September 2021
A growing imbalance between rising demand and stagnant or falling production is gradually pushing Southeast Asia towards becoming a net importer of crude oil and natural gas.

Over the past two decades, an overall increase in the production of oil and natural gas in Southeast Asia has kept aggregate volumes ahead of demand growth. However, the gap between demand and regional output has widened for oil, while recent market dynamics suggest that the production surplus for natural gas may slip in the next few years.

Crude oil production in Southeast Asia has gradually edged downwards over recent years, as new investment and field development – especially since the downturn in oil prices in 2014 – have not kept pace with natural production decline from more mature producing areas. Alongside rising demand, this pushed net import needs of the region up to more than 5.7 million barrels per day (Mbpd) in 2020. 

Turning to natural gas, Malaysia (8% of global supply) and Indonesia (4%) were significant exporters of liquefied natural gas (LNG) in 2020. However, despite an overall expansion of gas production by more than 30% since 2000, a correspondingly strong increase in demand has dragged down the regional gas export surplus.

Overall, these trends point to Southeast Asia becoming a net importer of crude oil and natural gas in the next few years, according to the International Energy Association (IEA). 


Crude Oil Supply

Southeast Asia’s oil demand is forecast to surpass 9Mbpd by 2040, up from just above 6.5Mbpd in 2021. Fuel for the transport sector and feedstock for petrochemicals represent 90% of growth. Oil consumption for all types of road transportation will rise from 2.5Mbpd today to 3.3Mbpd in 2040, while rising demand for air travel will more than double jet fuel consumption.

With increased petrochemical activity, demand for naphtha products is forecast to increase by more than 50% to almost 1Mbpd by 2040.

In terms of supply, around 60% of current regional production comes from offshore fields located in shallow waters (less than 450m water depth). There are substantial remaining technical recoverable resources across the region – estimated at close to 80 billion barrels (Bbbl) – as well as nearly 13Bbbl of proven reserves, however there are promising prospects in more challenging deep water plays. Combined with the ongoing maturation of shallow water basins and very limited unconventional resources, oil production is expected to fall from 2.3Mbpd today to 1.5Mbpd in 2040.



The main crude oil producers today, Indonesia and Malaysia, both expect production to tail off by 2040, despite new discoveries in 2019, as new projects (increasingly in deep water) do not offset declines elsewhere; production in both cases is around 500kbpd by 2040.

Thailand will also see a very strong drop in oil output, but Vietnam, which has the region’s largest proven oil reserves, will keep production around today’s levels thanks to projects such as the upcoming Lac Da Vang and Block B. The project is targeted to come on stream in 2022.

As a result of the projected supply-demand dynamics, Southeast Asia will become steadily more reliant on oil imports, which will rise to well over 7Mbpd from about 5.7Mbpd currently. Growing import demand in Southeast Asia is part of a wider shift in global oil trade, away from the Atlantic basin – where the US will become a significant net exporter – and towards Asia.


Natural Gas Supply

The power sector has traditionally been the mainstay of natural gas demand in Southeast Asia. Gas-for-power has accounted for 55% of growth in gas consumption since 2000, but this share is expected to drop to just over 40% over the long term to 2040.  Industrial demand will become the main driver for the rise in overall gas demand to almost 750Mcmpd in 2040, from 440Mcmpd in 2020.

The dilemma for natural gas is that, as domestic production growth slows and in some cases declines, the marginal cubic metre of gas is increasingly imported as liquefied natural gas (LNG). Under these circumstances, the outlook for natural gas depends on country policy priorities.

If the priority for new investment in power generation capacity is to maximise electricity output, then coal comes out on top. If the priority is to reduce emissions relative to today’s average emissions intensity for the region, then wind, solar – or carbon capture, utilisation and storage (CCUS) retrofit of an existing coal plant – all offer larger long-term emissions savings than gas-fired combined-cycle gas turbine (CCGT) plants.

On the supply side, overall gas production is forecast to edge higher and reach 720Mcmpd in 2040, from around 590Mcmpd in 2020. 

Indonesia accounts for most of this growth as new resource developments broadly keep pace with demand. Vietnam and Myanmar also add to the regional balance, but production in Malaysia will flatline while Thailand’s gas output will almost halve by 2040.

Southeast Asia as a whole is projected to become a net gas importer in the late 2020s, a major turnaround for a region that is home to some of the major traditional names in LNG export – Malaysia, Indonesia and Brunei Darussalam.




Indonesia is re-orienting energy production from serving primarily export markets to meeting its growing domestic consumption. Indonesia's energy industry has faced challenges in recent years from regulatory uncertainty and inadequate investment. Its declining crude oil production and rising domestic demand is resulting in higher levels of petroleum imports to meet demand.

Crude oil production in Indonesia continued to decline in 2020 as there were no major new production projects to offset declines at older fields. Aging infrastructure and fields suggest the country will struggle to meet production targets in the short term.



In 2020 Malaysia was the second-largest crude oil and natural gas producer in Southeast Asia (behind Indonesia) and the fifth largest exporter of LNG in the world. It is strategically located on important routes for seaborne energy trade. Malaysia’s government has focused on increasing hydrocarbon production through upstream investment and exploration as a driver of economic growth. However, pursuing this strategy has become increasingly challenging because production has been declining as a result of maturing fields and a lack of developed new fields.

Much of Malaysia’s crude oil product trade occurs within Asia, especially with neighbouring Singapore. Malaysia exported 276kbpd of crude oil in 2020. Almost all was shipped within the Asia Pacific, the bulk to Australia, India, Thailand, and Singapore. Most of Malaysia’s LNG is sold through medium- or long-term supply contracts. In 2020 Malaysia exported about 36.7Bcm of LNG, accounting for 8% of LNG exports worldwide, with the bulk shipped to its three largest importers, Japan, China, and South Korea.



Over the past few decades Vietnam has emerged as an important crude oil and natural gas producer in Southeast Asia. Vietnam has boosted exploration activities and allowed for greater foreign company investment and cooperation in the oil and gas sectors, and has introduced limited market reforms to support the energy industry. Vietnam produced an estimated 262kbpd of crude oil in 2020. Although production has risen some years, overall production has dropped from a peak of 403kbpd in 2004 as output in the country’s large, mature fields declines.

The offshore Cuu Long and Nam Con Son Basins in the south have been the primary areas for crude oil production, but reserves in these basins are depleted and production requires enhanced oil recovery. Vietnam’s production faces decline in the medium term unless it can explore the more challenging deep-water areas. The recent improved outlook on crude oil prices in 2021 may incentivise investment in these more technically challenging fields.




Thailand has limited geological prospects for crude oil and natural gas. The country is a net importer of both oil and gas and its petroleum reserves are declining with increasing demand. Thailand imported a total of 856kbpd of crude oil in 2020, or approximately 87% of consumption.

In 2020, Thailand produced about 400kbpd of petroleum and other liquids. Natural gas plays a large role in satisfying the country’s energy requirements. Based on the Energy Statistics of Thailand, it produced 98Mcmpd, whereas the total importation rate of natural gas was 39Mcmpd or approximately 28% of consumption.  


Boosting Future Production

Southeast Asia faces rising crude oil and natural gas supply concerns – discoveries of replacement reserves are decreasing, production from national oil companies (NOCs) and oil majors is falling, and there have been fewer approvals of new developments. These factors are driving a structural decline of crude oil production despite recent increases in prices, although aggregate natural gas production will rise slightly in the medium term.

A combination of policy improvements, technological developments and business strategies could ease the situation. Improved fiscal terms and capital cost incentives could help to attract investment for more complex developments such as enhanced oil recovery (EOR) and resources found in deep waters, potentially increasing recovery rates and opening up new upstream plays.  While EOR is not new to the region – Indonesia and Malaysia are applying the practice for onshore fields (Duri, Minas, Handil) and offshore fields (Baram Delta, Tapis, Dulang, North Sabah) – its high cost can dissuade activity during periods of lower oil prices.


Decommissioning Impacts on Supply

The decommissioning of offshore platforms is set to play a larger role in shaping the crude oil and natural gas sector in Southeast Asia over the long term. Experience from US offshore waters and the North Sea shows that regulation plays an important role in addressing the financial, operational and environmental risks of offshore platforms. By 2030, more than 200 offshore fields will have ceased production in the Southeast Asia region.  

Almost 40% of all offshore producing fields have been in operation for more than 20 years (in Indonesia, the level is 55%). The overall decommissioning costs for such assets is difficult to state with precision, but could range from US$30bn to US$100bn in Southeast Asia.