Energy consumption: The Asian Experience

With many countries in Asia witnessing furious economic growth, the demand for energy in the continent is rapidly rising. At present, the continent accounts for about 30% of the global energy demand. No doubt China and India’s economic growth stories had contributed immensely to the rise in energy demand at 5.5% and 6% respectively. While in developed countries, past experience of oil crises had resulted in an ethos of efficiency in energy consumption and cutting down on oil demand. Globally, the demand for oil is expected to increase at an average annual growth rate of 1%, and will in effect, remain the single largest energy source. Compared to world demand, in developing Asian countries, energy demand, particularly oil demand, is expected to grow much faster to cater for growth needs of countries like China, Japan, India, Vietnam, Thailand, Malaysia, Indonesia and other ASEAN countries. By 2017, China is seen to rank the highest in primary energy demand and by 2033 in primary oil demand. The trend is expected only to grow in the coming years, particularly, as both China and India, both countries with vast populations, are seen continuing the growth trajectory. Global oil demand consumed in the transport sector will peak in 2032, while global oil demand will almost peak around 2035 with more than 60% of this expected to come from the transport sector in Asia and the world.


Coal, besides oil, is expected to keep on playing the key role in the Asian energy consumption. The biggest market for coal in the world is Asia, which accounts for more than two-thirds of global coal consumption. China and many other Asian countries only recently industrialised. The advent of international trade gave them opportunities to make and sell goods below the cost of other countries. In order to do this, they needed fuel, the cheapest of which is coal. The Asian demand for more and more coal will come from the usual suspect - the power sector. In 2007, in Asia, coal-fired power accounted for the single-largest share at 60%, followed by natural-gas-fired power, hydropower, and nuclear power. While China is poised to be the biggest coal energy consumer in 2035, followed by USA and India, coal is also seen maintaining its current position as the main energy source although its share may decline gradually and the share of natural gas and oil will replace coal’s share. Coal is popular as a fuel and energy source for the growing economies of Asia because of a number of reasons: there is abundant regional endowment of coal in Asia; it often can be extracted without advanced technology; it is relatively cheap to extract; and a conscious policy encouraging effective coal use so as to conserve domestic oil and gas reserves in the energy producing countries. While the demand for natural gas on a global scale is expected to rise, the biggest among fossil fuels accounting for 34% of the increase in primary energy consumption followed by oil at 23%, and coal at 22%, Asia is seen bucking the trend with coal demand expected to show the largest increase of all fossil fuels and account for 33% of the increase in primary energy demand, followed by oil at 27%, and natural gas at 22%.


Primary energy demand in Asia is projected to grow at 2.5% per annum and reach 7.1 btoe (billion tons of oil equivalent) in 2035, accounting for 42% of the world’s primary energy demand. This rapid rise in demand is reflective of the sharp economic growth in countries like China, India, Vietnam, Thailand, Malaysia, Indonesia and other ASEAN countries. Fossil fuels are expected to contribute to about 80% of the increase in primary energy consumption to 2035 in both Asia and the world, and therefore would continue to play an important role. As fossil fuels would be responsible for about 80% of the incremental increase in the world’s primary energy consumption through 2035, global CO2 emissions are forecast to reach about 41.5 billion tons by 2035. While China and the whole Asian region will be responsible for about 30% and 60% respectively of the world incremental growth of CO2 emissions, it is implicit that Asia will lead the global growth of CO2 emissions, underlining the crucial importance of clean, cheap and sustainable energy sources. Widespread switching to less carbon-intensive fossil fuels from coal to gas in power generation, increased use of nuclear and renewables in power generation and of biofuels in transport will represent a key mitigating measure. That is why the Asian countries are investing in energy-saving and emission-reducing projects. According to the Asian Development Bank, about $944 billion of investment is needed by 2020 for Asian countries to meet their national energy efficiency and greenhouse gas emission reduction goals. Looking ahead to 2030, China by far will be the biggest spender on the energy resources. Investments in clean energy will also increase in India, Japan, Indonesia, South Korea and other countries in the region.


CHINA: China is one of the world’s largest consumers of oil, gas and coal. As shown in the graph, the consumption of different sources of energy is massive. The country is forecast to rank as the third largest consumer of natural gas by 2035, while the coal demand in China will continue to be the single largest consumer in the world through 2035. The key factor behind this development is China's population with a growing appetite for consumer goods that need energy to use and to manufacture. As it relies on imports for 57% of the oil, China has a strong influence on global energy demand, prices, and asset acquisition. By 2020, China’s dependence on imported oil will reach 63%. The chief driver of oil demand growth is China’s expanding vehicle fleet which is seen growing to 296 million in 2035.

INDIA: India’s population will reach 1.5 billion in 2035, larger than China and become the largest populous country in the world. India will become the third largest energy consuming country in the world after China and USA by 2035. The share of India in the world primary energy demand will rise to 7% or about 1,208 Mtoe in 2035. By energy source, coal will keep the current position as the main energy source, but its share will decline gradually and the share of natural gas and oil will replace the coal’s share. Nuclear and other energy sources will increase, but 90% of the incremental energy consumption will be covered by fossil fuel. Oil demand will increase to 7.0 million b/d in 2035.