APAC Oil and Gas Firms Lack Decarbonisation Plans Despite Net Zero Pressure

Most oil and gas companies in the Asia-Pacific region have adopted a wait-and-see approach to decarbonisation and lack detailed implementation plans for phasing out fossil fuel production, according to an IEEFA analysis of 259 companies across 17 economies. China and India hold the greatest potential to lead the regional transition, given the size of their economies and their dominant share of sector borrowing.

The IEEFA study covered oil and gas producing economies including Australia, Bangladesh, Brunei, China, India, Indonesia, Japan, Malaysia, Pakistan, South Korea, and Vietnam, among others. China, India, and Indonesia are the largest APAC oil producers by volume, while China, Australia, Malaysia, and Indonesia lead on gas production. APAC oil production declined at 1.2 percent per annum over the decade to 2021, while gas production grew at 3.1 percent annually over the same period. Aggregate debt-to-total capital ratios across the 259 companies surveyed averaged approximately 32 percent.

The analysis found that O&G companies in APAC rely predominantly on equity rather than debt financing, with highly geared companies representing an anomaly. Only 14 of the 259 companies carried high debt levels, with an average outstanding debt balance of US$820 million, compared to the sector average of US$2.2 billion. Debt capital is heavily concentrated, with just 27 of the 259 entities representing 80 percent of the regional O&G debt market and holding approximately US$280 billion in combined indebtedness, predominantly in China, including Hong Kong, and India.

GFANZ currently lacks membership representation from China and India, the two largest holders of APAC O&G debt capital. As GFANZ membership expands, IEEFA projects that capital raising for oil and gas businesses will become increasingly difficult. Six APAC companies identified as having both high outstanding borrowings and significant production growth plans are highlighted as requiring more robust decarbonisation commitments to maintain lender support, given growing institutional focus on portfolio carbon footprints.

Key figure — US$280 billion — combined O&G debt held by the top 27 borrowers in the Asia-Pacific region, concentrated in China and India