May 14, 2015
Cross-Straits Series: Implications of Energy Security on Critical Geopolitical, Economic, and Environmental Issues in the Asia-Pacific Region
By Atlantic Council
After a short introduction, the session began with the general context laid out by Mr. Manning. He commented on the displaced focus on China when it comes to gas and oil in the region, when most lessons were learned from Japan, as well as a couple important facts that are not considered by most: that the drilling technology didn’t exist in the Asia-Pacific just twenty years ago, and that Asians get 75% of their oil from the Gulf and have become one of the biggest importers of oil in the world, but now that reactors they are dependent on are shutting down, this is creating an energy gap. Asians are also still very doubtful as to whether the US has the ability to sustain even with the seemingly successful shale gas revolution.
Mr. Chow provided the Chinese perspective. China passed the US as the largest net oil importer in the world last year and is now ambitious to increase their natural gas utilization as opposed to coal from 6% to 10% by the end of the decade. The world average is currently in the 20s. As the biggest importer now, the country is investing heavily abroad and another big goal is developing unconventional gas domestically. It is a messy process however, due to state-owned enterprise reforms and the government’s anti-corruption campaign that has a tight grip on the companies. State control and political direction is obstructing potential economic growth and a true market of free trading of petroleum products in Asia. And as for the South China Sea, Chow emphatically stated that it is an issue about sovereignty, sea lands, communications, fishery and not oil and gas.
Southeast Asia is clearly seeing positive economic progress but the average amount of energy consumed per person remains half of the world average today, suggesting a lot of room for development. Ms. Miller said, the predictions are, however, that by 2035, the region will see a sharp increase and will become the fourth largest importer of oil from the Gulf. The demand for gas is already going up quickly. There are some problematic factors, however. Countries are facing fiscal pressure; there are environmental issues such as CO2 emission is said to double and with every 10% increase, about 64 million people are projected to be pushed into poverty. The US energy revolution is also impacting the region – the dip in oil prices has allowed subsidy reforms to reduce burdens on countries. The international community could also help with the outdated technology that is being used in Southeast Asia so that they can burn their coal as efficiently as possible.
The issues between Japan and Korea reflect the broader prospects of the Asia-Pacific region. Dr. Jackson says there are some good news and some bad news. On the positive side, the two countries have a common interest in finding a stable energy supply because they are both worried about their dependence on the Middle East. They are both creating energy projects and both facing demographic crises. It seems the US has the potential to become the game changer as both countries have made it explicit that they prefer the US to the Middle East as the oil provider. On the negative side, the US law is still constraining the US export potential, and even if the US provided oil for Japan and Korea, their demand on oil from the Middle East is so high that the US could only slighly mitigate their dependence on the Middle East. The Asian policy elites are also putting up a firewall that trumps economic logic. Once again, the region is facing too many political problems, driven from motives unrelated to economic progress. It is increasingly difficult to tell whether this is all an issue of sovereignty, economics, race, resources, or anything else that is creating this Asian paradox of economic progress and suspension.