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Energy Security in PECC RegionEnergy Security in PECC Region

Dr. David Hong Taiwan Institute of Economic Research

28-30 November 2001

TIER 2WTI: West Texas IntermediateWTI: West Texas Intermediate

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World Oil Markets World Oil Markets World oil prices initially rose in September following the

terrorist attack, but then fell sharply as OPEC reassured world markets that it would maintain plentiful supplies on world markets. Also enhanced by weakening world oil demand, then West Texas Intermediate(WTI) crude oil spot price averaged $22.6 per barrel in October. Commercial oil stocks in OECD countries are expected to fall well within the average range throughout the forecast.

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OIL MARKET VOLATILITY OIL MARKET VOLATILITY

CONTINGENT CAUSESCONTINGENT CAUSES

-Oil suppliers’ Politico-military factors

-Accidental occurrence (e.g. Sept. terrorist attack)

-Market psychology and over reaction STRUCTURAL CAUSESSTRUCTURAL CAUSES

-Supply constraints and rapid growth of demand

-Supplier’s targeted-price policy

-Side effect of market liberalization

-“Green Impacts” + “Dash for Gas”

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Source: TIER Calculation based in APEC Energy Data Base (IEEJ)

1999 Crude oil & Petroleum Indigenous Production in PECC Region

24,5188,129

132,052

250

152,003

0

59,879

643 0

32,835

152,630

2,145 4,331 5,179 45

305,099

0 40 3,919

391,865

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000A

ustr

alia

Bru

nei

Can

ada

Chi

le

Chi

na

Hon

g K

ong

Indo

nesi

a

Japa

n

S. K

orea

Mal

aysi

a

Mex

ico

N. Z

eala

nd

P N

Gui

nea

Peru

Phili

ppin

es

Rus

sia

Sing

apor

e

Tai

wan

Thai

land

USA

Countries

Uni

t:KTO

E

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PECC Energy Supply Indicators

Crude Oil Proved ReservesPECC Energy Supply Indicators

Crude Oil Proved Reserves

0

10000

20000

30000

40000

50000

Crude Oil (Million barrels), 2000

Aus Bru Can Chil Chin HK Ind JapMal Mex NZ PNG Per Phil Rus Sin

SK CT Tha USA Vie

Source: Energy Information Administration/ APEC

USAUSA

RussiaRussia

MexicoMexicoChinaChina

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ECONOMIC AND SOCIAL IMPACTS OF OIL MARKET

VOLATILITY

ECONOMIC AND SOCIAL IMPACTS OF OIL MARKET

VOLATILITY It is essential to secure the adequate oil supply at reasonable price for sound and sustainable economic growth and social development. Yet, the recent oil market volatility is not resource-based. Supply cushion to deal with the fluctuation in supply-demand balance is difficult to work in the short term.

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Energy Supply / Demand

In PECC Region

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Source: TIER Calculation based in APEC Energy Data Base (IEEJ)

1999 Final Energy Consumption of Asian-Pacific Countries

76,534665

188,549

18,701

575,616

10,65860,741

359,698

136,46526,649

96,94212,991 824 8,563 17,112

482,355

3,56548,54440,293

1,621,312

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000A

ustr

alia

Bru

nei

Can

ada

Chi

le

Chi

na

Hon

g K

ong

Indo

nesi

a

Japa

n

S. K

orea

Mal

aysi

a

Mex

ico

N. Z

eala

nd

P N

Gui

nea

Peru

Phili

ppin

es

Rus

sia

Sing

apor

e

Tai

wan

Thai

land

USA

Countries

Uni

t: K

TOE

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Source: TIER Calculation based in APEC Energy Data Base (IEEJ)

1999 Primary Energy Supply in PECC Region

110,2151,837

256,649

23,993

723,622

14,24783,019

511,108

174,66852,878

149,12118,3071,145 9,369 29,953

583,112

20,75676,08660,363

2,254,689

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000A

ustr

alia

Bru

nei

Can

ada

Chi

le

Chi

na

Hon

g K

ong

Indo

nesi

a

Japa

n

S. K

orea

Mal

aysi

a

Mex

ico

N. Z

eala

nd

P N

Gui

nea

Peru

Phili

ppin

es

Rus

sia

Sing

apor

e

Tai

wan

Thai

land

USA

Countries

Uni

t:KTO

E

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1999 Excess Energy Supply in PECC Region1999 Excess Energy Supply in PECC Region

132,025

15,564

182,561

-11,751

115,315

-10,658

104,722

-257,917

-105,484

55,773

123,748

1,906 3,730 -645

-6,739

451,119

-3,565

-36,984-13,714

82,454

821,460

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

Aus

tral

ia

Bru

nei D

arus

sala

m

Can

ada

Chi

le

Chi

na

Hon

g K

ong,

Chi

na

Indo

nesi

a

Japa

n

Rep

ublic

of

Kor

ea

Mal

aysi

a

Mex

ico

New

Zea

land

Pap

ua N

ew G

uine

a

Per

u

Phi

lippi

nes

Rus

sia

Sin

gapo

re

Chi

nese

Tai

pei

Tha

iland

Uni

ted

Sta

tes

of A

mer

ica

Tot

al

Countries

Uni

t: K

TO

E

Excess Supply

Excess Supply means (Primary Energy Supply) –(Final Energy Consumption).Excess Supply means (Primary Energy Supply) –(Final Energy Consumption).

Source: TIER Calculation based in APEC Energy Data Base (IEEJ)Source: TIER Calculation based in APEC Energy Data Base (IEEJ)

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1999 Primary Energy Supply Sources in PECC Region

40%

27%

23%

7%

2%

1%

Crude oil & Petroleum Coal Natural Gas Nuclear Power Hydro Power Geothermal, Solar, etc.

Source: TIER Calculation based in APEC Energy Data Base (IEEJ)

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1999 PECC Energy Reserves1999 PECC Energy Reserves

0% 20% 40% 60% 80% 100%

Oil

Natural Gas

Coal

PECC Other Part of the World

Source: TIER Calculation based on B P Amoco Statistical Review of World Energy, 2000

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PECC Energy Production/Consumption

Increase in Past 20 years (1980-1999)

PECC Energy Production/Consumption

Increase in Past 20 years (1980-1999)

0% 100% 200% 300% 400% 500%

Total

Hydrolectric

Nuclear

Coal

Natural Gas

Oil

Production Consumption

Source: APEC Report, EIA 2000

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Promotion of Natural GasPromotion of Natural Gas Resource Potential in PECC Numbers of LNG, P/L projects being examined or

implemented, eg. China, Korea, Taiwan, ASEAN countries.

Advanced Technologies Advantage as a “Clean Fuel” But constraints are: Price competitiveness, requirement

for large-scale investment in infrastructure buildup.

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PECC Energy Supply Indicators

Natural Gas Proved Reserves

PECC Energy Supply Indicators

Natural Gas Proved Reserves

0

50

100

150

200

Natural Gas (Trillion cubic feet),2000

Aus Bru Can Chil Chin HK IndJap Mal Mex NZ PNG Per PhilSin SK CT Tha USA Vie

+ Russia: 1700

Source: Energy Information Administration/ APEC

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Promotion of CoalPromotion of Coal Abundant resource potential, eg. China. Top-class production capacity and record, eg. China: 2nd

largest producer. 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, Nox, Co2

emission). Importance of “clean technology”for further promotion on coal.

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PECC Energy Supply Indicator Coal Proved Reserves

PECC Energy Supply Indicator Coal Proved Reserves

0

50

100

150

200

250

300

Coal (Billion short tons), 1998

Aus Bru Can Chil Chin HK Ind JapMal Mex NZ PNG Per Phil Rus SinSK CT Tha USA Vie

Source: Energy Information Administration/ APEC

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Nuclear Power Development in PECCNuclear Power Development in PECC

New plants are constructed in Korea and China. Stagnation in US. In most Asia countries, nuclear power is promoted as: 1) Quasi-domestic energy 2) Mainstream of oil alternative 3) Important source of base-load power

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Promotion of Energy ConservationPromotion of Energy Conservation Energy conservation has benefits to: Limit energy demand and imports Reduce environment load Enhance economic competitiveness Energy conservation is a top priority in many PECC

economies. Governments set long-term target for energy conservation.

In reality, however, energy conservation is difficult to achieve due to the “income effect”. Energy intensity flattened out or increased in many economies.

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Alternative EnergyAlternative Energy

Outlook of Renewable Energy

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PECC Domestic Renewable Energy Share of the Primary

Energy supply

PECC Domestic Renewable Energy Share of the Primary

Energy supply

0%

20%

40%

60%

80%

100%

AusBruCanChiChnHK IndJapMalMexNZPerPhiRusSinKorCTThaUSVie

Hydro Solar/Wind/Other Geothermal Biomass

Source: APEC Energy Data Base (IEEJ), 2000

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CONSTRAINTS FOR RENEWABLE ENERGYCONSTRAINTS FOR RENEWABLE ENERGY

Relatively low price of fossil fuelsHigh initial investment costsLack of information dissemination Ineffective distribution and

marketing

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Outlook of RENEWABLE ENERGYOutlook of RENEWABLE ENERGY The renewable portfolio is diversified geographically in response to

available resources and technologies, and the level and structure of energy demand.

The portfolio is currently dominated by large-scale hydropower and biomass consumption.

But the development of large-scale hydropower will be limited in the future because of substantial environmental and social impacts.

Other renewable energies (solar, wind, geothermal, etc.) are growing rapidly (500-600% in the past two decades), but from a very small base.

Estimated total share continues to be around 2-8% in the next two decades.

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Policies for Energy SecurityPolicies for Energy Security

Diversifying Energy Import Sources Strengthening Ties with Oil Producers Investing Overseas Upstream Introducing Oil Producers’ Capital into Domestic

Downstream Market

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In principle, pursuit of energy security by each PECC economy can contribute to enhance energy security in whole PECC region.

However, if initiatives to enhance energy security conducted too exclusively, tensions could be generated and escalated among PECC economies, thus damaging regional energy security.

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International Strategic Alliance for Energy Security in PECC Region…

International Strategic Alliance for Energy Security in PECC Region…

International Cooperation for Crude Oil Storage International Cooperation for Crude Oil Exploration International Cooperation for Energy Technology

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Thank you very much!Thank you very much!