Energy Challenge in Asia

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Yasuo TANABE Yasuo TANABE

Director, International Affairs Division Director, International Affairs Division Agency of Natural Resources & Energy Agency of Natural Resources & Energy

Ministry of Economy, Trade and Industry, JAPAN Ministry of Economy, Trade and Industry, JAPAN

At Session 1 of IEA-KEEI Joint Conference on Northeast Asia Energy Cooperation

16-17 March, 2004, Seoul, Korea

“ “ Energy Challenge in Asia Energy Challenge in Asia " "

METI Ministry of Economy,

Trade and Industry

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1. Energy Challenge in Asia 1. Energy Challenge in Asia

2. Energy Situation in Asia 2. Energy Situation in Asia

3. Issues to be addressed 3. Issues to be addressed

33--1. Oil Market1. Oil Market 33--2. Energy Data2. Energy Data 3-3-3. Oil Stockpile3. Oil Stockpile 3-3-4. Natural Gas4. Natural Gas 3-3-5. Coal5. Coal

3-3-6. Energy Efficiency / Renewable6. Energy Efficiency / Renewable

4. Russian Projects 4. Russian Projects

5. 5. Forum, Dialogue & Cooperation Forum, Dialogue & Cooperation 6. Japan

6. Japan ’ ’ s Energy Policy Review s Energy Policy Review

Contents

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1. Energy Challenge in Asia 1. Energy Challenge in Asia

Energy Demand/Supply Situation Energy Demand/Supply Situation

- Rapid Growth of Energy Demand in Asia

- Increasing Dependence on Imported Energy (especially oil from the Middle East countries)

Challenge: Energy Security Challenge: Energy Security

- “Energy Security” in the broader sense:

- Secure stable supply of energy at a reasonable cost in an environmentally friendly manner

Enhancement of Asian Energy Security

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2. Energy Situation in Asia 2. Energy Situation in Asia

1. Major Focal Point of Growing Demand in the 1. Major Focal Point of Growing Demand in the

International Energy Market International Energy Market

2. IEA Members (Japan and Korea) &

Non Non - - members (China, ASEAN and so on) members (China, ASEAN and so on)

3. Indigenous Natural Gas & Oil Resources 3. Indigenous Natural Gas & Oil Resources

(China, Russia<East Siberia & Sakhalin>, (China, Russia<East Siberia & Sakhalin>,

and ASEAN producing countries)

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0 2000 4000 6000 8000 10000 12000 14000 16000

2000 2010 2020 2030

Mtoe 15,267

13,167

9,179

Source: ＩＥＡ/World Energy Outlook ２００２４０％

１０％

14%

20%

６％

５％

４３％

１１％

１３％

１９％

４％

５１％

１１％

11%

17%

４％

３％

４％

11,132

４７％

１１％

１２％

１９％

５％

３％

４％

５％

World Primary Energy Supply Outlook by Region World Primary Energy Supply Outlook by Region

Growing Energy Demand in Asia Region Growing Energy Demand in Asia Region

Latin Am.

America

Asia China Africa

Transition Economies

OECD

Excluding Japan & Korea

Middle East

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Natural Gas Reserves, Oil & Gas Projects in the Region Natural Gas Reserves, Oil & Gas Projects in the Region

30.5 30.5 1680.0

1680.0 Russia

Russia

（（including Sakhalinincluding Sakhalin））

1.6 1.6 90.0

90.0 Australia

Australia

1.4 1.4 75.0

75.0 Malaysia

Malaysia

1.7 1.7 92.5

92.5 Indonesia

Indonesia

1.0 1.0 53.3

53.3 China

China

0.3 0.3 13.8

13.8 Brunei

Brunei

Share of total

（％）

Proved Reserves

（TCF）

Gas Producing

Countries

>Natural Gas Reserves

Source: BP Statistics 2003

>Recent Projects

>Recent Projects PL Project from Russia

<East Siberia & Sakhalin>

Malaysia：

Tiga LNG

Indonesia：

Tangguh LNG

Australia: NWS LNG Guandong LNG Terminal

Guandong LNG Terminal Fujian LNG Terminal Fujian LNG Terminal

To Potential To Potential

Buyers Buyers West

West--East Gas PL ProjectEast Gas PL Project

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3. Issues to be addressed 3. Issues to be addressed

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8 10 12 14 16 18 20 22 24 26 28

1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 AL Formula price

To Asia To Europe To U.S.

Premium

T o Asia - T o Europe

Premium(Average)

0.94$/B

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Price（ $/B） Gap of price（ $/B）

3 3 - - 1. Oil Market 1. Oil Market

““Asian premiumAsian premium”” _is…_is_…

the situation that the price of oil which the Middle East export

the situation that the price of oil which the Middle East exports to Asia is higher by $1 s to Asia is higher by $1 〜〜

$1.5 than that to Europe and U.S.A.

>Establishing Oil Market in Asia>Establishing Oil Market in Asia

-Establishment of more open and transparent Asian - Establishment of more open and transparent Asian Oil Market will create better price mechanism and Oil Market will create better price mechanism and supply

supply - - demand balance. demand balance.

-Collective Asian demand should have market - Collective Asian demand should have market power vis

power vis - - à à - - vis suppliers vis suppliers

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3 3 - - 2. Energy Data 2. Energy Data

<Example: Joint Oil Data Initiative (JODI) >

- - To make the energy market function appropriately To make the energy market function appropriately and to make a right energy policy

and to make a right energy policy

-Energy data / Statistics fundamental - Energy data / Statistics fundamental -Harmonization, level up quality - Harmonization, level up quality

(accuracy, timeliness, coverage)

- - Capacity building Capacity building

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Decided to revise

Decided to revise ””ASEAN Petroleum Security AgreementASEAN Petroleum Security Agreement”” ₍₁₉₈₆₎₍₁₉₈₆₎ Planning to enhance regional emergency preparedness capability Planning to enhance regional emergency preparedness capability

（（₂₀₀₃₂₀₀₃））_._.

ASEAN ASEAN Keeping national oil stockpiling

Keeping national oil stockpiling＝＝ IEA members IEA members Japan & Korea

Japan & Korea

3 3 - - 3. Oil Stockpile 3. Oil Stockpile

China China

Decided to establish national oil stockpiling Decided to establish national oil stockpiling

Considering the continuous increase of Energy demand in Considering the continuous increase of Energy demand in Asia, as an Emergency Response Measure, Establishment of Asia, as an Emergency Response Measure, Establishment of Oil Stockpiling and regional cooperation in Asia is important.

Oil Stockpiling and regional cooperation in Asia is important.

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3 3 - - 4. Natural Gas 4. Natural Gas

>Natural Gas Development

>Natural Gas Development in Northeast Asia

in Northeast Asia

Kovikta Gas PL Kovikta Gas PL

West-West-East Gas PLEast Gas PL

LNG

LNG LNG

Sakhalin Gas PL Sakhalin Gas PL

LNG

>Recent Features in LNG Trade

Diversification of LNG market Diversification of LNG market

- - Increase of LNG suppliers and consumers (China, etc) Increase of LNG suppliers and consumers (China, etc) - - Increase of flexible contracts, spot transaction, swaps Increase of flexible contracts, spot transaction, swaps

between seasons, etc.

South Korea 16%

Taiwan 5%

North & South America

5%

Europe 26%

Japan 48%

>World LNG Trade

Asia’Asia’s Total Share: 69%s Total Share: 69%

Source: BP Statistics 2003

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12 Primary Energy Consumption in Asia

Primary Energy Consumption in Asia

3-5. Coal

Source: Institute of Energy Economics, Japan

Coal

Oil

Natural Gas Natural Gas

Hydraulic

Hydraulic NuclearNuclear

71.5

90.6 49.5

Natural Gas

Oil Coal

(g-CO2/MJ) Source: METI

Comparison of CO2 Emission per Calorie Comparison of CO2 Emission per Calorie

““Clean Coal Technology (CCT)Clean Coal Technology (CCT)”” will contribute towill contribute to……

¾Reduction of Environmental Load.¾Reduction of Environmental Load.

¾Effective Usage for other fossil fuels using coal as relatively ¾Effective Usage for other fossil fuels using coal as relatively rich resource. rich resource.

>Coal will remain as major energy source in Asia

>Coal will remain as major energy source in Asia till 2020.

till 2020.

>Emission of CO2 by consumption of Coal is

>Emission of CO2 by consumption of Coal is almost double of Natural Gas

almost double of Natural Gas

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13 Primary Energy Consumption per GDP 2001 Primary Energy Consumption per GDP 2001

Source: Energy Balance of OECD/Non-OECD Countries, IEA 2003

3 3 - - 6. Energy Efficiency & Renewable 6. Energy Efficiency & Renewable

0 100 200 300 400 500 600 700 800 900

China Korea Asia Total Japan

In Asia, each country shows different In Asia, each country shows different index on how much efficient in energy index on how much efficient in energy use.

use.

>Some countries have own technology

>Some countries have own technology and experience in efficient energy

and experience in efficient energy use.use.

>Possibility on cooperation to share

>Possibility on cooperation to share those technology and experience in those technology and experience in Asian countries.

Asian countries.

And also, And also,

>Renewable energy (hydro, solar, wind, geothermal, combustion,

>Renewable energy (hydro, solar, wind, geothermal, combustion, biomass, etc) to successfully deal with environment problems a biomass, etc) to successfully deal with environment problems and nd energy security,

energy security,

>Further cooperation of renewable energy policy in Asian countri

>Further cooperation of renewable energy policy in Asian countries .es .

TOE/MMUS$@1995

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4-4-1. Sakhalin Projects1. Sakhalin Projects

2007:

Commencement of Commencement of Natural Gas by Natural Gas by LNG *planning LNG *planning Max. 9.6MMt/yr Max. 9.6MMt/yr 2008:

2008:

Commencement of Commencement of Natural Gas by Natural Gas by pipeline *planning pipeline *planning Max. 6MMt/yr

Max. 6MMt/yr Length: 1,300

Length: 1,300--1,600km1,600km

1999:

Commencement of Commencement of Oil Production Oil Production Max. 180,000B/D Max. 180,000B/D 2005:

2005:

Commencement Commencement of Oil Production of Oil Production Max. 250,000B/D Max. 250,000B/D Schedule

Schedule

10 Billion USD 10 Billion USD 12 Billion USD

12 Billion USD Grand

Grand Project Project CostCost

Gas: approx. 17TCF Gas: approx. 17TCF Gas: approx. 17TCF

Gas: approx. 17TCF

Oil: approx.1.1 Oil: approx.1.1 Billion BBL Billion BBL Oil: approx.2.3

Oil: approx.2.3 Billion BBL Billion BBL Recoverable

Recoverable Reserves Reserves

Sakhalin Sakhalin--22 Sakhalin

Sakhalin--11

Source: Report from related companies

4. Russian Projects 4. Russian Projects

Sakhalin-1 Sakhalin-2

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-- Route:Route: From Angarsk to Nakhodka From Angarsk to Nakhodka -- Length: Length: 3,885km3,885km

-- Capacity: Capacity: 1MMB/D1MMB/D

-- Estimated Construction Cost: Estimated Construction Cost: approx. 6 billion USDapprox. 6 billion USD

-- Status: Status: Under consideration by Russian Gov.Under consideration by Russian Gov.

Source: Publication from Transneft

4-4-2. East Siberia Oil Development and Pipeline Project2. East Siberia Oil Development and Pipeline Project

Angarsk

Nakhodka PL Project from Russia<East Siberia & Sakhalin>

Sakhalin

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5. Forum, Dialogue & Cooperation 5. Forum, Dialogue & Cooperation

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- - Republic of Korea Republic of Korea

On 19 March 2004: The 12

^th^th

Korea Korea - - Japan Energy Policy Dialogue Japan Energy Policy Dialogue will be held.

will be held.

- - People’ People ’ s Republic of China s Republic of China On 23 October 2003: The 7

On 23 October 2003: The 7

^th^th

China China - - Japan Energy Policy Dialogue. Japan Energy Policy Dialogue.

- - Australia Australia

In May 2004: The 28

^th^th

Australia Australia - - Japan High Level Group on Energy Japan High Level Group on Energy and Minerals Consultations will be held.

and Minerals Consultations will be held.

- - Russian Federation Russian Federation Under Planning 3

Under Planning 3

^rd^rd

Russia Russia - - Japan Energy Policy Dialogue Japan Energy Policy Dialogue

Bilateral Fora Bilateral Fora

between Japan & other Asia Region Countries

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► ► ASEAN + 3 ASEAN + 3 (Japan, China, and Korea) (Japan, China, and Korea)

Energy Cooper

Energy Cooper ation ation

- - Priority areas Priority areas (from

(from “ “ HIRANUMA Initiative HIRANUMA Initiative ” ” , September 2002) , September 2002)

* Creation of an emergency network

* Initiative for the development of oil stockpiling

* Development of joint studies on the Asian oil market

* Initiative for the improvement of natural gas development

* Initiative for the improvement of energy efficiency and

* Initiative for the improvement of energy efficiency and renewable energy

renewable energy

- - Natural Gas Forum, to be held in Shanghai in 29 Natural Gas Forum, to be held in Shanghai in 29 - - 30 30 March 2004

March 2004

Multilateral Energy Forum

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► ► APEC APEC Energy Cooperation Energy Cooperation

“Energy Security Initiative“Energy Security Initiative”” (from 2000)(from 2000)

* Monthly oil data collection

* Energy information sharing, etc.

► ► IEF IEF (The International Energy Forum) (The International Energy Forum)

-- 8th Forum achievements (September, 2002)8th Forum achievements (September, 2002)

* Confirmation of collaboration between oil

* Confirmation of collaboration between oil-producing and oil -producing and oil consuming countries toward stabilization of the oil market consuming countries toward stabilization of the oil market

* Support for Joint Oil Data Initiative (JODI)

* Support for Joint Oil Data Initiative (JODI) (Priority: M

(Priority: M--1 Data on production, stocks, and demand)1 Data on production, stocks, and demand)

* Sharing awareness of the energy supply

* Sharing awareness of the energy supply-demand situation in Asia-demand situation in Asia

* Confirmation of the importance of natural gas

* Agreement to set up a permanent secretariat

* Agreement to set up a permanent secretariat -- 9th Forum: Amsterdam, May 20049th Forum: Amsterdam, May 2004

Multilateral Energy Forum

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6. Japan

6. Japan ’ ’ s Energy Policy Review s Energy Policy Review

Japan

Japan’’s Energy Policy including long-s Energy Policy including long-term outlook is under review. term outlook is under review.

Related Points:

1.Asian Regional Approach 1.Asian Regional Approach 2. Natural Gas Shift

2. Natural Gas Shift 3. 3. Oil Market in Asia Oil Market in Asia

4. Energy / Environment Integrated Policy