Weaker China, stronger India
It was a mixed year in Asia's energy sector, where the oil market's gaze shifted away from its stalwart to a new rising economy
Chinese energy demand disappointed in 2016 - a source of global energy-market anxiety and the stand-out theme in Asia's energy sector. But the other big feature was the glut of supply in the region's liquefied natural gas market, which drove down prices there and further afield. India tried to take advantage of cheap LNG. China introduced rules that should increase its companies' imports of crude oil.
With much of their financial power coming from state-owned banks, China's energy giants were able to tighten their grip on big-ticket projects across Asia-Pacific, especially in the region's power sector.
The moves reflected China's ever-present thirst for foreign deals, especially in fast-growing markets. At home, though, the country's slowing economy meant reduced imports of crude oil, coal and natural gas, disappointing world markets that hoped it might mop up global surpluses. By late 2016, things were starting to turn around with purchases of crude starting to rise strongly again - some said the buying spree suggested China thought the global energy-price slump would end soon.
Another reason was the government's introduction in May of new rules demanding energy companies stockpile crude at a rate of 10% of total capacity within the next three years.
No such wellspring of demand was evident in the Asian LNG market. Consumption of gas remained slack, despite a 50% drop in the price of spot cargoes since 2014. Some countries tried to take advantage. India started to promote gasification of its economy and put in motion plans to add about 50m tonnes a year of LNG import capacity by end-2017.
That was part of a broader surge in India's energy economy. Refining projects underway will give the country more than 310m t/y of processing capacity. It helped India - its economy is expected to expand by 7.5% - become the oil market's focus in 2016. Thus, while Chinese oil consumption was expected to rise by just 300,000 barrels a day in 2016 (growth on 2015 of less than 3% a year), India's was up to almost 7%, year-on-year, by August. In absolute terms, that would amount to about 260,000 b/d of extra oil consumed in India in 2016 - so China remained the bigger force. But 2016 was a year when India seemed to start meeting its promise, at least where oil markets were concerned.
Japan's energy sector remained as troubled as its economy. Oil demand continued to shrink. Prime minister Shinzo Abe struggled with his plan to get the country's fleet of nuclear plants restarted. In October, a second anti-nuclear governor was elected, this time in a region north of Tokyo where Tepco's Kashiwazaki-Kariwa plant, the world's largest, was gathering dust. By November, all but two of the country's 42 nuclear reactors remained offline. Polls continued to show that most of the population was against the restart.
A spate of public-private partnerships got off the ground in the region. Indonesia signed several power-purchase agreements to add 35 gigawatts of extra generation capacity by 2019. With the help of the German Development Bank and others, Vietnam started to spend the $48.8bn it reckons its power sector will need by 2020.
The Association of Southeast Asian Nations pushed a plan to integrate power supply across the region along the lines of one agreed in 2016 between Laos and Thailand. That saw Thailand commit to buy 3,316 megawatts from Laos's Hongsa plant. Vietnam began importing electricity from the Xekaman 1 hydropower operation in Laos. Earlier in the year, Malaysia and Indonesia made a belated start on the trans-Borneo power grid, when Malaysia's Sarawak began supplying 230 MW of electricity across the border. Deeper regional energy integration was a theme of 2016.
Things looked less promising in Thailand - in the energy sector, like other parts of the economy - where the military tightened its grip on the country. After a decade of political instability, Thailand's economy continued to dawdle. In 2016, the volume of exports fell for the third year in a row as foreign companies shunned the junta.
Nor did the geopolitics of the region look especially promising. China's reaction to the repudiation by Europe's Permanent Court of Arbitration of its claim to "historic rights" in the South China Sea was unsettling. By dismissing the 497-page ruling as "a mere scrap of paper", Beijing set off alarms in Vietnam, Malaysia and Indonesia, which all have claims to the waters and the oil and gas resources beneath them. America, in response, reiterated its commitment to keeping open the South China Sea's trade routes.
This article is part of Outlook 2017, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here