- 38% of respondents see shale gas as having the greatest growth potential over 10 years, made available through advancements in horizontal drilling and hydraulic fracturing technologies coming out of the United States.
- Over 20 years, shale gas will still dominate investment and growth potential, but closing the gap will be solar, wind and nuclear, particularly as technology improves.
- Oil and coal will transition from having among the greatest growth potential over five years (37%) and (14%) respectively, to greatly reduced growth over 20 years (11%) and (4%) respectively.
- A third of respondents believe enhanced oil recovery will see the strongest investment of all technologies in the year ahead. A quarter point to unconventional gas extraction technologies.
- 74% see regulatory issues as a significant impediment to deals and projects in the next year.
The Asia-Pacific region's future energy mix will see a significant shake-up over the next 20 years according to new research released today by global legal practice Norton Rose Fulbright.
Rapid urbanisation and a major shift in socio-economic demographics as a larger percentage of the region's population joins the middle class will drive energy demand in the decades to come. This will require the industry to innovate to meet demand at the lowest cost in a new, carbon constrained environment.
The research "Fuelling the future: Asia-Pacific energy outlook" is based on a survey of 100 key players in the Asia-Pacific energy market, including energy corporations, private equity firms, investment banks, sovereign wealth funds and financial institutions. The research was conducted by Remark, the research and publications division of Mergermarket.
It comes at a time when the world's attention is focussed on the region for the G20 summit in Australia – at which the future of energy will be a focus - and immediately follows new commitments by world powers China and the United States on climate policies and future energy mix.
With technological advances in the US driving down gas prices and allowing easier access to global reserves, and increasing moves in the Asia-Pacific to address environmental and carbon issues, the study identifies shale gas as having the greatest growth potential over the next 10 years to meet regional demand. Investment in energy efficiency technologies and outcomes is also expected to increase dramatically over the period. Solar, nuclear and wind energy, becoming more price competitive as their technologies develop, will also be major recipients of investment.
Vincent Dwyer, Head of Energy – Asia Pacific, Norton Rose
"Technology will play a key, even disruptive, role in the search for affordable energy in a lower carbon and more energy efficient environment. Which technologies will drive that is an open question, but there is no doubt it will be a mix of many. In that context, governments should support technologies' transition to commercialization but not look to pick 'winners'."
Right now, coal-fired plants will continue to dominate the electricity supply in Central and Southeast Asia, Africa, and Australia given the need for immediate energy security and abundant coal reserves. But as environmental and carbon issues increase in importance, a global shale gas revolution supporting Asia-Pacific demand, with India and China likely to play leading roles, holds increasing potential.
Simon Currie, Global Head of Energy, Norton Rose Fulbright
"It's all about resources. Every country wants to maximise use of its own resources such as gas, wind, coal or solar in a sustainable and efficient way. At the same time you must seek to remain competitive. This is one of the reasons why so many Asia-Pacific players have invested in the North American energy value chain."
Respondents suggest that the large funding gap needed to attain greater low-carbon energy use will see investment flows remain focussed on more traditional fuel sources, such as oil and gas, at least in the short term. Preferences for technologies likely to see investment in the year ahead favoured those necessary to tap oil and gas reserves.
As the search for resources pushes up exploration and production costs, a third of respondents say enhanced oil recovery methods would be most likely to see the strongest investment. This was followed by advanced subsea technologies and unconventional extraction methods.
Three in four respondents say regulatory issues would likely be a significant impediment to companies looking to conduct energy deals, either through M&A or project development in the Asia-Pacific. Government scrutiny over these investments is heavily influenced by national security and resource sovereignty concerns. This is particularly true when a foreign investor is involved. Another often-cited reason for regulatory barriers was increased environmental concerns in the region, either through a desire to protect natural landscapes or to curb carbon emissions.
Mr Dwyer continued:
"Governments need to resist the urge to over-regulate the industry in ways that would throw up obstacles to investment. They need to focus on simplification and, if at all possible, the harmonization of regulatory structures. With increased global competition for investment dollars, a failure to do so could deter investment, and therefore impact on the fundamental requirement of energy security."