Rising oil import costs is putting Asia difficult position, is creating a growing capital drain for the region and leaving countries vulnerable to global supply disruptions and of course a quick surge in oil prices.
The gap between oil production and demand has jumped over 30 percent since 2010 to an estimated 25.7 million bpd in 2016 and is set to grow by another 1.1 million bpd in 2017. In the end the cost could soar by a third in just one year to $566 billion.
The oil price slump since mid-2014 had offer Asian economies a little break from high import bills.
In 2015 Asia’s net oil imports easily surpassed the total amount of oil used in North America and will continue to increase due to the fact that producers slashed spending on exploration and production on low oil prices, leaving oilfields at risk for the next years or decade.
Activities across Asia-Pacific to search for energy resources have almost stopped in the past year while recent exploration finds have struck more natural gas than oil.
“With demand growth set to continue and outpace declining domestic production, this leaves Asia increasingly vulnerable to rising prices,” said Energy Aspects analyst Virendra Chauhan.
While Asia’s net imports grow and crude prices recover, the region’s oil import bill is set to climb back above $500 billion in 2017 for the first time in three years, calculations based on forecasts by the International Energy Agency and a Reuters crude oil price poll in August.
Therefor oil demand in the Asia-Pacific is expected to grow by 800,000-900,000 barrels per day (bpd) this year and next, while the region’s output could shrink by 240,000-330,000 bpd during the same period
“We have seen two years in a row in 2015 and 2016 oil investments declining,” International Energy Agency (IEA) chief Fatih Birol said. “This would mean oil security and oil markets may face a challenge as a result of a huge drop in the investments in a very few years in the medium term.”
Consultancy Wood Mackenzie expects Asia’s oil production to fall to 5 million barrels per day in 2025 from 7.6 million bpd in 2016.