Asia’s Gas Production May Rise Amid Energy Security Focus

Asia's focus on energy security may lead to new investments in gas production, according to a report by consulting firm McKinsey released on Thursday, October 22. The report estimates that these investments could add 10 billion to 15 billion cubic feet of gas production per day across Southeast Asia, China, and Central Asia.

Key Details

Governments might encourage domestic exploration, even if it costs more than importing gas, which is usually cheaper. McKinsey noted that fossil fuel production in the region has peaked. Output is expected to drop sharply without significant reinvestment. To keep current production levels, over $60 billion in annual investment may be needed as existing fields age.

McKinsey emphasized that ongoing investment is crucial for Asia's mature basins to avoid production declines. Some projects in China, Indonesia, and Thailand, which have had low returns in the past, may now be reconsidered for investment. The report also mentioned that national oil companies are boosting exploration efforts in Asia. This is especially true due to tensions affecting traffic through the Strait of Hormuz, which could disrupt global supply chains.

Background

For example, Malaysia's Petroleum Sarawak is committed to developing several projects in East Malaysia. However, costs remain a major challenge, as many projects have break-even points just above the expected long-run oil price of $70 to $80 per barrel. McKinsey believes these projects could become viable with government support through incentives or subsidies. Additionally, biofuels and coal are expected to play a larger role in Asia's energy mix.

Related coverage: ASEAN+3 Faces Energy Price Surge Amid Middle East Conflict, Europe Faces Rising Energy Costs Amid Low Gas Reserves.

Based on reporting by: businesstimes.com.sg