share
April 24, 2008, Fereidun Fesharaki and Kang Wu

 


Additional Resources for this event:


 


(click to enlarge) Top: Fereidun Fesharaki delivers remarks. Below: David Pumphrey, left, Kang Wu, Fereidun Fesharaki and Charles Morrison, at the East-West Center event at the Russell Senate Building on April 24, 2008.

Asia's Energy Future

 

(WASHINGTON, DC) April 24 – The Asia-Pacific region’s rising fuel consumption is leading to a shift in the global center of gravity for oil demand, a shift that has raised concerns about energy security—and its implications for economic performance and political stability—around the world. When measured by incremental use, Asia and the Pacific account for an increasingly large share of the world’s annual growth in oil consumption, fueling fears of tension both among Asian nations and between Asia and the West. Fereidun Fesharaki and Kang Wu, Senior Fellows at the East-West Center, discussed some of the drivers, implications, and future approaches to this dramatic shift in the global energy markets during a briefing on Capitol Hill co-sponsored by the East-West Center and the Center for Strategic & International Studies (CSIS).

 

Fesharaki, a former energy advisor to the Iranian Prime Minister, explained that in today’s global energy landscape, three primary demand centers are emerging: China, the Persian Gulf, and India. A few years back, China overtook Japan, while India surpassed Korea, to be the largest and third largest oil consuming countries in Asia. These four Asian countries alone consume more than 70 percent of Asia’s oil, though the actual quantity combined is still 30 percent less than what the United States consumes. Increasingly, these and other Asia-Pacific countries will be looking to the Middle East and Africa for their oil imports, growing progressively more dependent on outside sources for their crude supply over the coming decades.

 

The global liquefied natural gas (LNG) market conveys a similarly dramatic disproportionateness, said Fesharaki. In 2007, the Asia-Pacific region’s share in the world’s LNG demand was 65 percent, compared to just 24 percent in Europe. According to Fesharaki, the radical change in the global LNG equation is the result of five primary factors: higher oil prices, rising construction costs, the United States’ rapid entry into the LNG market from out of nowhere, the decline of Indonesia as a major LNG exporter due to resource problems and political pressure, and the near-term importance of Qatar.

Kang Wu shared specific insights about China’s energy future. While coal remains China’s primary source of energy consumption—and will continue as such for years to come—the country’s position as an oil importer is deepening after becoming an oil importer over a decade ago. Most notably, Africa’s importance as an oil supplier to China is growing, although the Middle East remains a major source and China is continually seeking to diversify its oil and gas imports. According to Wu, China will rely on domestic energy sources—especially coal—while enhancing domestic oil/gas exploration activities to maximize production. China’s energy strategy also includes strengthening its overseas upstream energy investments, increasing investments in oil and gas infrastructure, and expanding its strategic petroleum reserves (SPRs).

 

Fesharaki and Wu concluded their discussion by outlining a number of future options and implications for the Asia-Pacific energy market. Nuclear fuel, they noted, will inevitably make a return—especially for China and India, where there is no other viable alternative. The diversification of energy supplies, meanwhile, may not have a significant impact given the connectivity of the global oil market, while cooperation among Asian countries—on common areas such as oil storage, pipelines, and investments—will be “necessary and possible, but difficult.”  Finally, they noted limited possibilities for gas-to-liquid, coal-to-liquid, and coal-to-gas conversion projects, but a more optimistic outlook for Canadian tar sands and Venezuelan heavy oil, though huge investments in the latter will be needed.

 

David Pumphrey, Deputy Director of the Energy and National Security Program at CSIS and former deputy assistant secretary for international energy cooperation at the U.S. Department of Energy, served as a discussant for the program and reiterated the idea that the Asia-Pacific’s share of global oil demand will not abate anytime soon. China and India are emerging prominently as central variables to the world’s energy equations, he said, and questions for the future will revolve around how these two countries reconcile the historic supply-side dilemma of source diversification and begin to incorporate cleaner, more sustainable technologies.

 

###