On March 23th, 2021, Aussenwirtschaft Austria in Kuala Lumpur (Austria Advantage) held an online event named “Oil & Gas in Malaysia & ASEAN, Market Potential and Outlook”. ASEAN Centre for Energy (ACE) participated in this event, represented by the ICT & Data Research Officer, Ms. Rika Safrina, who is also the team member of the ASEAN Climate Change and Energy Project (ACCEPT). Other speakers include Mr. James Chan, Vice President of Malaysia Petroleum Resources Corporation; Mr. Hazli Jemaat, Director of Oil & Gas, Maritime & Logistics Services Division of Malaysian Investment Development Authority; and the Hoerbiger representative in Southeast Asia. Mr. Reinhart Zimmermann from Austria Advantage hosted the entire event.

Ms. Safrina presented “The Oil & Gas Sector in Southeast Asia during 2020 and COVID-19”. COVID-19 pandemic began in China at the end of 2019 before started spreading throughout the world and landed in ASEAN during the first quarter of 2020. Suddenly, the status quo of each state was disrupted. Every state must adapt to survive, despite plenty of new limitations and restrictions. Pandemic leads to financial crisis worldwide, economic recession reached an all-time high, unemployment, and negative economic growth among the majority of ASEAN Member States (AMS), where Thailand and Singapore plummeted the most.

Restriction on travel heavily that damaged the travel industries, unfortunately, makes many of it could not survive. ACE conducted a survey and figured out that the oil and gas industry was considered by the public as the most affected sector from the pandemic. This might be caused by restricted mobility that led to less fuel consumption. At one point, oil prices dropped below zero for the first time in history due to oversupply and low demand.

Although market sentiment was gloomy during the first pandemic hit, after a while, positive feedback on the oil and gas industry started to appear in the media. Based on ACE research on ASEAN energy news in 2020, the word “recovery” was mentioned the most in the period of May-June, marking a good beginning of recovery. On a good note, the pandemic pushed the oil and gas sector to invest, research and develop renewable energy which was more stabilised. Several other companies refocused their business on non-oil and gas segments. For example, the Indonesian giant state-owned oil and gas, Pertamina, was interested in the hospital and healthcare business during the pandemic. Business diversification allows companies to become resilient during the crisis.

According to the 6th ASEAN Energy Outlook (AEO6), the oil and gas consumption in the region will keep increasing for the next 20 years, proving that in the long term, the industry will continue to grow despite the struggle during the pandemic. Compared to 2020, in 2030 the oil demand is projected to rise by 52 per cent in the Baseline Scenario from 198 Million tonnes of oil equivalent (Mtoe) or about 1.4 billion barrels, to 301 Mtoe or about 2 billion barrels. Under AMS Target Scenario (ATS) and Sustainable Development Goals (SDG) Scenarios, the projections are 15%, while APAEC Target Scenario (APS) projection is 8%. On the other hand, natural gas consumption possesses a more promising outlook than oil. The demand for this fuel in 2040 is projected to rise by 81 per cent in the Baseline scenario, 48 per cent in ATS, 33 per cent in APS, and 48 per cent in SDG scenario from 2020 levels.

During a question-and-answer session, an audience asked Ms. Safrina about the effect of global pressure of reducing CO2 emissions on oil and gas company. AMS have submitted their commitment to Paris Agreement through their each Nationally Determined Contribution (NDC). ASEAN also enhanced their cooperation through APAEC 2016-2025 Phase II towards energy transition. Currently, fossil fuel is still a majority of the energy mix and this will not be changed in one night, and any changes will cause extra cost. But with these intentions and global commitment, the oil demand will surely drop in the long term. Therefore, the oil industry in ASEAN will be impacted and should be prepared with this pressure.

ACE, through ACCEPT, provides a comprehensive insight into COVID-19 impact on the energy sector. Reports and articles could be accessed from this.