Oil and biofuels security review

The oil security challenge is intensifying for ASEAN member states as demand rises while regional crude production declines. Oil consumption increased by an average of 1.7% per year in the decade to 2025, almost twice the global rate, and Southeast Asia is expected to become the largest regional contributor to global oil demand growth over the medium term. Demand is projected to grow by around 130 kb/d annually between 2025 and 2031, led by diesel and jet fuel, petrochemical feedstocks, LPG and marine fuels. Indonesia and Viet Nam account for much of this increase. Electric vehicle uptake is growing in the region, but its impact on transport fuel demand will emerge only gradually.

Supply trends are moving in the opposite direction. ASEAN upstream oil production fell from 2.5 mb/d in 2015 to 1.8 mb/d in 2025 and is projected to decline further to around 1.6 mb/d by 2031. Indonesia is the main exception: fiscal reforms, enhanced recovery and new condensate production are expected to lift its output after decades of decline. Regional refining capacity of around 5.5 mb/d meets most product demand, but utilisation is constrained by ageing facilities and reliability issues. Moreover, refineries remain dependent on imported crude, particularly medium and heavy grades from the Middle East, so downstream capacity provides only a partial buffer against external disruption.

Import dependence will therefore remain a structural vulnerability. Crude import requirements are expected to approach 3 mb/d by 2031, while net product imports rise to around 2.2 mb/d. LPG poses a particular challenge: imports have more than doubled in ten years to around 500 kb/d, regional natural gas liquids production is declining, and alternative supply options are limited. ASEAN member states are also highly exposed to disruption risks posed by the need for supply to be transported through the Strait of Hormuz and the Strait of Malacca. Disruption at either maritime choke point can rapidly affect physical availability, freight and product prices, inflation and public finances, especially in economies with limited refining or storage capacity.

Liquid biofuels can reduce import exposure if growth is sustainable. Regional demand increased more than twelve-fold from 2010 to over 360 kb/d in 2025, driven mainly by biodiesel mandates in Indonesia, Malaysia and Thailand. Biofuel blending already displaces meaningful volumes of imported gasoline and diesel, including up to 35% of diesel demand in Indonesia. Demand is projected to increase by around 50% to more than 550 kb/d by 2030, with biodiesel providing most of the growth and smaller contributions from ethanol, renewable diesel and sustainable aviation fuel. Robust sustainability frameworks are essential to verify emissions reductions and ensure the sustainable management of land, water and biodiversity.

Demand-side preparedness remains regionally fragmented. Oil use is concentrated in transport, where short-term alternatives are limited, while subsidies, regulated prices and broad consumer support can weaken incentives to conserve fuel and also place pressure on government budgets. Recent disruptions showed that teleworking, public information campaigns, carpooling, travel restrictions and targeted rationing can reduce demand, but measures were largely national and sometimes created cross-border distortions. Over time, stronger vehicle efficiency, affordable public transport, electrification of two- and three-wheelers, modal shift and sustainable biofuel blending can reduce exposure more durably.

Emergency oil stocks are the most effective tool for managing severe physical disruption. Commercial inventories provide a first layer of protection but are generally designed for normal operations rather than prolonged international shortages. Strategic systems can combine government stocks, central stockholding agencies and mandatory industry obligations, with the appropriate model depending on each country’s market structure, import dependence, refining base, storage capacity and fiscal resources. Transparent governance, sustainable financing and clear release rules are critical. Dedicated LPG stocks may merit separate consideration because LPG has distinct infrastructure and supply characteristics.

The ASEAN Framework Agreement on Petroleum Security (APSA) provides the platform for regional co-operation. APSA provides a foundation for consultation, information exchange and voluntary commercial assistance to a member state facing a critical shortage, but practical implementation remains limited. ASEAN member states should further operationalise APSA, strengthen the ASEAN Centre for Energy’s secretariat role, improve regional oil-market data and monitoring, clarify emergency procedures and conduct regular workshops and simulation exercises. Smaller or highly import-dependent economies could also explore voluntary, commercially based regional storage and stockholding arrangements.

To deliver oil security, the priority is to combine stronger national resilience with a more operational regional response. Countries with domestic resources can support economically viable production through predictable investment frameworks. Import-dependent economies should assess whether commercial inventories are sufficient and, where needed, establish affordable strategic reserves and strengthen storage and logistics. Refinery reliability, crude-source diversification and infrastructure flexibility should improve, while crisis support should be targeted rather than open-ended. A regional liquid biofuels taskforce could support sustainable supply chains, common criteria and trade opportunities. Together, these measures would reduce exposure to supply and price shocks while preserving mobility, industrial activity and economic stability.