At a high level, the Association of Southeast Asian Nations (ASEAN) region is a market that is hard to describe in one stroke because there is limited economic commonality between the various countries that are contained within the region. On one hand there’s Singapore with a per capita GDP of $43,000, which is comparable to any other developed country. On the other hand there’s Vietnam with a per capita GDP of $1,000. The former is forecasted to grow at 3-4% over the next 10 years whereas the later is forecasted at 6-7%. Singapore has little known reserves of oil or gas whereas Vietnam’s has significant oil and gas reserves. For this first overview of opportunities, we will focus on Indonesia. Indonesia’s booming economy accounts for over 50% of the population in the ASEAN region.

Indonesia

With a population of 235 million, Indonesia is the largest country in ASEAN and has one of its fastest growing economies. The primary energy sources for Indonesia are oil, natural gas and coal. Due to the booming economy, the Indonesian automotive market is growing at a healthy pace – passenger vehicles at 8%, commercial vehicles at 6% and two-wheelers at 8%. Transportation fuels are subsidized – current subsidized prices at the pump are IDR 4500/liter ($0.53) for both RON 88 gasoline and diesel. The government plans are to phase-out fuel subsidies by 2014.

Currently Indonesia is following Euro II specifications (Gasoline sulfur: 500 ppm and Diesel: 3,500 – 5,000 ppm) but is expected by 2015 to adopt Euro IV equivalent standards. Refined product demand is ~ 1.200 million BPD – 0.4 million BPD gasoline and 0.5 million BPD diesel, with gasoline growing faster at 15% and diesel growing at 2%. Indonesia’s diesel consumption has been relatively flat because of the penetration of coal and biodiesel. Domestic capacity in Indonesia is insufficient to meet the growing demand. Indonesia imports about 250,000 BPD of gasoline and 100,000 BPD of diesel.

Petrochemicals

The Indonesian petrochemical industry is still developing. Current per capita consumption is low compared to its ASEAN peers: polyolefin consumption rate at 7 Kg/capita vs. Thailand/Singapore at 30Kg/capita or global average of 16 Kg/capita are low. Though the demand is low, healthy growth rates at 5 – 8% per year are forecasted going forward. Indonesian olefin production capacity is limited at 600 million metric tons annum (MTA) of ethylene forecasted to grow 3 – 5% annually and 835,000 MTA of propylene forecasted to grow 8+%. Domestic capacity of ethylene is currently short and the shortage is expected to grow. A similar story is emerging in propylene too. LPG is emerging as a favorable feedstock for propylene producers as naphtha prices rise.

Natural Gas

Indonesia produces about 3 trillion cubic feet of natural gas annually growing at 2.5 – 3.0%. Domestic consumption is about 1.4 TCF or about 25% of domestic energy supply, growing at 2 – 2.5%, leaving over 50% (1.4+ TCF) of production for exports growing at 4+%. Natural gas accounts for 25% of domestic energy supply. Indonesia has over 150 TCF of conventional natural gas reserves, 70% of which are located offshore. Currently, of the 3 TCF produced, only 0.75 TCF is produced offshore.

Indonesia is one of the largest exporters of liquid natural gas (LNG) in the world. Current LNG capacity is about 36 million tons per annum (TPA) of LNG capacity. Domestic demand for natural gas is estimated to overtake domestic supply in the coming years since gas producers can demand higher prices in international market compared to the low, government regulated gas prices in Indonesia. As a result, natural gas supply to electricity companies and industries is unreliable; thus, Indonesia is looking to explore other sources of gas such as coal gasification. Indonesia is also estimated to have 450+ TCF of CBM reserves. Commercial production is expected to commence in 2013.