ASEAN region's rising energy demand may draw big investment

ASEAN region's rising energy demand may draw big investment

Dow Jones, Bangkok

Increasing demand for energy in Association of Southeast Asian
Nations member countries over the next two decades should create
a number of big investment opportunities in the sector, according
to energy experts.

Investment in ASEAN's energy sector during the 2000-2020
period will amount to US$176.3 billion, with major investments in
power generation, said Hassan Ibrahim, chief executive officer at
Malaysia Energy Center, a state-linked research institute.

Of the total investment, $88 billion will be in the power
generation sector, $77.7 billion for energy efficiency
improvement projects, $7 billion for the Trans ASEAN Gas pipeline
project and $3.6 billion for renewable energy projects, Hassan
said.

Energy demand has been picking up as ASEAN nations are
recovering from the 1997 financial crisis. The gross domestic
product of ASEAN countries during the 1999-2020 period is
projected to average 4.9 percent per annum, with annual energy
demand of 3.6 million tons of oil equivalent during the period,
he added.

"Energy demand is expected to grow dramatically in ASEAN
countries. The ASEAN region will be one of the leading energy-
consuming regions of the world, accounting for 32 percent of
world energy demand by 2020" said Hassan.

An increasing population is also one of the drivers of the
growth in energy demand, he added.

The population in the region is expected to surge to 592
million by the year 2020, from 453 million in 1999.

Given the region's current dependence on oil and coal, the use
of natural gas and renewable energy could be expanded. Natural
gas use in the region is projected to double to 162 trillion
cubic feet in 2020, from the level in 1999, said Hassan.

There has been a turnaround of the investment climate in the
ASEAN region in recent years, as market liberalization and
industry consolidation continue, said William Bradley, an
executive at Norton Rose Ltd., a consultant company.

"There are encouraging signs to invest in the region, but
there are many challenges also," said Rose.

The economic slowdown following the 1997 financial crisis
still clouds the market, causing delays in many projects.
Uncertainties in legal and regulatory frameworks in most ASEAN
countries are also a challenge to investors, he added.

Despite numerous investment opportunities in the ASEAN region,
only a few investors have expressed interest. Following the
economic slowdown resulting from the 1997 Asian financial crisis,
investors from North America and Europe have focused on their own
markets rather than invest in ASEAN counties, said Giuseppe
Jacobelli, head of regional utilities research at SG Securities
Ltd.

Disparity between ASEAN nations is one of the region's
drawbacks. Some investors may turn to China instead, as the
country has numerous investment opportunities under a single
government, he added.

"ASEAN governments should point out lucrative opportunities of
increasing (energy) demand and also provide investment incentives
to attract investors," said Jacobelli.