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SE Asia needs policy rethink for energy security: IEA

SE Asia needs policy rethink for energy security: IEA

Singapore, 16 June (Argus) — Energy shipment disruptions arising from the US-Iran war have exposed southeast Asia's structural vulnerabilities and prompted the need for a reassessment of policy strategy, Paris-based energy watchdog the International Energy Agency (IEA) said in its latest report. The Middle East accounts for 60pc of southeast Asia's crude oil imports, and 45pc of the oil products refined or consumed in the region come from Middle East crude oil, the IEA said in its Southeast Asia Energy Outlook 2026 , released today. The effective halt of energy shipments through the strait of Hormuz has therefore greatly impacted the region, leading to shortages of petrochemical feedstocks — particularly naphtha — chemical products, and LPG, a key cooking fuel in the region. Surging fuel prices have also led to higher energy bills and inflation. Southeast Asia accounts for nearly 20pc of global demand growth to 2035 under current policy settings. The region's energy import bill is projected to reach a record high $185bn this year, and is set to increase further in the decades ahead, potentially rising to $400bn, or 5pc of its economy, by 2050 based on current policy settings. The Middle East conflict has been a stress test of southeast Asia's existing energy system and a catalyst to accelerate structural change, the report said. "Diversification of energy sources and supply routes is now a central priority, with deployment of different fuels and technologies, electrification and efficiency serving as important levers to reduce import exposure and strengthen resilience," said the IEA's executive director Faith Birol. Short- and long-term responses Governments have so far mainly focused on managing short-term impacts by adopting measures to curb demand, such as promoting the use of public transport and remote working. Almost all of the region's governments have also reduced taxes on energy products or deployed price controls and subsidies. Countries have also looked to diversify fuel supply sources. A preference for domestically available energy resources is emerging, the report said, although strategic options differ across countries. Some countries can develop untapped domestic oil and gas options, although the report notes that more investment is set to flow towards other options, such as renewables. Coal accounts for about half of electricity generation in southeast Asia, and could see further upside from the renewed focus on energy security. Coal- and gas-fired power plants are likely to continue playing a role in all possible policy scenarios. More southeast Asian countries are also considering nuclear power as a diversification option, but its role will depend on how fast deployment can take place and how countries deal with long construction lead times. In the longer term, countries could strengthen collective security through co-ordinated fuel stockholding and emergency response arrangements. The region could also expand cross-border connections through the Asean Power Grid to balance supply and demand, integrate renewable power and improve system flexibility. Renewable capacity stood at 120GW in 2024 and is projected to nearly triple by 2035 under current policy settings, or grow by up to fivefold if announced targets are reached. The shift towards greater renewables is already apparent. The Philippines, for example, was the second-largest destination for China's solar exports in the first quarter of 2026. Electricity is also becoming increasingly important to the region. Electricity demand in southeast Asia is set to almost double to 2,000 TWh/yr in 2050 from 1,300 TWh/yr today. But electricity supply depends on the pace at which renewables and other low-emission power sources can be scaled up, as well as infrastructure development. Transmission and distribution networks need to more than double in length by 2050 to keep up with rising demand, and to cope with higher variability in supply and demand. Grid and storage investment needs to ramp up from $13bn today to $50bn in 2050 to meet announced pledges. This includes an estimated $27bn to 2040, to realise planned cross-border interconnections under the Asean power grid. But in turn, mobilising investment will depend on regulatory reforms and strong international public support to reduce costs of capital and crowd in private finance. By Prethika Nair Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.