IEEJ: November 2006

395th Forum on Research Works

September 21, 2006

Asia / World Energy Outlook 2006
The Institute of Energy Economics, Japan (IEEJ)The Institute of Energy Economics, Japan made long-term predictions on the world energy
supply and demand situation (up to 2030) with particular focus on Asia, based on the analyses
of world trends that are already evident or expected to emerge in the future. This paper reports
on major prediction results.
【Major assumptions】● Economic growth
World: The world economy will grow steadily at a rate of 3.1% per annum during the period
2004 to 2030.
Asia:The economic growth rate will be 5.4% per annum in the entire Asian region(excluding Japan), being 6.1% in China and 5.8% in India.
● Population
The world population will grow from 6.5 billion in 2004 to 8.4 billion in 2030. Within
Asia, the population will grow to 1.49 billion in China and to 1.46 billion in India.
● Crude oil price
While the crude oil price was $51/barrel in 2005 (OECD’s average crude oil importprice, CIF base) and $61/barrel in the first half of 2006, the price will come down to $50/barrel(the real price based on the currency value as at 2005; the same referred hereafter) by 2010.
Subsequently, the price will gradually rise again to $52/barrel in 2020 and to $56/barrel in 2030.
【Major Results】● Primary energy consumption
World:
The world’s primary energy consumption will grow at a rate of 1.7% per annum inthe period up to 2030, from 102 Mtoe in 2004 to 159 Mtoe in 2030. Approximately 90% of thisgrowth will be due to an increase in the consumption of fossil fuels.
Asia:

Geographically, approximately one half of the expected increase in primary energy

consumption will be accounted for by increases in Asia, particularly in China and India. :Around 90% of this growth will be also satisfied with an increase in the consumption of fossil
fuels, and coal, in particular, will be responsible for approximately 35%, the largest shareamong fossil fuels, of the growth in the Asia’s primary energy consumption (about 33% with oil
and 19% with gas).
● Accelerated shift to electricity and increase in electricity supply
The shift to electricity will continue further in each Asian country as income levels rise. In
the next 30 years or so, electricity consumption is expected to grow by a factor of 2.5. Even
though coal-fired electric power generation will be the main source of electricity, natural
gas-fired electric power generation will become increasingly popular because of its highgeneration efficiency and environmental compatibility, greatly expanding its share of generated
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electricity from 14% in 2004 to 20% in 2030.
● Expansion of nuclear
In Asia, where electricity consumption is expected to grow sharply, nuclear powergeneration will expand rapidly. Of the 114 GW increase in the installed capacity for nuclear
power generation expected in the world during the period up to 2030, 110 GW of capacity will
be added by new nuclear power plants in Asia. Thus, Asia will contribute most to the expansionof nuclear power generation in the world. The growth will be highest in China and India: theinstalled capacity for nuclear power generation will expand to 50 GW in China and to 32 GW inIndia by 2030.
● Progress in motorization
In Asia, the number of automobiles owned will increase from 165 million in 2004 to510 million in 2030. The increased consumption of transport fuel will drive the oil consumptionin Asia up from 22 million barrels per day in 2004 to 44 million barrels per day in 2030.
China and India● Primary energy demand in China and India
In 2030, the primary energy consumed by China and India will represent
approximately one quarter of the primary energy consumed in the world: these two countries
alone will be responsible for approximately 40% of the growth in the world’s primary energy
consumption (approximately 60% with coal, 40% with oil, 10% with gas and 60% with nuclearpower).
● Motorization in China and India
The number of automobiles owned in China will grow by about 200 million from 27
million in 2004 to about 233 million in 2030 (about three times as many as the number ofautomobiles owned in Japan). As a result, oil consumption in China will grow by 10.2 million
barrels per day from 6.5 million barrels per day in 2004 to 16.7 million barrels per day in 2030,
which is a growth factor of about 2.6.
● CO2 emissions
World: World CO2 emission is expected to grow at a rate of 1.7% per annum in the period up
to 2030, from 7.4 Gt-C in 2004 to 11.4 Gt-C in 2030.
Asia:

CO2 emission in Asia is expected to grow by a factor of 1.9, with the emission of 4.8

Gt-C in 2030. Asia will be responsible for about 60% and China alone for about 30%, of thegrowth in global CO2 emission.
【Challenges in the world】● Growing world oil demand
World oil consumption will grow at a mean per-annum rate of 1.5%, from 80 million
barrels per day in 2004 to 117 million barrels per day in 2030. Approximately 80% of theincrease will have to be met by supplies from OPEC countries, mostly the Middle East. The
share of OPEC countries in the oil production of the world will increase from 42% in 2005 to53% in 2030. The world’s oil resources are adequate to meet the projected increase in oil
demand to 2030 so long as necessary investments in supply infrastructure, which is a key factor
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to stabilize international oil market, are made.
● Increasing demand for LNG
World LNG demand will grow at a mean per-annum rate of 5.2%, from 139 million
tons in 2005 to 495 million tons in 2030, a growth factor of 3.6. LNG imports in Europe andUSA are projected to increase rapidly, mainly because of growing gas demand in power
generation sector and the sluggish growth of regional natural gas production. LNG demand in
the West may surpass LNG demand in Asia by 2020.
【Challenges in Asia】● Increasing dependency on imported oil and on the Middle East
In Asia, dependency on imported oil is expected to grow from 55% in 2004 to 89% in
2030. Most of the imported crude oil is expected to be procured from the Middle East becauseof advantages in supply capacity and economy (cost competitiveness). Most importantly, innortheast Asia (Japan, China and South Korea), dependency on the Middle East will increase
from 72% in 2004 to 83% in 2030. (China’s dependency on the Middle East will increase from46% in 2004 to 74% in 2030.)● Sharp increase in the oil traffic through the Strait of Malacca
With the increasing dependency of Asia on imported oil and on the Middle East, thetransportation of oil through the Malacca/Singapore Strait (i.e. Strait of Malacca) will growfrom 11.7 million barrels per day in 2004 to 24 million barrels per day in 2030. Accordingly,
the number of very large crude carriers (VLCCs) passing through the Strait will increase fromabout 4,200 vessels per year in 2004 to 8,300 vessels per year in 2030. Thus, the congestion
problem in the Strait of Malacca is expected to become much more severe.
● Growing investment on energy infrastructures
In the period 2004 to 2030, Asia will require a total investment of about 7.8 trillion
dollars (real price based on the currency value as at 2004) on energy infrastructure (including
upstream and downstream investment in the oil, gas and coal sectors and total investment in theelectric power sector). This translates into new annual investment of about 300 billion dollars,required mostly in the electric power sector.
● The possible impact of faster development of energy technologies in Asia
In “Technological Advanced Scenario” (assuming the implementation of a series ofenergy and environmental policies that will contribute to more stability of energy supply and thereinforcement of global warming countermeasures), primary energy consumption in Asia in
2030 is expected to be 15% less compared with the reference case and CO2 emissions areexpected to be 23% less (achieving a reduction equivalent to the present level of CO2 emission
by China, which is 3.2 times as large as the CO2 emission by Japan). Again in comparison withthe reference case scenario, fossil fuel consumption is expected to decrease by 20%, while theuse of other forms of energy is expected to increase by the following percentages: 14% fornuclear power, 34% for hydro power and 63% for renewable energies. The assumed energy andenvironmental policies greatly contributes to ensure energy supply and mitigate global warming
problems in Asia.

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【Implications】■ Assurance of energy security
In Asia, as dependency on imported oil and on the Middle East increases with a sharp
growth in oil demand, energy security will become an important issue. While it is naturally
important for the individual countries to promote cooperative relations with the Middle East
countries and to make efforts to secure their own energy supplies, there is also a possibility that
excessive pursuit of the national interest by any single country could damage the energy
security of the rest of the region.

It is consequently becoming increasingly important for theissue to be treated as one in which all countries in the region have a common stake.
■ Response to global environmental problems
The outlook for a rapid increase in CO2 emissions in China and other countries in Asia
(excluding Japan) only indicates that a far larger and greater overall cost benefit (from themitigation of environmental burden) therefore would be achieved by pursuing the transfer ofenergy conservation and environmental technologies to other economies in Asia and the otherregions where the demand for energy is booming. Thus, it is important for Japan to reduce its
CO2 emission strictly by strengthening domestic measures while contributing to the progress ofenvironmental efforts in Asia by transferring energy-saving and environmental technologies toother Asian countries.
■ Pursuit of energy “Best Mix”
The pursuit of the best energy mix is another item with which each economy could
approach in relation to its own level of energy demand, available resources, level of technology,and economic conditions. It is however extremely important to retain the perspective ofoptimizing the mix in the whole Asian region.
・Coal: Coal demand is expected to grow in Asia, particularly due to demand from the electric
power generation sector. Efforts should be made for the development and wider utilization ofclean coal technologies(CCT).
・Natural gas: Natural gas demand is expected to grow in Asia, particularly due to demand fromthe electric power generation and residential/commercial sectors, calling for measures thatenable the more economic use of natural gas. In view of a sharp increase in LNG demand in
USA and Europe, it is also important to develop a future-oriented strategy for ensuring thesecurity of gas supplies.
・Nuclear power: In Asia, because of the scarcity of domestic energy resources, nuclear power
generation will play a major role in ensuring a stable supply of electricity and in overcoming
environmental problems in the interests of the public. It is important that we should maintainand increase the share of nuclear power generation, seeing it as a core source of energy supply.
・Renewable energies: Most renewable energies are produced domestically and moreover, they
constitute an important option for combating global warming. We should ensure wider use ofrenewable energies by reinforcing the implementation of effective and efficient measures forpromoting their use and by introducing policies in support of technological innovations.

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【Conclusions】
For Asia to simultaneously achieve its “3S” goals (security of supply; sustainability bysolving global environmental problems; and stability of the market), each Asian country, in amanner that befits the energy supply-demand structure of the country and the prevailing state of
economic development, should accelerate the decarbonization of energy supplies throughdiversification of energy supply sources, energy-conservation and a shift to alternative fuels andstrengthen its efforts toward achieving the best energy mix.
In the context of these efforts, Japan will have a tremendous role to play in Asia, with
its advantages in terms of technology, economic power and legislative design. Of pivotal
importance in the context of Japan’s international energy strategy will be our efforts to further
develop and utilize energy-conservation and environmental preservation technologies, in which
we already excel, as well as the technologies and know-how unique to Japan which is a leading
country in the area of nuclear power generation. It is, thus, crucial for Japan to support theadvancement of its economy through extensive use of these technologies, and to contribute to
Asian economy and environment.
【Positioning on the forecasts given in this report】
This report presents estimates based on a set of assumptions with a logically andquantitatively integrated prediction method. Considering various uncertainty factors, there canbe considerable deviation from these estimates. Therefore, we performed sensitivity analyses
using the technological advanced scenario, the results of which are included in this report. We
hope that these forecasts serve as a reference and basis for studies and discussions concerningenergy supply and demand in the future.
Contact: report@tky.ieej.or.jp

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