IEEJ：October 2015ｃ○ IEEJ 2015

Special Bulletin
A Japanese Perspective on the International Energy Landscape (243)

October 30, 2015

SIEW Think Tank Roundtable Discussions
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn October 26-30, the Singapore International Energy Week (SIEW) 2015 took place inSingapore. The SIEW is a very large-scale international energy conference that the government ofSingapore puts special effort into sponsoring. During the SIEW period, multiple meetings and events
attract high-level government officials, energy industry leaders and experts from throughout theworld. The SIEW has been taking hold as one of the major events among energy stakeholders.
During this year’s SIEW, I had an opportunity to participate as a speaker in one think tankRoundtable and as a moderator in another. Based on the discussions there, I here would like tosummarize the points I see as important.
The first of the two Roundtables dealt with the theme of “Oil Pricing and Outlook,” ashandled by the Institute of Energy Economics, Japan. I and three other panelists discussed the themefrom various viewpoints at the Roundtable. Interestingly, the four panelists agreed that: a) oil prices
are very likely to remain at current low levels for the immediate future (at least until the first half ofnext year); b) they could drop further depending on circumstances; and c) the medium to long-term
future path of crude oil prices could be lowered.
The current low oil prices have begun to influence oil supply and demand in the world.
The oil market is going in the direction of “rebalancing” through a demand rebound and a slowdown
in production by those other than OPEC countries. But the current supply surplus still totals as muchas 1.5 million barrels per day. U.S. shale oil production has unexpectedly enhanced its resistance toprice drops and turned out flexible. Saudi Arabia’s oil production policy that holds the key to thefuture oil price trend has signaled no change, indicating that the oil kingdom still retains priority on
its market share. These above mentioned factors have prompted most energy analysts to predict thatthe oil market will remain weak for the immediate future.
While the Chinese economic situation has seemingly restored stability at this moment after
its economic growth deceleration caused oil prices to plunge again in August, downside risks for theChinese economy are still feared to emerge again. In addition, Iranian crude oil’s comeback to theinternational market accompanying the termination of Western economic sanctions on Iran could
become a factor to induce turbulence in the international oil supply-demand balance in the future, asindicated by discussions at the Roundtable. Some panelists noted that oil prices could plunge further
depending on the circumstances, which may become a factor to prompt OPEC or Saudi Arabia tochange its oil production policy.
1IEEJ：October 2015

ｃ○ IEEJ 2015

Regarding the medium to long-term crude oil price path, many participants in theRoundtable noted that the mainstream view that crude oil prices would rise back above $100 per
barrel in and after 2030 now faces with great uncertainty. In this respect, participants indicated theirgreat interest in explanations about the Lower Price Scenario in the IEEJ’s Asia/World Energy
Outlook 2015. Some participants forecast that oil prices would rise back above $70/bbl in 2020 fromthe current low levels as higher-cost oil production of several million barrels per day is required dueto the net effects of future demand growth, increased output in Iran and other Middle Easterncountries and the natural depletion of oil fields now in operation. At the same time, others pointed toa possible higher increase in U.S. shale oil supply and smaller future global oil demand growth,which may also result in weaker supply-demand balances. Anyway, participants broadly agreed thatoil prices would follow a lower path than earlier predicted.
The second Roundtable where I participated covered renewable energy, which is attracting
attention and expectations in Asia, under the theme of “Integrating Renewables into the Grid: Is It
the Right Time to Act Now in Asia?”
Asia has been placing growing expectations on renewable energy as domestic clean energy
contributing to energy security and environment protection. Factors behind the growing expectations
also include renewable energy for new business or industry promotion and renewables’ greater social
acceptability than that of nuclear and coal power generation. As is well known, high or ambitious
targets and policy measures for the diffusion of renewable energy have been considered or
introduced in many Asian countries including Japan.
As indicated by German, Spanish and other early renewable energy diffusion cases,
however, there emerged various challenges with regard to renewable energy introduction. The
challenges include: a) electricity price hikes caused by the massive introduction of higher-cost
renewable energy into the electricity system; b) relevant increases in consumer costs; c) grid
capacity expansion and relevant cost hikes for the massive introduction of intermittent solar
photovoltaics and wind energy; and d) problems regarding operation and maintenance of gas andcoal power plants. Participants in the Roundtable discussed how to proceed with energy
transformation to realize the economically sustainable expansion of intermittent renewable energy in
the Asian market where energy demand is expected to greatly increase.
The Roundtable discussion indicated that it is important for various stakeholders(including national governments, energy companies, industry users, local governments and citizens)
involved in renewable energy promotion to engage in stepping up understanding and cooperation.
This is really a challenge in Asia. A significant opinion given at the Roundtable was that market
analyses based on accurate, detailed data are required for working out appropriate energy planningwhich is indispensable for promoting renewable energy. Many panelists also noted that: a)governments and policies play fundamentally important roles in making and implementing
renewable energy planning; and b) policy efforts are indispensable for designing electricity market
systems as the market system and design has an important implication on renewable energy
development. Another point made at the Roundtable was that European experiences indicate the2

IEEJ：October 2015ｃ
○ IEEJ 2015

enhancement of grid network integration under consideration in Asia would be important forallowing the entire grid network to absorb intermittent renewable energy supplies. Thus it isimportant to have a medium to long-term strategic perspective in tackling the enhancement ofwide-area grid network integration. The Roundtable discussion also pointed out that: a) it isnecessary to promote the development and diffusion of advanced technologies including renewableenergy supply systems and smart grids on the demand side; b) investment must be secured with therelated finance issues to be resolved. In Asia, which will become the center of the global energy
market, sustainable development of renewable energy in increasingly important by addressing thechallenges/weakness of renewable energy.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

3