Cleaner vs cheaper fuels: Asia's policy dilemma is here to stay -- for now

Banner Image

Embracing a new energy order will surely come at a hefty cost for Asia, but will it be higher than the price the region pays for its deep addiction to imported fossil fuels?

For more than 1,000 delegates who attended the Asia Pacific Petroleum Conference by S&P Global Commodity Insights in early September, a key takeaway was that Asia today is relatively better placed to strike a balance between providing affordable and sustainable energy, as well as ensuring energy security, compared to where it was a few years ago.

But the biggest headache for policy makers in the region will be that the pace at which Asia can move away from fossil fuels -- oil, gas and even coal -- won't be anywhere near the speed at which the Americas and Europe are embracing the changing energy landscape.

Click here for our full APPEC 2023 coverage

APPEC delegates were of the view that sustainability no doubt attracted a lot of attention just before the coronavirus pandemic, but the themes of energy security and affordability quickly moved to center stage when energy flows were disrupted and prices skyrocketed following the Russia-Ukraine conflict.

"I wonder what percentage of the population in Asia would be willing to pay huge and increasing prices for the sake of sustainability right now," Prasad K Panicker, chairperson and head of refinery at Nayara Energy, told the conference.

Shifting trends

The conference highlighted some key trends that could reshape the fossil fuels market over the next decade. One of the key themes that emerged was how Asia's long-term oil demand growth center was shifting to India from China.

China has been supporting global crude demand for the past 20 years, but in the coming 3-5 years, its demand is expected to peak and then start to decline. The global market has to look to India or other countries for demand resilience.

"China's demand will taper off a little but countries like India are coming up and the demand is growing. India will continue to require oil and gas maybe for a couple of decades, although it would transition and move over to renewables by that time," said APPEC speaker Vivek Tongaonkar, finance director and CFO at Mangalore Refinery & Petrochemicals.

The view got strong support from analysts at S&P Global who said that China's peak oil demand would come much earlier than India.

APPEC delegates also provided insights on Asian oil demand revival outlook, saying that China would play a key role in aiding that recovery, even though it might fall short of earlier expectations. In addition, tightening oil market fundamentals will also keep prices supported.

S&P Global gave out some projections, saying world oil demand was expected to increase by 2.2 million b/d in 2023, with China contributing about 942,000 b/d. Jet fuel demand, which is estimated to rise 1 million b/d in 2023, will be the main driver of the global oil demand recovery from COVID-19. Asia's total oil demand is forecast to increase 3.8%, or 1.39 million b/d, year on year to 38.1 million b/d in 2023.

Picking up speed

Even though Asia's near-term oil demand is expected to remain intact, APPEC delegates said refiners are rushing to re-draw their long-term strategies.

While renewables, hydrogen and solar have started figuring in their ambitions, a key area of focus for them is to raise their petrochemical intensity to ensure their business models remain profitable in the event electric vehicles and other cleaner forms of energy take a toll on demand for transport fuels.

Therefore, going further downstream may be the only viable option to remain relevant over the longer term.

The conference also threw the spotlight on some key developments in Asia on the new energy space.

For instance, Vitol said its new biofuel bunker barges will be delivered to Singapore in 2024 as it aims to capitalize on the country's growing biofuel demand. These bunker barges will be able to deliver B30 blends to all ships, potentially up to B100 for vessels that can run on them, and even eventually methanol.

In the sustainable aviation fuel space, APPEC speakers said that sourcing feedstock and establishing credibility for its emission offsets claims would be key hurdles before its use in Asia can expand in a big way.

"Neat" sustainable aviation fuel producers like Neste are exploring possibilities of expanding the feedstock pool with prospects like novel vegetable oil and lignocellulosic biofuels. Neat SAF is a jet fuel produced from a blend of biomass materials-based feedstock with a certain percentage of fossil-based jet fuel.

Coming to terms with reality

Highlighting some global trends, speakers from energy majors and S&P Global highlighted that energy supplies are on the way to becoming more secure now that the world is coming to terms with the reality that we have transitioned into a "multiplex global order."

As far as affordability goes, after factoring in global inflation over the past decade, oil markets had rebalanced at around $60/b in 2015 terms, which is quite incredible given the tectonic changes in supply chains. In fact, oil is so affordable that supplies are being held back voluntarily by major producers.

On the energy transition front, a key view that emerged at APPEC is how sustainability has also adjusted to new global economic realities. Dependence on consensus for sustainability is being replaced by a race for technology breakthroughs in a competitive world.

In a nutshell, competition will help to accelerate the speed and scope of energy transition, rather than consensus on its own.

Visit and bookmark APPEC 2024 for updates on next year's event

Conferences LIVE


  • Crude

Related content


Infographic: India Elections - Oil sector to be in spotlight for India's new government

India’s role in global oil markets is set to expand at a fast pace by the end of the decade, making it the biggest hub for demand growth. Battling high prices, oil diplomacy with countries such as the US and Russia, as well as revival of flagging upstream production will be some of the key priorities for the new government. Related feature: INDIA ELECTIONS: Refining capacity, crude output, storage to top new government's oil agenda Click here for full-size infographic


Interactive: Seaborne trade in Russian oil under G7 price cap

(Latest update: May 10, 2024) Related content: Russian crude exports by non-G7 tankers hit new high in April since price cap Russia, one of the world’s largest oil suppliers, has increasingly turned to non-Western firms to transport its crude to overseas buyers during its ongoing war with Ukraine . With a dual goal of undermining Russia’s war chest without creating significant disruptions to global supplies amid inflation pressure, G7 countries and their allies have banned tanker operators, insurers and other services firms from facilitating seaborne Russian crude exports unless the barrels are sold for no more than $60/b. The price cap regime, which came into force Dec. 5, 2022, does not directly cover tankers flagged, owned and operated by companies outside the G7, the EU, Australia, Switzerland and Norway, and not insured by Western protection and indemnity clubs. While such ships tend to be older and less maintained, their share in Russia’s crude exports market has been rising in recent months amid strengthening prices of Urals -- the OPEC+ member’s flagship crude grade -- and tightening sanctions enforcement by the West. Non-price-capped tankers have a larger market share in shipping Russia’s Pacific crude exports, according to analysis of S&P Global Commodities at Sea and Maritime Intelligence Risk Suite data. Crudes such as Sokol, Sakhalin Blend, and Eastern Siberia–Pacific Ocean grades are more often involved in these trades than Russian barrels from Baltic or Black Sea ports like Urals. Tanker operators in Greece, Europe’s top shipowning nation, managed to keep their traditionally strong market position in Russia in the first few months since the price cap took effect before giving ways to their peers in the UAE, Russia, China and Hong Kong. Related content: Interactive: Global oil flow tracker


Interactive: Global oil flow tracker

(Latest update May 3, 2024) Recording changes to Russian oil exports and EU oil imports since the war in Ukraine Russia’s war in Ukraine has triggered a major upheaval in the global oil markets, forcing Moscow to find alternative buyers and Europe to source new supplies as Western sanctions seek to clamp down on Moscow’s vital oil revenues. With an EU embargo and the G7 price cap on Moscow's oil now fully in place, Russian seaborne crude exports have remained largely resilient as displaced volumes of its discounted oil flow East. Russian oil product exports have also mostly held up with new buyers in Africa absorbing Russian diesel and other fuels now banned from Europe. Related stories: Russian oil product exports slump to post-pandemic low as drone hits resume (subscriber content)


Infographic: Chasing the lowest-carbon crudes

Global oil producers are increasingly touting efforts to reduce the carbon intensity of their upstream operations to stand out as investment dollars shrink during the energy transition. Some producers see carbon intensity rankings as a measure of which fields will have staying power, while environmental groups say the efforts ignore the much larger global warming emissions created downstream when the oil is refined for transportation, shipping and petrochemicals. S&P Global Commodity Insights Analytics has expanded its carbon intensity calculations to 162 fields and 41 grades. The greenhouse gas emissions represent current operations from the wellhead to storage/export terminal. The newest expansion of fields and grades covers Central, South, and North America. South and Central American grades are shown in the infographic below.