Energy demand is exploding in Southeast Asia. The region’s electricity demand is the fastest growing in the world, and the Association of Southeast Asian Nations (ASEAN) is struggling to keep up. Total demand in these rapidly developing countries has skyrocketed by a whopping 80 percent since 2000, with millions of consumers increasingly securing access to electricity. Energy demand has also been pushed higher by rising temperatures in the region, meaning that the demand is only going to keep growing as the world grows warmer. Growing energy demand has put a lot of stress on the ASEAN countries’ ability to make good on their own climate change promises, as the region is largely powered by emissions-heavy fossil fuels. As of last year, according to the World Economic Forum, renewable energy was only meeting about 15% of Southeast Asian energy demand. Rising carbon dioxide emissions are a huge problem in the region, where air pollution is a deadly issue. According to projections by the International Energy Association (IEA), 450,000 people died from causes linked to outdoor and household air pollution in Southeast Asia in 2018, and that number is on track to skyrocket to 650,000 deaths a year by 2040.
ASEAN, like so many other countries and consortiums around the world, has seen the COVID-19 pandemic as a crossroads and a unique opportunity to clean up its act when it comes to energy. “With current indigenous fossil fuel resources incompatible with climate and sustainable development goals, and the COVID-19 pandemic causing fuel price volatility and economic uncertainty, the region can now seize the moment to put renewable energy sources at the forefront of its energy planning and growth agenda,” the International Renewable Energy Agency (IRENA) reported in August.
While ASEAN and IRENA are strategizing to increase Southeast Asia’s energy security and environmental responsibility, energy exporters around the world are eyeing the energy-hungry region as a lucrative new and growing market. The United States has been strategizing a strong entrance into Southeast Asian energy markets for a while now “as part of Washington's strategy to bolster regional ties and pave the way for more US LNG exports, US equipment supply, and financial backing for energy infrastructure” according to reporting by S&P Global Platts on Thursday.
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Washington made major headway on this initiative this week as U.S. companies secured freshly inked contracts for liquefied natural gas (LNG)-to-power development deals in Vietnam. Most of these deals have been a long time in the making, but according to S&P “they signaled varying levels of progress in project milestones at a time when Vietnam is struggling with declining domestic gas production and limits on exploration due to territorial disputes with China.”
These deals also come at a fortuitous time for the United States, which desperately needs more buyers for its natural gas. The U.S. shale sector is struggling with low demand in the wake of the economic chaos wrought by the novel coronavirus pandemic, and the once-mighty Permian Basin is currently more associated with shut-in wells and bankruptcies than the shale revolution.
Natural gas, which is considered to be greener than coal and oil, could figure into Southeast Asia’s plans to curb its carbon emissions. The United States has also shown strong backing for energy transition initiatives, with pilot programs like the U.S. Agency for International Development’s $36 million Vietnam Low Emission Energy Program II, which aims to catalyze Vietnam's clean energy transition over the next five years.
Natural gas is not as climate-friendly as renewable resources like wind and solar, and programs advocating for LNG as a clean energy alternative can easily be criticized for greenwashing. As a stepping stone toward decarbonization, however, natural gas can be a helpful, plentiful, and cheap tool--and it just so happens to be extremely convenient for both the U.S. and Vietnam.
By Haley Zaremba for Oilprice.com
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