2016 (WEO 2016) of the International Energy Agency (IEA). A special focus is placed on the crucial role of the power sector in meeting surging energy needs of the region. The third section analyses gas-coal competition in the power sector based on relative prices and cost of generation. Other determining factors of the competition between coal and gas, such as environmental and financial issues, are discussed. The region has set an ambitious target for the share of renewable energy in its energy mix. The fourth section looks at the impact of increased renewables on gas power capacity. Section 5 reviews ongoing gas and coal power projects and extends the analysis to recent power development plans (PDPs) adopted by national governments in the region. The next two sections are focused on the main barriers that have hampered the use of gas in the region over the recent years. Section 6 is devoted to upstream investment in gas E&P, while Section 7 looks at the development and integration of the gas infrastructure in the region as well as security of supply issues. The conclusion (Section 8) offers some final thoughts on the future development of gas in Southeast Asia.