1
Energy Security Policies Energy Security Policies in the Asian Economicsin the Asian Economics
October 5, 2001
Ken Koyama, PhDGeneral Manager, Department of Energy Intelligence & Analysis
Institute of Energy Economics, Japan
2
OutlineOutline
1. Growing Oil Imports and the Oil Price Increase
2. Energy Security Policies in Asia ● To Limit Oil Imports
● To Secure Oil Imports
● To Enhance Emergency Preparedness
3. Implications of the policy development
3
Growing Energy Imports in Asian Growing Energy Imports in Asian Developing EconomiesDeveloping Economies
Source: Prepared from BP Statistics
55 65 101
134
159
192
219
256
254
291
315
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Million TOE
Consumption
Production
Net Import
4
Supply/Demand of Coal, Gas and Oil in Supply/Demand of Coal, Gas and Oil in Asian Developing Economies Asian Developing Economies (( 20002000 ))
34
-43
325
-100
0
100
200
300
400
500
600
700
800
900
Coal Gas Oil
Million TOE
Consumption
Production
Net Import
(Net Import)
(Net Export)
Source: Prepared from BP Statistics
5
Growing Oil Imports in Asian Growing Oil Imports in Asian Developing EconomiesDeveloping Economies
75 89
129 15
7 185 21
8 243 27
5
261 30
2 325
0
100
200
300
400
500
600
700
800
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Million Tonnes
Production
Consumption
Net Import
Source: Prepared from BP Statistics
6
Oil price (WTI) increased Oil price (WTI) increased sharply since 1999sharply since 1999
10
15
20
25
30
35
40
1月
2月
3月
3月
4月
5月
6月
7月
8月
9月
10
月11
月
12
月1
月
2月
3月
4月
5月
6月
7月
8月
9月
10
月
11
月12
月
1月
2月
3月
4月
5月
6月
7月
8月
9月
10
月11
月
12
月1
月
2月
3月
3月
4月
5月
6月
7月
8月
9月
(USD/bbl)
1998年 1999年 2000年 2001
年
Source: Prepared from NYMEX data
7
Policies To Limit Oil ImportsPolicies To Limit Oil Imports
Alternative Energy Development (Natural gas, Coal, Nuclear, etc.)
Energy ConservationPromotion of Domestic Oil Production
8
Promotion of Natural Gas Promotion of Natural Gas
Resource Potential in AsiaNumbers of LNG, P/L projects being
examined or implementedAdvanced Technologies (CCGT)Advantage as a “clean fuel”→Constraints are: Price competitiveness,
requirement for large-scale investment in infrastructure buildup
9
Promotion of natural gas in Asia Promotion of natural gas in Asia
● China : West Gas to East Project, Shenzhen LNG project, P/L project from East Siberia (Russia), etc. are now being examined/implemented.
● Korea : Progress in the 3rd LNG terminal and the completion of domestic trunk P/L. LNG demand is expected to increase from 12.7 million tonnes in 1999 to over 20 million tonnes in 2010.
● Taiwan : Progress in the 2nd LNG terminal construction and Tatan LNG fired power plant. LNG demand is targeted to reach 13 million tonnes in 2010 (4.5 million tonnes in 1999).
● India : Promotion of domestic gas production by NELP, numbers of LNG projects, P/L projects from Iran and Bangladesh.
● ASEAN countries : Numbers of P/L projects actually being implemented.
10
Abundant Resource Potential (China, India) Top-class production capacity and record(China:
2nd largest, India: 4th largest producers) Availability of Australian coal ( 3rd largest
producer) as regional resource Price competitiveness→ Promoted as base-load power source in many
economies→ But environmental constraints exist (SOx 、 NO
x、 CO2 emission). Importance of “Clean Technology” for further promotion on coal
Promotion of Coal Promotion of Coal
11
Stagnation in US/European market In Asia, nuclear power is promoted as:
a) quasi-domestic energy
b) mainstream of oil alternative
c) important source of base-load power New plants being constructed in Korea,
Taiwan, China, India (and Japan)
Nuclear Power Development in AsiaNuclear Power Development in Asia
In Operation Under Construction Planned Total
Numbers of plant Capacity Numbers of plant Capacity Numbers of plant Capacity Numbers of plant Capacity
Korea 14 12.0 6 5.7 10 11.2 30 28.9
Taiwan 6 5.1 2 2.7 8 7.8
China 3 2.1 8 6.6 11.3 20.0
India 2.7 4 1.4 8 3.9 12 8.0
Total 21.9 16.4 26.4 64.8
Unit: Million k W
12
Energy conservation has benefits to:
a) Limit energy (oil) demand and imports
b) Reduce environmental load
c) Enhance economic competitiveness
→ Energy conservation is a top priority in many Asian economies. Governments set long-term target for energy conservation.
→ In reality, however, energy conservation is difficult to achieve due to the “income effects.” Energy intensity flattened out or increased in many cases
Promotion of Energy ConservationPromotion of Energy Conservation
0
100
200
300
400
500
600
700
800
1980 1985 1990 1995 1996 1997 1998
TO
E/ M
illio
n U
SD
(199
5$)
SingaporeKoreaIndonesiaMalaysiaPhilippinesThailandIndia
13
Promotion of Domestic Oil ProductionPromotion of Domestic Oil Production State oil companies as the major player (China: : CNPC,
SINOPEC, CNOOC; Indonesia: Pertamina; India: ONGC; Malaysia: Petronas)
Growing role of IOCs for capital requirement and introduction of advanced technologies
Onshore/offshore opening up in China, incentive policy in the frontier areas in Indonesia, New Exploration & Licensing Policy in India, etc.
In reality, however, oil production is expected to flatten out
6.0
7.1 7.2 7.2 7.1 7.0
0
1
2
3
4
5
6
7
8
1990 1999 2005 2010 2015 2020
Million B/D
Source: EIA, “International Energy Outlook 2001 ( Reference case)”
14
Outlook for Oil Imports in Outlook for Oil Imports in Asian Developing EconomiesAsian Developing Economies
Source: EIA, “International Energy Outlook 2001 ( Reference case)”
1.6
6.2
9.6
13.4
17.9
22.7
0
5
10
15
20
25
30
35
1990 1999 2005 2010 2015 2020
Million B/D
Production
Consumption
Net Import
15
Import source diversificationStrengthening ties with oil producersOverseas upstream investmentIntroduction of oil producers’ capital into
domestic downstream market
Policies to Secure Oil ImportPolicies to Secure Oil Import
16
Reduce risks from over-dependence on a specific source (Disruption risk in the source, market power risk, etc.)
Constraints for diversification are: export availability and import economics of crude oil for diversification purpose (Production/export capacity, physical property, transportation costs, refining configuration, etc.)
Notable increase in crude oil imports from Africa
However, Middle East will remain the mainstream of import source. Diversification policy has a limit.
Import Source DiversificationImport Source Diversification
0
200
400
600
800
1,000
1,200
1991 1992 1993 1994 1995 1996 1997 1998 1999
Thailand
Philippines
Indonesia
Singapore
Japan
China
Taiwan
Korea
India
(1000BD)
0.6%
6.6%
8.8%
17
Secure oil supply by enhancing access to oversea oil resource
Make full use of know-how and human resources accumulated in state oil companies
Diversification of business, improvement of portfolio, enhancement of profitability
China: CNPC in Sudan, Venezuela, Iraq, Kazakhstan, etc. SINOPEC in Iran
Malaysia: Petronas in 13 countries (Iran, Vietnam, Sudan, etc) over 30% earnings from overseas operation
India: ONGC Videsh Limited in Russia, Iraq, Venezuela, Vietnam, etc
Overseas Upstream InvestmentOverseas Upstream Investment
18
Secure stable oil import by strengthening capital relation
Investment burden-sharing in the case of JV refinery construction
Korea : Saudi Aramco participates in S-Oil (35%). IPIC (UAE) in Hyundai Oil (50 % )
Philippines: Saudi Aramco participates in PETRON (40%)
New refinery projects, refinery expansion and upgrading, capital participation are examined in China, India, etc.
Oil Producers’ Capital in the Asian Oil Producers’ Capital in the Asian Downstream MarketDownstream Market
19
Only Japan and Korea hold national stockpile under direct government control
Stockpile obligation to oil company exist only in Japan, Korea, Taiwan, Thailand and Indonesia
As a result, stockpile levels are low in terms of international comparison
Majority of stockpile is commercial inventories, not emergency stocks
Problems in international cooperation framework
Current Situation of Oil Stockpile Current Situation of Oil Stockpile in Asiain Asia
20
Oil Stockpile level in Asia (1999)Oil Stockpile level in Asia (1999)
Source: Koyama, K. “Oil Supply Security Initiatives in the Asian APEC economies”
81
169
56 60
4436 40
20
34
0
20
40
60
80
100
120
140
160
180
OECD Japan Korea Taiwan Singapore Thailand Philippines Indonesia China
21
Taiwan: After enactment of Petroleum Business Act, national oil stockpile is to be established
Korea: National Stockpile program in progress implemented by State KNOC. Korea joined IEA on April 2001.
Thailand: Government (NEPO) now examines stockpile build up programs
China: Government announced a plan to establish national stockpile during the 10th 5 years plan
Moves to Stockpile buildup in AsiaMoves to Stockpile buildup in Asia
22
Despite the policy development, oil import dependence continues to rise rapidly
Constraints for further policy development are:
a) Limited economic capacity
b) Coordination with other policy agenda
such as environmental protection, economic
liberalization, etc.
c) Pursuit of higher cost-effectiveness
Points to be consideredPoints to be considered
23
In principle, pursuit of energy security by each economy can contribute to enhance regional and global energy security
However, if initiatives to enhance energy security conducted too exclusively, tensions could be generated and escalated among Asian economies, thus damaging regional energy security
Therefore, the development of energy security policy in Asia is a great concern to Japan
To enhance energy security in Asia, Japan can play an important role. With respect to Japan’s cooperation, the following points are important: making full use of Japan’s experience and know-how, focus on cost-effectiveness, prioritization, etc.
ImplicationsImplications