IEEJ：October 2019○ｃIEEJ 2019
Special Bulletin
A Japanese Perspective on the International Energy Landscape (449)

October 11, 2019

At the Pacific Energy Summit 2019
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn October 10, the Pacific Energy Summit (PES) 2019 took place at the Asian Development
Bank Institute in Kasumigaseki, Tokyo. The annual PES conference has been sponsored by the U.S.
National Bureau of Asian Research. The latest one was cosponsored by the NBR and the ADBI tomark the 10th anniversary of the first one held in Tokyo in 2009. In the 10-year history, the conferencewas held in such cities as Jakarta, Hanoi, Vancouver, Seoul, Beijing, Singapore and Washington to
deepen discussions on the future and challenges of energy issues in the Asia Pacific region. Titled“Advancing Energy and Environmental Security in the Indo-Pacific: Translating Vision into Action,”
the latest conference comprised four sessions for discussions under the Chatham House Rule.
Participants in the gathering numbered some 60 including government officials, energy industry
people and experts as well as NBR experts. In the following, I would like to summarize particularly
impressive points of the discussions.
First, Indo-Pacific issues taken up for the first time at last year’s PES conference were thefocus of discussions at the latest one. See “A Japanese Perspective on the International Energy
Landscape (402)” for discussions at the previous PES conference. More than two years have passed
since the United States and Japan came up with the strategic concept of the Indo-Pacific to launch
discussions on bilateral cooperation in the region. As indicated by the title, participants in the latest
Tokyo conference discussed how to translate vision into action to enhance Indo-Pacific energy andenvironment security under the current international energy situation.
In the first session, panel discussions came under the title “Vision for an Energy Secure
Indo-Pacific.” Major Asian energy consuming countries in the region face the issue of risingdependence on energy imports and must tackle their high dependence on the Middle East and thechallenge of energy security. In this regard, attacks on Saudi Arabia and subsequent large-scaledisruptions to oil supply in September came as a shocking incident to these countries, leading themanew to grow conscious of the significance of energy security. Major energy-consuming countries in
the region are also required to address environmental issues such as air pollution and climate change
and make a transition to cleaner energy.
In this context, speakers in the session interestingly argued that the expansion of natural
gas/LNG use in the Indo-Pacific would play a key role in enhancing energy security and environmentalprotection. Particularly, they noted that while hopes on LNG grow, the degree and speed of LNG
expansion in Asian emerging countries expected to boost energy demand would depend on theaffordability of LNG prices. Significant arguments were also made on how the government and private
sectors should cooperate in addressing energy and environmental issues. Impressively, they citedspecific cases in which the government sector provided politically desirable future visions as a key
guideline for the private sector’s consideration of long-term investment.
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IEEJ：October 2019○ｃIEEJ 2019
The second session dealt with the theme “Bringing Quality Infrastructure in Scale.”
Fundamentally, it is most desirable that quality infrastructure contributing to enhancing energy
security and protecting the environment be developed in a business-as-usual manner. In fact, however,such infrastructure fails to be developed due to problems regarding certainties, institutions, social
acceptability and economy in many countries and cases. Participants in the session discussed what
would be required to improve the profitability and economic viability of infrastructure investment.
There was an interesting discussion on an innovative idea of considering a mechanism in which not
only direct profits from infrastructure investment but also additional local tax revenues from spillover
effects of such investment for local economies would be distributed to investors. Importantly, it waspointed out that while the stability of policies and regulations is more important than any other factors
for considering long-term infrastructure investment, the lack of confidence in such stability impedes
investment.
In the third session titled “Energy, Trade and Trade Tensions,” discussions focused on thecurrent U.S.-China trade war that has become the biggest risk factor for the present global economy.
As a race for economic and technological supremacy is behind the U.S.-China trade war that has
intensified through an exchange of retaliatory tariff hikes, no easy solution to the war can be expected.
While some compromise could unexpectedly come due to various speculations over the U.S.
presidential election and calls for domestic stability, many people views the clash between the UnitedStates and China as structural. Amid the escalating war, international energy trade has been affectedby international energy price falls attributed to economic slowdown risks. However, discussions in thethird session covered more direct issues including implications for U.S. LNG exports. The growing
Chinese LNG market could have become a key U.S. LNG export destination without the trade war.
The present conditions including the trade war and a subsequent Chinese economic slowdown
affecting LNG demand growth are unfavorable for U.S. LNG exports, exerting negative effects on
U.S. efforts to expand its share of the global LNG market. The trade war thus could impede U.S.
energy dominance, according to some analysts. If U.S. LNG is sufficiently competitive and attractive,
however, U.S. LNG export destinations other than China may be secured. As competition among LNG
suppliers attracted attention, participants in the third session interestingly pointed to the importance ofRussia’s LNG/natural gas export strategy.
The fourth session represented a panel discussion titled “What More is Needed to Ensure
That Energy & Climate Policies are Implemented?” Talks there focused on the role of renewableenergy. Solar photovoltaics, wind and other renewables are expanding their share of the global energy
mix, taking advantage of their characterization as domestic energy sources free from CO2 emissions
and of their rapidly falling power generation costs. While renewables are destined to further expand,
the potential extent of the expansion has become a focus of attention. In the panel discussion,
participants warned that if solar PV and other renewables expand their share to the extent to whichwholesale electricity prices decline substantially, their values would be lost, inviting the issue ofcannibalism, and that enormous total costs for their expansion above a certain level could become aconstraint on the expansion if renewables’ diffusion is left to market forces. Such warning indicatesthat there is no perfect energy source, as I and the Institute of Energy Economics, Japan, have argued.
This leads to our conclusion that the most adequate combination or best mix of all energy sources
would be significant. In this sense, talks in this session were impressive to me.
Contact: report@tky.ieej.or.jp
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