SESSION 3. IEA/ASEAN/ASCOPE Workshop Oil Supply Disruption Management Issues Cambodia, 6 April Norio EHARA. Head, Non-Member Countries Division

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1 SESSION 3 IEA/ASEAN/ASCOPE Workshop Oil Supply Disruption Management Issues Cambodia, 6 April 2004 Norio EHARA Head, Non-Member Countries Division International Energy Agency

2 Increase in Primary Oil Demand by Region, (b/d) mb/d OECD N.America China East Asia Latin America South Asia Middle East Africa Transition economies OECD Europe OECD Pacific Increase in oil demand Average annual growth rate (right hand axis) Two-thirds of oil demand increase over the next three decades will take place in Non-OECD regions (29mb/d in the 45mb/d increase during ) per cent Developing Asia will take the largest share (China: 7mb/d from 5 mb/d to 12 mb/d).

3 Oil Supply Security and Emergency Preparedness Asia s Increasing Oil Import Dependency (%) net imports as per cent of oil supply % 83% 65% 82% 60% 34% 74% 61% 30% 0 OECD Pacific OECD Europe OECD N.America South Asia China East Asia

4 Global Oil Stocks (August-2003) At sea/in transit 16% Total World Oil Stocks: 6.0 billion barrels* *Excludes ex-ussr, China and South African strategic stocks. OECD Commercial 45% Non-OECD Commercial 18% OECD Strategic 21% (170 mil. Tons) China + India = 10 million tons => 6% among OECD strategic stocks

5 IEA s Collaboration with NMCs z Consumer-Producer dialogue by IEF + Energy Experts Meetings z IEA Ministerial encouragement in April 2003 ¾ Russia: Joint Declaration of Co-operation in 1994 ¾ China: Memorandum of Policy Understandings in 1996 ¾ India: The Declaration of Co-operation in 1998 ¾ ASEAN: Framework for Co-operation between the ASEAN Centre for Energy (ACE) in 2002

6 China z The largest oil consumer and importer outside OECD z Decrease domestic oil production z Rapid increase of oil imports and dependency on ME and Russia z Price volatility and burden on the national economy: ¾ 10% price up 0.7% GDP down z Market liberalisation & possible decrease of commercial stocks z Strong concerns on Oil Security & decision for establishing strategic oil stocks by General People s Congress in March z IEA/China Joint Workshop in Paris in April 2001 and in Beijing in December z Hotline was tested in Spring Domestic Production and Import Dependency Mtoe 34% 60% Domestic Supply 73% 82% Net import

7 Current Plan (Industry Proposal) z System : Government stocks and supplemented by compulsory industry stocks. National stocks as the last resort z Stock Level : 2005: Gov. 4 mil tons: 14 days of crude import Ind. 6 mil tons: 21 days 2010: Gov. 8 mil tons: 22 days of domestic cons. Ind. 11 mil tons: 28 days z Quality : Crude oil for gov. and crude & products for ind. z Location : 4 sites in coastal regions were reportedly identified z Legal Issues : to be established z Management : Energy Bureau and final decision by State Council z Time table : 1st stage by 2005 (current 5YP) z Financing : Bank loans? Companies responsibility for industry stocks? Ready to collaborate with the international community

8 Proposed Locations of Strategic Oil Reserves in China KNOC:8 mil. tons JNOC:88 mil tons Zhejiang Islands: 4 mil. tons

9 India z Growing oil demand:3.3% pa z Decrease domestic oil production z Rapid increase of oil imports and dependency on ME z Price volatility and burden on the national economy z Regional geopolitical uncertainty z Market liberalisation & possible decrease of commercial stocks: 60 days of consumption z Strong concerns on Oil Security and decision for establishing strategic oil stocks by PM in Feb Domestic Production and Import Dependency Mtoe 40% 65% Domestic Supply 83% 94% Net import

10 z Stock Level Current and Future Plan : 15 days of consumption = 5 mil. tons progressively increased to 45 days : crude oil to start with : 1 site on West coast and 1 on East : underground storage z Quality z Location z System z Legal Issues : to be established shortly z Management : 100 % state-owned new entity to be z Time table z Financing established : depending on the settlement of financing issue : Oil tax? IEA/India Joint Workshop on Emergency Stocks in Jan in New Delhi.

11 Proposed Locations for Mangalore: Underground rock cavern 1.5 MMT MMT Strategic Oil Reserves Phase I Vizag: Underground rock cavern 1.0 MMT Vizag Mangalore

12 IEA Collaboration with NMCs z IEA Ministerial encouragement zactivities: ¾Stocks and oil security workshops 9China in 2001 and India in ASEAN in 2003 and 2004 ¾Hotlines: agreed with China and India ¾Simulation exercise (2002, 2004 )

13 The Approach: Learned Lessons by IEA s Outreach Activities in Key NMCs z Approaches: ¾ Step by step approach for long term co-operation ¾ Timely and attentive input to their needs ¾ Policy input and sharing experiences at the initial stage of planning ¾ China and India would make a great impact on the global oil security and maybe good models for others ¾ Co-operation with key NMCs for global emergency systems: Global issue need global approach

14 z Step Forward: Step Forward ¾ Continue to contribute to key NMCs and involve in the IEA events : Simulation Exercise in 2004 in Paris ¾ More Hotlines? ¾ Data collaboration: JODI and IEA training course? ¾ Encourage to establish NESO-type org. in NMCs z Issues to be considered before going ahead: ¾ Co-ordinated actions with key NMCs: on what and to what extent? ¾ Beyond China, ASEAN and India? ASEAN +3, APEC?

15 Thank you