GENERATION REPORT: GAS
The demand for oil and gas will boost, especially in the second half of 2021, as the global economy rebounds from the pandemic
Future of gas power sector ‘in the dark’ over energy transition LNG might be the sector’s main driver for demand growth.
T
he demand for oil and gas will boost, especially come the second half of this year, as the global rollout of COVID-19 vaccines will help the global economy rebound—and this will be paralleled by the global energy consumption. Industry leaders in the Asia Pacific have then presumed that oil and gas demand will post modest gains in 2021 especially during H2. Asia Pacific’s oil and gas industry, however, can be seen facing a new normal, beyond the unprecedented challenges brought about by the pandemic and into uncertainty amidst the ongoing energy transition of many countries to a more environment-friendly and less carbon-intensive energy mix. Fitch Solutions noted that the cyclical recovery, which started late in 2020, has continued to accelerate, particularly as more countries make significant progress with vaccinations and continue to ease some restrictions. “Given the accelerating pace of vaccination in key markets, a strong relationship has been established between lower ongoing COVID-19 impacts and a robust return in fuel consumption,” Fitch Solutions said. 24 ASIAN POWER
The rapid collapse in refined fuel demand due to COVID-19 laid bare the precarious position of low-margin petrochemical refiners
It mentioned, however, that a cautionary note should be highlighted in areas in which lockdowns were reinstituted after a spike in infections for second or third waves did see fuel consumption fall. Meanwhile, the think tank also observed that the rapid collapse in refined fuels demand from COVID-19 laid bare the precarious position of lowmargin refiners. “Although all refiners have suffered from low margins and reduced output in the face of surging fuel supplies, we expect newer facilities that support high-end premium products and petrochemicals to rebound stronger during the recovery,” it said. Fitch Solutions views that refinery closures continue to mount as fuel demand remains well below preCOVID-19 levels. A lack of international air travel and local lockdown measures continue to see fuel market overcapacity build as new facilities come online in the near term. The return in fuel demand postCOVID has not been enough to preserve downstream facilities facing challenging market conditions. Fitch Solutions noted
that whilst this trend had already been in play prior to 2021, the pandemic impacts have accelerated the pace of closures. “The sharp downturn in fuel demand across 2020 has yet to fully return in most markets with some developed markets forecast to have already peaked. This disconnect between existing capacity and new build capacity that can better compete on cost and quality has seen further announcement of facility closures globally,” it said. Environmental impacts to accelerate strategy shift for the oil and gas industry Fitch Solutions noted, as of the time of its writing, that there have been at least 934,000 b/d (43%) of refining capacity announcing either closure or conversion to biofuels in the Asia Pacific region. Moreover, external pressures from environment-related impacts and a quickening approach of peak oil demand brought on by the low-carbon energy transition will accelerate a strategy shift for the oil and gas industry, with a more diverse set of companies announcing netzero ambitions and investment plans to reduce climate impacts. “The impacts of the events are yet
