Asia’s crude oil imports have recently rebounded, with news outlets noting a surge to over 27 million barrels per day in August from the 24.91 million in July. Such an increase was believed to have come from heavyweight importers like China and India, who bought more crude from top exporters in the Middle East following low oil prices in May and June.
The increase further marked a significant shift in import, showcasing how unstable prices and changes in energy demand have swiftly reshaped energy flows across Asia, including Southeast Asia nations, some of which are also major crude as well as refined oil importers.
From East Asia, for example, reports have surfaced that China is tying new long-term LNG deals across Southeast Asia, which has intensified the fight over gas as the region gets ready for another wave of seasonal demand pressure.
In Malaysia, the new trading environment has forced its state-owned oil giant Petronas to prepare for a future in which the country may become an LNG importer. The company has reportedly begun preliminary preparations for a third regasification terminal, indicating Kuala Lumpur is starting to question its status as one of Asia’s leading exporters in the face of increasing domestic demand and tighter regional markets.
Petronas has also anticipated that Malaysia is set to rely more on imported LNG over “the next four to five years”, according to its group CEO and president Tengku Muhammad Taufik Tengku Aziz.
“We are already actually preparing for this scenario,” he said in reference to the S&P Global statement, adding that soaring domestic energy demand is rewiring the way the company is planning for its future supply strategy.
The move shows the wider trends in the region. Japan’s delayed nuclear restarts and record-breaking heatwaves, which have affected East Asia, have also boosted demand for power generation fuels, driving LNG prices higher. In the wake of this, major buyers like China have accelerated contracting activity to secure supply and squeeze its availability for Southeast Asian importers.
But countries like Vietnam, Thailand, the Philippines, Malaysia and Indonesia have more “optionality” with regard to LNG sourcing these days, according to data analytics firm Enverus, which noted lesser constraints they would face compared to nations like Qatar and Russia, who faced hindrances in the Suez Canal and tense developments in the Middle East.
However, this adaptability in Southeast Asia has also increased competition among exporters, with established gas suppliers like Malaysia having to rethink how they market their gas.
Domestic oil companies focus on stability, whereas independent traders have moved faster than ever to predict and take advantage of market swings. One example is BGN International, which has pre-positioned LNG, LPG and crude cargoes for East Asia ahead of expected demand surges. East Asia, including Japan, South Korea and China, is seeing a multifactor demand crunch, as reluctance to restart nuclear facilities in the wake of Fukushima compound with renewables not providing enough reliable baseload power. This deficit is worrisome especially in light of meeting the demands of a population that is getting wealthier thanks to artificial intelligence technology boom. Without adequate energy, the region will struggle to integrate into the global technology race and its ageing population will not have the support it needs.
The growing energy shortage is demanding players like BGN International step up to source transition fuels for the region and strengthen the supply gap. These new contracts with the region highlight the firm’s market position as a reliable supplier of much needed fuels like LPG and LNG — widely understood as clean options to fill the region’s energy needs.
“Asia now has to live with the risk of LNG price volatility and sudden surges in demand from Europe. Traders have diverted LNG cargoes from Asia towards Europe because they can obtain higher profits,” said Dario Kenner of Zero Carbon Analytics.
Related to BGN International’s nimbleness, Ryan Lance, CEO of American hydrocarbon company ConocoPhillips also noted that customers would “want some flexibility” and “shorter terms” regarding their LNG contracts, as the Association of Southeast Asian Nations is set to become a net LNG importer by the early-2030s. “Some (LNG) contracts are multi- decade, but there is demand for more agility,” Ryan said at an event back in June.
In the larger ASEAN region, this move to flexibility has implications for prices, hedging and delivery terms for suppliers and traders. For Malaysia, the competition is two-fold. On the one hand, it has to maintain its status as a dependable LNG supplier in regional markets. On the other, it must also meet domestic needs that will only increase with consumption and industrial demand.
Finding a balance between these priorities will assess both policy pathways and investment capacity. Upstream exploration, for one, is a bright spot. Stefano Raciti, the chief operating officer of Abu Dhabi-based energy company Mubadala Energy, said in Kuala Lumpur that the company would accelerate upstream investment in Malaysia and the region.
“In Southeast Asia, we believe this means continuing investing in exploration and expanding in gas production,” Stefano said.
All these signs from energy giants suggest their belief in Malaysia to pull through amid these shifting tides. It also shows that the extent to which Malaysia can adapt will dictate whether it can remain competitive in Asia’s changing energy landscape, where traders like BGN International are more swift and agile in their ability to adapt to the market’s demands.
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