Oil Security and Collaboration in Northeast Asia

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Oil Security and Collaboration in Northeast Asia

Seoul, Korea, 16-17 March, 2004

Norio EHARA

Head of Non-Member Countries Division Asia/Pacific and Latin American Countries

International Energy Agency (IEA)

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Content

z Challenges for Northeast Asia Oil Security z Ways towards Regional Oil Collaboration

and IEA’s Role

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1. China factor

2. Supply security 3. Diversification

Challenges for Northeast Asia

Oil Security

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1. China Factor : Oil Demand in Asia

0 100 200 300 400 500 600 700

1971 2000 2010 2020 2030

China

East Asia

Jap/Aus/NZ

India

Russia

Korea

Mtoe ¾China exceeded Japan and is the 2^nd largest oil consumer in the world

¾The rate of demand increase is one of the highest in the world: 3%

¾Volatile to the oil disruption and price hikes => concern of the world

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China Factor: Impact in NE Asia

0 200 400 600 800 1000 1200 1400 1600

1971 2000 2010 2020 2030

OECD NA OECD Eur China

East Asia Jap/Aus/NZ India

Russia Korea NE Asia

Mtoe ¾Of the top 10 oil consumers, 4 are Northeast Asian Economies

¾NE Asia will consume 20% of the world oil in 2030

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Growing gap between Oil demand and Production in China

0 2 4 6 8 10 12 14

1980 1990 2000 2010 2020 2030

Production Consumption

Mb/d

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China’s Impact on Global Primary Energy Demand, 2000-2030

20

49

16 6

30

8

29 41

50 43 55 53

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TPES Coal Oil Gas

China OECD Non-OECD (excl.China)

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2. Supply Security

Increasing Oil Import Dependency

0 10 20 30 40 50 60 70 80 90 100

OE C D P acific

OE C D E urope

OE C D N.A merica

S outh A sia C hina E ast A sia

net imports as per cent of oil supply

2000 2010 2030

34%

60%

82%

72%

85%

95%

31%

52

71%

36%

40%

52% 53%

66%

85%

90%94%

95%

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Disruptions of Major Crisis

Growing Oil Import Dependence on ME

Vulnerability to price volatility and supply disruption

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Oil demand growth will come from transport sector

0 50 100 150 200

Transp. Electricity Industry Res&Comm

Japan/Aus/NZ

0 20 40 60 80 100 120

Transp. Electricity Industry Res&Com m

Russia

0 50 100 150 200 250 300

China

0 20 40 60 80

Republic of Korea

Mtoe

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Strong Concern on Oil Security in China and India

Total World Oil Stocks: 6.0 billion barrels*

*Excludes ex-USSR, China and South African strategic stocks.

OECD Commercial

45%

OECD Strategic

21%

Non-OECD Commercial

18%

At sea/In transit

16%

China and India : 5 + 5 million tons

= 10 million tons = 6% of OECD Strategic

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5mb/d Contingency Plan in 1991

Good Model for Other CERM Plan

Surge Prod.

Fuel Switch

Demand Restr.

Stockdraw

67 kb/d

330 kb/d

2 086 kb/d

17 kb/d

¾In the wake of the Y2K rollover in 1999

¾Ex-post 11 September 2001

¾Strikes in Venezuela, turmoil in Nigeria and the war in Iraq in 2002/2003

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3. Diversification: Regional Mismatch

Growing international and inter-regional trade in energy

•International oil trade grows considerably as the gap widens between P&Cs

•Inter-regional trade will rise from 32m/bd (43%) in 2000 to 66 mb/d (55%) in 2030.

•Asia: from 4.9 mb/d in 2000 to 24 mb/d in 2030. (China: 1.7m/bd-10 mb/d).

•The Middle East strengthens its position as the world oil exporter.

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0 200 400 600 800 1000 1200

China Russia Japan Korea DPRK Mongolia

Coal Oil Gas Nuclear Hydro Renewables

Different TPES in NE Asia

Mtoe

20%

49%

52%

5% 19%

21%

¾Diversity of energy supply

¾Regional mismatch = potential co-operation - Infrastructure investment

- Market reform and transparency

- Need of good business models with Russia : Lessons of other regions

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TPES Projection in NE Asia

0 100 200 300 400

Oil Gas Coal Nuclear Other

Japan/Aus/NZ

0 100 200 300 400 500 600

Russia

0 200 400 600 800 1000 1200 1400

Oil Gas Coal Neclear Other

China

0 50 100 150 200

Republic of Korea

Mtoe

More diversified in Japan and Korea, more rely on domestic resources in China and Russia

2000 2030

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Energy Supply Potential from East Russia

♦

Energy Production in Siberia and the Far East

11080- 67-89

52-63 42-49

Far East

32

154-202 124-174

105-133 87-96

Eastern

78

Siberia

927- 1023 940-

1017 963-

1033 1019-

998 1064

Western Siberia

Primary Energy Production

(Mt)

2020 2015

2010 2000

1999

♦Energy Resources in East Russia

- Oil (Potential): 14 billion tonnes in East Siberia and the Far East - Hydro and Tidal generation capacity: 17.2 GW

- Natural Gas (proven): 5.4 tcm (12% of total Russian reserves)

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Russian Oil Production Outlook Russian Oil Production Outlook

0 100 200 300 400 500 600

1990 1995 2000 2005 2010 2015 2020

Million tonnes / year

West Siberia European Part of Russia E. Siberia & Far East Russia - Optimistic case Russia - Moderate case Old Strategy

IEA-WEO

Old

Investment New

$160-

$200

$230-

$240

Source: Russian Energy Strategy, May 2003 / IEA projection – WEO (2002)

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9 Gazprom and Rosneft:

Angarsk-Nahodka: $5B - 1mbd 9 YUKOS, TNK-BP, Sibneft:

Angarsk-Daikin: $2B – 400

kbd

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Ways toward Regional Oil

Co-operation and the IEA’s Role

in NE Asia

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OLADE

IEA Collaboration in the Global energy security systems

ASEAN

(ACE, ASCOPE) Japan, Korea

ASEAN+3

China

India

US, Canada, Australia & NZ

Russia

Mexico, Peru, Chile

APEC-EWG(APERC)

EU

SAARC

AFRC

Energy Charter

IEA

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Basis for the NE Asia and IEA Collaboration

z IEA Ministerial Communiqué in April 2003

¾Emerging need to collaborate with key NMCs

¾Lessons from the past and share the policy goals

z Japan&Korea + China, Russia as strategic partners with MOUs

z Same challenges and objectives :

¾Oil supply security

¾Investment

¾Market volatility and economic damage

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Co-operation between NE Asia and IEA

z Current and future co-operation

¾ Stock Workshops with China (2001&2002), ASEAN+3

(2002), ASEAN (2003&2004) and India (2004) => Hotlines

¾ IEA/KEEI Conference on energy security in March &

IEA/KERI Conference on electricity in May 2004

¾ Cross-border study on oil and gas in 2005/2006

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Suggestions for Joint Work in the Future

z Energy security co-operation with NE Asia and IEA’s Emergency Response Measures

¾ Experience sharing for energy policy and market reform to foster investment

¾ Harmonization of the regional framework with world energy security in real emergency situation

=> simulation exercise in 2004, joint workshop in the future, etc

z Oil data system and market monitoring

¾ NE Asia specific data

¾ Information exchange for energy market transparency

¾ Producer-consumer dialogue: IEF in 2004 in Amsterdam & EEM in 2005 Paris

z The IEA’s contribution to capacity building

¾ Training of experts and statisticians

¾ Co-operation with bodies and countries in NE Asia

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Government Role for Regional Co-operation

Regulatory &

Regulatory &

market market frameworks frameworks

ENERGY &

OIL SUPPLY Security

Energy security Energy security

policies &

measures measures

International International

trade rules trade rules

Environmental Environmental

policies &

measures measures

Government policies will shape the energy

Government policies will shape the energy--supply landscapesupply landscape Producer

Producer-- Consumer Consumer

dialogue dialogue Research &

Research &

development development