IEEJ: March 2014. All Rights Reserved.

Energy Securityin North Asia
March 1２, 201４

The Institute of Energy Economics, Japan
CEO & Chairman

Masakazu Toyoda

IEEJ: March 2014. All Rights Reserved.

Table ofof Contents
Contents
Table
1. Asia: A Center of Growth and Energy Consumption
2. Recent Uncertainties in the Global Energy Landscape

3. How to ensure energy security under those
uncertainties: Four cooperative agenda for North East Asia
4. Conclusions

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1

IEEJ: March 2014. All Rights Reserved.

1. Asia: A Center of Growth andEnergy Consumption
2. Recent Uncertainties in the Global Energy Landscape
3. How to ensure energy security under those
uncertainties: Four cooperative agenda for North East Asia
4. Conclusions

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2

IEEJ: March 2014. All Rights Reserved.

1. Asia : Center of growth and energy consumption

1-(1) World Energy Supply and Demand Outlook (by Region)
10,000Mtoe
石油換算百万トン

World
2011
13.1 Btoe↓
2040
19.6 Btoe(Up 1.5-fold)

8.9 Btoe

9,000
8,000

Asia

7,000
6,000

5.1 Btoe

5,000

Asia

4,000
3,000

North America

2,000OECD Europe
Non-OECD Europe

Latin America
AfricaMiddle East

1,000

Oceania

2040

2030

2020

2011

2000

1990

1980

1971

0

2011
5.1 Btoe↓2040
8.9 Btoe(Up 1.8-fold)• Under steady economic growth assumptions, Asian energy consumption in 2040 will increase 1.8-foldfrom the present level (from 5.1 billion tons in 2011 to 8.9 billion tons in 2040). Non-OECD countries
will account for about 90% of global energy consumption growth between 2011 and 2040.
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Source: IEEJ “Asia / World Energy Outlook 2013”3

IEEJ: March 2014. All Rights Reserved.

1. Asia : Center of growth and energy consumption

1-(2) Primary Energy Demand by country (Asia)

ReferenceAdv. Tech.

M toe
2,000

AAGR
1980-20112011-2040

China
5.3%
2.3%

India
5.3%
3.4%

Japan
-0.4%
-1.2%

0.39 bil.toe
(19％)

Korea
Taiwan Sin gapo r e
4.1%
2.2%
5.2%
-0.1%
0.7%
1.5%

Indonesia Malaysia Phi l i ppi nes Thailand Vietnam Other A s i a

4.2%
2.9%

1,500

1,000

4.1%
1.3%

0.6%
3.4%

4.9%
2.2%

China

India

Japan

Korea

TaiwanIndonesia

Malaysia

Philippines

Thailand

VietnamSingapore

Hong Kong

Other Asia

Adv. Tech.

8.1%
4.0%

Reduction

3.5%
2.4%

7%

Japan

21%

India

●Reference

14%

41%

China

2.10 bil.toe (43.0 mbd)
●Adv. Tech.

37%
0
1971

↓
2040

17%
500

2011
1.20 bil.toe (24.5 mbd)

1.71 bil.toe (35.1 mbd)
1980

1990

2000

2011

2020

2030

2040

Though the vehicles’ fuel efficiency may be improved, and clean energy vehicles may expand, oil
demand in Asia will expand from 24.5 million B/D in 2011 to 43.0 million B/D in 2040, due mainly to its
escalating vehicle ownership. The share of China and India together in Asian oil demand will grow from
51% in 2011 to 62% in 2040.
• Even in the Adv. Tech. Scenario, projected oil demand saving will be equal to 19% of the Reference
Scenario in 2040.
•

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Source: IEEJ “Asia / World Energy Outlook 2013”

4

IEEJ: March 2014. All Rights Reserved.

1. Asia : Center of growth and energy consumption

1-(3) Energy independence is increasingly weakened in Asia
Adv. Tech.

77％

Asia
Net Oil Import

81%

2011
17mbd
↓
2040

Mtoe
2,500

DemandProduction

Net import
79%

2,000

75%
69%

1,500

51%

1,198

52%

1,000

1,542

2,102

1,842
1,712
1,451

●Reference

1,151

35 mbd
(2.1-fold inc.)821●Adv. Tech.

618

500

478
227 250301 317

377

390

390

390

27 mbd
(1.6-fold inc.)

0
1980

•
•

1990

2011

2020

2030

2040

Net oil import in Asia will expand from 17 mb/d (720 Mtoe) in 2011 to 35 mb/d (1,712 Mtoe) in 2040.
Oil production in Asia (such as China, India, Indonesia and Malaysia) will marginally increase, notkeeping pace with the steady increase in oil demand. Therefore, net oil import ratio will reach 81% in
the Reference Scenario, and 77% in the Adv. Tech. Scenario by 2040 (compared with 69% in 2011).

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Source: IEEJ “Asia / World Energy Outlook 2013”5

IEEJ: March 2014. All Rights Reserved.

1. Asia : Center of growth and energy consumption

1-(4) Very low self-sufficiency in Korea and Japan
Self sufficiency rate (2011)
200%

180%

With nuclear

180%

162%

Without nuclear

160%

6%

10%

140%
120%
100%

81%

80%

69%
54%

60%

11%
6%

0%

1%

5%

18%

19%

15%

19%

0%

3%

Japan S.Korea

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9%

1%

174%
153%

10%

10%

40%

40%
20%

72%

89%

88%
46%

59%

71%

72%

India

U.S.

31%

8%

Italy Germany France

U.K.

China Canada Russia

Source: IEA "Energy Balances of OECD countries"

6

IEEJ: March 2014. All Rights Reserved.

1. Asia : Center of growth and energy consumption

1-(5) Energy Vulnerability is increasing in China
China’s supply and demand outlook on Oil andNatural gas
1,000

900
800

Oil

Mtoe
Consumption
Production
Net import

73%
68%

500

400
300
200
100

631

645

Oil
ImportDependency
Ratio
▲20%
▲20%

89 108119138

573

62%

438

442

34%
234

210

206

203

58

-100

-20

1980

800

700
600

1990

2000

2011

2020

2030

2040

Net Naturalgas ImportNatural gas

Bcm

50%

Consumption
Production
Net import

698

523

300
200

Natural gas
ImportDependency
Ratio
0%

45%
352 347
302

20%
▲10%

0%

100
13 13

0

0

14 14

0

120

258 266

166

24 Bcm↓
2035

136

347 Bcm

95

24

23 25

• Full-scale countermeasures
include developing domesticenergy, diversifying supply
sources, independently
conducting overseas
development andstrengthening companies asplayers.

2011

51%

500

400

631 Mtoe(2.6-fold inc.)0-19

239 Mtoe
↓
2035

239

221
163

Net Oil
Import

2011

866

783

700
600

73%

• Increasing dependence onenergy imports= Increasingly recognized
as a vulnerability(esp. by China)(14.3-fold inc.)• However, these actions may
increase the hoarding ofand competition forresources, destabilizing theinternational markets.

-2

-100

1980

1990

2000

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2011

2020

2030

2040

Source: IEEJ “Asia / World Energy Outlook 2013”7

IEEJ: March 2014. All Rights Reserved.

1. Asia: A Center of Growth and Energy Consumption

2. Recent Uncertainties in the
Global Energy Landscape
3. How to ensure energy security under those
uncertainties: Four cooperative agenda for North East Asia
4. Conclusions

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IEEJ: March 2014. All Rights Reserved.

2. Recent Uncertainties in the Global Energy Landscape2-(1) Uncertainty in M.E. has deepened as Arab Spring spread.
Uncertainty
over Middle
East PeaceissuesIraqi
situations
after the war

Tensions on
Iran Nuclear
development

Shale Revolution
and its impact
on Middle East
economics

Rising energy
demand and its
impacts

Growing Anti US
sentiments in Araband Islam society
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Uncertainties in thecurrent regimes ofMiddle East because of“Arab Spring”

Terrorism, threats
to energy
production andexports
Source: Prepared by IEEJ

9

IEEJ: March 2014. All Rights Reserved.

2. Recent Uncertainties in the Global Energy Landscape2-(2) Oil Prices hovering at high level(US$/bbl)

lehman
shock

150
130

Historicalhigh•

Average Brent crude oil is$109/bbl (WTI $98/bbl)•

The price has remained at ahistorically very high level
since 2011.

•

In November 2013, provisional
agreement was reached on
Iran’s nuclear development.
However, its impact on oil
prices is limited due topersistent geopoliticalconcerns over Syria and Iraq.

•

In the US, WTI prices have
dropped since the summer of2013 due to the easing
demand for oil caused byincreasing production of shaleoil. The difference with the
Brent price is now greater than
$10/bbl.

Irannuclearissues"ArabSpring"

Brent

115

110105

105

95

90

WTI

2010

2009

2008

2007

30

Euro
creditconcerns

2014

Bandedtrading

2011

50

Euro
fiscalcrises2012

Recovberyfromthe bottom

2013

70

Source: EIA/DOE

In 2013, oil prices remained high (more than $100/bbl)
for the third consecutive year since 2011.
• Average Brent crude oil price is forecasted at $105/B(±$10/B) for 2014.
•

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2. Recent Uncertainties in the Global Energy Landscape2-(3) Shale revolution ①
The surge in unconventional oil & gas has huge implication.
Remaining technically recoverable Oil resources by type and region
Conventional（billion barrels）

NGLs

Crude oilOECD Americas
OECD Europe
E.Europe/Eurasia
Asia
Middle East
AfricaLatin America
World

Unconventional

253
59
352
100
982
255
245
2245

57
31
81
37
142
52
32
433

Extra heavy oil
and bitumen
809
3
552
3
14
2
498
1880

Kerogen oil

Light tight oil

1000
4
20
16
30
0
3
1073

70
18
14
63
4
33
37
240

total
2188
116
1019
219
1172
341
815
5871

Remaining technically recoverable Natural gas resources by type and region（tcm = trillion cubic
meters）

Conventional

E.Europe/Eurasia
Middle East
Asia-Pacific
OECD Americas
AfricaLatin America
OECD Europe
World
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144
125
43
47
49
32
24
462

Unconventional
Tight gas
Shale gas
Coalbed methane
11
12
20
9
4
21
57
16
11
47
9
10
30
0
15
33
4
16
2
81
200
47

total
187
137
137
114
88
80
46
790

Source:IEA"WorldEnergyOutlook2012“

11IEEJ: March 2014. All Rights Reserved.

2. Recent Uncertainties in the Global Energy Landscape2-(3) Shale revolution ②： Asian premium($/MMBTU)

New York Citygate

Russian pipeline gas (at German border)

Algerian LNG (in France)

Japan LNG

Japan LNG
France LNG
from Algeria

German border:
Pileline gas from

Russia

US:NY City Gate
(Pipeline gas)

US:

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2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

Henry hubMay, 2000

22
20
18
16
14
12
10
8
6
4
2
0

Henry Hub

(Pipeline gas)

Sources: Japan's customs clearance statistics and EnergyIntelligence Data from the US Department of Energy

12

IEEJ: March 2014. All Rights Reserved.

2. Recent Uncertainties in the Global Energy Landscape2-(3) Shale revolution ③： Implications of US Energy Independence
Dependence of Natural gas importon the Middle East

Dependence of Oil importon the Middle East
30%

•

•

30%

Europe
US

2012

0%
2012

0%

2010

5%
2008

5%
2006

10%

2004

10%

2002

15%

2000

15%

2010

20%

2008

Europe

2006

20%

2004

25%

2002

US

2000

25%

Oil: US dependence on the Middle East continues to decline, while imports from Canada and Central
and South America are increasing. European dependence on the Middle East also continues to decline,
while imports from former USSR countries are increasing.
Natural gas：Dependence on the Middle East is slightly increasing due to reinforced LNG export
capacity in the Middle East.

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2. Recent Uncertainties in the Global Energy Landscape2-(3) Shale revolution ④： Possible Impact on Real GDP
Enhanced Development Scenario : Changes in 2040 from the Reference Scenario
Reference: Accumulation
after U.S. shale revolution
Latin America
India
Oceania
China
Southeast Asia
USA
Japan
EuropeFSU
Middle East••

Note: Effects of a shift
from the Reference
Scenario to the Enhanced
Development Scenario

As oil & gas industries expands, net energy import value drops and energy price falls, most national
economies benefit. The degree of benefits depends on output growth, industrial structure, oil and natural
gas industries’ portion of the economy, energy supply and demand structure, external demand changes
in trading partners, etc.
Traditional energy producing countries will face downward pressures on their GDP due to a combinationof demand loss and price drops.

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Source: IEEJ “Asia/Word Energy Outlook 2013"14

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2. Recent Uncertainties in the Global Energy Landscape2-(4) Serious concerns with Nuclear Energy
The trust on nuclear safety was seriously damaged because of Fukushima
nuclear accident.

<Global shift in opinion on nuclear energy after Fukushima>

Source: Gallup International (April 19,2011)
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1. Asia: A Center of Growth and Energy Consumption

2. Recent Uncertainties in the Global Energy Landscape

3. How to ensure energy security
under those uncertainties: Four cooperative agenda for
North East Asia
4. Conclusions
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IEEJ: March 2014. All Rights Reserved.

3. How to ensure energy security under those uncertainties

3-(1) Energy conservation is beneficial for all importing
countries.
Energy conservation would increase energy independence andcontribute to combat Climate Change
CO2 emissions per GDP (2011)(Carbon Intensity)

Primary energy supply per GDP (2011)(Energy Intensity)［ kgCO2/US$（Standard exchange rate in 2005 ） ］

1.90

2.00
1.75

1.80

[ ktoe/1000 US$（Standard exchange rate in 2005） ]

1.00
0.90

1.60
1.32

1.20

0.60

1.00

0.50

0.80

Source: IEA “CO2 emissions from fuel combustion 2013”

Russia

China

India

0.25

Korea

0.14 0.17

USA

China

Russia

India

Korea

Australia

Canada

USA

0.00

Japan

0.10

0.00
EU-27

0.20

0.10 0.11

Australia

0.20

EU-27

0.24 0.26

0.20

Canada0.30

0.40 0.43 0.44

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0.57

0.40

0.56

0.60

0.65

0.70

Japan

1.40

0.40

0.77

0.80

17

IEEJ: March 2014. All Rights Reserved.

3. How to ensure energy security under those uncertainties＜Example of cooperation＞：It is important to continue to holdEnergy and Environmental Forum for China and Japan The above mentioned forum has been held with about 1000
business people and Government officials for seven years since2006, in China, either in Tokyo or in Beijin, alternately. The forum
has been hosted by Ministers of METI and NDRC (National
Development and Reform Commission). The last meeting was heldin Tokyo.
 Various issues have been discussed such as policies, technology
transfer, and experiences with respect to energy conservationand introduction of low and zero carbon. A large number ofprojects have been agreed.
 Trends of cooperative projects：(1) 5 projects → (2) 10 → (3) 19 → (4) 42 →(5) 44 → (6) 51 → (7) 47 （Total 218 projects)
 Unfortunately the meeting was not held last year(2013).

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3. How to ensure energy security under those uncertainties

3-(2) Emergency Response Arrangement(IEA)
Emergency
Response
MeasuresSource: IEA “IEA
Emergency Response
System” New Delhi,
30 May 2012

(APEC) APEC Oil & Natural gas Security Exercises
METHODOLOGY FOR THE EXERCISE• Arrange thewhole schedule
for the exercise

Stakeholders from:• The Government’s
energy department• Organizations orcompanies in theenergy industry• The Government’s
industry, commerce &transport departments

the Host
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APERC• discuss,question andanswer• Organize
experts onenergyemergency

the External
Review
Team

Experts from:• APEC economies• IEA• ASEAN institutions• ERIA• APERC• Upon the instruction from APEC Energy
Ministers Meeting (EMM) in St. Petersburg
on June 2012, APERC has worked on
activities to improve the response to oil andgas emergency situations in the APEC
region, including two emergency response
exercises in Thailand (jointly with other
ASEAN APEC economies) on September
2013 and in Indonesia on October 2013.
• The result of these activities will be reported
to the forthcoming APEC EMM in Beijing on
September 2014.

19

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3. How to ensure energy security under those uncertainties

3-(3) Joint efforts are essential to eliminate Asian premium(1) Goals
1. Relaxing supply and demand of natural gas in Asia
2. Increasing liquidity in Asia LNG market
3. Developing a benchmark LNG price in Asia

(2) Possible cooperation
2-1) Cooperation by private sectors
a. LNG swap
b. Joint purchase and development for diversification of supply sources(incl. pipeline gas) and pricings (e.g. Henry Hub, Hybrids, Spot LNG)
2-2) Cooperation by Governments
c. Diplomatic and financial supports for upstream gas projectd. Prohibiting destination clause of LNG contracte. Ensuring free flow of goods, personals and money through EPA
f. Deciding energy mix, which will improve price negotiation capability

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3. How to ensure energy security under those uncertainties<Reference> Possible Gas pipeline network in North east Asia

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3. How to ensure energy security under those uncertainties

3-(4) Nuclear Power could expand safely based on lessons
from Fukushima
1000

GW

World

History← →Forecast
Middle East, Africa

900
800

700

495 GW

600
500

18%

FSU,
non-OECD
Europe235 GW400

11%

Latin America

13%

OECD Europe

11%

20%

17%

22%

300

North America

33%

47%

200
31%

Asia

100

389 GW↓
2040
Reference
624 GW (Up 235 GW)

Adv. Tech.
885 GW (Up 495 GW)

41%

23%

0

2013

Adv. Tech.
1980

2013

2020

2030

2040

2040

• Global nuclear power generation capacity in 2040 will grow by 235 GW in the Reference

Scenario and by 495 GW in the Advanced Technology Scenario. Asia will lead the growth
and account for nearly half of the global capacity in 2040 in the Advanced Technology
Scenario.
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Source: IEEJ “Asia / World Energy Outlook 2013”22

IEEJ: March 2014. All Rights Reserved.

3. How to ensure energy security under those uncertainties＜Example of cooperation＞: Formation of cooperative
framework for nuclear safety(1) Elements to be considereda. Types of cooperation : those among gov. (either promoting
agencies or regulators) and /or operators
b. Nature of cooperation : EU like cooperation (Non-binding but
virtually effective)(2) Points of cooperationa. Establishing meaningful regulatory frameb. Accident preparedness or crisis managementc. Risk communicationd. Enhancement of nuclear security and coping with terrorism
e. nuclear cycle
f. liability schemeg. human resource development

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Table ofof Contents
Contents
Table
1. Asia: A Center of Growth and Energy Consumption
2. Recent Uncertainties in the Global Energy Landscape

3. How to ensure energy security under those
uncertainties: Four cooperative agenda for North East Asia

4. Conclusions
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IEEJ: March 2014. All Rights Reserved.

4. Conclusion
1. Asia is a center of growth, but this means that
Asia is a center of energy consumption
2. Energy landscape surrounding North Asia is full of uncertainty
3. Energy security in North Asia is getting more vulnerable unlessregional cooperation is promoted to cope with recent uncertainty
4. At least four cooperation can be listed to be promoted;
1) Energy conservation=> more energy independence2) Emergency Response arrangement=> helping each other among
countries with similar characteristics3) Elimination of Asian premium for LNG trade=> cheaper and cleaner fuel4) Ensuring nuclear safety => safer North Asia

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Thank you for your attention !!

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