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Competition for Energy Security: A Challenge to Regional Cooperation 2004. 11. 27 whkim@kiep.go.kr Korea Institute for
Competition for Energy Security:
A Challenge to Regional Cooperation
2004. 11. 27
whkim@kiep.go.kr
Korea Institute for International Economic Policy
Won-Ho Kim, Director, Center for Regional Economic Studies
Contents . Growing economy, Growing consumption of Energy . Raising Gap between Demand and Supply of
   

Contents

 
 

. Growing economy, Growing consumption of Energy . Raising Gap between Demand and Supply of Oil . Energy-consuming Structure . Alternatives to Short Supply of Oil . Petrodiplomacy . Regional Cooperation and/or Competition

 
 
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I. Growing economy, Growing consumption of Energy Asia has become a principal driver in world energy
   
  • I. Growing economy, Growing consumption of Energy

 
 

Asia has become a principal driver in world energy market, largely due to Chinas remarkable growth in demand

 

1. Energy importers in Asia

China

  • - Accounts for 12.1% of the worlds energy consumption,

while the US reaches 24% - Chinas rising oil demand and import is a significant factor in world oil markets

Japan

  • - Depended on external sources to keep its economy running

  • - 2 nd largest energy importer after the US

 
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I. Growing economy, Growing consumption of Energy Asia has become a principal driver in world energy
   
  • I. Growing economy, Growing consumption of Energy

 

Northeast Asia

 
 
  • - Worlds fifth oil importer and second largest LNG importer after Japan

  • - Depends on oil for 55% of its energy consumption

South Asia

  • - Contains more than one-fifth of the worlds population

  • - Experiencing rapid energy demand growth

India

  • - Coal meets more than half of Indias energy demand and oil makes up 30% of its energy portfolio

  • - Imports 73% of its oil

 
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I. Growing economy, Growing consumption of Energy □ Thailand - Energy consumption is growing rapidly as
   
  • I. Growing economy, Growing consumption of Energy

 

Thailand

 
 
  • - Energy consumption is growing rapidly as a result of strong economic growth in this country

2. Energy Exporters in Asia Bangladesh

  • - Large potential natural gas reserves as world energy markets

Brunei

  • - Large liquefied natural gas producer (third largest in Asia)

  • - Located close to vital sea lanes through the South China Sea linking the Indian and Pacific Oceans

 
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I. Growing economy, Growing consumption of Energy □ Thailand - Energy consumption is growing rapidly as
   
  • I. Growing economy, Growing consumption of Energy

 

Indonesia

 
 
  • - OPEC membership and substantial, but declining, oil production

  • - World's largest liquefied natural gas (LNG) exporter

Malaysia

  • - 75 trillion cubic feet of natural gas reserves

  • - Net oil exports of almost 300,000 barrels per day

Vietnam

  • - Potential to become a regional oil and natural gas supplier

 
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II. Raising Gap between Demand and Supply of Oil As the gap b/t consumption and production
   

II. Raising Gap between Demand and Supply of Oil

 
 

As the gap b/t consumption and production levels in Asia expands, concerned that tight supplies and consequent high prices may constrain economic growth

 

China

  • - Demand for oil will nearly double by 2020

  • - Chinese annual growth of oil demand reaches 4.6%

(2.5 times the world average of 1.9%)

  • - Chinas demand for oil will continue to grow at 5% or more

India

  • - Needs to triple its power generation by 2025 to feed fast-growing technology and manufacturing industries

  • - Shorter on energy resources than China

 
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II. Raising Gap between Demand and Supply of Oil As the gap b/t consumption and production
   

III. Energy-consuming Structure

 

Industrial Structure of China

 
 
  • - Factory of the world

  • - A Fast growing economy requires more energy

  • - Chinas modernization drive has produced a manufacturing structure that requires huge increases in energy consumption

  • - Oriented toward industries that are primarily energy-driven

  • - Heavy industrial structure is the tremendous waste of energy

  • - China uses three times or more as much energy as the global average to generate every $1 of GDP,

 
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III. Energy-consuming Structure □ Consumption Pattern of China - Policies for energy efficiency and energy conservation,
   

III. Energy-consuming Structure

 

Consumption Pattern of China

 
 
  • - Policies for energy efficiency and energy

conservation, but weak in implementation

  • - The transport sector is an extreme example of inefficient energy usage

  • - Household electrical appliances are all growing at an unprecedented rate

Conservation

  • - China must curb its demand for more energy and focus on conservation

  • - Push for cooperation between China and other major powers to explore energy and secure the oil supply

  • - Easing Chinas energy crisis through non-traditional means

 
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IV. Alternatives to Short Supply of Oil □ Diversification - Most of China ’ s power
   

IV. Alternatives to Short Supply of Oil

 

Diversification

 
 
  • - Most of Chinas power is generated by coal

  • - Large deposit of natural gas, yet it makes up only 2% of its energy supply, far below the world average of 23%

Overseas Supply

  • - The Chinese government seems to have adapted and

combined all the approaches in its overall energy strategy

  • - Chinas approach to security of energy supply is based

on uncertaininternational energy markets and a

preference for self-reliance

 
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IV. Alternatives to Short Supply of Oil - Key element of official strategy • Build political
   

IV. Alternatives to Short Supply of Oil

 
 
  • - Key element of official strategy

 

Build political relations with a wide range of oil exporting nations Construct pipelines from oil fields in neighboring countries

  • - China has signed billions of dollars in deals around the

world in energy purchasing and pipeline building

  • - Chinese companies have stepped up their investment abroad to acquire direct control or partial rights in some of the world potential petroleum fields

 
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IV. Alternatives to Short Supply of Oil - Key element of official strategy • Build political
   

V. Petrodiplomacy

 
 

20% of Chinas oil and gas come from Africa and 40% from the Middle East

 

Middle East

  • - Middle East still remains as the traditional and vast oil tank where most of the worlds remaining oil lies - Chinas new plan to enhance energy cooperation with 6 Gulp countries through Gulf Cooperation Council (GCC)

Africa

  • - China is attracted to the relatively under-exploited petroleum resources in Africa

  • - China has already signed deals to import oil from Nigeria, Gabon, Equatorial Guinea, Cameroon and Angola

 
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V. Petrodiplomacy □ Russia - As China, Japan and South Korea scramble to meet their energy
   

V. Petrodiplomacy

 

Russia

 
 
  • - As China, Japan and South Korea scramble to meet their energy needs, the largely undeveloped resources of neighboring Siberia have become the prize

 
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V. Petrodiplomacy □ Russia - As China, Japan and South Korea scramble to meet their energy
   

VI. Regional Cooperation and/or Competition

 

Asias Undeclared Oil War

 
 
  • - Between China and Japan, a diplomatic battle over access to the big oil field in Siberia has broken out

  • - The regions energy thirst is so intense, so is their quest for energy security

  • - Potential consequences of rising energy competition in Asia vary, ranging from dire predictions of conflict to scenarios for unprecedented regional cooperation

China-Japan Conflicts

  • - Diplomatic battle over access to the natural gas field in Chungxiao - Japan, depends on imported oil, is lobbying Moscow for a 2,300-mile pipeline from Siberia to the Pacific port of Nakhodka

 
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VI. Regional Cooperation and/or Competition - China settled a long-standing border dispute with Moscow and promised
   

VI. Regional Cooperation and/or Competition

 
 
  • - China settled a long-standing border dispute with Moscow and promised some $12 billion in business investment in Russia

 

India-Pakistan Cooperation

  • - Agreed to negotiate on energy cooperation with Pakistan, indicating the possibility

of unprecedented regional cooperation

Desperate Regional Cooperation

  • - Energy importers in Asia rely on oil subsidies, import tariff reductions, oil consumption regulation as short-term measures - Concerns about inflation, economic slowdown, and fiscal constraints

 
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VI. Regional Cooperation and/or Competition - China settled a long-standing border dispute with Moscow and promised
   
   
 

Thank you

 
VI. Regional Cooperation and/or Competition - China settled a long-standing border dispute with Moscow and promised
 
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