Asia oil demand slows for now, but long view intac
03:05 a.m. Jun 03, 1998 Eastern
By Azlin Ahmad
KUALA LUMPUR, June 3 (Reuters) - The Asian economic crisis has severely
hit the growth of oil demand and is expected to keep refinery margins
under pressure into the next decade, analysts and oil industry officials
said.
But growth will still be higher than in western Europe or North America
and longer term it should rise more strongly again, they said at an oil
conference this week in Kuala Lumpur.
But when the previous strong growth trends would resume remained open to
question.
''We have the perspective to view the current economic crisis as a
difficult, but temporary interruption in a longer term horizon,'' Lance
Johnson, executive vice president of Mobil Oil Corp of the United
States, said.
''Asia is a growing region. Economic slowdown caused by the recent
currency crisis will be short-lived,'' said Masato Hisatake, director
for International Petroleum Affairs, Japan's Ministry of International
Trade and Industry.
Energy demand has been severely hit by the economic crisis that
enveloped Southeast Asia and South Korea.
But it has also been exacerbated by an economic slowdown in India and
China, two major oil importers, and a stagnant economy in big-volume oil
-consumer Japan.
That has resulted in major downgrades of expectations for oil demand
growth in Asia.
Johnson said Mobil lowered its forecast for Asian demand growth over the
next five years to 2.7 percent per year from a previous forecast of four
percent.
He forecast overall Asian oil demand at 22.3 million bpd in 2002, from
19.5 million bpd in 1997.
Dennis Eklof, senior director of Asia Pacific Energy at Cambridge Energy
Research Associates (CERA) of the U.S., said he forecast Asian demand
growth in 1998 at 240,000 bpd, compared to the 1.0 million bpd that had
been predicted in early 1997.
The slowdown has resulted in energy projects being shelved, scrapped or
delayed. Energy requirements have been cut.
Muri Muhamad, vice president of gas business at Petronas, said South
Korea had cancelled 770,000 tonnes of liquefied natural gas (LNG)
shipments for 1998 because reduced demand.
Despite the hit to growth, Asian demand was still growing faster than in
the west.
Tim Faithfull, chairman and chief executive of Shell Singapore forecast
Asian-Pacific oil demand would grow 3.3 percent a year between 1996 and
2000, compared with growth in western Europe and North America of 1.1
percent.
He forecast Asian growth of 3.5 percent for 2000-2005 compared with 0.8
percent for western Europe and North America.
But the sudden slowdown in growth has moved Asia from a net importer to
a net exporter of oil products, which poses the challenge of ''coping
with excess capacity,'' CERA's Eklof said.
''We estimate that the region's oil refining capacity is adequate
through at least early 2000 and with additions already underway, the
period of excess capacity could continue even longer,'' he said.
Refining margins in Asia have been under pressure since late last year
as capacity expansions met with the economic slowdown, leading Asian
refiners to cut output several times.
Shell's Faithfull said he expected incremental annual capacity expansion
in Asia Pacific to be around 600,000 bpd between 1998 to 2001.
''With the economic slowdown, the building momentum is slowing, however
projects already in place, such as in India and Taiwan are expected to
continue to completion,'' Faithfull said.
''The overbuilding in 1996 and the sharp drop in demand after the Asian
crisis in 1997 has put Asia into a surplus situation with Singapore
prices no longer able to attract product from Europe,'' Richard Fernie,
vice president of Caltex Singapore said. ''As a result, refining margins
are very weak.''
Despite the slowdown and implications for trade and investment, all
sources were optimistic the stronger growth trends more associated with
Asia would resume in coming years.
''Eventually, we see strong and sustainable economic growth returning to
the region and with that growth will come a return to high rates of
energy demand growth and a soaring need for energy infrastructure
investment,'' Eklof said.
But the question of timing still lingers.
''Everyone says Asia will bounce back, but no one will say when,'' one
oil trader said. ''You do get the impression that they expect only some
countries to rebound, and others to take a long time.''
-- Kuala Lumpur newsroom (+603-275-6839) fax (+603-232-6752)
Copyright 1998 Reuters Limited. |
