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.