Energy dependency and challenges to energy security (Hooman Paimani)

Energy Dependency and Challenges to Energy Security in the Asia-Pacific Region 16 June 2014

Global Forum on Energy Security Beijing, 16-17 June 2014 Dr. Hooman Peimani Research Fellow, Asia Pacific Energy Research Centre (APERC) Views and opinions expressed in this presentation are those of the presenter only.

I-Energy Mix of the Asia-Pacific Region A-The Asia-Pacific region (APR) consisting of South Asia, Southeast Asia and East Asia is the world’s largest energy consumer. Its total energy consumption in 2012 was: 4992.2 Mtoe; 40% of the global energy consumption Oil: 1389.4 Gas: 562.5 Coal: 562.5 B-Its forming economies are heavily dependent on fossil energy for the bulk of their energy requirements (91.35%).

C-Non-fossil energy (renewables and nuclear account for a small share of its energy requirements (8.63%): Renewables: 353.1 Mtoe Nuclear: 78.1 Mtoe 2

Energy Mix of the Asia-Pacific Economies 2012 (Mtoe) Asia Pacific

Australia Bangladesh China China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Chinese Taipei Thailand Vietnam Other Asia Pacific Total Asia Pacific Total World

Oil

46.7 5.6 483.7 17.9 171.6 71.6 218.2 29.8 7.0 20.0 13.0 66.2 108.8 42.2 52.4 16.6 18.3 1389.4 4130.5

Gas

22.9 19.6 129.5 2.5 49.1 32.2 105.1 30.0 3.8 37.3 3.1 7.5 45.0 14.7 46.1 8.5 5.6 562.5 2987.1

Coal

49.3 0.7 1873.3 7.6 298.3 50.4 124.4 14.3 1.7 4.3 9.4 0 81.8 41.1 16.0 14.9 21.6 2609.1 3730.1

Nuclear

0 0 22 0 7.5 0 4.1 0 0 1.3 0 0 34.7 9.1 0 0 0 78.1 560.4

Hydro

4.1 0.4 194.8 0 26.2 2.9 18.3 1.8 5.2 6.4 2.5 0 0.7 1.2 2.0 11.9 10.7 289 831.1

Other renewables

2.8 < 0.05 31.9 < 0.05 10.9 2.2 8.2 0.3 2.0 < 0.05 2.3 0.3 0.8 1.1 1.2 < 0.05 0.1 64.1 237.4

Total

125.7 26.3 2735.2 28.1 563.5 159.4 478.2 76.3 19.6 69.3 30.2 74.0 271.1 109.4 117.6 52.0 56.3 4992.2 12476.6

Share of non-fossil Energy (%)

5.48 1.71 9.09 0.17 7.91 3.19 6.39 2.75 36.73 11.18 15.89 0.99 13.35 10.32 2.72 22.98 19.18 8.63 13.05

Source: Author’s creation based on data provided in BP. “Primary Energy: Consumption by Fuel.” BP Statistical Review 2013. London: BP, 2013, p.41. http://www.bp.com/content/dam/bp/pdf/statistical-review/statistical_review_of_world_energy_2013.pdf All shares have been calculated by the author.

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Small Regional Fossil Energy Resources D-Apart from its negative environmental impact, heavy dependency on fossil energy is challenging as the APR as a whole is not self-sufficient in energy especially oil (27.83%) and gas (11.26%) accounting for about 40% of its energy mix, having a much larger share in all its economies’ energy mixes, excluding China and India, (e.g., South Korea: 56.43% and Thailand: 83.75%).

Global Oil and Gas Reserves by Regions

Supplying Regions

Oil Share of Global Reserves (%)*

Oil Billion Barrels

Gas Share of Global Reserves (%)*

Gas Trillion Cubic Metres

Africa Asia Pacific Europe & Eurasia Middle East, including North Africa North America South America Total world

7.80 2.50 8.40 48.45

130.30 41.50 140.80 807.70

7.70 8.20 31.20 43.00

14.50 15.50 58.40 80.50

13.20 19.70 100

220.20 328.40 1668.90

5.80 4.10 100

10.80 7.60 187.30

Source: Author’s creation based on data provided in BP. “Oil: Production.” BP Statistical Review of World Energy June 2013. London: BP, 2013, p. 6, and BP. “Natural Gas: Proved Reserves.” BP Statistical Review of World Energy June 2013. London: BP, 2013, p. 20, http://www.bp.com/content/dam/bp/pdf/statistical-review/statistical_review_of_world_energy_2013.pdf *All percentages have been calculated by the author.

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II-Supply Situation A-Regional supply situation: The regional oil and gas reserves have been depleting rapidly due to exports and increasing domestic consumption to the extent that some of the regional suppliers have become energy importers themselves. They include: Indonesia: It suspended its OPEC membership in January 2009 as it could no longer meet its export quota. It has since become a net importer of oil (264.2 bpd/2012), although it still exports oil to maintain its market ties with a hope of developing its untapped reserves to restore its ex-export status.

Malaysia: It imports oil (160,000 bpd in 2010 when it exported 245,000bpd), although not a net importer, and coal.

B-Import dependency: The region as a whole has become increasingly dependent on oil imports (19,482,200 bpd) and gas imports (258,810 ,000,000 cm) from many oil and gas-exporting countries located in all the major supplying regions, North, Central and South America, Africa, Europe and the Middle East: Total imports in 2012: Oil: 19,482,200 bpd; Gas: 258,810 ,000,000 Intra-regional exports/imports: Oil: 1,384,000 bpd; gas:110,650,000,000cm Imports from other regions: Oil: 18,098,200 bpd; Gas: 148,160,000,000

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III-Challenge of Heavy dependency on the Middle East (ME) A-The APR’s heavy dependency on imported oil and gas pose dependency-related challenges to the regional energy security by making the regional oil/gas-importing economies vulnerable to various political, economic, financial, military/security and environmental developments in their supplying regions.

B-Within this context, the challenge posed by the APR’s dependency on the Middle East (ME), consisting of countries between the Persian Gulf and the Mediterranean Sea and the North African Arab states, is especially outstanding for two major reasons: 1-Its phenomenally large share of the APR’s oil and gas imports as it has become the APR’s single largest supplier of oil and gas as evident in its 2012 oil/gas exports: Oil: 14,984,000 bpd; 76.91% of the APR’s total oil imports Gas: 110,300,000,000 cm; 42.61% of the APR’s total gas imports The ME will retain its preeminent supplying-role in the foreseeable future due to its having the world’s largest proven conventional oil (807.77 bb; 48.45% of the global oil reserves) and conventional gas (80.50 tcm; 43% of the global gas reserves) reserves.

Its reserves are expanding due to new discoveries and potential for more discoveries.

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Challenge of Heavy dependency on the ME 2-The ME’s major characteristic, i.e., being prone to instability.

This characteristic manifested itself in various armed conflicts (intra- and inter-state, alike) as well as crises and revolutions leading to major political upheavals, including change of political systems.

C-Especially since 2010, the ME has experienced major upheavals affecting many of its major oil and gas exporters, which have particularly questioned the sustainability of Middle Eastern oil and gas (LNG) exports on a predictable, uninterrupted and affordable manner.

These are the “Arab Spring” engulfing so far Egypt, Libya and Yemen, instability in Iraq, Iran’s dispute with the Western countries over its nuclear energy program and armed conflicts in Sudan and South Sudan, which have continued to this date and will likely continue in the foreseeable future to potentially affect their oil/gas production and exports.

To appreciate the impact of instability on the ME’s export capability, suffice to say that conflicts in Libya, Sudan/South Sudan and Syria (small oil supplier to non-APR economies) as well as the sanctions on Iran removed 2,000,000 bpd of oil from the global markets in 2013.

D-The instability factor has created an element of uncertainty about the long-term sustainability of the ME suppliers’ oil and gas (LNG) exports to affect the energy security of their largest importers, the APR economies, by making them vulnerable to instability in the ME’s oil and gas suppliers.

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IV-Conclusions: Meeting challenges A-Energy security imperatives and economic necessities suggest a prudent approach to the APRâ&#x20AC;&#x2122;s existing heavy dependency on imported oil and gas, which makes its forming economies vulnerable to developments in their supplying countries.

B-In particular, such approach is necessary for its phenomenal and increasing energy dependency on the ME although the mentioned scenario may not necessarily become a reality in the immediate future or future interruptions in the MEâ&#x20AC;&#x2122;s oil/gas supplies may be short-term.

C-Decreasing dependency on oil and gas through a major diversification of the regional energy mix to increase the share of other types of energy, particularly renewables and nuclear, should become a priority for the APR to ensure its energy security and economic health in the coming decades, added to addressing its large and growing GHG emissions.

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APERC Staff Meeting 28th

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