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The South-East Asia Perspectives on the Challenges to Energy Security and the Sustainable Use of Energy

Prepared by Energy Security Division Energy Studies Institute

National University of Singapore

Contributors:

Dr Hooman Peimani, Principle Fellow and Head Dr Eulalia Han, Fellow

Mr Nur Azha Putra, Research Associate Ms Su Liying, Energy Analyst

DRAFT

September 2012

Note by the Secretariat: The draft presented here is as per the original submission before the Consultation Meeting. The draft is being revised upon the comments made by the Consultation meeting held from 3-5 October 2012. The revised background document will be circulated among the participants of the Consultation Meeting prior to its finalization.

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List of Figures

Figure 1: Electricity Generation of Non-fossil Energy in ASEAN, 1990-2030 (TWh).……………….….……. 28

List of Tables

Table 1: Basic Indicators of Southeast Asia ………………………………………………………………....….. 6

Table 2: Southeast Asia’s Conventional Fossil Energy Reserves………………………………………...…..…..7

Table 3: Southeast Asia’s Unconventional Fossil Energy Reserves ………………………………………..…....8

Table 4: Southeast Asia’s Energy Mix…………………………………….………………………………...…... 9

Table 5: Southeast Asia’s Energy Mix (in percentage)……………………………..…………………...…...….. 9

Table 6: ASEAN’s Primary Energy Consumption (Mtoe) …...…………………………………………...…….10

Table 7: Timor-Leste 2006: Useful Energy Share of Major Fuels for All Sectors ……...……..……….……… 11

Table 8: Individual ASEAN Countries Primary Energy Consumption Outlook [BAU]………………………...11

Table 9: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Brunei Darussalam in 2009..13

Table 10: Supply and Consumption of Fossil and Non-fossil Energy Resources in Cambodia in 2009…..….....13

Table 11: Supply and Consumption of Fossil and Non-fossil Energy Resources in Indonesia in 2009...…....….14

Table 12: Supply and Consumption of Fossil and Non-fossil Energy Resources in Malaysia in 2009 ….……...14

Table 13: Supply and Consumption of Fossil and Non-fossil Energy Resources in Myanmar in 2009 …...……15

Table 14: Supply and Consumption of Fossil and Non-fossil Energy Resources in the Philippines in 2009.…..15

Table 15: Supply and Consumption of Fossil and Non-fossil Energy Resources in Singapore in 2009..….........16

Table 16: Supply and Consumption of Fossil and Non-fossil Energy Resources in Thailand in 2009....…...…..16

Table 17: Supply and Consumption of Fossil and Non-fossil Energy Resources in Vietnam in 2009....…..…....17

Table 18: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Timor-Leste………..…..…17

Table 19: Renewable Energy in Southeast Asia Countries (KTOE)……………………………...……...……....19

Table 20: Access to Modern Fuels in Southeast Asia……………………………………………..……..............23

Table 21: Electricity Access in Southeast Asia, 2009…………………………………………………………....24

Table 22: Electricity Generation by Country, 2009 (GWh)…………………………………………………...…27

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List of Acronyms ACE ASEAN Centre for Energy

ADB Asian Development Bank

AFOC ASEAN Forum on Coal

APAEC ASEAN Plan of Action for Energy Cooperation

APG ASEAN Power Grid

ASCOPE ASEAN Council on Petroleum

ASEAN Association of Southeast Asian Nations

CBM Coalbed Methane

CO2 Carbon Dioxide

EE Energy Efficiency

EECCHI Energy Efficiency and Conservation Clearing House Indonesia

EE&CO Energy Effiency and Conservation Office (Vietnam)

EE&C-SSN Energy Efficiency and Conservation Sub-Sector Network

EIB Energy Information Bureau (Malaysia)

EU European Union

E2PO Energy Efficiancy Programme Office (Singapore)

GDP Gross Domestic Product

GHG Greenhouse Gasses

GWh Gigawatt-hours

HAPUA Heads of ASEAN Power Utilities/Authorities

IEA International Energy Agency

KTOE Thousand Tons of Oil Equivalent

LNG Liquefied Natural Gas

LPG Liquefied Petroleum Gas

MTOE Million Tons of Oil Equivalent

MW Megawatt

NRSE-SSN New and Renewable Sources of Energy Subsector Network

SEA South-East Asia

SPP Small Power Producer

TAGP Trans-ASEAN Gas Pipelines

TWh Terawatt-hours

UAE United Arab Emirates

UNDAF United Nations Development Assistance Framework

VSPP Very Small Power Producer

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http://en.wikipedia.org/wiki/Association_of_Southeast_Asian_Nations

Table of Contents Chapter I: Introduction .............................................................................................................. 5

A-Brief description of the Sub-region ................................................................................... 5

B-Energy Situation ................................................................................................................. 6

1-Fossil Energy Resources of SEA .................................................................................... 6

2- SEA’s Energy Mix and the Production and Consumption of Oil, Gas and Coal .......... 8

Chapter II: Major challenges relevant to enhancing energy security and the sustainable use of energy ....................................................................................................................................... 18

A. Major sustainable development challenges to energy security ....................................... 18

B. Major energy challenges ................................................................................................. 22

1. Access to energy services ............................................................................................ 22

2. Energy Efficiency ........................................................................................................ 24

3. Renewable Energy ....................................................................................................... 26

4. Energy Trade ................................................................................................................ 28

5. Energy pricing, subsidies and taxation ........................................................................ 30

C. Linkages between sustainable development and energy challenges ............................... 32

Chapter III: Opportunities for the sub-region to enhance energy security and the sustainable use of energy ............................................................................................................................ 33

A. Driving forces that could remove the barriers ................................................................ 33

B. Existing initiatives ........................................................................................................... 35

C. Actions that could be taken through regional cooperation .............................................. 39

D. Analysis of the existing activities ................................................................................... 40

Chapter IV: Political Commitments....................................................................................... 40

A. Critical elements that the sub-region would like to see reflected in Ministerial Declaration ........................................................................................................................... 41

B. Justification ..................................................................................................................... 41

Chapter V: Proposed Actions................................................................................................... 42

Bibliography ............................................................................................................................ 46

Endnotes ................................................................................................................................... 49

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Chapter I: Introduction Energy Security is certainly one of the major preoccupations of all countries. They all need adequate amount of desired types of energy at an affordable price in a sustainable manner to ensure the normal operation of their countries and their economic and social development. Added to energy, various factors at the national, regional and international levels affect countries’ quest for energy security to a varying extent, namely political, economic, social, military/security and environmental. Hence, energy security is a multi-dimensional issue complicated by the mentioned factors of which some are beyond the control of any given country. This reality is applicable to all countries, regions and subregions, including South-East Asia (SEA). Against this background, the main objective of this report is to develop the South-East Asia’s perspectives on the challenges to energy security and the sustainable use of energy. Towards this end, certain topics are covered each dealing with one aspect of the perspectives. Thus, Chapter II focuses on the major challenges relevant to enhancing energy security and the sustainable use of energy in SEA under which it discusses the major sustainable development challenges as well as the major energy challenges. It also elaborates on the linkages between sustainable development and energy challenges. Chapter III concentrates on the opportunities for the sub-region (SEA) to enhance energy security and the sustainable use of energy. It therefore analyzes certain issues, including the driving forces that could remove the barriers to achieving this objective as well as the existing initiatives. Actions that could be addressed through regional cooperation are also studied while providing an analysis of the existing activities by the major regional and international entities concerned with SEA. Chapter IV deals with the political commitments required for achieving energy security and the sustainable use of energy. For this matter, the critical elements that the sub-region would like to see reflected in the Ministerial Declaration and their justifications are provided. Finally, Chapter V offers certain proposed actions for which it prioritizes the challenges and opportunities.

*** Energy security takes place within a certain geographical framework with specific socio-economic characteristics, which determines the challenges and the opportunities shaping countries’ efforts towards this end. It is therefore necessary to discuss briefly the overall situation of SEA’s forming countries and of course their energy situation as provided below.

A-Brief description of the Sub-region SEA is a large sub-region stretching from the Bay of Bengal to the Philippine Sea sharing sea and land borders with the Asia-Pacific’s large economies (Australia, China, India, Japan and South Korea). Scattered over a large area, together the regional countries account for a significant land area (almost 2.8 million km2) on which over 620 million people live. Its 11 forming countries have different economies in terms of size, complexity and diversification. However, within a degree of fluctuation, they have all experienced steady growth starting in the 20th century’s last decade. Their GDP growth has been especially significant over the last decade as evident in their most recent rates (2011) provided in Table 1. Although they were

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all affected to a varying extent by the severe economic/financial crisis of 2007-2010 like all other regions and subregions, they have maintained their growth despite the continuity of the crisis to a differing extent in many regions and particularly the European Union (EU).

Table 1: Basic Indicators of Southeast Asia

Country **Area (square km) *Population (million) *GDP

($US - billion)

*Economic Growth Rate (per cent)

Brunei Darussalam 5,765 0.405,900 12.37 2.6 (as of 2010)

Cambodia 181,035 41.31 12.88 6.9 Indonesia 191,093,1 242.3 846.8 6.5 Laos 236,800 6.288 8.298 8.0 Malaysia 330,803 28.86 278.7 5.1 Myanmar 676,578 48.34 **18.9 **4.8 Philippines 300,000 94.85 224.8 3.7 Singapore 710 5.184 239.7 4.9 Thailand 513,120 69.52 345.6 0.1 Timor-Leste 14,874 1.176 1.054 10.6 Vietnam 331,212 87.84 124 5.9 Source: Author’s creation using data provided by The World Bank and UNDATA listed below. * The World Bank, Country and Economies. 2011. (http://data.worldbank.org/country; accessed on 12 September, 2012). ** UNDATA, Country Profile – 2009. (http://data.un.org/; accessed on 12 September, 2012). The sub-regional countries are at different levels of social and economic development and thus have different needs to be met through their development projects. Yet, they all need the continuity of such development to address their underdevelopment in different areas such as infrastructure, agriculture, industry and service sectors. Added to this need, their large and growing population with improving living standards has guaranteed large and increasing energy consumption. As a result, meeting the energy needs of the SEA countries in a sustainable manner to ensure their continued growth has become a major preoccupation of the sub-regional governments to give prominence to energy security. It is therefore necessary to have a clear understanding about SEA’s energy situation as follows. The Asia-Pacific region of which SEA is a part is the world’s largest energy-consuming region. Being much smaller in terms of economy and population than two other Asia-Pacific sub-regions (North-East Asia and South Asia), SEA follows the regional pattern of energy consumption as its sub-region to be discussed below.

B-Energy Situation This section elaborates on SEA’s fossil energy (conventional and unconventional) and non-fossil energy resources, the sub-regional energy mix and supply and demand and the sub-regional pattern on energy dependency and trade.

1-Fossil Energy Resources of SEA The Association of Southeast Asian Nations (ASEAN) region is rich in oil, gas and coal resources as reflected in Table 2. In addition to conventional fossil energy reserves, it also has significant deposits of unconventional fossil energy such as coalbed methane (CBM).

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http://data.worldbank.org/country

http://data.un.org/

Unconventional fossil energy exploration in this region (Table 3), however, is only at its stage of infancy unlike in North America. • Conventional oil, gas and coal The major ASEAN players with the largest regional oil reserves are Brunei, Indonesia and Malaysia. These resources make the three sub-regional countries excluding Indonesia meet their domestic needs while providing for their exports; Indonesia is a net importer of crude oil. Other sub-regional countries have either no oil resources at all or their reserves are too small to meet the bulk of their domestic oil requirements, let alone make them self-sufficient.

Table 2: Southeast Asia’s Conventional Fossil Energy Reserves

Country

Proved Oil Reserves in ASEAN + Timor Leste

(Billion Barrels) – 2011

Proved Gas Reserves in ASEAN + Timor Leste

(Trillion Cubic Meters) - 2011

Proved Coal Reserves in

ASEAN + Timor Leste

(Million Tones) - 2011

Brunei 1.1 0.3 Nil Cambodia Nil Nil Nil Indonesia 4 3 5,529

Laos Nil Nil Nil Malaysia 5.9 2.4 4 Myanmar ***2.1 ***25 2

Philippines ****0.14 ***0.9 316 Singapore Nil Nil NIL Thailand 0.4 0.3 1,239

Timor-Leste **0.9 **11.7 Nil Vietnam 4.4 0.6 150

NIL = Not available Source: Author’s creation using data provided by BP listed below. BP Statistical Review of World Energy June 2012. (http://www.bp.com/statisticalreview; accessed 14 September 2012). **Appendix 1: La’o Hamutuk. “Appendix 1. Oil and gas fields and near Timor-Leste.” Sunrise LNG in Timor-Leste: Dreams, Realities and Challenges, Timor-Leste Institute for Reconstruction Monitoring and Analysis, February 2008. (http://www.laohamutuk.org/Oil/LNG/app1.htm; accessed on 13 September 2012). ***‘Myanmar Invites Foreign Energy Firms to Explore 23 Offshore Oil, Gas Blocks’, Dow Jones Newsire in NASDAQ. 18 July 2012. (http://www.nasdaq.com/article/myanmar-invites-foreign-energy-firms-to-explore-23-offshore-oil-gas-blocks-20120718-00011; accessed on 14 September 2012). *** World Energy Council. 2010 Survey of Energy Sources. (http://www.worldenergy.org/documents/ser_2010_report_1.pdf; accessed on 14 September 2012). Indonesia and Malaysia possess the sub-region’s largest gas reserves making them self-sufficient in gas with a strong export capability. Having much smaller gas deposits, Brunei is also a major regional exporter. Timor Leste whose gas resources are small is in the process of developing them also for export. Indonesia and Thailand have the region’s largest coal reserves. Yet, Indonesia and Vietnam are the two sub-regional countries with export capabilities leading by the former. • Unconventional fossil energy in the ASEAN region SEA’s unconventional fossil energy resources only exist in Indonesia, the Philippines, Thailand and Vietnam. These countries do not have any specific project for their development or are still at the very early stages of their exploration (Indonesia). Consequently, the production of such energy in SEA is very low. The four countries’

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http://www.bp.com/statisticalreview

http://www.laohamutuk.org/Oil/LNG/app1.htm

http://www.nasdaq.com/article/myanmar-invites-foreign-energy-firms-to-explore-23-offshore-oil-gas-blocks-20120718-00011


http://www.worldenergy.org/documents/ser_2010_report_1.pdf

unconventional oil exploration is hardly developed because of several reasons particularly its unavailability at a large scale. When it comes to natural bitumen, for instance, there is only one significant deposit with 4,456 million barrels of discovered reserves in Indonesia.1 Hence, the unconventional oil, including natural bitumen, is unable to play a major role in SEA’s unconventional energy industry. However, there is a potential for faster growth of SEA’s unconventional gas production, with a great potential for the CBM reserves in Indonesia, the Philippines and Vietnam. Indonesia started its CBM exploration in 2008. However, its specifics are unknown, including its current annual production. In Vietnam and the Philippines, the CBM industry is also emerging. Table 3 provides a summary of the regional unconventional resources.

Table 3: Southeast Asia’s Unconventional Fossil Energy Reserves Country Bitumen

(million barrels)

Oil Shale (billion tons)

CBM (billion cubic meters)

Shale Gas (billion cubic

meters) Indonesia 4,4561 Nil 12,8302 16,1403

Philippines Nil Nil 10.318-16.4164 Nil Thailand Nil 18.6685 Nil Nil Vietnam Nil Nil 170-2806 Nil

NIL = Not available Source: Author’s creation based on the following sources: 1. World Energy Council, Survey of Energy Resources 2007 (London: World Energy Council, 2007), p. 133. 2. CBM Asia, Indonesia. (http://www.cbmasia.ca/s/Indonesia.asp; assessed on 2 February 2012) 3. Nurseffi Dwi Wahyuni, “Shale Gas Potential of Indonesia at 570 T Cubic Feet,” Indonesia Finance Today, 27 May 2011. (http://en.indonesiafinancetoday.com/read/5886/Shale-Gas-Potential-of-Indonesia-at-570-T-Cubic-Feet-; assessed on 20 January 2012) 4. Romeo M. Flores , Gary D. Stricker, Ramon F. Papasin , Ronaldo R. Pendon, Rogelio A. del Rosario, Ruel T. Malapitan, Michael S. Pastor, Elmer A. Altomea, Federico Cuaresma, Armando S. Malapitan, Benjamin R. Mortos, and Elizabeth N. Tilos, The Republic of the Philippines coalbed methane assessment: based on seventeen high pressure methane adsorption isotherms: U.S. Geological Survey Open−File Report 2006-1063, Reston, Virginia: U.S. Geological Survey, 2006. (http://www.usgs.gov/of/2006/1063; accessed on 27 April 2012) 5. Apiradee Suwannathong and Damrong Khummongkol, Oil Shale Resource in Mae Sot Basin, Thailand, paper presented at 27th Oil Shale Symposium 15-17 October 2007, Colorado Energy Research Institute. (http://ceri-mines.org/documents/27symposium/papers/ma11-4suwannathong.pdf; accessed on 6 February 2012) 6. Do, Thai Son Do, Coal Bed Methane is Hot in Vietnam, Frost & Sullivan, 7 August 2008. (http://www.frost.com/prod/servlet/market-insight-top.pag?docid=140182389; assessed on 6 February 2012)

2- SEA’s Energy Mix and the Production and Consumption of Oil, Gas and Coal The SEA’s energy mix is dominated by fossil energy, oil, gas and coal (Table 4) although renewables dominates those of Cambodia, Lao PDR, Myanmar and Timor Leste having small energy consumption (Table 8). Yet, the subregion is not self-sufficient in fossil energy with the effect of requiring an increasing amount of imports of such energy from other energy-producing regions. This reality has created a growing energy dependency on those regions for the ASEAN region accounting for almost the entire SEA excluding Timor Leste.

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http://www.cbmasia.ca/s/Indonesia.asp

http://en.indonesiafinancetoday.com/read/5886/Shale-Gas-Potential-of-Indonesia-at-570-T-Cubic-Feet-

http://www.usgs.gov/of/2006/1063

http://ceri-mines.org/documents/27symposium/papers/ma11-4suwannathong.pdf


http://www.frost.com/prod/servlet/market-insight-top.pag?docid=140182389

Table 4: Southeast Asia’s Energy Mix

*ASEAN Primary Energy Mix (KTOE)

**Timor-Leste Primary Energy

Mix (thousand tons)

Fuel Type 1990 1995 2000 2005 2010 2006 Natural

Gas 25,523 41,876 62,949 108,111 166,162 0

Coal 12,499 18,526 26,524 43,255 75,404 0 Oil 89,105 113,648 16,620 23,953 42,837 75.5

Hydro 7,596 11,448 16,620 23,953 42,837 0

Others 1,361 1,982 2,901 3,324 4,099 600 (Biomass: Fuel-Wood)

Note: KTOE=Thousand Tons of Oil Equivalent Source: Author’s creation using data provided by ASEAN and the World Bank listed below. * United Nations Economic and Social Commission for Asia and the Pacific, “Association of Southeast Asian Nations.” (http://www.unescap.org/esd/Energy-Security-and-Water-Resources/energy/trade_and_cooperation/cooperation/soc1/documents/Presentation%20ASEAN-CFE.pdf; accessed on 20 September 2012) ** World Bank, “Table 1: Timor-Leste 2006: Useful Energy Share of Major Fuels for All Sectors,” Timor-Leste Key Issues in Rural Energy Policy (Washington, D.C.: World Bank, December 2010, p.1). (http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf; accessed on 20 September 2012)

Table 5: Southeast Asia’s Energy Mix (in percentage)

*ASEAN Energy Mix (2010) **Timor-Leste Primary Energy (2006)

Natural Gas 32 0 Coal 14.5 0 Oil 44.4 11

Hydro 8.3 0 Others 0.8 89 (Biomass: Fuel-Wood)

Source: Author’s creation using data provided by UNESCAP and the World Bank listed below. * United Nations Economic and Social Commission for Asia and the Pacific, “Association of Southeast Asian Nations.” (http://www.unescap.org/esd/Energy-Security-and-Water-Resources/energy/trade_and_cooperation/cooperation/soc1/documents/Presentation%20ASEAN-CFE.pdf; accessed on 20 September 2012) **World Bank, “Table 1: Timor-Leste 2006: Useful Energy Share of Major Fuels for All Sectors,” Timor-Leste Key Issues in Rural Energy Policy (Washington, D.C.: World Bank, December 2010, p.1). (http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf; accessed on 20 September 2012) As evident in Table 5, non-fossil energy accounts for a small fraction of the sub-regional energy mix although its share of the individual SEA countries’ energy mix varies from one country to another. In general, the SEA’s potentials for renewables are yet to be harnessed fully. The sub-region currently lacks nuclear energy, which will change once Vietnam’s nuclear project is fully implemented. Evidence suggests that non-fossil energy’s role in meeting the sub-regional energy requirements will remain small in the foreseeable future despite the sub-regional countries’ projects in this field. The SEA as a whole is a net importer of fossil energy. Even not all of its energy-rich countries are considered net energy exporters. Brunei and Malaysia are fully self-sufficient in their oil and gas needs and have an export capability for these fuels, but Malaysia imports

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http://www.unescap.org/esd/Energy-Security-and-Water-Resources/energy/trade_and_cooperation/cooperation/soc1/documents/Presentation%20ASEAN-CFE.pdf


http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf




coal. Vietnam’s oil production is slightly above its consumption to leave the country a small export capability while its gas production is only enough to meet its domestic needs; its coal production is significantly above its consumption securing it an export capability. Indonesia has been a net importer of oil since 2008 when its OPEC membership was suspended due to its inability to meet its export quota. However, it has maintained a significant coal and gas export-capability while meeting its domestic needs in these fuels. Brunei has small oil and gas production while its consumption is also small leaving a small export capacity for the country. Finally, Timor Leste has a small oil export capacity while its small gas reserves are yet to be developed. Although the sub-region is currently considering the potential of including a substantial amount of renewable energy in its energy mix, it will remain highly dependent on fossil energy in the foreseeable future. By 2030, fossil fuels will make up 84.4 percent of ASEAN’s energy mix (constituting almost the entire subregion’s energy mix due to the small energy consumption of Timor Leste) and the remainder will be accounted for by hydro, geothermal and other energy sources.2 Therefore, as it is the case today, a wide disparity between the consumption of fossil energy compared to that of non-fossil energy will remain in place as the ASEAN countries’ consumption of fossil energy continues to increase significantly.3 This is evident in Table 6 containing ASEAN’s primary energy consumption in 1990, 2005 and 2010 and its projected energy consumption in 2015, 2020 and 2030.

Table 6: ASEAN’s Primary Energy Consumption (Mtoe)*

Source: ASEAN, ASEAN Plan of Action for Energy Cooperation 2010-2015 (Jakarta: The ASEAN Secretariat, July 2009), p. 6. *Mtoe: million tons of oil equivalent Similar data on Timor Leste is unavailable. Yet, the available data suggests that Timor Leste’s energy mix is dominated by a renewable (biomass) accounts for the bulk of its energy consumption, mainly used by households. As reflected in Table 7 based on the most recent available data on the country’s energy mix (2006), the consumption of biomass (fuel-wood) exceeds that of all other fuels combined, including fossil energy, accounting for 51.9% of its energy mix in 2006. This is mainly due to the undeveloped and rural nature of its economy, which has been in the process of development since its independence.

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Table 7: Timor-Leste 2006: Useful Energy Share of Major Fuels for All Sectors

Source: World Bank, “Table 1: Timor-Leste 2006: Useful Energy Share of Major Fuels for All Sectors,” Timor-Leste Key Issues in Rural Energy Policy (Washington, D.C.: World Bank, December 2010, p.1). (http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf; accessed on 20 September 2012) Having no coal production and is yet to develop its gas reserves, more recent data (2011) only provides for Timor Leste’s oil production, consumption and export. Yet, given the country’s rapid economic development is a very recent trend, it seems that the 2006 pattern of energy mix dominated by biomass (mentioned above) still persists. The ASEAN energy ministers link ASEAN’s growing dependence on oil to the growth in consumption in its transport sector, while its growing consumption of coal is due to the increase in electricity production/usage.4 There is a growing dependence on coal and gas amongst the ASEAN countries as they are cheaper compared to oil, and coal’s abundance in the region. Table 8 provides the projected primary energy consumption for the ASEAN countries in 2020 and 2030 compared to their 2007 actual consumption reflecting the regional dependency on fossil energy. Table 8: Individual ASEAN Countries Primary Energy Consumption Outlook [BAU]*

Country Primary Energy

Consumption

2007 (Mtoe)

2020 (Mtoe)

2030 (Mtoe)


Consumption

2007 (Mtoe)

2020 (Mtoe)

2030 (Mtoe)

Brunei Total 2.8 4.1 5.4 Cambodia Total 5.2 9.3 13.2 Coal - - - Coal - 2.0 2.6 Oil 0.8 1.4 1.9 Oil 1.5 2.7 4.4 Natural Gas 2.0 2.8 3.5 Natural Gas - - - Nuclear - - - Nuclear - - - Hydro - - - Hydro 0.0 0.8 2.0 Geothermal - - - Geothermal - - - Others - 0.0 0.0 Others 3.6 3.8 4.2 Indonesia Total 191.4 344.4 592.9 Lao PDR Total 2.2 6.2 8.7 Coal 36.8 102.4 209.1 Coal 0.1 3.1 3.3 Oil 60.9 116.6 191.8 Oil 0.5 1.4 2.5 Natural Gas 34.4 44.0 88.3 Natural Gas - - - Nuclear - - - Nuclear - - - Hydro 1.0 2.7 2.7 Hydro 0.3 1.4 1.9 Geothermal 6.0 16.6 26.5 Geothermal - - - Others 52.4 62.2 74.4 Others 1.3 0.3 1.0

Table 7 continues over to the next page

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Country Primary

Energy Consumption

2007 (Mtoe)

2020 (Mtoe)

2030 (Mtoe)


Consumption

2007 (Mtoe)

2020 (Mtoe)

2030 (Mtoe)

Malaysia Total 60.8 80.9 121.6 Myanmar Total 15.7 23.8 35.2 Coal 8.8 13.0 24.0 Coal 0.1 0.4 0.7 Oil 23.7 30.4 43.7 Oil 1.8 4.8 9.7 Natural Gas 26.1 34.0 49.8 Natural Gas 3.1 5.5 9.4 Nuclear - - - Nuclear - - - Hydro 0.6 2.0 2.0 Hydro 0.3 6.1 13.4 Geothermal - - - Geothermal - - - Others 1.6 1.5 2.1 Others 10.4 6.9 2.0 Others 7.6 7.9 9.8 Others - 0.1 0.3 Thailand Total 106.1 169.8 247.7 Vietnam Total 55.6 113.8 225.8 Coal 13.9 25.2 41.8 Coal 9.8 43.8 103.2 Oil 44.5 67.0 96.7 Oil 13.2 32.6 66.6 Natural Gas 28.3 34.3 36.3 Natural Gas 5.5 11.9 16.1 Nuclear - 2.3 11.4 Nuclear - 1.1 12.4 Hydro 0.7 0.3 0.3 Hydro 2.6 4.9 6.4 Geothermal - - - Geothermal - - - Others 18.7 40.7 61.3 Others 24.5 19.5 21.1

Source: ASEAN Center for Energy, The 3rd ASEAN Energy Outlook (Jakarta: ASEAN Center for Energy, February 2011), p. 123-142. *BAU: Business-As-Usual The figures may not add up in all cases as they have been rounded up or down by the source. The similar projections for Timor Leste are unavailable. Based on the most recent available statistics (2009), the following provides a detailed account of the ASEAN countries oil, gas and coal requirements to demonstrate the significance of oil, gas and coal for their energy mix. The tables below (Tables 9-17) are taken from the International Energy Agency’s report on the energy balances of non-OECD countries.5 They summarize the supply (domestic production and imports) and consumption of fossil and non-fossil energy in the various sectors of their respective ASEAN countries in 2009. Data for Lao PDR is unavailable. Comparable source on Timor Leste is also unavailable, but Table 18 provides details on its oil supply in 2011 and its energy mix dominated by biomass (fuel-wood) in 2006. As evident in Tables 9-17, ASEAN is highly dependent on oil and gas. Indonesia is its largest energy consumer, which consumed 145,879 thousand tons of oil equivalent in 2009. It is followed by Thailand (75,802 thousand tons of oil equivalent) and Vietnam (55,646 thousand tons of oil equivalent). ASEAN’s smallest energy consumers are Cambodia (4,665 thousand tons of oil equivalent) and Brunei (1,653 thousand tons of oil equivalent) while Timor Leste is the smallest energy consumer in SEA based on the mentioned available data. Drawing on the tables below, it is noteworthy that, amongst the renewable energy resources, biofuels and waste (biomass) are the most widely-consumed ones in the ASEAN region. With respect to Tables 9 to 17, please note the following:

• TPES: Total Primary Energy Supply • Other transformation figures include transfers, statistical differences, energy industry

own use, and losses. • TFC: Total Final Consumption

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Table 9: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Brunei Darussalam in 2009 (KTOE)

Supply and Consumption

Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear

Hydro Geothermal. solar etc.

Biofuels & waste

Electricity

Heat Total

Production - 8485 - 10454 - - - - - - 18939 Imports - - 98 - - - - - - - 98 Exports - -7667 - -8009 - - - - - - -

15675 Intl. marine bunkers

- - - - - - - - - - -

Intl. aviation bunkers

- - -91 - - - - - - - -91

Stock changes

- -145 -3 - - - - - - - -148

TPES - 674 4 2445 - - - - - - 3123 Electricity and CHP plants

- - -9 -1155 - - - - 311 - -854

Oil refineries

- -690 673 - - - - - - - -17

Other transformation

- 16 -86 -499 - - - - -32 - -600

TFC - - 582 791 - - - - 279 - 1653 Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.90.

Table 10: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Cambodia in 2009 (KTOE)


Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear

Hydro Geotherm. solar etc.

Biofuels & waste

Electricity

Heat Total

Production - - - - - 4 - 3664 - - 3668 Imports - - 1473 - - - - - 72 - 1545 Exports - - - - - - - - - - - Intl. marine bunkers

- - - - - - - - - - -


- - -31 - - - - - - - -31

Stock changes

- - - - - - - - - - -

TPES - - 1442 - - 4 - 3664 72 - 5182 Electricity and CHP plants

- - -442 - - -4 - -2 104 - -345

Oil refineries

- - - - - - - - - - -


- - - - - - - -148 -24 - -172

TFC - - 999 - - - - 3514 152 - 4665 Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.95.

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Table 11: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Indonesia in 2009 (KTOE)


Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear


Biofuels & waste

Electricity

Heat Total

Production 166802

48052 - 67047 - 979 15981 52981 - - 351841

Imports 46 18820 19458 - - - - - - - 38324 Exports -

136336

-18323

-5020 -31999

- - - -282 - - -19195


- - -167 - - - - - - - -167


- - -640 - - - - - - - -640

Stock changes

- 4888 -174 - - - - -115 - - 4600

TPES 30513 53437 13457 35048 - 979 15981 52584 - - 201999

TFC 10452 - 55710 16285 - - - 51858 11574 - 145879

Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.156.

Table 12: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Malaysia in 2009 (KTOE)


Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear


Biofuels & waste

Electricity

Heat Total

Production 1348 34226 - 50341 - 574 - 3205 - - 89693

Imports 9126 5839 7265 956 - - - 4 1 - 23192 Exports -119 -

12235 -

10030 -

22288 - - - -223 -9 - -


- - -43 - - - - - - - -43


- - -2120 - - - - - - - -2120

Stock changes

192 -76 892 - - - - - - - 1008

TPES 10547 27755 -4036 29009 - 574 - 2987 -8 - 66826 TFC 1613 - 22034 6120 - - - 1787 8287 - 39840 Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.189.

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Table 13: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Myanmar in 2009 (KTOE)


Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear


Biofuels & waste

Electricity

Heat Total

Production 761 968 - 9738 - 360 - 10531 - - 22357

Imports - - 487 - - - - - - - 487 Exports -619 -44 - -6996 - - - - - - -7659 Intl. marine bunkers

- - -3 - - - - - - - -3


- - -71 - - - - - - - -71

Stock changes

- 41 -90 - - - - - - - -49

TPES 142 965 322 2743 - 360 - 10531 - - 15062 Electricity and CHP plants

- - -101 -355 - -360 - - 503 - -313

Oil refineries

- -806 778 - - - - - - - -28


- -159 149 -416 - - - -389 -103 - -917

TFC 142 - 1148 1971 - - - 10142 401 - 13803 Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.203.

Table 14: Supply and Consumption of Fossil and Non-Fossil Energy Resources in the

Philippines in 2009 (KTOE) Supply and Consumption

Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear


Biofuels & waste

Electricity

Heat Total

Production 2474 1143 - 3213 - 842 8881 6922 - - 23474

Imports 4496 6909 7440 - - - - 33 - - 18877 Exports -1052 -1004 -484 - - - - - - - -2541 Intl. marine bunkers

- - -194 - - - - - - - -194


- - -1044 - - - - - - - -1044

Stock changes

- 432 -169 - - - - 8

- - 271

TPES 5918 7479 5547 3213 - 842 8881 6963 - - 38842 TFC 1658 - 11375 6120 - - - 5631 4377 - 23111 Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.227.

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Table 15: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Singapore in 2009 (KTOE)


Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear


Biofuels & waste

Electricity

Heat Total

Production - - - - - - - 29 - - 29

Imports 4 45058 89613 7093 - - - - - - 141767

Exports - -46 -82805

- - - - - - - -82851

Intl. marine bunkers

- - -35055

- - - - - - - -35055


- - -4196 - - - - - - - -4196

Stock changes

- - -1218 - - - - - - - -1218

TPES 4 45012 -33662

7093 - - - 29 - - 18476

Electricity and CHP plants

- - -2047 -6468 - - - -29 3595 - -4949

Oil refineries

- -55661

54465 - - - - - - - -1196


109 10649 -8457 - - - - - -495 - 1805

TFC 113 - 10299 625 - - - - 3100 - 14137 Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.244.

Table 16: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Thailand in 2009 (KTOE)


Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear


Biofuels & waste

Electricity

Heat Total

Production 5158 16230 - 19163 - 615 2 20538 - - 61705

Imports 10625 42361 448 7472 - - - 57 210 - 61174 Exports -17 -2128 -

11500 - - - - -26 -134 - -


- - -1481 - - - - - - - -1481


- - -3539 - - - - - - - -3539

Stock changes

-835 568 -505 - - - - 34

- - -738

TPES 14931 57031 -16576

26635 - 615 2 20603 76 - 103316

TFC 7870 5950 33781 3266 - - - 13306 11628 - 75802 Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.260.

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Table 17: Supply and Consumption of Fossil and Non-Fossil Energy Resources in Vietnam in 2009 (KTOE)


Coal &

peat

Crude oil

Oil produ

cts

Natural Gas

Nuclear


Biofuels & waste

Electricity

Heat Total

Production 24480 17330 - - - 2578 - 25155 - - 76642

Imports 465 - 14805 7093 - - - - 353 - 15623 Exports -

13995 -

13614 -1811 - - - - - -32 - -


- - -287 - - - - - - - -287


- - -387 - - - - - - - -387

Stock changes

1652 -1008 1266 - - - - - - - 1910

TPES 12602 2708 13585 7093 - 2578 - 25155 321 - 64048 Electricity and CHP plants

-3680 - -647 -6468 - -2578 - - 7154 - -6211

Oil refineries

- -1486 1514 - - - - - - - 28


- -1222 725 - - - - -863 -859 - -2219

TFC 8922 - 15177 625 - - - 24292 6616 - 55646 Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.284.

Table 18: Supply and Consumption of Fossil and Non-Fossil Energy Resources in

Timor-Leste Supply and

Consumption Coal &

peat Crude oil Natural Gas Biofuels & waste Electricity

*Production (thousand barrels per day, 2011) 0 83.74 0 Nil 0

*Net Export (thousand barrels per day, 2011) 0 80.99 0 Nil Nil

**Consumption (thousand tons, 2006) 0 75.5 0 600 Nil

NIL = Not available Source: Author’s creation using data provided by EIA and the World Bank listed below. * EIA, International Energy Statistics (http://www.eia.gov/countries/country-data.cfm?fips=TT&trk=p1; accessed on 10 September 2012) ** World Bank, “Table 1: Timor-Leste 2006: Useful Energy Share of Major Fuels for All Sectors,” Timor-Leste Key Issues in Rural Energy Policy (Washington, D.C.: World Bank, December 2010, p.1). (http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf; accessed on 20 September 2012)

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http://www.eia.gov/countries/country-data.cfm?fips=TT&trk=p1


Chapter II: Major challenges relevant to enhancing energy security and the sustainable use of energy

As true everywhere else, energy is crucial for the survival, normal operation, socio-economic development, economic growth, prosperity and defence of the SEA countries. For this matter, quest for energy security is a major undertaking for all these countries affected not just by the availability of a desired mix of supplies, but also certain challenges to this undertaking. In a broad sense, they include at least two major sets of challenges, sustainable development challenges to energy security and major energy challenges.

A. Major sustainable development challenges to energy security The SEA sub-region consumes a large amount of energy. Its consumption will increase on a steady basis in the foreseeable future for two major reasons, namely its expanding economy whose growth will continue and its growing population with improving living standards. Energy is therefore of crucial importance for the sub-regional countries to ensure their economic growth and prosperity. However, securing adequate amount of energy to achieve these two objectives in a sustainable manner has its own challenges geared to the issue of sustainability. This concept has two inter-related components, sustainable economic development and sustainable energy mix to fuel it. Sustainable economic development, among others, requires economic growth while preserving the environment and reversing the damages already made to it, including global warming. Hence the issue of green development or low-Carbone development has become prominent as the existing pattern of economic growth and development fuelled by oil, gas and coal in place for over two centuries has proven to be unsustainable. This is due to its pollutive nature, which damages the environment on which the economies are dependent for their operation. Green or low-carbon development needs its corresponding green and low-carbon fuel to be realized and kept sustainable. The SEA economic development has followed the existing pattern of development as is the case in other sub-regions. Being impressive for its achievements in addressing SEA’s underdevelopments in many fields, the sub-regional economic growth has been fueled with mainly fossil energy (oil, gas and coal) producing CO2, the main component of greenhouse gasses (GHG) causing global warming. Almost all the sub-regional countries have also used renewables, but their share of the sub-regional energy mix is small although there are significant differences between the regional countries in terms of their use of renewables as evident below (Table 19).

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Table 19: Renewable Energy in Southeast Asia Countries (KTOE)

Hydro Geothermal, Solar

etc.

Biofuels & waste

Total Renewabl

es

Total Primary Energy Supply

% Renewabl

es

*Brunei Darussalam 0 0 0 0 3,123 0%

*Cambodia 4 0 3,664 3,668 5,182 71% *Indonesia 979 15,981 52,584 69,544 201,999 34% *Malaysia 574 0 2,987 3,561 66,826 5% *Myanmar 360 0 10,531 10,891 15,062 72%

*Philippines 842 8,881 6,963 16,686 38,842 43% *Singapore 0 0 29 29 18,476 0% *Thailand 615 2 20,603 21,220 103,316 21% *Vietnam 2,578 0 25,155 27,733 64,048 43% **Timor-

Leste 0 0 600 600 675.5 89% Note: Statistics of Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam are in 2009; Statistics of Timor-Leste is in 2006. Source: Author’s creation using data provided by OECD/IEA and the World Bank listed below. *OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011) ** World Bank, “Table 1: Timor-Leste 2006: Useful Energy Share of Major Fuels for All Sectors,” Timor-Leste Key Issues in Rural Energy Policy (Washington, D.C.: World Bank, December 2010, p.1). (http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf; accessed on 20 September 2012) Yet, the bulk of the renewables used have not been environmentally-clean (non-CO2 emitting) although they emit less CO2 compared to fossil fuels once consumed. The share of the environmentally-clean renewables (solar, wind, geothermal and wave/tidal energy) of the renewables used in SEA has been generally-speaking small. Instead, biomass (e.g., wood, charcoal, animal droppings, waste and garbage), including biofuels, accounted for the bulk of such renewables as reflected in Tables 4 and 5. The share of hydro, which does not emit CO2 of SEA’s used renewables is significant (e.g., Lao PDR, Table 8). However, hydro energy, while not pollutive in terms of CO2 emissions, is not totally environmentally-friendly for various reasons. They include the climatic and environmental impact of the required diversion of rivers (partly or totally) from their natural paths and accumulation of a large amount of water in artificial lakes resulting in sudden decrease or total loss of water and thus dryness in some areas and massive humidity in other areas. This development has a long-term negative impact on the environment and human/animal life depending on it as well as the affected rivers and their immediate environment. In SEA, this is gradually becoming evident in the Mekong River region where a large number of dams have been built and/or being built by the regional countries. In brief, SEA has consumed fossil energy as the single largest component of its energy mix leaving a small share for non-fossil energy of which the share of environmentally-clean renewables has been small, by and large. This reality has created a challenge to the sustainability of the sub-regional socio-economic development as is the case in all other regions and subregions. The resulting global warming has not only been damaging the environment in many destructive forms (frequent droughts, depletion of fresh water resources, forest fires, rising sea levels, etc.) affecting all forms of life (human, animal and

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plant), it has also directly had destructive/restrictive impacts on economies, e.g., damages to crops, pastures and forests, desertification of arable/green lands, lowering crops’ yielding (agriculture) and increasing the cost of agricultural production. As a result, the necessity of mitigating global warming (for environmental reasons and also economic ones) calls for switching to environmentally sustainable socio-economic development (green/low-carbon development) in SEA. This challenges the current pattern of energy consumption, which is inconsistent with the mentioned objective as it is unsustainable. Yet, the mentioned switch is not an easy undertaking as the major argument for consuming fossil energy and the environmentally unclean renewables is the issue of their low cost making them the energy of choice for financial reasons. Being true in all other regions/subregions, this is likely especially true in the case of SEA where the majority of its member states are low-income developing countries with limited financial capabilities facing many costly developmental issues. Additionally, there is a technical barrier to such switch as the environmentally-clean renewables have low yields due to their under-developed nature, which makes them not a substitute for fossil energy in this regard. Moreover, liquid renewable alternatives to oil derivates (e.g., diesel and furnace fuels) and gas for electricity generation (i.e., biofuels) are even more pollutive and destructive to the environment than the latter because of their pollutive production process. The process is highly energy- and water-intensive involving the massive destruction of forests in many cases. Of course, it is technically possible to generate clean biofuels, which is not happening at a commercial level globally and generate adequate amount of electricity by nuclear energy along with solar (concentrated solar and solar panels) and wind (horizontal wind turbines) using more advanced technologies. However, the initial cost of their installation is much higher than other alternatives to create an economic disincentive to continue the existing pattern of energy consumption. Nevertheless, switching from heavy reliance on fossil energy to heavy reliance on environmentally-clean fuels to make the sub-regional energy mix sustainable is a necessity as the cost of not switching will be much higher. This is due to the fact that an environmental clean-up and reversing global warming will become an inescapable imperative in the near future should no major effort is made now to switch to an environmentally-sustainable energy mix. As discussed earlier, the SEA subregion’s energy mix is dominated by fossil energy (oil, gas and coal) leaving a small share for non-fossil energy confined to renewables as the sub-region has currently no operating nuclear energy sector. This heavy dependency on fossil energy is a major challenge for environmental reasons due to the aforementioned link between this fuel and global warming. Briefly, as is the case for other countries, decreasing dependency on such fuels by the SEA countries is a necessity for mitigating global warming and also making these countries’ development sustainable. Such dependency also creates other challenges geared to availability, accessibility, affordability and plausibility of supplies. The sub-region has fossil energy resources mainly concentrated in significant amounts in Brunei, Indonesia, Malaysia, Vietnam and Timor Leste. These countries meet some or all of their needs in oil, gas and/or coal and export their excessive production in any of these fuels to other SEA countries and/or other countries. A summary of the regional trade is provided in this report.

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Yet, as stated earlier, the sub-regional fossil energy production is below its consumption to make it dependent on imports of oil, gas and coal from certain countries in the Asia-Pacific region (e.g., Australia) and the Persian Gulf (e.g., Iran, Kuwait, Qatar, Oman, Saudi Arabia and UAE) as well as others to a lesser extent. Import dependency is a major challenge for its posing availability challenge, i.e., the existence of adequate supply in the supplying countries and their willingness to export them to SEA. Hence, the current pattern of imports from non-SEA countries can continue for as long the non-SEA suppliers have oil, gas and coal in excess to their own energy requirements. This supply availability will not be certain at some time in the future as the current and future suppliers’ production of oil, gas and coal decreases due to the depletion of their fossil energy reserves. At different points of time, all the SEA countries’ suppliers will face this situation to force them decrease or completely cut their exports to these countries. Furthermore, supply availability is meaningless if the suppliers, while having enough supplies for exports, lose interest in supplying the SEA countries for reasons ranging from economic one (finding more profitable markets) to political one (deterioration of ties between the supplying countries and the SEA countries). Currently, the supplying countries are all on good terms with the SEA countries, but this situation may well change because of the internal dynamics of their political systems, for example. Accessibility is another challenge. Major political and security changes in the supplying countries and also the insecurity of their supplying routes (sea and land routes) and their respective means (tankers and pipelines) could affect the availability of energy supplies in SEA’s importing countries. In fact, this is a conceivable scenario for SEA as a major military conflict in the Asia-Pacific region (e.g., between China and a SEA country such as Vietnam or the Philippines over the ownership of the South China Sea’s disputed islands) or in its proximity in the East China Sea (between China and Japan over the ownership of the disputed regional islands) could well interrupt sea routes used for Australia’s gas (LNG) and coal exports to the SEA countries. As well, a military conflict in the Persian Gulf between the USA and Iran or Israel and Iran is also feasible although not very likely in the near future. Should it happen, shipping, including oil/LNG-tanker movement, in the Persian Gulf and the adjacent/neighboring areas (Oman Sea and Arabian Sea) could well be affected seriously and even totally stopped to decrease or stop the tanker traffic destined to SEA. Apart from the insecurity of sea routes, political and military conflicts in the Persian Gulf oil/LNG-exporting countries could well happen to disrupt or end for a while their exportability. The region’s Arab oil/LNG-exporters are vulnerable to the expansion of the “Arab Spring” due to the existence of a high degree of discontent among their peoples. In fact, just about all of them, including Kuwait, Saudi Arabia and the UAE, experienced a degree of “Arab Spring” in 2011, which was suppressed. Briefly, unavailability of supplies in the SEA countries relying on imports is a realistic scenario. Affordability is another challenge as the availability of supplies is meaningless if their prices are too high for the sub-regional countries to make their imports sustainable. In fact, the financial cost of fossil energy, especially in the case of oil whose prices have been increasing since the 1990s (excluding short periods of decreasing prices), is a major challenge for the SEA countries depending on fossil energy imports. The current three-digit prices of oil, in particular, have created a heavy and growing financial burden on the SEA countries whose oil needs must be met partly or completely by oil imports. This could well increase due to the

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continued political instability (e.g., Egypt) and armed conflicts (Iraq, Libya and Yemen) in many Arab oil-exporting countries, given there is no logical ground to expect the restoration of peace and stability in these countries in the foreseeable future. Such growing cost of imported fuel will certainly retard the socio-economic development of the energy-importing countries of SEA to a varying extent. Finally, certain factors make the sub-regional energy mix an implausible option to form the plausibility challenge. They include the unsustainability of fossil energy imports and their consumption for the mentioned reasons, including environmental one, and also their making the consuming countries’ vulnerable to their suppliers’ political stability.

B. Major energy challenges Against this background, certain specific major challenges relevant to enhancing energy security and the sustainable use of energy should be analyzed. The following five challenges are of special importance.

1. Access to energy services The SEA’s energy requirements have been expanding due to the stated reasons. Energy supplies to meet these requirements partly exist in SEA and there are suppliers in the Asia-Pacific region and elsewhere to provide for the rest. However, as discussed above, the availability of supplies are meaningless if their imports cannot be secured on a regular basis due to the insecurity of import routes (sea routes for tankers and land routes for pipelines) for the SEA countries depending partly or completely on energy imports. Insecurity also affects the distribution of energy within the SEA countries regardless of its type (liquid, gaseous or electricity) and its origin (domestic or foreign). With respect to the availability of energy within the SEA countries, certain issues are noteworthy. There is a major discrepancy between these countries in terms of access to energy by their respective people. This is evident in two major indicators being the sources of energy used for cooking by the SEA people and the rate of electrification in the sub-regional countries. Table 20 indicates that the majority of the sub-regional countries do not use “Modern fuel”, including electricity, liquid fuels (e.g., kerosene) and gaseous fuels (e.g., liquefied petroleum gas [LPG] and natural gas), and excluding traditional biomass (wood, charcoal, animal droppings, etc) and coal. Instead, they use traditional sources of energy (e.g., fuel-wood) as their source of energy used for cooking.

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Table 20: Access to Modern Fuels in Southeast Asia

Country Access to modern fuels (% of the national population)

Brunei Darussalam Not available Cambodia *7.5 (2005) Indonesia *45.6 (2007)

Laos *2.6 (2006) Malaysia *96.7 (2003) Myanmar *3.4 (2003)

Philippines *49.4 (2004) Singapore *>95 (2007) Thailand *63.1 (2006)

Timor-Leste **3.8 (2010) Vietnam *34 (2006)

Source: Author’s creation using data provided by the World Health Organization and the World Bank listed below. *World Health Organization, The Energy Access Situation in Developing Countries. 2009. pp. 66-101. (http://content.undp.org/go/cms-service/stream/asset/?asset_id=2205620; accessed on 20 September 2012) ** World Bank, “Table 12: Sources of Energy Used for Cooking,” Timor-Leste Key Issues in Rural Energy Policy (Washington, D.C.: World Bank, December 2010, p.2). (http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf; accessed on 20 September 2012) Access to “modern fuels” being mainly fossil energy and electricity is very limited (under 8 percent) in Cambodia (7.5 percent), Laos (2.6 percent), Myanmar (3.4 percent) and Timor-Leste (3.8 percent). Three SEA countries provide access to modern fuels to less than 50 percent of their population, i.e., Indonesia (45.6 percent), the Philippines (49.4 percent) and Vietnam (34 percent). Only one sub-regional country provides such access to close to about two-thirds of its population, namely Thailand (63.1 percent). Finally, there are only two sub-regional countries where almost the entire population has access to modern fuel being Malaysia (96.7 percent) and Singapore (95 percent). Of course, the data reflects the most recent one collected at different periods of time between 2003 and 2010 being the most recent available data. It could well be a fact that there has since been improvements in the sub-regional access to the modern sources of energy used for cooking. However, given the relatively short period of interval between the data collections and the date of this report (2012), the achievement, if any, cannot change the mentioned pattern substantially. This pattern of access to modern fuels mirrors the difference in social-economic development between and among the SEA countries. The rate of electrification in the SEA countries reveals the availability of a type of modern fuel (electricity) in the SEA countries as evident in Table 21 containing the most-recent available data (2009). The table indicates the achievement of the sub-regional countries in providing this modern fuel to a larger portion of their population compared to other modern types of fuels. However, by and large, the rates of electrification reflect the same pattern, i.e., different level of socio-economic development in these countries, while reflecting the better performance in terms of electrification by a larger number of more developed sub-regional countries.

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http://content.undp.org/go/cms-service/stream/asset/?asset_id=2205620


Table 21: Electricity Access in Southeast Asia, 2009 Electrification Rate (%) Population without electricity, millions

Brunei 99.7 0 Cambodia 24 11.3 East Timor 22 0.9 Indonesia 64.5 81.6 Malaysia 99.4 0.2 Myanmar 13 43.5 PDR Laos 55 2.6 Philippines 89.7 9.5 Singapore 100 0 Thailand 99.3 0.5 Vietnam 97.6 2.1

Source: Author’s creation based on the Electricity Access Database, IEA World Energy Outlook 2011. Thus, one SEA country provides electricity to 100 percent of its population (Singapore), while another five are very close to this rate, namely Brunei (99.7 percent), Malaysia (99.4 percent), Thailand (99.3 percent) and Vietnam (97.6 percent). Two countries provide electricity to about two thirds of their populations, Indonesia (64.5 percent) and the Philippines (89.7 percent) and one country to slightly above half of its population , Laos (55 percent), leaving three countries providing electricity to less than 25 percent of their population, i.e., Myanmar (13 percent), Timor Leste (22 percent) and Cambodia (24 percent). Perhaps, in the case of Timor Leste (East Timor), the provided rate reflects the installed electricity capacity or the rate of electrification in the urban areas as The World Bank’s data suggests a much smaller rate as much of the country’s electricity infrastructure was “severely damaged during the period of civil unrest in 1999. Today, the national electrification rate is about 20 percent but is estimated to be less than 10 percent for rural areas.”6 Thus, as discussed above, there is an uneven pattern of access to energy services in SEA. This reflects the sub-region’s uneven pattern of socio-economic development. This pattern also reflects the challenge of energy security in most of the SEA’s countries with limited access to modern sources of energy. Yet, these realities also reveal a barrier to sustainable development as both the “modern fuel” in use and the non-modern ones are environmentally unsustainable.

2. Energy Efficiency Energy efficiency (EE) is one of the energy challenges, which must be dealt with not just for energy reasons, but also the economic and environmental ones. Although SEA’s increasing energy requirements are mainly because of the growing regional economies and population with an uplifting living standards, overconsumption of energy due to energy inefficiency is a contributing factor. To a varying extent, all the regional economic sectors and infrastructure suffer from using old and or inappropriate and thus inefficient technologies; this is also applicable to the appliances, devices and means of personal transportation used by the SEA households. Unnecessary energy consumption out of old habits should also be added to this list. The replacement of the mentioned technologies and their products with efficient ones and educating the SEA population to adopt a different life style without reducing their level of comfort will certainly decrease SEA’s energy consumption to a significant extent. In turn,

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this will reduce its dependency on fossil energy and, especially, imported one to a noticeable extent. The same is also necessary for the economic and environmental reasons. Efficient use of energy will surely decrease the production cost of goods and services, which will help, as a factor, make these items more affordable locally and competitive when it comes to their exports. Reduction in energy consumption when pollutive types of energy account for the bulk of SEA’s consumption will also curtail the sub-regional CO2 emissions, a necessity for mitigating global warming. The SEA countries are aware of the need to improve energy efficiency and have taken some steps to achieve this objective. Of course, the extent of efforts and their corresponding results vary from one country to another. In fact, some sub-regional countries have impressive EE programmes to substantially increase their EE. For example, Singapore has a target of reducing its energy intensity by 20% by 2020 and 35% by 2030 from the 2005 level while Thailand aims at saving 22% of its total energy by 2030 relative to the business-as-usual scenario.7 Towards these objectives, they have introduced certain supporting programmes. For Singapore, these are Sustainable Singapore Blueprint (incentives for EE investments in different industrial sectors)-2009, Environmental Protection and Management Act (mandatory energy labeling for HVAC, etc)-2008 and Building Control Act (energy labeling for new buildings)-2008.8 For Thailand, the EE programmes include Energy Conservation Act (promoting for conservation investments in building sector)-1992.9 Many sub-regional governments have established various agencies to centralize the formulation and implementation of EE policies and programmes in their countries, which include the Energy Information Bureau (EIB) in Malaysia, the EE and Conservation Clearing House Indonesia (EECCHI), the EE Programme Office (E2PO) in Singapore and the EE and Conservation Office (EE&CO) in Vietnam. Yet, at the sub-regional level, the ongoing cooperation is less ambitious. Accounting for all the SEA countries excluding Timor Leste, ASEAN has undertaken several EE-related capacity building activities to promote cooperation and information sharing among ASEAN members on EE practices. The objective is to reduce regional energy intensity by at least 8% by 2015 (based on 2005 levels).10 Under the ASEAN Plan of Action for Energy Cooperation (APAEC) 2010-2015, adopted by the ASEAN Energy Ministers in Mandalay/ Myanmar on 29 July 2009, the EE and Conservation Programme aims at strengthening cooperation in EE and conservation through institutional capacity building in certain areas.11 They include energy intensity assessment guidelines, energy auditing, increasing general EE awareness and increasing private sector involvement. Although the Programme’s focus has been predominantly on capacity building and information exchange, it is a promising start towards certain required region-wide measures such as the harmonization of energy testing procedures, EE standards and labeling. 12 There is currently no sub-regional programme to include Timor Leste. While efforts at both national and sub-regional levels have been made towards EE, it should be pointed out that the existence of EE polices, programmes and regulations are necessary, but not sufficient to ensure higher levels of energy efficiency in an SEA country or the sub-region. At the end, it is necessary to ensure their full implementation and strict compliance of all the required participants (e.g., industries, businesses, farmers and households). Finally, it must be stressed that the undertaken initiatives are still well below the sub-regional requirements. As revealed in a 2011 study of EE in SEA, there are four key challenges to stimulate the diffusion of energy efficiency technologies in the region. These challenges are:

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• Energy efficiency standards and policies are insufficient • Energy efficiency is still not seen as a top business priority by many companies • Expectations mismatch and information asymmetries between stakeholders are

pervasive within the industry • There is a shortage of funding options to finance energy efficiency projects. 13

3. Renewable Energy The domination of SEA’s energy mix by fossil energy is not sustainable for various reasons. They include its high cost especially in the case of imported oil and also its reducing energy security through making the involved SEA countries heavily dependent on a type of energy. For environmental reasons, it is also not sustainable as mitigating and eventually reversing global warming demand decreasing fossil fuel consumption as the latter is the main cause of this phenomenon through emitting CO2, which accounts for the bulk of GHG emissions. Thus, decreasing the share of oil, gas and coal from SEA’s energy mix is a necessity requiring the expansion of the small share of non-fossil energy in that mix. The regional non-fossil energy excludes nuclear energy to last in the foreseeable future, and therefore is and will remain confined to renewables. Biomass, including biofuel, and hydro accounts for the bulk of the sub-regional renewables while other types of renewables have a small share (geothermal, wind and solar). Biomass is surely renewable and decreases the sub-regional dependency on fossil energy, but it is not environmentally-friendly as it also emits CO2. As well, irresponsible cutting of trees (a major source of biomass) for producing energy (fuel-wood and charcoals) and clearing land for producing products such as palm oil for biofuel production among other purposes are also destructive to the environment. It is therefore necessary to expand the very small share of environmentally-clean renewables (mainly wind, solar, geothermal, tidal and wave)1 from the regional energy mixes’ renewables. This requires both a systematic planning and investment. Different types of renewables (wind, solar, geothermal, wave, tidal, biomass and hydro energy) are used in SEA for different purposes from electricity generation to cooking and space heating at a varying scale. In Timor Leste, the consumption of biomass (fuel-wood) exceeds that of all other fuels combined, including hydrocarbons, reflecting the still highly undeveloped and rural nature of the whole economy. In 2006, the most recent year on which data exist, biomass’s share of the country’s energy mix was 51.9 percent.14 Being a renewable emitting CO2, fuel-wood is the principal fuel used by about 98.7 percent of all Timor Leste’s households as their main cooking fuel.15 In the ASEAN region housing all SEA countries excluding Timor Leste, renewables’ overall share of the regional energy mix was 30 percent in 2009 being the most recent year on which reliable statistics are available.16 The following is an account of the overall status of such fuels in the ASEAN region with an emphasis on the major sectoral consumers and the types of non-fossil fuels they use.

1 Hydro does not emit GHG, but it is not environmentally-friendly as it damages the environment by diverting rivers from their original paths and/or reducing their water, which have a negative impact on the environment. Hence efforts must be made to minimize these damages of hydro energy as a necessity.

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Regarding ASEAN’s electricity generation, in 2009, fossil fuels accounted for almost 84 percent of such generation, whereas hydro and geothermal electricity accounted for 12 percent and 3 percent of it, respectively.17 This leaves a very small share for other types of non-fossil energy (1 percent). All the ASEAN countries except Singapore and Brunei have demonstrated their aspirations for hydropower because of their particularly favorable natural conditions. For instance, 29.98 terawatt per hour (TWh) and 11.38 TWh of electricity were generated by hydro dams in Vietnam and Indonesia in 2009, respectively.18 Production of electricity by biomass, including biofuels, and waste in the ASEAN region is dominated by Thailand, which used biomass to generate 5.98 TWh of electricity in 2009.19The Philippines is the major geothermal power-generating country in the region whose geothermal facilities generated 10.324 TWh of electricity in 2009.20 Being a type of non-fossil energy, but not a renewable, nuclear energy for electricity generation has also been discussed in the ASEAN countries, but besides Vietnam, no other regional country has made any concrete plan for it. Table 22 details the share of fossil and non-fossil energy of the ASEAN countries’ electricity generation in 2009, the most recent year on which such statistics exist. Such data on Timor Leste is unavailable.

Table 22: Electricity Generation by Country, 2009 (GWh)* Coal Petroleu

m Products

Natural Gas

Hydro Geothermal

Solar and Wind

Biomass &waste

Total % Renewables

Brunei 0 37 3575 0 0 0 0 3612 0% Cambodia 0 1153 0 47 0 0 0 1200 4% Indonesia 6497

6 35467 34351 11381 9295 0 0 15547

0 13%

Lao PDR n/a n/a n/a n/a n/a n/a n/a n/a n/a Malaysia 3249

5 2103 63812 6671 0 0 0 10508

1 6%

Myanmar 0 523 1146 4181 0 0 0 5850 71% Philippines 1647

6 5381 19887 9788 10324 65 0 61921 33%

Singapore 0 7858 33859 0 0 0 84 41801 0% Thailand 2959

6 710 10494

3 7148 1 10 5981 14838

9 9%

Vietnam 14980

2089 36141 29981 0 0 0 83191 36%

Source: OECD/IEA, Electricity/Heat by Country/Region (Paris: IEA Publication 2011). (http://www.iea.org/stats/prodresult.asp?PRODUCT=Electricity/Heat; accessed on 20 March 2012) * GWh: Gigawatts-hours The provided percentages are rounded down (e.g., Singapore) or up (e.g., Cambodia) to the nearest figure by the original source. According to IEA, electricity generated from hydro in ASEAN surged from about 30 TWh in 1990 to about 70 TWh in 2007 and is projected to reach 120 TWh in 2030.21 The geothermal-generated electricity is expected to reach 47 TWh in 2030.22 It is notable that although the

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http://www.iea.org/stats/prodresult.asp?PRODUCT=Electricity/Heat

share of biomass and waste in ASEAN’s electricity generation by non-fossil energy was small (4 TWh) in 2007, it is projected to become about ten times larger to reach 39 TWh by 2030 (Figure 1).23

Figure 1: Electricity Generation of Non-fossil Energy in ASEAN, 1990-2030 (TWh)

0

20

40

60

80

100

120

140

1990 2007 2015 2020 2025 2030

TWh

Nuclear

Hydro

Biomass andwasteGeothermal

Wind

Source: Authors ‘creation based on data in OECD/IEA, World Energy Outlook 2011. (Paris: IEA Publications, November 2011), p. 651. Biofuels and waste (used for power generation, transport, industry and residential usages) account for a significant percentage (24 percent) of the regional primary energy consumption. The biofuels and waste used for residential purposes (mostly for cooking and space heating) account for 77 percent of the overall regional consumption of biofuels and waste.24 Biofuels for transportation is mainly produced in Indonesia where the transportation sector is the major biofuel consumer. The nation produced 455 million liters of biodiesel in 2010 of which 235 million liters were exported to Europe due to limited domestic market absorption.25 Malaysia and the Philippines are increasing their production of biofuels for transportation although such production is still at a small scale. Given their small production elsewhere in ASEAN, the regional focus of biofuels for transportation is on Indonesia, the largest regional producer and one of the world’s largest producers. Yet, the continuity of biofuels in the ASEAN region, including Indonesia, is questionable given the unsustainable nature of their current process of production being highly energy-and water-intensive and pollutive resulting in deforestation. In short, despite the significant consumption of biomass, including biofuels and waste, in the ASEAN region, according to IEA, it is difficult for this type of renewable to replace conventional fossil energy due to the ineffective use of the former.26

4. Energy Trade Energy trade in SEA is focused on trading oil, gas and coal but not environmentally-clean renewables. This is actually a weakness, which should be addressed by encouraging the production of such renewables as part of a plan to make the sub-regional energy mix sustainable and also decrease the sub-regional dependency on imported fossil energy with its associated challenges (financial burden, availability uncertainty and vulnerability to political changes in the supplying countries). The sub-regional suppliers (Brunei, Malaysia, Indonesia, Vietnam and Timor Leste) meet some of the energy needs of the other sub-regional countries with no domestic production of fossil energy or inadequate one to force them to import part of their energy requirements.

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Details on the exact amount of oil, gas and coal exported by the sub-regional suppliers to their sub-regional importing countries are unavailable. The available ones (2009) cover the total amount of fossil energy exported by these countries to their SEA and non-SEA importing countries in thousand tons of oil equivalent (KTOE) of which an unknown amount was exported to the former. Thus, in 2009 the sub-regional suppliers exported the following amounts of oil, gas and/or coal: Brunei (7,667 KTOE of oil and 8009 KTOE of gas),27] Malaysia (12,235 KTOE of oil and 22,288 KTOE of gas),28 Indonesia (18,323 KTOE of oil, 31,999 KTOE of gas and 136,336 KTOE of coal and peat)29 and Vietnam (13,614 KTOE of oil and 13,995 KTOE of coal and peat).30 In 2011, the most recent year on which data exists, Timor Leste exported 80,990 barrels per day of oil.31 The sub-regional energy trade has certain limitations. They include the inadequacy of the sub-regional production to meet all the sub-regional needs and a reluctance on the part of the sub-regional importing-countries to heavily rely on one supplier whether sub-regional or otherwise as is the case in other sub-regions. The limitations also include a preference for export-target diversification by the sub-regional suppliers, which encourages them to export to non-SEA countries as well. Moreover, low-quality of the regional coal in cases also encourages at least some sub-regional coal importers to import from non-SEA countries (e.g., Australia). Infrastructural shortages such as the absence of a regional oil or gas pipeline and a connected power grid further limit regional trade. Finally, there is no sub-regional legal framework specific to energy to govern and facilitate SEA’s energy trade. The sub-regional trade of energy will decrease due to the rapid depletion of SEA’s energy reserves when the regional consumption increases. Accounting for the bulk of the sub-regional energy consumption, ASEAN’s energy consumption has increased substantially over the last few decades. For example, ASEAN’s domestic demand for coal rose from 12 million tons of oil equivalent (Mtoe) in 1990 to 76 Mtoe in 2007 and this increase will continue reaching a projected 145 Mtoe in 2020 and 220 Mtoe in 2030.32 The region’s demand for gas is also on the increase. It increased from 33 Mtoe in 1990 to 117 Mtoe in 2007 only to further increase to estimated 150 Mtoe in 2020 and 199 Mtoe in 2030.33 Against this background, there are two factors contributing to the depletion of the regional fossil energy resources, which will limit and eventually stop the sub-regional energy trade. The rapid consumption of energy as a result of uplifted living standards, population growth, expanding urbanization and growing economies in the ASEAN region is one factor. Growing energy exports of the region’s major energy producers are also a major contributing factor to the depletion of the regional fossil energy resources. Today, the ASEAN region as a whole is a net energy importer. However, both Brunei34 and Malaysia35 remain as net energy exporters, although Malaysia will lose this status by 2014. Moreover, Brunei and Vietnam are losing their capacity as oil exporters because of their years of exports added to their domestic consumption. In addition, Malaysia and Indonesia’s growing interest in exporting to China’s expanding energy market contributes to the region’s fossil energy depletion. Indonesia has, in fact, lost its position as an oil exporter and is now focused on exporting coal and gas instead. Myanmar and Cambodia will also be short-term exporters of oil and gas due to their limited resources once they are fully developed. Yet, once developed, Myanmar’s gas will be exported to China as per their agreements. Cambodia is yet to develop its limited oil and gas resources whose extent is unknown, at least publically, and build an export capacity. The extent of its oil/gas export-capability and its main exporting destinations are currently unknown.

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The ASEAN region’s energy resources will continue depleting to make the region heavily dependent on oil imports particularly from the Persian Gulf. By 2030, it will import 70 percent of its oil requirements from that region, a phenomenal increase compared to its imports of its oil requirements from that region in 2006 (less than 20 percent) and 2002 (9 percent).36 In the case of Timor Leste, its excess oil production is too small to turn it into a major sub-regional oil exporter. Its gas exports (LNG) will start in an unknown year as its gas fields are yet to be fully-developed and the required LNG plant be built, which has been a matter of dispute between its government and the developing company (Woodside-led consortium).37 It is unknown whether the sub-regional countries will be its market once its LNG export-capacity is realized. It is unknown how long its oil and gas exports can continue given the unavailability of information on its export plans.

5. Energy pricing, subsidies and taxation There are many influencing factors in energy pricing ranging from market detriments (supply and demand) to non-market factors (government intervention) apart from international events and influences (e.g., crises, wars and economic sanctions). All these factors affect pricing of energy in SEA, but government intervention in different forms (subsidies and taxation) has a major impact on the pricing of oil, gas, coal and electricity. It is especially so in the case of subsidies. The SEA countries excluding the Philippines and Singapore subsidize fuel and electricity prices. These subsidies are largely directed at gasoline, diesel, liquefied petroleum gas (LPG) and kerosene.38 Within the ASEAN region, government spending on subsidies is the largest in Indonesia and Malaysia, both significant energy producers. For example, energy subsidies in 2008 cost the Indonesian government $22 billion (equal to about 4.5 percent of Indonesia’s GDP) while cost the Malaysian government $14 billion (around 4 percent of Malaysia’s GDP). 39 Governmental efforts in SEA to maintain energy prices low through subsides are not sustainable for environmental and financial reasons. Putting in place with good intentions (e.g., encouraging investments and economic activities and making energy affordable for low-income people), such measures (e.g., subsidies) have artificially reduced the prices of energy (fossil fuels and electricity) to create a financial burden on their respective economies, which is not sustainable in the long-term. As well, under-priced liquid fuels for transportation and gaseous fuel for residential, commercial and industrial consumption have encouraged energy inefficiency and overconsumption of energy to increase CO2 emissions when global warming requires their lowering. As well, artificially-low prices of energy because of subsidies, which are way below its real cost slow infrastructure development in the energy sector by depriving its respective government of the revenues needed for new investment. A change in pricing, subsidizing and taxing of energy is necessary to address the mentioned issues. Against this background, rising oil prices, which have continued since the last decade has motivated some SEA countries, including Indonesia, Malaysia, Thailand and Vietnam, to review their subsidy policies. These policies have been creating an expanding financial burden on the sub-regional governments with the effect of decreasing their ability to invest in

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many necessary fields. Moreover, these policies have undermined their efforts to improve energy efficiency by encouraging overconsumption and providing incentives for fuel smuggling.40 The pressure of energy subsides has been the heaviest in Malaysia and Indonesia for being the largest SEA subsidizers resulting in their taking measures to reduce subsidies. Towards ending such subisies, Malaysia has been more successful. Its government increased gasoline prices by more than 40% in June 2008, 41 which was followed by its July 2010 decision to cut subsidies to gasoline, diesel and LPG as part of a gradual reform programme.42 Perhaps, the country’s ability to meet its oil and gas needs through domestic consumption has enabled the Malaysian government to take drastic measures to cut subsidies and maintain fuel prices within an affordable limit for the Malaysians. Indonesia has made progress towards ending its energy subsidies despite setbacks. Following the launch of the National Energy Policy of 2003–2020 (Kebijakan Energy Nasional, 2003-2020), it made its first effort when the government of President Megawati Sukarnoputri raised fuel and electricity prices, which provoked widespread protests. This reaction forced the government to eventually reinstate the subsidies. In place since 2004, the administration of President Susilo Bambang Yudhoyono has been more successful at reforming fuel subsidies.43 In May 2008 the Indonesian government increased gasoline prices by 28%.44 It postponed a restriction of subsidized fuel for private cars in February 2011,45 but is now planning to reduce spending on energy subsidies by 40% by 2013 and fully eliminate fuel subsidies by 2014.46 Although these reforms have decreased subsidies in Indonesia, fuel subsidies are still high in the country as a result of an effort to reduce the financial pressure of rising oil prices on the Indonesians since the country imports oil to meet its needs as it domestic oil production is below its requirements. Hence, in its 2012 state budget, the Indonesian government allocated up to IDR168.6 trillion (US$19.15 billion) for energy subsidies, with IDR123.6 trillion (US$14.05 billion) and IDR45 trillion (US$5.1 billion) allocated for fuel and electricity subsidies, respectively.47 Briefly, subsidy reforms have been restricted due to increased demand for oil products in Indonesia and increasing oil prices when the country has to imports large amounts of oil from abroad at high international prices. Apart from subsidies for fossil fuels, the SEA governments subsidize electricity to make it affordable especially for the low-income people. Electricity subsides are especially generous in Thailand and Malaysia, but particularly Vietnam and Indonesia.48 Such generosity encourages overconsumption of electricity. Regarding energy taxation in SEA, tax incentives (e.g., tax credit, tax reductions or tax exemptions) are usually used for renewables’ development. Thus, many sub-regional countries have used tax mechanism to encourage their private sector to develop renewable capacities as part of their plan to diversify their energy mix and decrease their heavy reliance on fossil energy. The examples include the following. In the case of Indonesia, geothermal exploration equipment has been exempted from import duties and geothermal exploration activities are exempt from taxes since 2007.49 In January 2010 its government introduced tax incentives for other renewable energy technologies, including “a reduced income tax base, accelerated asset amortization and exemption from import duties and value-added tax for strategic equipment and machinery.” 50

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Malaysia provides tax incentives for those companies using energy from certain renewables, namely biomass, mini-hydro or solar. The companies are eligible for various types of tax reliefs. They include eligibility for Pioneer Status with a tax exemption of 100% of the statutory income for 10 years. 51 They also include eligibility for Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within five years, which can be offset against 100% of the statutory income for each year of assessment. 52 In the Philippines, President Arroyo signed the Renewable Energy Act in December 2008 to encourage use of renewables. The ACT offers various fiscal incentives for investment in renewables such as a seven-year tax holiday, tax exemption for carbon credits generated from renewable energy sources, and a lower corporate income tax rate (10%) instead of the standard 30%.53 Other tax incentives include the following.54 Companies building renewable energy power plants pay no customs duties on materials imported into the country for power plant construction and pay no value-added tax on the green electricity sold by these power plants. To promote biofuels, the biofuel component in fuel is exempted from taxation and raw materials used for the production of biofuels are exempted from value-added tax. Water effluents resulting from biofuel production are exempt from payment of wastewater charges. Being the largest renewable in use in the Philippines (geothermal), several incentives have been introduced for geothermal exploration and development, including exemptions from taxes and duties, faster depreciation of capital equipment and easier remittance of earnings.55 Thailand’s tax incentives have focused on encouraging biofuel (ethanol) production by increasing the number of operating plants (currently 11) and their capacity. Towards this end, there is a tax mechanism to make ethanol cheaper than gasoline.56 Moreover, the Ministry of Energy and the Board of Investment have introduced import duty exemptions and eight-year tax holidays on renewable energy equipment, including that for ethanol production. 57

C. Linkages between sustainable development and energy challenges Energy is an absolute necessity for economic and social development and thus there is a direct link between them. By the same token, sustainable development demands, among other factors, an adequate and sustainable energy mix. Such development requires uninterrupted even development of all the sectors and social groups to prevent uneven development of the SEA countries and uneven distribution of wealth, economic and social opportunities and prosperity to avoid social, economic and political polarization. Hence fuelling it with sustainable types of energy is important for social, economic and political stability of the sub-regional countries and of course sustainability of the sub-regional development itself. As discussed above, SEA is facing the following energy challenges. These are securing access to energy supplies both in terms of its supplying regions and distribution of their supplies within the sub-regional countries, improving energy efficiency for energy security and economic purposes; increasing the very small share of environmentally-clean renewables of the regional energy mix; addressing barriers to the sub-regional energy trade and addressing the unsustainable current policy towards energy pricing, subsidies and taxation. In one form or another, these energy challenges affect the sub-regional energy security with the effect of complicating SEA’s meeting its energy requirements by challenging its four

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major components, availability, accessibility, affordability and plausibility of energy supplies. Hence the availability and accessibility of affordable supplies of energy is a must for the sustainable development of the SEA countries. That requires decreasing reliance on imported fuels and encouraging exploitation of the regional energy resources in an efficient way. As global warming endangering life sustainability on earth in different forms as well as limiting economic opportunities such as in the fields of agriculture and fishery and increasing their operation cost, environmental sustainability of the SEA energy mix is becoming even more important. This brings about the issue of plausibility of supplies and thus the sub-region must work towards a different energy mix, which is not dominated by CO2-emitting types of energy (fossil and non-fossil). Hence, there is a positive correlation between sustainable development and the mentioned energy challenges. Meeting these challenges to ensure the sustainability of SEA’s energy supplies is an imperative to ensure the sub-region’s sustainable development.

Chapter III: Opportunities for the sub-region to enhance energy security and the sustainable use of energy The SEA faces certain energy challenges, but it can certainly overcome them through efforts by its countries individually as well as collectively. While there are challenges, there are also opportunities thanks to the available regional resources to be exploited in a sustainable manner.

A. Driving forces that could remove the barriers

Energy security is a multi-dimensional concept involving a wide range of factors (energy, political, economic, military/security, social and environmental) and actors or forces (governmental and non-governmental covering a range of entities and individuals). Their interaction affects positively or negatively energy security of SEA as is the case in other subregions. Within this context, barriers to enhancing energy security and the sustainable use of energy could and should be removed by two forces, which ideally should work in concert to ensure achieving the mentioned objective. The main forces whose actions are absolutely necessary are the individual sub-regional countries and ASEAN. SEA countries Certain types of challenges to energy security and the sustainable use of energy are country-specific and thus must be dealt with by the affected countries individually. In such case, both their respective governments and private sectors added to individuals have a role to play in concert. To start with, the energy mix of all the SEA countries is dominated by fossil energy with a few exceptions such as Timor Leste and Myanmar whose energy mix is dominated by biomass (51.9 percent) and biomass and hydro (72.4 percent), respectively.58 Despite this commonality, there are differences in terms of the type of fossil energy (oil, gas and/or coal)

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used in the sub-regional countries and their volume. For example, Brunei uses oil and gas only while Indonesia also uses coal accounting for a significant percentage of its energy mix. The former’s energy mix lacks renewables while that of the latter also includes hydro, geothermal, solar and biomass. As a result, they face different types of energy security challenges affecting their sustainable use of energy. For instance, Brunei must add renewables to its energy mix to decrease its current 100 percent dependency on fossil energy, but Indonesia must increase the share of renewables of its energy mix while decreasing that of coal in particular as it is the most pollutive types of fossil energy. The uneven distribution of fossil energy in SEA also creates specific challenges to its individual countries. The existence of fossil energy reserves in Brunei, Indonesia, Malaysia, Timor Leste and Vietnam make them inclined to use their available energy resources, which, depending on the country, can meet all or a major part of their energy requirements. Such availability could and, in fact, have helped promote fossil energy as their countries’ energy of choice feeding just about all the aspects of their economies and thus justifying imports of such energy in cases when the local production is below the local needs. Although there are differences in terms of availability and share of non-fossil energy in the mentioned countries’ energy mix, the availability of fossil energy resources in their countries create a disincentive for their significantly increasing the share of non-fossil energy. This is particularly true for the CO2 emission-free ones (e.g., wind and solar), which are expensive compared to oil, gas and coal and also the CO2 emitting-ones (e.g., biomass). Geological and climatic disparities among the SEA countries pose challenges to their embarking on energy projects, especially non-fossil ones, while offering certian opportunities. Lack of geothermal sources and wind at the required speed makes geothermal energy and, at least, land-based wind energy (turbines) out of question for Singapore. The abundance of geothermal potentials in Indonesia and the Philippines makes them achievable and desirables type of renewable in those countries. Availability of rivers with certain volume of water makes hydro energy an option in the Mekong River region, which is not the case in Brunei, for instance. In short, these realities based on different national situations provide both opportunities and challenges in the way of enhancing energy security and the sustainable use of energy in the individual SEA countries requiring national decisions and planning although, in cases their experiences could have positive or negative implications beyond their borders. SEA There are certain types of challenges affecting SEA or most of its countries, which demand collective initiatives, to be taken by ASEAN within its existing structure and legal framework covering also Timor Leste. These initiatives require the cooperation of the ASEAN countries and Timor Leste, should it choose to take part, for their full implementation and success. Examples of such include setting a framework for regional cooperation on nuclear energy to cover a wide-range of areas. They include building a regional nuclear safety and security regime to ensure the sub-regional nuclear energy programmes’ meeting the highest safety and security standards in these fields as well as a regional training centre for training nuclear-energy workers for the sub-regional nuclear energy programmes. Today, Vietnam is the only SEA country with an active programme in this field having agreements with Russia and Japan for their constructing two nuclear reactors each. Vietnam is considering more reactors to meet its growing electricity requirements and decreasing its reliance on fossil energy

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particularly coal for energy security reasons. In fact, the construction of the first Russian reactor is set to start in 2015.59 Nuclear energy is currently the only available type of non-fossil energy capable of generating large-scale electricity without emitting CO2. For this matter, nuclear energy will continue in the post-Fukushima era and Asia will remain its main scene. In particular, the Asia-Pacific region to include SEA will be the most vibrant region for nuclear energy expansion. Most probably, at least some of the sub-regional countries with expressed interest in nuclear energy will initiate their nuclear programmes within a decade or so (e.g., Malaysia and Indonesia). Hence the number of sub-regional countries with nuclear energy will probably be more than one (Vietnam). This fact and also the existence of large and growing nuclear energy programmes in the sub-region’s close proximity (China and India) necessitate having a sub-regional safety and security regime to ensure the safe and secure use of nuclear energy in the entire sub-region and help prevent accidents, which could affect some or all the sub-regional countries. Decreasing the sub-regional GHG emissions could well be another area demanding collective work at the SEA level. Given the worsening global warming with an impact on SEA and all other sub-regions, setting targets for such decrease as part for a sub-regional plan for mitigating global warming and ensuring its sustainable development is a necessity as individual SEA countries’ targets, wherever exits, may not be enough. Moreover, switching to clean or, at least, cleaner sources of energy may well be technologically challenging and financially difficult for many SEA countries to require utilizing the sub-regional resources and expertise for achieving the necessary sub-regional target. Finally, it makes sense to have a sub-regional entity to provide advisory services to the SEA countries for helping them diversify their energy mix to make it sustainable. Knowing all the options in this regard may not be the case for all the SEA countries and their individual efforts to build such sophisticated and expensive capacity at their national level would be unnecessary and/or unachievable due to the small scale of their need and their limited available resources for such objective. Thus, the SEA countries could opt for energy programmes, which may not be the most appropriate or financially-suitable ones or spend their resources on building the required advisory capacity individually with a limited use in their respective country. Thus, a regional advisory entity is advisable to prevent redundancy and waste of resources.

B. Existing initiatives There are many initiatives at the national level in SEA as each sub-regional country has taken steps to address its energy security challenges. However, with respect to making the individual SEA countries’ energy mixes sustainable, the SEA countries’ efforts to further diversify their energy mixes by adding environmentally-clean renewables vary from one country to another in terms of their scale and scope and their specific types of energy involved. Despite their achievements, in all cases, these efforts are yet far short of their respective countries’ needs and therefore the regional countries must go beyond the existing projects for which certian conditions must be in place. By and large, the sub-regional expansion of renewables have mainly been focused on CO2-emitting renewables (e.g., biomass, including

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biofuel), which, while decreasing the sub-regional reliance on fossil energy, does not contribute to the objective of turning the SEA energy consumption sustainable. Based on the 2009 statistics being the most recent year on which reliable statistics exist, the following brief account substantiates this assessment. SEA countries Brunei’s only type of renewable is solar, which is too small to be reflected in the country’s energy mix (1.2 MW).60 Brunei is considering wind, biomass and recycled waste heat from its existing natural gas-run power plants as possible sources for electricity generation.61 Cambodia’s main type of renewable is biomass, which accounts for the bulk of its energy consumption (3,664 thousand tons of oil equivalent [ktoe] in 2009).62 Indonesia’s renewable resources are abundant of which some are underutilized. In 2009, this type of energy generated 20.676 TWh of electricity (13 percent of the country’s generated electricity), mostly by the hydropower and geothermal facilities.63 Based on the projected estimates, there will be no obvious change regarding the share in the country’s primary energy mix of non-fossil energy from 2007 to 2030. With the increasing demand for coal and natural gas in power generation, the share of non-fossil energy will shrink to 9 percent in 2030 from 12.8 in 2007.64 This is despite the country’s impressive plan to become the world’s first geothermal country.65 Indonesia also produces biofuel to achieve 5 percent of biofuel utilization in its energy mix for the period 2016-2025.66 The Lao RDR’s renewables are essentially confined to hydro on which it is 100 percent reliant for power generation. It is rich in hydro resources with a potential of 23,000 MW,67 but, currently, only about 8.7 percent of the potential (2,000 MW) has been developed. It has plans for generating more hydro power to account for 22.4 percent of the country’s energy mix in 2030.68 However, with the development of the country’s coal plants, its reliance on hydropower for power generation will decrease to 65.7 percent by 2030.69 In Malaysia, biomass and hydro are the main renewables. Biomass’s production was 2987 ktoe in 2009.70 Hydro generated 6.67 TWh of electricity in 2009 accounted for 6 percent of the year’s total electricity generation.71 Based on its expansion plans, hydro energy is expected to produce 23.7 TWh of electricity by 2030 accounting for 9.8 percent of the country’s total power generation.72 Reducing dependency on petroleum products and environmental considerations are the major objectives of Malaysia’s more recent policies to expand the share of non-fossil fuels of the country’s energy mix. According to the 10th Malaysia Plan (2011-2015), the country will improve its security of energy supplies by 2015 through developing alternative sources of energy, particularly hydro, and importing coal and LNG.73 The plan will also increase efforts to develop solar, wind and biofuels and explore the possible use of nuclear energy. Myanmar is a country with abundant hydro and geothermal resources yet to be developed.74 Wind and solar energy are at their very initial stage of development due to their high cost of realization, even though the available potential is estimated at 365.1 TWh and 51973.8 TWh per year, respectively.75 Being Myanmar’s only CO2-free renewable, hydro’s share of the county’s energy mix is 2.4 percent.76 Its share is expected to increase to 38 percent by 2030.77 Apart from this emission-free energy, the country’s energy mix is dominated by biofuels and waste (70 percent).78

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The major types of non-fossil energy in the Philippines are geothermal and hydro. In 2009, they accounted for 16.67 percent (10.324 TWh) and 15.8 percent (9.788 TWh) of the total power generation, respectively.79 The Philippines is the world’s second largest producer of geothermal energy for power generation (1.9 GW).80 Solar and wind accounted for about 0.1 percent of its total power generation.81 The shares of geothermal and hydro in power generation are expected to rise to 24.1 TWh and 16.6 TWh, respectively, by 2030.82 However, with the increasing exploration of fossil energy, especially coal, their shares of in the national energy mix will slightly decrease from the 2007 levels of 21.1 percent and 1.8 percent, respectively, to 18.8 percent and 1.3 percent, respectively, by 2030 under the BAU scenario. 83 Regarding Hydro, the country’s committed and planned capacity will increase its overall hydropower capacity to 5,468 MW from the current installed capacity of 2,518 MW.84 Being a city state with limited natural resources and facing geographical constraints, Singapore considers its large-scale adoption of alternative energy to oil and gas to be unlikely. The non-fossil energy is expected to account for 0.6 percent of the national energy mix by 2030.85 Solar PV energy is the only potential renewable energy, which is expected to generate 5 percent of Singapore’s electricity in 2030.86 Its current installed solar energy is 4MW. Thailand has an extensive renewable programme. Biofuels and waste accounted for almost 20 percent of Thailand’s energy mix (equal to 20,603 KTOE) in 2009.87 Unlike the other ASEAN countries in which biofuels are mainly used by residential consumers, Thailand’s use of biofuels for electricity plants makes up 35 percent of its production.88 Excluding 3 percent for transportation, the rest is mostly for industrial and residential heating and cooking. For power generation, hydropower and biofuels accounted for 4.8 percent (7.148 TWh) and 4.03 percent (5.981 TWh) of the country’s total power generation, respectively, in 2009 when the shares of geothermal and solar and wind were, respectively, about 0.0007 percent (1 GWh) and about 0.007 percent (10 GWh). 89 Hydro’s generated electricity is projected to decrease to 3.4 TWh by 2030, while other renewables, excluding geothermal, but mainly biofuels, are projected to surge their electricity generation to 103 TWh.90 In Thailand’s total primary energy mix, hydro’s share will decline from 0.7 percent in 2007 to only 0.1 percent in 2030 while that of other renewables (other than hydro and geothermal) will increase to 24.7 percent.91 By the end of 2009, 712.08 MW of biomass- and biogas-fired power plants were installed in Thailand.92 The Thai government is aggressively promoting these renewables through its Small Power Producer (SPP) and Very Small Power Producer (VSPP) Program. Besides biofuels for power generation, producing biofuels for the transportation sector has increased significantly in recent years because of the blending obligations for biodiesel (3 percent mandate) and tax advantages for fuel ethanol. By mid-2011, the domestic biodiesel production capacity reached 1.6 million tons per annum.93 Vietnam’s primary energy mix in 2009 included biomass, consisting of biofuels and waste (33 percent), and hydro (3 percent).94 Hydropower is expected to generate 74 TWh of electricity by 2030 equal to 15.4 percent of the country’s total generated electricity.95 Vietnam is rich in hydropower resources. Its total hydropower potential is estimated at 14,000 to 17,000 MW of which nearly 4,100 MW have been realized so far.96 SEA

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At the SEA level, there has not been any plan or project specific to enhancing energy security and the sustainable use of energy, but there has been a significant number of decisions made over time to facilitate regional energy cooperation within the ASEAN framework. Nevertheless, while they may have provided a framework for cooperation, they are yet to be translated into major projects. Currently, there are only two significant projects in place (Trans-ASEAN Gas Pipeline and ASEAN Power Grid), which are yet to be fully implemented. Nevertheless, they are still far short than the regional needs and thus cannot address all the energy security challenges, particularly in terms of sustainable use of energy. ASEAN cooperation in the field of energy was first deliberated in 1980 at the First Meeting of the ASEAN Economic Ministers on Energy Cooperation. The Agreement on ASEAN Energy Cooperation was subsequently signed in Manila, the Philippines, on 24 June 1986. The agreement was signed with the intent to “strengthen the economic resilience of the individual Member Countries as well as the economic resilience and solidarity of ASEAN.”97 The primary mechanism for regional collaboration on energy is the Jakarta-based ASEAN Centre for Energy (ACE), which was institutionalized by the ASEAN governments in May 1998.98 The ASEAN heads of governments have mandated the ACE to initiate and facilitate the policies and activities within ASEAN in relation to the energy sector. The ACE is headed by an Executive Director who reports to the ACE governing council that comprises the ASEAN secretariat and ASEAN senior officials on energy.99 A key responsibility of the ACE is to draft the five-yearly ASEAN Plan of Action for Energy Cooperation. This action plan will then be implemented by specialized organizations of the respective ASEAN member states, which include the forum of Heads of ASEAN Power Utilities/Authorities (HAPUA), the ASEAN Council on Petroleum (ASCOPE), the ASEAN Forum on Coal (AFOC), the Energy Efficiency and Conservation Sub-Sector Network (EE&C-SSN) and the New and Renewable Sources of Energy Subsector Network (NRSE-SSN).100 The ASEAN Plan of Action for Energy Cooperation covers two major projects: the Trans-ASEAN Gas Pipelines and the ASEAN Power Grid.101

i. Trans-ASEAN Gas Pipelines (TAGP) The Trans-ASEAN Gas Pipelines (TAGP) is meant to establish interconnecting natural gas arrangements in the ASEAN region through a network of gas pipelines, by connecting existing and planned gas pipelines.102 As of April 2009, there were nine completed pipeline interconnections as follows.103

1. Malaysia - Singapore (5km via Johore Straits), completed in 1991; 2. Yadana, Myanmar-Ratchaburi, Thailand (470 km), completed in 1999; 3. Yetagun, Myanmar-Ratchaburi, Thailand (340 km), completed in 2000; 4. West Natuna, Indonesia-Singapore (660 km), completed in 2001; 5. West Natuna, Indonesia-Duyong, Malaysia (100km), completed in 2001; 6. South Sumatra, Indonesia-Singapore (470 km), completed in 2003; 7. Malaysia-Thailand JDA (270 km), completed in 2005; 8. Malaysia–Singapore (4 km), completed in 2006; and 9. Malaysia–Vietnam (325 km through PM3-Ca Mau Pipeline), completed in 2007.104

There are four potential pipelines, but their construction is subjected to the commercial viability of the required gas supplies. These are:

1. East Natuna, Indonesia–JDA– Erawan Thailand (~ 1500 km)

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2. East Natuna, Indonesia–Kerteh, Malaysia (~ 600 km) 3. East Natuna, Indonesia–Java, Indonesia (~ 1400 km); and 4. East Natuna, Indonesia–Vietnam (~ 900 km).105

So far, more than 3,000 kilometers of gas pipelines have been laid, establishing 11 bilateral connections between ASEAN member states.106 The East Natuna gas fields of Indonesia will remain the main gas source for the ASEAN region in the foreseeable future with a reserve of 1.27 tcm (45 tcf) of gas. The TAGP is managed by a steering committee, the Association Council on Petroleum (ASCOPE), and led by Malaysia’s national oil company PETRONAS.107

ii. ASEAN Power Grid (APG) The main objective of the ASEAN Power Grid (APG) is to ensure regional energy security and effective utilization and sharing of electricity resources.108 Given the regional electricity production is likely to grow at 6.1 percent annually from 2005 to 2030, by integrating the national power grids of the ASEAN countries, the APG is meant to provide electricity stability by ensuring access to the available regional electricity to help the ASEAN countries meet their rising electricity demand.109 Towards this end, more than 15 grid lines will interconnect the ASEAN member states by the time the project is completed between 2015 and 2020. This project is led by the Heads of Power Utilities/Authorities (HAPUA).110 To date, the three APG projects that have been constructed are: the Thailand-Lao PDR, the Lao PDR-Cambodia and the Lao-PDR-Vietnam.111 The potential APG projects include the following: the Sarawak-Peninsular Malaysia, the Peninsular Malaysia-Sumatra, the Batam-Bintan-Singapore, the Sarawak-West Kalimantan, the Philippines-Sabah, the Sarawak-Sabah-Brunei, the Thailand-Myanmar and the Kalimantan-Sabah.112

C. Actions that could be taken through regional cooperation Added to the mentioned need to decrease the sub-regional dependency on CO2-emitting energy, within the existing energy framework (energy mix), certain actions could be taken to improve the energy situation in SEA through sub-regional cooperation. The most important one is to build a sub-regional-wide distribution system through different appropriate means of energy transfer (e.g., pipelines, land/sea-based tankers and a common power grid) for all the types of energy (fossil and non-fossil) in demand in all the SEA countries to address overproduction of supplies in one part of the sub-region and scarcity of supplies in other parts. This could improve the regional energy security, although the unsustainable one because of the current heavy dependency of the sub-regional energy mix on fossil energy. The distribution system could actually decrease the sub-regional emission of CO2 by reducing the production of fossil energy for domestic use in all the SEA countries with such energy through making available the excess production of a sub-regional supplier to other suppliers thereby decreasing their need for increasing their respective production. Such arrangement would decrease to some extent GHG emissions produced in the production process of oil, gas and coal as well as biofuel. The available excess electricity in some sub-regional countries (e.g., in the Mekong River region) could be exported to the sub-regional

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countries, which, otherwise, would have to generate electricity in their countries by using pollutive sources (e.g., coal). Thus, such SEA-wide arrangement would help realize as a transitional means a sustainable regional energy mix until such mix could actually be realized by switching to environmentally-clean sources of energy. Investing in the promising energy projects of the SEA countries of relevance to all or most of the sub-regional countries is another possibility for sub-regional cooperation. They include building energy-producing facilities (e.g., power plants), producing the required machinery/equipment and R&D projects. Regarding the former, certain energy projects for generating emission-free energy are huge financial and technological undertakings to make them unachievable for some sub-regional countries individually. However, these countries can participate in such projects as a partner and receive a share of their energy. A blatant case is nuclear power plants, which could be built in one country, but its electricity can be exported to the countries in its near proximity. Regarding R&D projects, common investment in developing emission-free energy suitable for SEA (e.g., wind, solar, geothermal and nuclear) could lead to the development of far less expensive technologies than the existing one, whose high cost have created a major barrier to switching to clean types of energy in the SEA countries.

D. Analysis of the existing activities There are not many major non-regional entities with publically-available comprehensive assessments of the existing energy activities in SEA. The existing relevant literature are not assessments per se but reports on the sub-regional energy activities involving in one form or another the mentioned entities. Among the available one, Asian Development Bank (ADB)’s assessment is significant, which focuses on the need to balance the growing sub-regional needs in energy with environmental considerations, mainly global warming.113 It focuses on sustainable growth (low carbon growth) and the necessity of consuming more clean energy. It therefore encourages the sub-regional countries to invest in the required technology and stresses the necessity of an innovative approach to energy by these countries to achieve the mentioned objective. Other concerned international/regional entities share the same view to a varying extent, but mainly concentrate on certain issues pertaining to energy in SEA. They include IEA, which focuses on the necessity of energy cooperation in the ASEAN region with the objective of achieving a cleaner, more efficient and sustainable ASEAN Energy program.114 UNDP emphasizes the importance of governance for sustainable development within which SEA’s energy policies can be developed.115 Finally, UNEP deals with the harmonization of energy efficiency standards in SEA as an important issue for the subregion.116

Chapter IV: Political Commitments

This report provides the following suggested list of the important elements reflecting the required political commitments on the part the SEA countries for energy security and the sustainable use of energy to be reflected in the Ministerial Declaration. They are provided under their respective fields.

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A. Critical elements that the sub-region would like to see reflected in Ministerial Declaration Major sustainable development challenges to energy security 1. Decreasing dependency on fossil fuels by all the SEA countries is a necessity for mitigating global warming 2. Decreasing dependency on fossil fuels by all the SEA countries is a necessity for addressing the challenges caused by such dependency (i.e., availability, accessibility, affordability and plausibility of supplies)

Major energy challenges 1. Securing access to energy supplies both in terms of import routes for the SEA countries and distribution within the sub-regional countries 2. Improving energy efficiency for energy security and economic purposes 3. Increasing the very small share of environmentally-clean renewables of the regional energy mix 4. Addressing the barriers to the sub-regional energy trade 5. Addressing the unsustainable current policy towards energy pricing, subsidies and taxation

B. Justification • Major sustainable development challenges to energy security

The SEA energy mix dominated by fossil energy is unsustainable. This domination has resulted in massive emissions of CO2 accounting for the bulk of GHG causing global warming. Decreasing dependency on such energy by all SEA countries is a necessity for mitigating global warming. Such dependency also creates other challenges geared to availability, accessibility, affordability and plausibility of supplies especially for the SEA importing countries.

• Major energy challenges 1.The availability of supplies are meaningless if their imports cannot be secured on a regular basis due to the insecurity of import routes for the SEA countries depending partly or completely on energy imports. Internal insecurity in the SEA countries also undermines the availability of supplies as it affects energy distribution in these countries. 2. Energy efficiency is one of the energy challenges, which must be dealt with not just for energy purposes, but also the economic ones (decreasing the production cost of goods and services to make these items more affordable locally and competitive globally when it comes to their exports. 3. Decreasing the share of fossil energy of SEA’s energy mix is a necessity requiring the expansion of the small share of non-fossil energy in that mix, which is now confined to renewables (mainly biomass and hydro). Biomass, including biofuels, is not environmentally-friendly as it emits CO2, added to its production process damaging forests and emitting CO2. It is therefore necessary to expand the very small share of the environmentally-clean renewables (e.g., wind, solar, tidal and wave) of the regional energy mixes demanding systematic planning and investment.

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4. Energy trade in SEA is mainly focused on trading oil, gas and coal, but not environmentally-clean renewables. It suffers from certain limitations, including the inadequacy of the sub-regional production to meet all the sub-regional needs, reluctance on the part of the sub-regional importing-countries to heavily rely on one supplier (sub-regional or non-sub-regional) and a preference for export-target diversification by the sub-regional suppliers, which encourages them to export to non-SEA countries as well. Added to the low-quality of the regional coal encouraging coal imports from non-SEA countries, infrastructural shortages for sub-regional exports and the lack of a sub-regional legal framework to govern and facilitate SEA’s energy trade further limit regional trade. 5. Putting in place with good intentions, some of the regional measures have artificially reduced the prices of energy (fossil fuels and electricity) to create a financial burden, which is not sustainable. As well, under-priced liquid fuels for transportation and gaseous fuel for residential, commercial and industrial consumption have encouraged overconsumption and inefficiency. A change in pricing, subsidizing and taxing of energy is necessary to address the mentioned issues.

Chapter V: Proposed Actions

This report proposes certain actions to deal with the challenges of energy security and sustainable use of energy while specifying the opportunities. The challenges include the necessity of meeting the growing demand for energy in SEA, which will continue at a significant rate in the foreseeable future. They also include the expanding environmental problems, including global warming, which necessitate making SEA’s energy mix sustainable; this demands a reduction in consuming fossil energy and increasing the share of clean energy (clean renewables and nuclear) of the current mix. The required financial, technological and human resources pose other challenges as the SEA countries are mainly developing ones with limited resources. Yet, SEA also offers opportunities given its vast potential for clean energy generation (e.g., wind, solar and geothermal). The previous section provides a list of energy-related challenges requiring actions. These challenges reflect certain realities in SEA, namely: the increasing energy requirements in the sub-region due to its expanding economy and growing population whose living standards are improving; the growing dependency of the sub-region on imported energy due to its inability to meet all its energy requirements; the necessity of taking measures to mitigate global warming; and the necessity for sub-regional cooperation to make SEA’s enhance its energy security within the framework of sustainable development. Appreciating these realities, certain inter-related actions are proposed to be taken to ensure SEA’s sustainable development and energy security as discussed below.

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Prioritizing challenges and opportunities Proposed actions 1-SEA has large and growing energy requirements, which must be met to ensure its sustainable development. However, the current sub-regional energy mix dominated by CO2-emitting fossil fuel to which CO2-emitting renewables (biomass) should be added is not sustainable. Thus, efforts must be made to replace the unsustainable mix with a sustainable one based on the sub-regional realities. Adding environmentally-clean energy consisting of nuclear and non-CO2-emitting renewables to the sub-regional energy mix and/or increasing their very small current share in the case of the mentioned renewables are both necessary and feasible actions. SEA has a vast potential for non-CO2-emitting renewables, namely solar, wind, geothermal, hydro and wave/tidal, which can possibly meet the entire sub-regional needs in terms of electricity generation. Yet, they have been under-utilized for various reasons, including their current high cost and low yield compared to fossil energy and also biomass. Nevertheless, some of the regional countries have utilized them to a varying extent and thus gained experiences in terms of both manufacturing of the required equipments and production and distribution of their energy. Developing new technologies suitable for the region to address the two mentioned shortcomings or modifying the existing non-regional technologies towards this end can make large-scale use of non-CO2-emitting renewables feasible and affordable for the entire SEA countries. Based on such achievements, large-scale production of equipments needed for environmentally-sustainable renewables’ facilities will further decrease their cost to make them realistic options for the SEA countries. However, such undertaking is not an option for many SEA countries individually for various reasons, including their financial and technological/scientific restrictions. Given this reality, the SEA countries can initiate a joint project on R&D and manufacturing of the mentioned equipments as well as training personnel for their installment and repair and maintenance in the form of a partnership. In this case, each SEA country will contribute to this project funds and or scientific/production expertise as well as land and/or facilities. Based on a consensus, the project could be located in one or more sub-regional countries suitable for it. Nuclear energy is also a necessity for a sustainable energy mix as a non-CO2-emitting source of energy for large-scale electricity generation. However, its cost of realization is high and its operation requires highly-trained personnel, which is especially the case for large nuclear reactor (over 700 MW). Drawing on the mentioned proposed action, a similar project could be undertaken by the SEA countries to identify the appropriate nuclear technology for the sub-region and/or develop the appropriate one in terms of capacity, ease of operation, safety and cost to make available affordable and safe type of nuclear power reactors to SEA. Given their lower cost of realization and operation and the shorter-required period of construction than large nuclear power reactors (over 700 MW), small nuclear power reactors (under 300 MW) and medium nuclear reactors (300-700 MW) seem to be the right choice for SEA to be developed in association with the existing global technology suppliers. These suppliers have been working on the same types of reactors and have interests in expanding their market to SEA, which should make them interested in joining the proposed project.

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A combination of non-CO2-emitting renewables and nuclear energy is a feasible option for SEA to meet its growing needs in electricity in a sustainable and environmentally-friendly manner. The two projects could also help the sub-region to develop itself as a technology supplier for sustainable energy to help fuel sustainable development wherever needed. This is surely a feasible and desirable way to diversify the sub-regional economy and generate income to help finance its sustainable development. 2-SEA is developing a growing dependency on imported fossil fuels with its associated energy insecurity potentials, heavy financial burden on the sub-regional economies and worsening impact on global warming. It is therefore necessary to decrease this dependency to the extent possible as a necessary step for immediate purposes (e.g., decreasing the financial burden of imported fuels on SEA) and also developing a sustainable sub-regional energy mix. Towards this end, certain inter-related joint actions at the SEA-level must be taken as a common project under a sub-regional centre in which all SEA countries participate and whose leaderships rotates. ASEAN is a right entity for forming this centre in association with Timor Leste, which must have a clear plan covering the following actions as a special project. All the SEA countries must become committed to implement these actions through their joining of a SEA-wide program detailed below having a clear implementation plan with specified milestones to gradually decrease the existing heavy dependency on imported energy. A-It is necessary to fully utilize the regional resources to decrease and eventually end dependency through various measures. A major one is to build a sub-regional-wide distribution system using all the required means of energy transfer (e.g., pipelines, land/sea-based tankers and a common power grid) for all the types of fossil and non-fossil energy used in the SEA countries as discussed earlier. Among other benefits, this system ensures that the available sub-regional energy resources can be distributed throughout SEA, which otherwise may not be available. B- It is necessary to end unnecessary consumption and overconsumption of energy through identifying the major sources of such consumption and offering easy-to-implement instructions to end such consumption through education and enforcement. For example, ending unnecessary use of electricity by street lights when there is no traffic late at night is feasible by using sensors to activate/deactivate lights. C-It is necessary to increase energy efficiency by replacing the old energy-intensive technologies with the more-efficient new ones starting with the least-efficient sectors. D- It is necessary to end the unsustainable current policy towards energy subsidies. Such subsides are necessary in the case of non-CO2-emitting renewables to encourage their respective R&D, production and consumption, which must be kept in place and increased whenever necessary. However, subsidizing oil, gas and coal process and the production and consumption of CO2-emitting renewables (e.g., biomass) only encourage the growing consumption of environmentally-unsuitable energy to worsen global warming affecting the SEA economies and increase its dependency on imported fuels in the case of fossil energy.

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http://www.aseansec.org/20506.htm


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http://www.frost.com/prod/servlet/market-insight-top.pag?docid=140182389

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Endnotes 1 World Energy Council, Survey of Energy Resources 2007 (London: World Energy Council, 2007), p. 133. 2 ASEAN, ASEAN Plan of Action for Energy Cooperation 2010-2015 (Jakarta: The ASEAN Secretariat, July 2009), p. 6. 3 BP, BP Statistical Review of World Energy June 2011. 4 Ibid. 5 OECD/IEA, Energy Balances of Non-OECD Countries, 2011. 6 The World Bank, “Timor-Leste: Key Issues in Rural Energy Policy, 2010. p.2. (http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf; accessed on 12 September, 2012) 7 European Chamber of Commerce, Market Potential in Energy Efficiency in Southeast Asia, Singapore: European Chamber of Commerce, November 2011, p. 14. (http://www.rolandberger.com/media/pdf/Roland_Berger_Market_Potential_in_Energy_Efficiency_in_Southeast_Asia_20111104.pdf; accessed on 26 September 2012) 8 Ibid. 9 Ibid., 10 Ibid. 11 Ibid. 12 Ibid. 13 Ibid. 14 World Bank, “ Table 1: Timor-Leste 2006: Useful Energy Share of Major Fuels for All Sectors,” Timor-Leste Key Issues in Rural Energy Policy (Washington, D.C.: World Bank, December 2010, p.1). (http://siteresources.worldbank.org/INTEAPASTAE/Resources/TimorLeste_RuralEenergyPolicy.pdf; accessed on 20 September 2012) 15 World Health Organization, The Energy Access Situation in Developing Countries, 2009, pp. 66-101. (http://content.undp.org/go/cms-service/stream/asset/?asset_id=2205620; accessed on 20 September 2012) 16 OECD/IEA, Energy Balances of Non-OECD Countries, 2011. 17 OECD/IEA, Electricity/Heat by Country/Region, Paris: IEA Publications 2011. (http://www.iea.org/stats/prodresult.asp?PRODUCT=Electricity/Heat; accessed on 20 March 2012) 18 Ibid. 19 Ibid. 20 Ibid. 21 OECD/IEA, World Energy Outlook 2009 (Paris: IEA Publications 2009), p. 651 22 Ibid. 23 Ibid. 24 OECD/IEA, Energy Balances of Non-OECD Countries, 2011. 25 Jonn Slette and Ibnu Edy Wiyono, Indonesia Biofuels Annual Report 2011, Washington DC: U.S. Department of Agriculture, 19 August 2011. (http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Biofuels%20Annual_Jakarta_Indonesia_8-19-2011.pdf; accessed on 22 March 2012) 26 Samantha Olz and Milou Beerepoot, Deploying Renewables in Southeast Asia (Paris: International Energy Agency, 2010), p. 19. 27 OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.90. 28 OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.189. 29 OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.156. 30 OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.284. 31 EIA, International Energy Statistics (http://www.eia.gov/countries/country-data.cfm?fips=TT&trk=p1; accessed on 10 September 2012) 32 OECD/IEA, World Energy Outlook 2009, p. 648. 33 Ibid. 34 ASEAN Center for Energy, The 3rd ASEAN Energy Outlook, p. 29. 35 ERIA, Analysis on Energy Saving Potential in East Asia, June 2011, p. 125. 36 Ibid, p.14. 37 Damon Evans, “The great game of Greater Sunrise”, Presidency of the Republic vol. 11, no. 6 (December 2011), p.28. 38 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 542 39 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 542 40 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 542 41 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 542-543

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42 IEA World Energy Outlook 2011, Paris: OECD/IEA, p. 526 43 David Braithwaite, Alexander Chandra, Prasetyaning Diah R.L., Ami Indriyanto, Kerryn Lang, Lucky Lontoh, Nataliawati Siahaan, Damon Vis-Dunbar, Bobby A.Wattimena, Unggung Widhiantoro and Peter Wooders, Indonesia’s Fuel Subsidies: Action Plan for Reform, Canada: The International Institute for Sustainable Development, March 2012 (http://www.iisd.org/gsi/sites/default/files/ffs_actionplan_indonesia.pdf; accessed on 7 August 2012) 44 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 542-543 45 IEA World Energy Outlook 2011, Paris: OECD/IEA, p. 526 46 Ibid. 47 David Braithwaite, Alexander Chandra, Prasetyaning Diah R.L., Ami Indriyanto, Kerryn Lang, Lucky Lontoh, Nataliawati Siahaan, Damon Vis-Dunbar, Bobby A.Wattimena, Unggung Widhiantoro and Peter Wooders, Indonesia’s Fuel Subsidies: Action Plan for Reform, Canada: The International Institute for Sustainable Development, March 2012 (http://www.iisd.org/gsi/sites/default/files/ffs_actionplan_indonesia.pdf; accessed on 7 August 2012) 48 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 542-543 49 “Geothermal Power Opportunities in Indonesia and the Philippines,” Kuala Lumpur: Green Prospects Asia, 27 July 2012 (http://www.greenprospectsasia.com/content/geothermal-power-opportunities-indonesia-and-philippines; accessed on 20 September 2012) 50 Ibid. 51 IEA, Deploying Renewables in Southeast Asia, Paris: OECD/IEA, 2010, p.53 52 IEA, Deploying Renewables in Southeast Asia, Paris: OECD/IEA, 2010, p.53 53 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 612 54 IEA, Deploying Renewables in Southeast Asia, Paris: OECD/IEA, 2010, p.53 55 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 617 56 IEA World Energy Outlook 2009, Paris: OECD/IEA, p. 596-597 57 IEA, Deploying Renewables in Southeast Asia, Paris: OECD/IEA, 2010, p.53 58 OECD/IEA, IEA Energy Statistics 2011 (Paris: IEA Publication 2011) (http://www.iea.org/stats/pdf_graphs/MMTPESPI.pdf; accessed on 23 March 2012) 59 World Nuclear Association, Nuclear Power in Vietnam, London: World Nuclear Association (http://www.world-nuclear.org/info/vietnam_inf131.html; accessed on 20 September 2012) 60 Goh De No, “Brunei to Boost Use of Renewable Energy,” Brunei Times, 24 September 2011. (http://bruneitimes.com.bn/business-national/2011/09/24/brunei-boost-use-renewable-energy; accessed on 20 March 2012) 61 “Renewable Energy for Brunei’s Sustainability,” Brunei Times, 2 May 2012. (http://www.bt.com.bn/science-technology/2012/05/02/renewable-energy-bruneis-sustainability; accessed on 9 May 2012) 62 OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.95. 63 OECD/IEA, Electricity/Heat by Country/Region (Paris: IEA Publication 2011). (http://www.iea.org/stats/prodresult.asp?PRODUCT=Electricity/Heat; accessed on 20 March 2012) 64 ASEAN Center for Energy, The 3rd ASEAN Energy Outlook, p. 127. 65 Ibid. 66 Informa Agra & Commercial, World Ethanol and Biodiesel Markets-A Global Industry Outlook 2011, p. 36. 67 ASEAN Centre for Energy, The 3rd ASEAN Energy Outlook, p. 43. 68 Ibid. 69 Ibid. 70 OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.189. 71 OECD/IEA, Electricity/Heat by Country/Region (Paris: IEA Publication 2011). (http://www.iea.org/stats/prodresult.asp?PRODUCT=Electricity/Heat; accessed on 20 March 2012) 72 ASEAN Centre for Energy, The 3rd ASEAN Energy Outlook, p. 131. 73 “Better Handling of Resources,” New Straits Times, page Y 12, 11 June 2010. 74 Ministry of Energy, Myanmar, Renewable Energy Sector, Yangon: Ministry of Energy, 2001. (http://www.energy.gov.mm/renewableenergysector.htm; accessed on 23 March 2012) 75 Ibid. 76 OECD/IEA, IEA Energy Statistics 2011 (Paris: IEA Publication 2011) (http://www.iea.org/stats/pdf_graphs/MMTPESPI.pdf; accessed on 23 March 2012) 77 ASEAN Centre for Energy, The 3rd ASEAN Energy Outlook, p. 133. 78 OECD/IEA, IEA Energy Statistics 2011 (Paris: IEA Publication 2011) (http://www.iea.org/stats/pdf_graphs/MMTPESPI.pdf; accessed on 23 March 2012) 79 OECD/IEA, Electricity/Heat by Country/Region (Paris: IEA Publication 2011). (http://www.iea.org/stats/prodresult.asp?PRODUCT=Electricity/Heat; accessed on 20 March 2012 80 John W. Lund, Derek H. Freeston, and Tonya L. Boyd. Direct Utilization of Geothermal Energy 2010 Worldwide Review, Bali, Indonesia: Proceedings of the World Geothermal Congress 2010, 25-29 April 2010. (http://www.geothermal-energy.org/216,welcome_to_our_page_with_data_for_philippines.html; accessed on 13 March 2012) 81 OECD/IEA, Electricity/Heat by Country/Region (Paris: IEA Publication 2011). (http://www.iea.org/stats/prodresult.asp?PRODUCT=Electricity/Heat; accessed on 20 March 2012 82 ASEAN Centre for Energy, The 3rd ASEAN Energy Outlook, p. 135. 83 Ibid. 84 Philippine Department of Energy, Renewable Energy-Hydropower, Manila: Department of Energy, 2005. (http://www.doe.gov.ph/ER/Hydropower.htm; accessed on 23 March 2012) 85 ASEAN Center for Energy, The 3rd ASEAN Energy Outlook, p. 137.

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