Energy firms eye Asian expansion, but risks loom

SINGAPORE (Reuters) - Companies and banks are upbeat about expanding in Asia's recovering commodities and energy sectors, but global oil oversupply, euro zone debt woes and volatile markets pose risks to growth, industry executives say.

Asia offers refuge to firms seeking to emerge from the worst of the 2008 financial meltdown and the current turbulence in Europe, but the region is not immune to shaky demand growth and the specter of risk aversion, they told the Reuters Global Energy Summit.

Expanding overseas, venturing into alternative energy and new products are also crucial to boosting growth, executives say.

Thailand's PTT Exploration and Production PTTE.BK is looking to buy one or two oil and gas assets worldwide this year, after losing a bid with its partners for a stake in Norwegian oil firm Statoil's (STL.OL) offshore oilfield in Brazil.

"We remain focused on high-quality assets, and no matter whether we win or lose, our growth objective is more geared to foreign than domestic markets," Executive Vice-President Asdakorn Limpiti said.

Likewise, Japan's Showa Shell Sekiyu (5002.T) is eyeing overseas solar cell markets and new energy businesses as it diversifies in a bid to counter declining domestic oil demand.

"The next frontier for us is the creation of new core businesses, like our solar enterprise, and to move Showa Shell from a being a domestically centered business into a global one," President Jun Arai said.

Gas giant Gazprom (GAZP.MM) is pushing into Asia, even as the Russian government urges firms to re-route exports from low-growth Europe to other faster-expanding markets. The company plans to set up a shipping unit in Singapore and is looking to expand the trade of other energy products in the region.

Opportunities in India also beckon. Hong Kong-based Noble Group (NOBG.SI) will operate a new iron ore terminal in India and has already leased storage space in Western India to boost its presence in the fuel sector.

Persuaded by the strong demand Asia offers, French bank Societe Generale and Australia and New Zealand Banking Group, as well as broker Ginga Petroleum are focusing on new product markets.

SocGen (SOGN.PA) opened an office in China this month, aiming to expand its trade financing volume in Asian commodities by 20-25 percent this financial year.

ANZ (ANZ.AX) ANZ.NZ launches physical trading of gold on June 1, and may consider moving into commodities such as grain, coal or oil in future.

To capture the growth and to create Asian commodity benchmarks that serve the region's specific trading and hedging needs, the Singapore Mercantile Exchange will start trading in August, launching one energy contract out of six initial securities.

Ginga is poised to start a gasoline desk this year, and is considering to revive its distillates business in Asia next year, while brokerage BGC Radix Energy has diversified into less traditional areas such as tanker broking.

RISK AVERSION, SATURATION, HIGH COSTS

Yet, even as Asia's oil broking market recovers from the crisis, growth could be hampered by a saturated sector, BGC Radix Managing Director Richard Tan said, adding that further consolidation of the oil swaps market was possible.

And the growth in commodities demand across Asia, led by China, also poses a long-term force that will drive up prices and impact the overall economy, said Peter Aitken, Vitol head of coal risk.

The world's third-largest independent oil trader Trafigura cautioned that Europe's sovereign debt crisis has sparked an outflow of funds from most assets, including commodities and energy, as risk aversion gripped investors.

Unstable markets have also accompanied shrinking risk appetites, prompting Green Dragon Gas (GDG.L) to delay its listing on the mainboards of London and Hong Kong.

"I don't think this is particularly the right time for companies to be proceeding forward with IPO plans or main market moves considering the turbulence," its chief Randeep Grewal said.

While the recent fall in crude brought prices more in line with demand-supply fundamentals, it would take longer than expected for physical fuel demand to recover, said Trafigura's Chief Financial Officer Pierre Lorinet.

"People are realizing you can't have one of the worst crises in the last hundred years, come out of it suddenly, and everything is fine," he said.

"It should not be a surprise that a pick-up in consumption will take longer than what most people expect."

Weak oil demand is aggravated by overcapacity in Europe and heavy supplies from higher refining runs in the United States ahead of the summer driving season.

Higher U.S. refining runs could also stop the drawdown in oil products held in floating storage and weigh on diesel margins, said Total's TOT.PA head of strategy Jean-Jacques Mosconi.

Neste Oil (NES1V.HE), the world's top biodiesel producer, also warned that European refining margins may come under pressure again later this year due to overcapacity.

"It's a tough market still in refining," Chief Executive Matti Lievonen said.

(Editing by Ramthan Hussain)