Soldiers guard a gas station as people queue for fuel among widespread shortages after an earthquake and tsunami, on October 03, 2018 in Palu, Indonesia. Photo: VCG

Southeast Asia could become a net importer of fossil fuels in the next few years, raising the financial burden on governments and increasing carbon emissions in the region, the International Energy Agency (IEA) warned in a report.

This comes despite expectations of slower growth in the region's energy demand as economies shift toward less energy-intensive manufacturing and services, and greater efficiency, the agency said in its annual Southeast Asia outlook.

Southeast Asia was already a net oil importer at 4 million barrels per day (bpd) in 2018, while strong growth in demand for natural gas has reduced the surplus of gas for export, the world's energy watchdog said.

For coal, output from the region's top producer, Indonesia, remained well above 400 million tons of coal equivalent last year but increases in domestic demand and exports to China and India could reduce its surplus, the IEA said.

"These trends point to Southeast Asia becoming a net importer of fossil fuels in the next few years," the agency said.

The region's overall surplus of supply over demand at 120 million tons of oil equivalent (mtoe) in 2011 had been eroded to just above 30 mtoe in 2018, it said.

Growing reliance on imports also raises concerns about energy security, the IEA said. The region's overall dependence on oil imports is forecast to exceed 80 percent in 2040, up from 65 percent today.

With no change in policy, Southeast Asia's energy demand is expected to grow by 60 percent by 2040, accounting for 12 percent of the rise in global energy use as its economy more than doubles, the IEA said. This was slower than the region's 80 percent growth since 2000.

Southeast Asia's growth in electricity demand, at an average of 6 percent per year, has been among the fastest in the world, the IEA said. Still, some 45 million people there still lack access to electricity. The region is well on the way to achieving universal access to electricity by 2030, the IEA added.

Oil demand in Southeast Asia, home to nearly 10 percent of the world's population, is expected to surpass 9 million barrels per day (bpd) by 2040, up from just above 6.5 million bpd now, the IEA said.

"Oil continues to dominate road transport demand, despite an increase in consumption of biofuels," the IEA said.

"Electrification of mobility, with the partial exception of two and three wheelers, makes only limited inroads. This pathway suggests little change in Southeast Asia from today's congested roads and poor urban air quality."

Demand for coal is also projected to rise steadily over the coming decades, largely fuelled by new coal-fired power plants, despite headwinds facing such projects that include increasing difficulty to secure competitive financing for new facilities.

The IEA said the region's increasing reliance on imports of natural gas made the fuel less price-competitive though it appeared to be a good fit for the fast-growing cities and lighter industries in the region.

Renewable energy is set to play a larger role, but without stronger policy frameworks the share of renewables in power generation would rise only to 30 percent by 2040, from the current 24 percent, the IEA said.