ASEAN energy sector stays resilient amid global headwinds
IN ASEAN, upstream remain resilient, buoyed by regional collaboration and co-investment in local and international assets.
Towards the local front, the initiatives on carbon capture and joint development areas continue to grow.
To reiterate from Petronas Activity Outlook 2025-2027, 73 development wells are expected to be drilled in 2025 with an estimated RM50 mil capital expenditure (capex) allocated for brownfield and greenfield developments.
For the sake of energy security, Petronas also expanded its footprint in Suriname, Angola, Brazil, UAE and Oman, while holding 15% stake in Indonesia's Masela LNG project.
This signals that upstream would remain a long-term powerhouse, despite the convoluted environment in the oil market.
Likewise, LNG saw temporary interferences from maintenance works on LNG terminals, as well as certain LNGCs being adrift due to saturated LNGCs at sea.
'However, in our local front, investments in gas pipelines and LNG regasification terminals continue to support the division,' said MIDF Research (MIDF).
Additionally, MIDF noted that carbon transportation had seen a slight uptake in May 2025, with growing investments in CO2 pipeline networks and capture hubs in Canada and Europe.
In ASEAN, transboundary carbon transport and storage had also seen a higher prioritisation post-ASEAN summit, which includes the development of a regional carbon market and blending of infrastructure for renewable gas and hydrogen.
During this summit, Petronas, ADNOC and Storegga had signed a joint agreement to develop a CCS site in the Penyu Basin, targeting 5mT of CO2 per year by CY30.
In May 2025, the tanker market saw volatility due to the weakening oil demand and shifting trade flows, prompting lesser utilisation for tankers.
However, long term charters saw a stable rate, supported by:
(i) regional demand for refined petroleum products.
(ii) ongoing intra-ASEAN trades and trades with China and India.
(iii) sustainable shipping solutions such as dual-fuel tankers and green corridors.
Additionally, as of May 2025, the Mediterranean Sea was designated as an emission control area (ECA) which will require tankers to use low-sulphur fuel (0.1%).
While this may lead to increasing bunker cost for traders in the long run, marine companies could leverage on the ECAs from retrofits and EPCC contracts.
Malaysia had also shown interest in expanding ECA-compliant fuel availability, as part of its green shipping and sustainable fuel efforts.
Global refining margins had reached a 12-month high in late Apr 2025, and had remain strong in May, driven by:
(i) lower crude prices.
(ii) strong demand for refined products in non-OECD countries.
(iii) inventory build rising (>60mbl) in crude stocks.
(iv) minimal disruptions in refineries.
(v) energy efficiency and cost optimisation initiatives in refineries.
Refineries in Europe and North America had accelerated fuel-switching and hydrogen integration and increased investments in biofuels to meet tightening emissions regulations.
Likewise, ASEAN countries continue to modernise refining assets to meet clean fuel standards and carbon intensity targets, with emphasis on energy efficiency, carbon credit mechanism and renewables integration.
'In our local front, the downstream sector remained stable on retail fuels but was downcast by the bearish petrochemical subsector,' said MIDF.
While downstream would benefit on the cheaper import of crude oil for refineries, the downside risks remain on a broader picture, including weaker MYR against USD impacting feedstocks and crude purchasing, and higher competition with China and other ASEAN countries for petrochemicals.
While Petronas continue its aggressive E&P activities in the upstream despite the lower crude oil prices, midstream and downstream divisions are expected to turn towards sustainability and green energy solutions and integrating them into its operations.
In the ASEAN summit concluded in the end of May 2025, LNG and CCS transportation and logistics were put forth as strategic priorities within the region.
More focus was set on renewable energy and hydrogen projects to be integrated with the conventional oil and gas developments, providing a balanced and sound energy transition as highlighted in Malaysia's National Energy Transition Roadmap (NETR).
Regional cooperation is likely to expand through energy security, carbon credit management, ECA compliance and CCS solutions.
'In addition, we opine that domestic demand and robust LNG exports will continue to locally support the sector,' said MIDF.
Overall, MIDF retains their neutral view on the oil and gas sector. The sector continues to face challenges, primarily from oil price volatility, driven by output hikes from OPEC+ and non-OPEC producers, and sluggish global demand due to tariff-related uncertainties.
The possibility of the lifting of sanctions from Iran also added into the unfavourable outlook on the oil price movement.
The mixed results in quarter one 2025 alongside more cautious capital spending, have further clouded the short-term global outlook.
'However, in our regional and local front, decarbonization and green energy projects are expected to put a floor on the downtrends in the sector, as the US trade tariffs are anticipated to encourage more intra-ASEAN and ASEAN-China collaborations in the sector,' said MIDF.
Nevertheless, downside risks remain on upcoming scheduled maintenance activities, lower production output, regulatory changes, and escalating cost pressures from increased feedstock and raw materials costs. —June 6, 2025
Main image: Vidya
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Borneo Post
an hour ago
- Borneo Post
Power-sharing of a different kind
For Malaysia, the cross-border power-sharing is a meaningful contribution to the APG scheme itself, which aims to build an electricity grid link with almost all the member countries of Asean. — Bernama photo SHOULD the Republic of the Philippines need extra electricity for its industries and private homes and cannot get it elsewhere, it can turn to Sarawak. Within minutes, through the renewable energy grid, the Asean Power Grid (APG), electricity could be transmitted to the Southern Philippines through Sabah. I take it that Sarawak has no problem with the federal government in this cross-border transaction. After all, we are selling power to the Indonesians too in a similar fashion. In December of last year, the Tenaga Nasional Berhad (TNB) began selling green energy to Singapore. So you say that Malaysia, both the West and the East, is a good source of electricity for the neighbours. Here is a good chance for Malaysia as the Asean Chair to play the role of a good promoter of product as well as act as salesman. Should there be any problem with any member of Asean with regard to the project, the Chair would be able to display tact and ingenuity to ensure that this, being an Asean project, has to proceed. Once the vendor and the buyer agree upon the terms of purchase that it is a deal, no second, third or fourth opinion needed. For Malaysia, this a meaningful contribution to the APG scheme itself, which aims to build an electricity grid link with almost all the member countries of Asean. Let's start with Malaysia. The electricity is actually from Sarawak, but never mind the saying 'lembu punya susu, sapi punya nama' (the milk is from the cow, but the buffalo gets the name). Somehow my gut feeling is that this energy grid, going through the territory of Sabah, may meet with some political problems. I'm thinking about the Philippines' claim to Sabah. I am confident that this was on the mind of the Prime Minister before he popped the suggestion, and he was confident that it would not stand in the way because this would be an Asean project. It is crucial that the Chair of Asean will be supported by the other member countries. Malaysia must make a mark during its term of office. 'Good personal relationship matters' I am told that our Prime Minister Datuk Seri Anwar Ibrahim has a good personal relationship with the President of the Republic of the Philippines. That relationship is crucial when it comes to tackling a problem relating to an economic scheme that benefits both parties. This electricity grid is one such scheme. This is a sensible suggestion from our Prime Minister. It is a practicable move that deserves full support by anyone thinking about what to do with excess electricity in Sarawak. At this stage, there appears to be clear evidence of the existence of political will on the part of Malaysian leaders in terms of state-federal relations. However, at this stage, we do not really know what the Philippines government thinks of the proposal. The potential buyer of our electricity has not made known publicly its response or even interest in purchasing power from us. I am sure there will be some response from President Ferdinand R Marcos Jr after he has received the report from his representative. Give him and his colleagues time to think about the proposal by our PM in terms of the economic viability of the purchase of power, and to make decisions at their own speed. Politics may have a role in this deal. My surmise. I hope this would not derail the initial talks on the sale and purchase. Treat the dealing like a normal sale and purchase of a product that the buyer needs and the vendor has the stock for disposal anytime – a business-like transaction. Meanwhile, we should support PM Anwar's proposal if we have enough electricity supply for our own use and enough to sell overseas. We are selling electricity to Indonesia anyway. Is there enough of the product for another buyer? As regards the sale of power to Kalimantan, my sources say that the time may come when the demand will be reduced or even stopped altogether once the Indonesians have built a hydro-power dam across the upper reaches of the River Mahakam. The power generation from that dam will serve the needs of the new capital Nusantara, and the districts along the coast including the city of Samarinda itself. There are several rivers in that part of Borneo that may be dammed for hydropower generation. In 1989, I was in the Sarawak team as a delegate attending the post-Asean Conference on Land Settlement Conference held in Samarinda. I joined a team who rode a Russian double-decker helicopter flying over the great Mahakam; we were being flown to a settlement of Kenyah and Kayan at Datah Bilang. It was an eye-opener. The river, if dammed, would generate an enormous amount of electricity for the entire region. The electricity supply from Sarawak could be affected if the Indonesians could produce enough electricity from their own dams, unless the APG steps in to enable the grid to provide the link to continue. An economic question. Between good neighbours, sharing of electrical power would be mutually beneficial on a commercial basis. It makes good economic sense. The other power (political) is not for sale, though! * The opinions expressed in this article are the columnist's own and do not reflect the view of the newspaper. Asean power grid malaysia Philippines
The Star
3 hours ago
- The Star
Duisburg launches return leg of ASEAN Express to boost Europe-Asia trade
DUISBURG, Germany, June 21 (Xinhua) -- A freight train loaded with maternal and infant products, cosmetics, and medical supplies departed Duisburg, Germany on Saturday, marking the launch of the return leg of the ASEAN (Association of Southeast Asian Nations) Express service. The departure marks the start of bidirectional operations for a new trade corridor linking Europe and Asia. The train is expected to arrive in ASEAN countries in 19 days, traveling via Chongqing, an inland municipality in southwest China. The ASEAN Express has achieved "seamless connection" between two vital international trade routes of the New International Land-Sea Trade Corridor and the China-Europe freight train service. Its transportation efficiency has significantly improved compared with traditional sea routes. "As the service continues to be optimized and expanded, more enterprises are expected to benefit from this efficient and reliable logistics solution, ushering in a new era of trade," said Liu Taiping, chairman of New Land-Sea Corridor Operation Co., Ltd. Li Yan, deputy director of Chongqing port and logistics office, said the ASEAN Express, as an extension of the China-Europe freight train service, is poised to become an efficient, green, and stable economic and trade corridor connecting the two continents. Following the departure ceremony, a promotional event for the ASEAN Express was held, during which representatives from Chinese and German enterprises exchanged views on corridor cooperation and supporting services. Several cooperation agreements were signed.
The Star
9 hours ago
- The Star
South-East Asia's budget airlines bet on travel demand, despite competition woes: Analysis
SEOUL: South-East Asia's biggest budget airlines are pursuing a bruising capacity expansion race despite rising cost pressures that are squeezing profitability and led Qantas Airways to shut down Singapore-based offshoot Jetstar Asia. Low-cost carriers have proliferated in Asia in the past two decades as disposable incomes rise, supported by robust travel demand from Chinese tourists. Demand for air travel in Asia is expected to grow faster than other regions in the next few decades and carriers like Vietnam's VietJet Aviation and Malaysia-headquartered AirAsia are to buy more planes to add to their already large orderbooks as they seek to gain market share. But margins are thinner than in other regions. The International Air Transport Association (IATA), an airline industry body, this year expects Asia-Pacific airlines to make a net profit margin of 1.9%, compared with a global average of 3.7%. Airlines across Asia have largely restored capacity since the pandemic, which has intensified competition, especially for price-sensitive budget travellers, and pulled airfares down from recent high levels. International airfares in Asia dropped 12% in 2024 from 2023, ForwardKeys data shows. AirAsia, the region's largest budget carrier, reported a 9% decline in average airfares in the first quarter as it added capacity and passed savings from lower fuel prices onto its customers. Adding to challenges for airlines, costs such as labour and airport charges are also rising, while a shortage of new planes is driving up leasing and maintenance fees. This shifting landscape prompted Australia's Qantas to announce last week that its loss-making low-cost intra-Asia subsidiary Jetstar Asia would shut down by the end of July after two decades of operations. Jetstar Asia said it had seen "really high cost increases" at its Singapore base, including double-digit rises in fuel, airport fees, ground handling and security charges. "It is a very thin buffer, and with margins this low, any cost increase can impact an airline's viability," said IATA Asia-Pacific Vice President Sheldon Hee, adding that operating costs were escalating in the region. Aviation data firm OAG in a February white paper said Asia-Pacific was the world's most competitive aviation market, with airfares driven down by rapid capacity expansion "perhaps to a point where profits are compromised". "Balancing supply to demand and costs to revenue have never been more critical," the report said of the region's airlines. South-East Asia has an unusually high concentration of international budget flights. Around two-thirds of international seats within South-East Asia so far this year were on budget carriers, compared to about one-third of international seats globally, CAPA Centre for Aviation data shows. Qantas took the option to move Jetstar Asia's aircraft to more cost-efficient operations in Australia and New Zealand rather than continue to lose money, analysts say. Budget operators in South-East Asia were struggling for profits amid fierce competition even before the pandemic and now there is the added factor of higher costs, said Asia-based independent aviation analyst Brendan Sobie. Low-cost carriers offer bargain fares by driving operating costs as low as possible. Large fleets of one aircraft type drive efficiencies of scale. Jetstar Asia was much smaller than local rivals, with only 13 aircraft. As of March 31, Singapore Airlines' budget offshoot Scoot had 53 planes, AirAsia had 225 and VietJet had 117, including its Thai arm. Low-cost Philippine carrier Cebu Pacific had 99. All four are adding more planes to their fleets this year and further into the future. VietJet on Tuesday signed a provisional deal to buy up to another 150 single-aisle Airbus planes at the Paris Airshow, in a move it said was just the beginning as the airline pursues ambitious growth. The deal comes weeks after it ordered 20 A330neo wide-body planes, alongside an outstanding order for 200 Boeing 737 MAX jets. AirAsia, which has an existing orderbook of at least 350 planes, is also in talks to buy 50 to 70 long-range single-aisle jetliners, and 100 regional jets that could allow it to expand to more destinations, its CEO Tony Fernandes said on Wednesday. "At the end of the day, it is go big or go home," said Subhas Menon, director general of the Association of Asia Pacific Airlines. - Reuters
