Asia needs $1.2t investment annually for next 15 years to boost energy security, McKinsey says

SINGAPORE — Asia may need to invest as much as US$1 trillion (S$1.2 trillion) annually in energy over the next 15 years, according to a McKinsey report released on Thursday (Oct 22), as countries seek to strengthen energy security after the Iran war disrupted oil and gas flows through the Strait of Hormuz.

Here are the key findings:

McKinsey raised its forecast for Asia's energy demand to 370 million terajoules in 2040, 15 per cent higher than its forecast from a year ago

Asia is expected to drive about 70 per cent of global net energy demand growth through 2040

New sources of energy demand include data centres while requirement from cooling and industrial activities is also rising

Coal is expected to remain a part of Asia's energy mix for longer than previously anticipated, with regional demand seen staying broadly flat over the next decade as declining consumption in China is offset by growth in India and Southeast Asia

Gas demand is set to slow down in the next five to 10 years as countries prioritise coal and renewables for power generation. However, gas consumption could rebound in the longer term driven by industrials

Renewables continue to accelerate particularly in India and Southeast Asia, with about US$300 billion in annual solar and wind investment expected through 2040

Focus on energy security could enable the development of higher-cost upstream assets with government support in China, Philippines, Thailand, Vietnam and Turkmenistan

Biofuels could replace about US$90 billion to US$100 billion in fuel imports in 2040, creating the potential for a longer-term reduction in import dependence.

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