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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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Oil Majors Are Missing The Renewable Boom In Asia

India solar

Renewables energy investment in Asia, excluding China, will bypass spending on upstream oil and gas projects in the region as soon as next year, research consultancy Rystad Energy said on Sunday. In 2020, total capex in renewables will overtake oil and gas exploration and production (E&P) spending, with contributions from Australia and other Asian countries, including Vietnam, Taiwan and South Korea.

Gero Farruggio, Head of Renewables at Rystad Energy, said that “these countries each have strong pipelines for renewable energy developments of all types, including offshore wind, and importantly, most have large targets outlining the inclusion of renewable power sources within their respective energy mixes, with corresponding support policies.”

Australia and India going forward

In Australia, the renewable energy project pipeline is now over double the national electricity market, according to the report. Only 1 percent of the country’s solar, wind and utility storage projects is currently owned by oil majors. “By 2020 it is feasible that the majors will be the dominant renewable developers in Australia as they pursue ‘oil and gas’ scale opportunities. Commercial drivers are increasing the desire to ride the ‘solar-coaster,’” Farruggio said.

“Upstream companies will lead the charge, building sizeable utility storage, solar and – ultimately – offshore wind portfolios. Solar panels, lithium-ion batteries, and turbines will soon be conventional segments of Australia’s oil?eld services,” he added.

Rystad also forecasts that renewables in Australia will continue strong growth seen in 2018 through 2020, although the country still faces local challenge of transmission losses, which impacts revenues and creates policy uncertainty. It added that investor confidence is high in Australia, while the country currently has a development pipeline of over 105 GW of solar, wind and storage projects, as well as a fleet of aging coal-fired power stations which will require replacement. Related: The U.S. Is Losing The Nuclear Race To Russia And China

India’s renewables present significant scale and are also worth watching, Farruggio said. “It is no surprise that Petronas and Shell have recently made moves in the Indian commercial and industrial (C&I) renewables space.” According to the World Economic Forum (WEC), India is investing more money in solar power than coal for the first time ever. Total renewable power investments topped those in fossil fuel-based power for the third year in a row. And spending on solar photovoltaics (PV), supported by government auctions, exceeded coal for the first time last year. The falling costs of bringing solar power online as well as favorable government policies have seen solar’s star rise in recent years.

Countries in Asia have historically relied on coal for a significant amount of their electrical power production, especially since coal has proven to be a cheaper, albeit dirtier burning fuel than natural gas - the cleanest burning hydrocarbon. The problem of trying to wean utilities away from coal to gas is particularly acute in both the Philippines and Vietnam. In the Philippines, the government has pushed its cleaner fuel agenda only to have its wishes side-stepped as plants continue to burn coal with more coal power plant proposals going forward. Efforts for the Philippines to have its first operational liquefied natural gas (LNG) receiving terminal have fallen through for nearly a decade due to governmental red tape, inefficiencies and the inability of LNG project proposals to find credit worthy off-takers. Yet, it’s likely that the Philippine could see is first operational LNG receiving terminal within the next five years, but the country will continue to rely heavily on coal. Related: Canada’s Oil Hotspot Considers Going Nuclear

Vietnam has an even bigger quandary facing its energy sector. With natural gas reserves being depleted and with the country’s inability to tap its own offshore natural gs due to geopolitical tensions in the South China Sea and intervention from Beijing, the country is also trying to get its first LNG receiving terminal online, but it won’t be enough. The country is indeed pushing for more renewables, particularly solar, yet it will still rely on coal for around 75 percent of its fuel mix needed for power generation. A Reuters report said last week that “Vietnam is a big growth story for the coal industry,” while coal demand in the country of nearly 100 million people will remain extremely strong.

China's insatiable hydrocarbon demand

The Rystad report excluded China from its forecast. While China does indeed have a growing renewables sector, its hydrocarbon demand is insatiable. China, the world’s largest oil exporter, will continue to see that reliance on imported oil increase, even as its economic growth will lose steam in the short term due to trade tensions between Washington and Beijing. Its gas demand is also transforming global gas markets, especially LNG markets. China bypassed South Korea late last year to become the second largest importer of the super-cooled fuel, while it will likely bypass Japan before the mid part of the next decade to become the world’s top LNG importer. Last year, China’s gas consumption grew by a substantial  16.6 percent year-on-year, to 276.6 billion cubic meters (9.77 trillion cubic feet), with imported gas making up the lion’s share of growth as demand races ahead of domestic production.


By Tim Daiss for Oilprice.com

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