Keisuke Sadamori Director, Energy Markets and Security International Energy Agency Kuala Lumpur, 8 October

Keisuke Sadamori Director, Energy Markets and Security International Energy Agency Kuala Lumpur, 8 October

The context Southeast Asia is a key pillar of Asia s growth A mix of countries with disparate energy and economic backgrounds but sharing a set of common challenges 120 million people lack access to electricity and almost 280 million without clean cooking facilities Energy efficiency remains a large unexploited resource across the region Rising imports sharpen focus on economic & security aspects of energy use Domestic oil, gas & coal production facing a more challenging environment Continued development will hinge on the strategic direction of the region s and individual country s energy policies

Fossil fuels remain dominant in Southeast Asia s energy mix Growth in ASEAN primary energy demand Mtoe 1 200 1 000 800 600 400 200 2000 2013 2020 2025 2030 2035 2040 100% 90% 80% 70% 60% 50% 40% Renewables Nuclear Gas Oil Coal Share from fossil-fuels (right axis) Southeast Asia s energy demand increases by 80% in the period to 2040, with coal becoming the single largest energy source of region s energy mix

Electricity demand triples, with shift towards coal set to continue Electricity generation by fuel Installed coal-fired capacity & efficiency TWh 2 500 2 000 1 500 1 000 500 Geothermal Solar & wind Bioenergy Hydro Nuclear Oil Gas Coal GW 250 200 150 100 50 50% 40% 30% 20% 10% Efficiency 1970 2000 2020 2040 2014 2020 2030 2040 Ultrasupercritical Supercritical Subcritical IGCC Efficiency (right axis) Power capacity expands by 400 GW, equal to current size of Japan and Korea power systems, with increasingly deployment of more efficient coal-fired plants

A more challenging environment for oil, gas & coal production ASEAN fossil fuel production and trade 8 Oil (mb/d) 300 Gas (bcm) 700 Coal (Mtce) 6 4 2 0-2 -4 250 200 150 100 50 600 500 400 300 200-6 0 100-8 2000 2013 2025 2040-50 2000 2013 2025 2040 2000 2013 2025 2040 Production Demand Net trade While oil output continues to decline, rising coal and natural gas production is increasingly earmarked for domestic markets

Growing import needs raise economic and security concerns ASEAN value of fossil-fuels net trade 2000 Oil 2013 2025 Gas Oil and gas import bills 2040-350 -300-250 -200-150 -100-50 0 50 Billion dollars (2014) Southeast Asia oil import dependency reaches almost 80% in 2040 and the region turns into a net gas importer; spending on fossil fuel imports reaches $300 billion

IEA strategy to raise climate ambition GHG emissions savings Change in energy demand Gt CO 2 -eq 2.4 2.2 2.0 1.8 New Policies Scenario Bridge Scenario Upstream methane Reducing inefficient coal Renewables investment Fossil-fuel subsidy reform Energy efficiency Mtoe 40 20 0-20 -40 1.6-60 1.4 2014 2020 2025 2030-80 Coal Oil Gas Low-carbon sources Five measures shaping the Bridge Scenario slow the rise in region s energy demand and emissions, using only proven technologies & without harming economic growth

Greater integration of the power network can deliver strong benefits Potential implications and benefits of enhanced power grid interconnection (Based on ERIA study 2014, Investing in Power Grid Interconnection in East Asia ) Enhanced cross-border integrations can facilitate efficient use of the region s resources and enhance energy security

Attracting sufficient investment is vital for securing regional energy needs Average annual investment in energy supply Billion dollars (2014) 120 100 80 60 40 20 Biofuels Transmission and distribution Power plants Coal Gas Oil 2000 2005 2013 2015-2020 2021-2030 2031-2040 Annual average investment needs to increase steadily to exceed $100 billion, driven by expansion in power sector

Significant progress has been made towards phasing out fossil-fuel subsidies Value of fossil-fuel subsidies in Southeast Asia, 2010-2015 Billion dollars (nominal) 60 50 40 30 20 10 120 Coal 100 80 60 40 20 Dollars per barrel (nominal) Electricity Gas Other oil Diesel Gasoline IEA average crude oil import 2010 2011 2012 2013 2014 2015e After a peak in 2012, fossil-fuel subsidies are following a decreasing trend a result of notable reforms efforts and lower oil prices

Looking forward Southeast Asia consolidates its status as an emerging giant in global energy markets The energy landscape in Southeast Asia continues to shift but dominance of fossil fuels remains unquestioned Increasing reliance on oil & gas imports will come at a large cost and will push energy security higher on the region s energy agenda Progress in energy access, fossil-fuel subsidies and energy efficiency is unfinished business in Southeast Asia A stable policy landscape and greater regional co-operation is critical for balancing energy, economic and environmental policy objectives