Asian oil and power demand 'will rebound'

Asian oil and power demand 'will rebound'

SINGAPORE (Dow Jones): Asian demand for oil and power will return to 1997 levels in two to five years, industry executives and an investment market analyst said Wednesday.

When it does, it will push most Asian countries to become net oil importers in the first decade of the next millennium, said Herb Vogel, an executive with Atlantic Richfield Indonesia Inc., a unit of Atlantic Richfield Co. in the U.S. (ARCO).

The cross-over point will depend on the rate of Asia's recovery and how much more crude reserves are discovered, he said. For example, Indonesia was set to become a net oil importer by 2003, but that has been delayed by decreased demand due to the Asian crisis.

In addition, prospects of huge supplies from new discoveries in Asia aren't good. Asian producers account for only about 10 percent of the world's crude production and hold less than 5 percent of proven oil reserves, Vogel said.

The prospect of becoming net oil importers and the related security issues, plus a search for cleaner energy sources, will push Asian countries to greater reliance on natural gas as a power source, said Vogel.

From a financial investor's point of view, this is a positive development, according to David de Pury, chairman of De Pury Pictet Turrettini. Combi-cycle plants or gas-powered plants have a shorter lead time on investment returns compared to other types of power plants, such as hydropower or nuclear energy plants, de Pury said.

But build-operate-transfer and independent power producer investments have dried out in Asia since the economic crisis began.

"And now, the little money that is coming into the sector is going to go through acquisitions as national power companies" sell off assets or invite investment as they liberalize and privatize, he said.

Eventually, investment in the power sector will more closely resemble the U.S. and Europe where financial investors can put their money in listed companies and private equity companies rather than greenfield developments.

"At the end of the crisis, the BOTs and IPPs will come back because there will be a need for new plants" as Asia's power demand recovers, he said.

The investment alternatives and investors' greater attraction to gas-powered plants as well as Asia's desire to reduce dependence on foreign oil will push the industry toward greater reliance on gas as an energy source, he said.

Arco Indonesia is the largest supplier of natural gas in Indonesia and the largest offshore gas producer in China.