Closing Session:
Conference Summary and Closing Remarks:
March 17, 2004
Prof. Sang-Gon Lee, Ph.D.
President Korea Energy Economics Institute
Distinguished participants, ladies and gentlemen,
First of all, I would like to thank you all for your wonderful presentations, valuable discussions and active participation at each session. Over the last two days, we have gone though so exciting discussions on two essential questions. “What are the most urgent works to promote energy security in Northeast Asia?” And “what is the most appropriate way to speed up the evolved momentum toward more productive and beneficial cooperation for all countries in the region?”
At the opening session, I hoped that this Conference would be a great opportunity in enhancing mutual understanding of energy issues in Northeast Asia countries. Through all the sessions, we have been defining a vivid picture on why we need to collaborate with strong resolution. With new perspectives for energy security in Northeast Asia, we have discussed the ways to overcome the challenges by designing a regional cooperation framework, and figuring out the role of the governments and other stakeholders to facilitate cross-border energy projects.
In specific, I would like to remind you several important issues and conclusions.
<Session 1: Energy Security in Northeast Asia>
Session One effectively covered the key issues relating to Northeast Asian energy security from a range of perspectives.
Energy security was defined by one speaker as a stable, cost-effective and sustainable supply of energy based on an efficient and environmentally friendly energy supply system, emergency preparedness and international cooperation.
Challenges to Northeast Asia’s energy security include the rapid growth of energy demand; limited energy reserves; increasing imports from outside the region; geopolitical vulnerability and a high dependence on oil from the Middle East; and environmental problems stemming from dependence on coal and oil as well as energy inefficiency in certain areas.
The discussion emphasized the key importance of a regional approach to Northeast Asian energy security.
Regional energy cooperation (in particular Russian natural gas exports to the rest of Northeast Asia) is expected to rectify the region’s imbalance of supply and demand, strengthen energy security through geographical and fuel diversification, improve stability, decrease
vulnerability to external shocks, and provide cleaner and more cost- effective energy.
While the potential benefits are clear, speakers also recognized significant obstacles.
Cross-border energy trade depends on very large investments, stable political relationships and multilateral institutions. The speakers suggested various concrete strategies and cooperative frameworks to address these issues through concerted efforts, in order to ensure that the search for energy security becomes a catalyst rather than a constraint for regional cooperation.
<Session 2: Framework Building for Regional Energy Cooperation in Northeast Asia>
Session Two began with the presentation of a vision for regional integration of energy systems, addressing both physical and non- physical integration. In this context, confidence building processes and legal frameworks and institutional arrangements were highlighted.
Because Northeast Asia has no substantial experience in energy cooperation, it was suggested that a consultative mechanism at government level could provide significant momentum to energy development in the region.
We learnt about the evolution of energy cooperation in Europe and the
role of such cooperation in enabling large infrastructure investments.
The close coordination between governments and companies in establishing a multinational gas network was highlighted, as was the role of regional institutions in the ongoing process of promoting a single European market in energy. We also heard about the Energy Charter processes that have been implemented.
In both cases it was felt that Northeast Asia can draw certain lessons from Europe’s experiences although Europe may not provide a model.
In particular, there is seen to be a need for a framework for cross- border energy trade to stimulate investor confidence in such projects.
It was concluded that long-term negotiations between the various stakeholders and the establishment of a regional framework for energy cooperation will be difficult but worthwhile, in time enabling the region to move from confidence-building measures to real projects.
<Session 3: Financing Cooperative Projects in Northeast Asia>
It was commented in the first session that neither academicians nor bureaucrats build pipelines, and that the private sector must be engaged. However, infrastructure investment requirements in Northeast Asia are well beyond the range of the private sector alone.
Government backing and commitment at the highest level is required, as is the support of international financing institutions.
Financing of cross-border gas pipelines was highlighted as particularly complex, with problems related to risk, relations between central and local governments, regulatory issues, legal frameworks and various other concerns to be overcome.
Considering the scale of the financial resource requirements for infrastructure development in Northeast Asia, the idea of a Northeast Asian Development Bank was raised. There is currently no multilateral financing institution that involves all six Northeast Asian countries, and a Northeast Asian Development Bank would have the advantage of a relatively neutral image.
Establishment of an Asian energy agency which can propose bankable regional projects was also suggested.
On the second day, the discussion moved to specific areas of energy cooperation.
<Session 4: Natural Gas Cooperation in Northeast Asia>
Session Four provided a clear outline of LNG projects and possible PNG projects in the region, looking at both individual projects and the bigger picture.
Speakers commented on the complementarity between LNG and pipeline gas in the region, and compared the specific features of each.
It was noted that Northeast Asian use of natural gas is relatively low, but seeing strong growth because of its anticipated environmental and economic benefits, and advantages in terms of supply diversification.
PNG is expected to play an increasingly important role in the region in the mid- to long term. However, so far there is an absence of both
‘hard’ and ‘soft’ infrastructure for cross-border trade in pipeline gas.
The Irkutsk PNG project was highlighted as technically and commercially viable. However, echoing the previous day’s discussions, it was emphasised that government backing and an enabling policy will be critical to implementation. Regional cooperation and the need for official inter-governmental discussions were also mentioned.
There was discussion of the idea of more flexible terms and conditions for pipeline gas consumers, but one speaker noted the importance of downstream commitment for such large scale, long-term, demand- driven investments.
We were reminded of the problem of balancing competition with investment protection and environmental concerns, and the need for a balance between market and regulator.
<Session 5: Electricity Cooperation in Northeast Asia>
This session discussed integration of electricity systems in Northeast Asia, starting with an overview of the region’s power demand and generating capacity.
We learned about the research project on Northeast Asian Regional Electric System Ties and about the European experience in overcoming challenges to electricity cooperation.
The experience and current situation of the energy sector in Mongolia were also outlined, as well as energy trade between Mongolia and Russia.
The benefits of a regional power network based on electricity exports from the Russian Far East were discussed, while the obstacles to development of such a network were fully recognized. A concrete proposal was presented, with an analysis of the financing required.
By highlighting transmission from Russia to the Korean peninsula as a potential first step in creating the envisaged regional power network, the discussion again touched on the role of geopolitics as a force in cross-border energy transactions.
Participants were cautioned not to forget about the potential for increased use of renewable energy.
<Session 6: Cooperation in Oil and Energy Security in Northeast Asia>
This session revisited the key issue of energy security for Northeast Asia, specifically oil supply security.
The expected massive increase in Chinese oil consumption was highlighted, as was the projected growth of the transport sector across the region. The need for diversification in case of volatility was emphasized, and the establishment of strategic oil stocks in China and India noted as a positive development.
Cooperation between Northeast Asia and the IEA, and concrete suggestions for joint work in the future were outlined. Specific suggestions include cooperation on emergency response measures, oil data system and market monitoring, and capacity building.
The importance of moving from national to international energy policy was mentioned, and one speaker suggested that regional cooperation in oil security could play a leading role in economic cooperation in the region.
Our final session also highlighted the ‘Asian premium’ and the role of international cooperation in resolving this issue.
Ladies and gentlemen!
As the discussion has proven over the Conference, we should not underestimate the expected contribution of energy cooperation to the co-prosperity of Northeast Asian countries. The one important thing that I have learned over the Conference is that we should be a part of the solutions and also need to become leading actors in promoting energy security in Northeast Asia.
I believe that we should share our knowledge and develop joint understandings of problems and their solutions. We are now exerting genuine efforts, which demand integration of different perspectives and your expertise. Reflecting the importance of Northeast Asia energy issues not only for the constituents of Northeast Asia but also for the world energy security, the IEA has recently enhanced its research focus on the Northeast Asian region. It is expected that further collaboration with the IEA will be much conducive to regional energy cooperation in Northeast Asia.
Albert Einstein once said, “Problems cannot be solved by thinking within the framework in which they were created.” It is now the time
for us to build up a new cooperative scheme for dealing adamantly with any challenges. Fortunately, the concerns and interest for the Northeast Asian energy cooperation has been evolving strongly, and hence we should keep rolling forward this momentum that has been
built up.
Again I want to thank all participants for your intellectual discussion over the Conference and all institutions for their hard works in organizing this meaningful Conference. One more time, I would like to offer my best wishes for all participants.
Thank you very much for your attention.
