Asia - key to the energy markets of the future By Willy H Olsen, Senior Associate, The CWC Group. Former advisor to the CEO of Statoil. Willy Olsen
About the author
Willy H Olsen is the former Senior Advisor to the President & CEO of Statoil. He joined Statoil in 1980 after 15 years in journalism. During his time at Statoil, Willy Olsen held a number of senior positions, including Managing Director of Statoil UK and head of Statoil's activities in the former Soviet Union. Willy Olsen has an in-depth knowledge of the role of National Oil Companies. He has been a member of various advisory boards on Caspian and Russia, and has been a Governor on the Board of Oxford Energy Institute. Willy is now the Senior Advisor to INTSOK, a foundation owned by the Norwegian government and Norwegian oil industry. INTSOK is coordinating the efforts of expanding the internationalisation of the Norwegian petroleum cluster. He is an Associate Fellow of Chatham House in London and member of the Governing Board of Revenue Watch Institute in New York and has in recent years worked with Governments and National Oil Companies in several oil producing countries. Willy Olsen is also the course leader for the School’s National Oil Companies - Challenges & Opportunities and Maximising the Benefits of Local Content courses.
Much of the history of the 21st century will be written in Asia. Largely defined by its staggering economic growth which will have a huge impact on how the global energy markets will be transformed in the next two decades. China has experienced an average growth of close to 10 percent annually for more than 30 years and is likely to continue to see significant economic growth, making China the world’s largest importer of oil and gas. The United States and European Union countries are likely to see the trend of reduced demand for crude oil continuing.
Korea is the world’s fifth largest crude importer and the second largest LNG buyer.
Around 70 percent of future growth in oil demand is expected from the emerging economies in Asia. Security of energy supply will remain at the top of the political agenda in several of the Asian capitals. Access to energy is a prerequisite for ensuring sustainable economic growth. Investment in new supplies, innovative technologies and improving energy efficiency will be critical for shaping the Asia’s secure energy future. In order to meet growth in energy demand and address concerns of high energy prices, price volatility, and supply disruptions, Asian governments are likely to pursue all available energy sources - including natural gas, nuclear, coal, hydroelectric, and renewables. The largest consumers, China, India, Korea and Japan, will look for strategic alliances with key oil producing countries in the Middle East, both upstream and downstream. Asian governments are likely to expand further the role of their national oil companies’ global upstream expansion through acquisitions and strategic partnerships. Korea is the world’s fifth largest crude importer and the second largest LNG buyer. The government has high ambitions of reducing its dependence on imported oil and gas. The goal is to have 40% self-sufficiency by 2030. KNOC and Kogas, together with other Korean firms in the energy sector, are in the midst of a global expansion. Funding and political support is made available from the government. Korea has inked a deal with Abu Dhabi than can provide access to significant resources in the future. Chinese, Korean and Malaysian oil and gas companies are playing a significant role in developing the Iraqi oil and gas resources. Korea has become a global manufacturing force. It may be more difficult to become a global force in the upstream oil and gas sector, but a strong partnership between the industrial conglomerates and the oil and gas companies could develop into a global force.
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Asia - key to the energy markets of the future By Willy H Olsen, Senior Associate, The CWC Group. Former advisor to the CEO of Statoil.
Saudi Arabia, as the world’s largest owner of oil resources, will increasingly look to the east to build links to the growth markets to secure demand for its resources. Iraq, an emerging oil producing power, has signed upstream contracts with leading Asian companies both in the oil and gas sector. New partnerships between consuming nations and producing nations are developing and the trend is likely to be strengthened in the next two decades. Natural gas will play a more significant role in the global energy mix as countries try to move towards a lower carbon based economy. Natural gas is poised to play the most important new role in the region, as it is abundant, relatively lower-carbon, cost-effective, efficient, and has a variety of uses in the power sector, industrial sector and the transportation sector.
Natural gas will be important as a transition fuel as countries try to reduce their greenhouse gas emissions.
Security of supply issues are less critical since access to gas resources are more balanced as a result rapid growth in unconventional gas resources like shale gas and coal bed methane gas. Russia, with the world’s largest reserves of conventional natural gas resources, will continue to be a leading force, but gas will be available from many sources and countries. Russia is however likely to strengthen its policy towards the east to maintain its political influence under a new President Putin era. Russia will have to balance its dependence of European gas market by looking to Japan, China and Korea. Australia will emerge as an even stronger global LNG player and is likely to match Qatar in supplying liquefied natural gas to predominantly Asian markets. Australia is the first to move into converting coal bed methane gas to LNG. Several projects are already under way. Others will follow suit. North America will develop unconventional gas as LNG that will be looking for a home in Asia. New huge gas reserves off East Africa will have to find customers in the Far East. Natural gas will be important as a transition fuel as countries try to reduce their greenhouse gas emissions. Renewables like solar and wind will grow in importance as a cleaner energy option, but their scalability can vary depending on a country’s natural endowment. Many, especially China, India and countries in the Middle East, are still making plans for major investments in nuclear energy. Policymakers must recognise the importance of planning ahead to be able to meet future demand. Technology choices and infrastructure decisions made today will impact the region’s energy sector and economy for decades to come. Given the magnitude of projected future demand, investment in the energy sector and development and deployment of new technologies is critical.
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