Report

NEAT Working Group on
Energy Security Cooperation in East Asia
(Phase III: Energy Diversification)

Singapore
27 April 2007

1IIntroduction

1The NEAT Working Group (WG) on Energy Security Cooperation in East Asia

met in Singapore on 27 April 2007. The WG was chaired by the East Asian Institute,Singapore’s NEAT Country Coordinator. The delegates included scholars and experts
from the ASEAN Plus Three (APT) countries. A delegation list is at Annex.

2This is the third meeting of the WG since it was formed in 2004. The first meeting(Phase I) on 6 May 2005 focused on the energy outlook in the region and maritime
security in energy transport. The second meeting (Phase II) on 30 June 2006 looked atenergy efficiency and energy conservation. The theme for the third meeting (Phase III)was on energy diversification in the APT countries.

3

The meeting covered three main aspects, namely: (a) the issue of energy

diversification in the APT countries, (b) potential, challenges and problems of energy
diversification, and (c) possible areas for regional cooperation in energy diversification.

4The meeting is timely in the wake of continuing volatility in oil prices, growing

uncertainty over long-term energy supply and rising concerns over the environmental
impact of fossil fuels use. This report highlights the major issues raised at the WG
meeting, including possible areas for bilateral and regional cooperation among APTcountries.

5The report, prepared by NEAT Singapore and after the endorsement of thedelegates to the WG, will be submitted to the 5th Annual Conference of NEAT to be heldin Singapore in August 2007.

IIThe Issue of Energy Diversification

6Energy diversification is conventionally defined as a move away from reliance oneither one or two primary sources of energy, usually fossils fuels, to non-fossil fuels.

2While each APT country has a different mix in its overall energy utilisation, the meeting
noted that most APT countries are predominantly dependent on either one or two fossil
fuels. Countries like Brunei, Cambodia, Myanmar, Singapore and Vietnam are heavily
dependent on fossil fuels (almost up to 100%) while Japan is the least dependent on fossil
fuels (84%) followed by Korea (85%) and the Philippines (92%). Given the heavy
reliance on fossil fuels, the governments of all the APT countries are making concerted
efforts to diversify their energy sources and vary their energy mix. 1

7The meeting highlighted a number of factors behind energy diversification efforts.

From the political and security perspectives, diversifying energy sources and varying theenergy mix would enable countries to better withstand energy supply shocks in the short
run and demand squeeze due to sudden surge in demand coupled with insufficientinvestment in energy infrastructure to keep up with the demand. On the economic front, asharp and sustained rise in oil prices would make renewable sources of energy morecommercially viable. Technological progress may also bring down the costs of renewablesources of energy, thus increasing their commercial viability. The growing concerns forthe environment and global warming provide a strong impetus to search for cleaner
substitutes.

8The APT countries are at different stages of economic development, so are theyfor energy diversification. In Northeast Asia, Japan has introduced nuclear power andnatural gas to reduce its reliance on oil. China is tapping oil and renewables such ashydro, wind and solar power to reduce its dependence on coal. Korea is reducing its coaland oil demand by looking at gas, nuclear and waste incineration. In Southeast Asia,
Brunei is making nascent efforts to move away from oil and gas while Cambodia,
Indonesia, Laos, Malaysia, Myanmar, Philippines, Thailand and Vietnam have hadvarying success in diversifying into fossil fuels (other than oil), hydro power and otherrenewables. Singapore, with its heavy reliance on oil and gas, is diversifying within thesetwo sources and exploring renewable sources of energy.

1

For more details, see Appendix.

3

III

Potential, Challenges and Problems of Energy Diversification

9The potential, challenges and problems of energy diversification for individual

APT countries are closely related to their respective levels of economic development andresource endowment, and their respective government priorities and policies toward
energy diversification. What are listed below just highlight some key issues that countries
in the region must grapple with. Naturally, some countries face more challenges andproblems than others.

10In brief, the key reasons for lack of sufficient energy diversification efforts in theAPT countries include: 1) the availability of capital, technology and trained humanresources, 2) the political costs and social inertia involved in shifting from one or twoenergy sources to others; 3) the comparatively high cost of renewable sources of energy
at the present state of technology, 4) the level of social awareness and acceptance ofalternative energy resources such as nuclear power, and, 5) the set of government policies
and incentives, and the importance of coordination among relevant ministries andagencies.

IVImplications for Regional Cooperation

11Although energy diversification is largely undertaken by the individual APT

governments, there is room for cooperation at regional level. Such cooperation will servea number of purposes. First, it can help complement national policies and actions. Second,it can address issues of common interest or concern such as the safe use of nuclear energy
and safe disposal of nuclear waste. Third, it can lead to optimal use of existing or
potential assets such as joint exploration and joint stockpiling.

12Regional cooperation in energy diversification should cover:-

Sharing of information, technology and know-how on the use of bothfossil and non-fossil fuels4-

Exploring viable alternatives, particularly renewable sources of energy-

Removing

impediments

tocross-borderinvestments

forenergy

diversification projects-

13

Promoting greater use of natural gas in the short run

The meeting takes the view that the APT governments should actively identify

and push for ways and means to diversify sources of energy and promote regional
cooperation in this area. Given the unique experiences and strengths of each country’s
energy diversification efforts, regional cooperation can result in better synergies andmore cost-effective solutions, and promote economies of scale.

14

By working together, more eco-friendly ways of generating power can also befound and shared which will safeguard the environment. The region’s long-termsustainable growth and stability critically depends on whether or not the region caneffective address its energy needs by taking into account individual national priorities andinterests, as well as overall environmental considerations.

VPolicy Recommendations

15

Below are some of the key recommendations and suggestions by the WG onenergy diversification to the APT governments:(i)

Recommendation 1: To explore all possible avenues related to energy cooperation
for APT countries, especially in the areas of energy conservation anddiversification.

(ii)

Recommendation 2: To facilitate the sharing of information, technology andknow-how on the use of both fossil and non-fossil fuels for APT countries. In
particular, more advanced APT countries should consider sharing energy-saving
technology with others.

5(iii)

Recommendation 3: To explore viable alternatives, particularly renewable sourcesof energy e.g. safe nuclear energy, clean coal, solar energy and biofuels. APT
countries should consider undertaking research in appropriate technology forrenewable sources of energy.

(iv)

Recommendation 4: To remove impediments to cross-border investments forenergy diversification projects and devise a conducive set of policies andincentives toward a more viable energy mix.

(v)

Recommendation 5: To promote greater use of natural gas in the short run, e.g.
hastening the development of the Trans ASEAN Gas Pipeline (TAGP) andreducing the heavy reliance on oil in the transportation sector.

(vi)

Recommendation 6: To propose that the ASEAN Centre for Energy (ACE)expand its scope of activities to cover all APT countries. In particular, the centre
should pay more attention and channel more resources to energy conservation anddiversification efforts.

.....

6ANNEX
Delegates to the Working Group on
Energy Security Cooperation in East Asia
(in alphabetical order)
Singapore
Friday, April 27, 2007
No.

Country1)

Brunei2)

Cambodia

3)

China4)

Indonesia5)

Japan6)

Korea

7)

Laos8)

Malaysia9)

Myanmar10)

Philippines

11)

SingaporeNameContact Details

Dr. Azman bin Ahmad(Dean/Senior Lecturer
Faculty of Business, Economics and Policy Studies
Universiti Brunei Darussalam)
Mr Cheap Sour
(Director, Ministry of Industry, Mines and Energy)
Asso. Prof. Zhu Caihua (Ms)
(Department of International Economics, China
Foreign Affairs University)
Dr. Kusnanto Anggoro(Senior Researcher, Department of International
Relations, Centre for Strategic and InternationalStudies)
Mr Ishida Hiroyuki(Senior Economist, International Strategy Analysis
Group, Strategy & Industry Research Unit, The
Institute of Energy Economics)
Dr. Park Bokyeong(Research Fellow, Center for Regional Economic
Studies, Korea Institute for International Economic
Policy)Dr. Daovong Phonekeo(Deputy Director-General, Department of Electricity,
Ministry of Energy and Mines)
Dr. Muhamad bin Hamzah(Senior Director
Energy Commission, Malaysia)
U Thein Lwin
(Managing Director,Myanma Petro Chemical Enterprise)
Dr. Peter Lee U(Dean, School of Economics, University of Asia andthe Pacific)
Prof. John Wong
(Research Director, East Asian Institute)

Azman@fbeps.ubd.edu.bn

Dr Yang Mu(Senior Visiting Research Fellow, EAI)

eaiyu@nus.edu.sg

Dr Elspeth Thomson(Visiting Research Fellow, EAI)

eaiebt@nus.edu.sg

Mr Teng Siow Song(Research Officer, East Asian Institute)eaitss@nus.edu.sg

Cheap_sour@hotmail.com(absent with apologies)
zhucaihua@cfau.edu.cn

kusnanto@csis.or.id

ishida@tky.ieej.or.jp

bypark@kiep.go.kr

daovongph@yahoo.com

muhamad@st.gov.my

m2k555@gmail.com

peteru@uap.edu.phpeterleeu@gmail.com
eaiwongj@nus.edu.sg

712)

Thailand13)

Vietnam

Mr Lim Tin Seng
(Research Officer, EAI)
Dr. Praipol Koomsup(Professor of Economics, Thammasat University)
Ms Khong Thi Binh(Research Fellow, Institute for InternationalRelations)

eailts@nus.edu.sg
praipol@econ.tu.ac.thkhongbinh2003@yahoo.com8

APPENDIX

EconomyBrunei
China
Indonesia
Japan
Korea
Malaysia
Philippines
Singapore
Thailand
Vietnam
APEC

Figure 1A: Energy Diversity Indicator (Points 1-100)
1980
2002
2030(Forecast)
1433
45
68
68
65
62
84
86
53
78
86
50
74
8950
63
77
55
74
82
128
47
56
78
83
36
64
92
83
89
87
Source: APERC (2006)

Notes: Figure 1A shows the energy diversity indicator (assesses the distribution of energy sourcesin the primary energy mix for each economy in the range from 1 to 100 points) for the APEC
region as a whole. A number closer to 0 indicates zero energy diversification whereas a number
closer to 100 indicates full energy diversification. These figures are calculated by the Asia Pacific
Energy Research Centre (APERC) using five main energy resources namely coal, oil, gas, nuclear
and renewable energy resources (Figure 1B below). Among the ASEAN nations, the least
diversified are Brunei and Singapore with an indicator of 33 and 28 in 2002, 45 and 47
respectively projected by 2030.

Figure 1B: Energy Diversity Indicator for Selected Economies in 2002

NuclearRenewable

Coal806040200

Oil

Brunei 33
China 68
New Zealand 82
Canada 89

Gas

Source: APERC (2006)

9Figure 2: Estimates of Energy Consumption by Country & Source in 2005 (in Mtoe unless otherwise stated)
FossilFuels

Renewable
EnergyHydro

NuclearOil

NaturalGas

ChinaJapan
Korea
Brunei #Cambodia #

327.3
244.2
105.5
0.6
0.2

42.3
73.0
30.0
1.6
-

1081.9
121.3
54.8
-

90.8
19.8
1.2-

11.8
66.3
33.2
-

Indonesia

55.3

35.5

23.5

2.1-

Laos +
Myanmar #

1.7

2.2-

-

-

Malaysia

22.0

31.4

6.3

1.5

c

Philippines
Singapore #

14.7
42.2

2.7
5.9

5.9
-

1.9-

-

Thailand

45.6

26.9

11.8

1.3

-

Vietnam

13.0

4.5

Coal

Wind

Solar

Geothermal

Biomass

TERU
∗
(No.)

0.13
0.000
09-

-

0.26-

9a9
a9
2
1

a

0.67
0.47
0.47
0.73
1.00

0.99
1.00
1.00
1.00
1.00

0.93
0.84
0.85
1.00
1.00

0.0002

0.47

0.036

9a

0.47

1.00

0.98

0.000
03

0.0000
7-

20.56

1.00

1.00

3.9

0.025

8

0.51

1.00

0.9761.2

0.00020.000
090.0000
4-1 PP in palm
doil mill653
operationalbiogas
dsystems-b0.026

83

0.58
0.88

1.00
1.00

0.92
1.00

25.2
48.1
87.3

0.52

1.00

0.96

0.37

1.00

1.00

0.00031.67
0.065
80.0000d3
10.4e200 sites
0.006
6
Source: Estimated using BP 2006 Statistical Review of World Energy and various compilation by authors

SMUR/
TEC
(%)∗

TOP 5/
TEC∗

TFFU/
TEC∗

TEC∗

1554.5
524.6
224.7
2.2
0.2
116.9

27.9

∗TERU: Total Energy Resources Utilized (all available statistics on the 9 energy resources) e.g. China utilizes all 9 energy resources in our study whereas Cambodia uses only 1 energy resource
TPEC: Total Primary Energy Consumed (include oil, natural gas, coal, hydro & nuclear energy)
TEC: Total Energy Consumed (sum of all available data on energy resources consumed by each country)
SMUR/TEC: Share of the Single Most Used Resource/ Total Energy Consumed e.g. Coal made up 67% of China’s energy usage whereas oil made up just 37% of Vietnam’s energy usage
TOP 5/ TPEC: Top 5 Most Used Energy Resources/ Total Primary Energy Consumed
a: In the cases of China, Japan, Korea & Indonesia, exact statistics for their solar, geothermal, biogas or nuclear respectively were unavailable. However, we know from various reports that thesecountries are using all 9 energy resources. b: Philippines use biomass, but data unavailable. c: Though Malaysia has one research nuclear power facility, it is experimental and thus not counted as anenergy source.
d: Malaysia, The Philippines and Vietnam listed the number of geothermal plants instead of statistics.
e: Vietnam has hydropower but reliable data not available.
# : Brunei, Cambodia, Myanmar and Singapore are the least energy diversified.
+: Reliable data on Laos unavailable. For instance, Laos has tremendous hydropower potential but accurate realised power from this source is unavailable.

10