Asian Countries Accelerate Energy Transition

Recently, Asian countries are accelerating efforts toward energy transition, but the region's deep reliance on fossil fuels and preference for low-cost energy present a series of challenges for policymakers and businesses. At the Asia Energy Conference held in Kuala Lumpur, Malaysia, from June 16 to 18, energy leaders from Asia and the Middle East emphasized that Asia’s energy transition requires both a pragmatic approach and accelerated change—particularly avoiding extremes regarding fossil fuels and achieving balance.

Energy Supply Gains Opportunity for Localization

Regarding energy transition, participants from S&P Global Commodity Insights described it as a strategic window for Asian countries to localize their energy supply chains. Dave Ernsberger, Co-President of S&P Global, stated: "For Asia, shifting to new energy is more an opportunity than a challenge. Governments now have the chance to localize energy supply chains and manage their energy systems more comprehensively within national security frameworks."

S&P Global noted that Asian governments will face increasing demands to intervene in next-generation fuel markets, including clearer policy guidance and support through subsidies or government investment. Despite strong development needs in hydrogen, ammonia, and renewable energy sectors, returns on these investments remain low, making it increasingly difficult for the private sector to address this alone.

Daniel Yergin, Vice Chairman of S&P Global, wrote: "For many developing countries, oil and gas remain key components of their economic strategies. For some nations, abandoning cheap and reliable coal is not easy. Experience shows this transition will take longer, involve greater challenges, higher costs, and require careful trade-offs by governments."

"Three-Speed Asia" Creates Multiple Opportunities

At the conference, S&P Global Commodity Insights participants highlighted that the "three-speed Asia" dynamic—where different economies exhibit varying levels of oil demand—will shape overall oil demand outlooks before 2050. As China's energy transition path becomes clearer, the Asian oil market will experience divergent growth rates: OECD Asian countries face gradual transformation impacts, China's market growth is slowing and may even decline, while non-OECD Asian countries continue to grow.

Driven by electrification, demographic changes, and policy shifts, China has transformed from the global engine of oil demand growth into a mature and gradually declining market. Meanwhile, India is emerging as the core pillar of refined product demand in Asia and a primary driver of global oil consumption growth. The Asian refining industry faces unprecedented challenges and opportunities, with refiners rethinking energy use, waste management, and product supply strategies to become engines of low-carbon energy. Emerging decarbonization pathways are redefining the future role of refineries.

Not only downstream industries but also upstream oil and gas companies face challenges adapting to the rapidly changing energy landscape, needing strategies for new basin development, cost management, emissions reduction, and technological innovation. National oil companies such as Malaysia's Petronas and Saudi Aramco must not only play key roles in reshaping domestic energy landscapes but also help define how hydrocarbons, renewables, and low-carbon technologies can coexist in Asia’s energy future.

Industry Leaders Call for Pragmatic Transition

At the conference, Asian energy leaders stressed that energy transition should follow a pragmatic path, allowing fossil fuels to continue supporting economic growth and rising energy demand in developing countries. Recent geopolitical tensions have heightened global concerns over energy security and potential supply shortages, while recent shifts in U.S. climate policy have stalled previously pledged financial support to developing nations. Given this context, Asian industry leaders emphasized that fossil fuels should not be phased out as radically called for by some developed countries, but rather coexist with renewable energy. However, they also stressed the need to manage carbon emissions from fossil fuels using decarbonization technologies such as carbon capture and storage (CCS).

HE Haitham Al Ghais, Secretary General of OPEC, stated: "The Paris Agreement is not about choosing one energy source over another. With world energy demand still significantly growing, OPEC believes in an 'all-of-the-above' energy strategy." He added that although OPEC supports inclusive transition pathways, oil-producing countries have already begun expanding renewable energy applications domestically and internationally and launching large-scale CCS/CCUS projects.

Malaysian Prime Minister Anwar Ibrahim pointed out that ASEAN urgently needs more international funding to unlock its renewable energy potential. In 2023, Southeast Asia attracted only 2% of global clean energy investment, a stark contrast to its vast potential in areas such as Vietnam's wind power, Laos' hydropower, Malaysia's solar energy, and Indonesia's geothermal resources.

Mahara Shinichi, Director for International Net-Zero Policy at Japan’s Ministry of Economy, Trade and Industry, said Japan is collaborating with Asian partner countries to develop tangible, balanced solutions—expanding clean energy use while decarbonizing high-emission fuel sources. Through the "Asia Zero Emission Community" initiative, Japan has facilitated over 350 joint decarbonization projects across Asia since 2023, covering renewable energy, energy efficiency improvements, grid upgrades, liquefied natural gas decarbonization, hydrogen, ammonia, CCS, and zero-emission industrial parks.