Regional Cooperation on Gas Pipeline and LNG Market in Northeast Asia ``````````````

Transcription

1 3 rd Northeast Asia Energy Security Forum Seoul, Korea Regional Cooperation on Gas Pipeline and LNG Market in Northeast Asia `````````````` Views and opinions expressed in this presentation are those of the presenter only. Dr. Hooman Peimani Research Fellow, APERC 17 December 2015

2 I-Introduction A-Regional context: Northeast Asia, consisting of China, Japan, Korea (South Korea) and Russia, accounts for the bulk (82.16% in 2014) of the Asia-Pacific region s energy consumption ( Mtoe). Northeast Asia is the world s largest energy consumer with its share of 33.88% ( Mtoe) of the global demand. Map of Northeast Asia Source: Energy Consumption in Northeast Asia 2014 China Japan Korea Russia Northeast Asia Asia Pacific World Volume Mtoe Share (%) Source: Author s creation based on data in: BP. BP Statistical Review of World Energy June London: BP, 2015, p. 41. All percentages calculated by author. 2

3 Introduction B-Northeast Asia energy mix: The regional energy mix has certain characteristics: Heavy dependency on fossil energy as evident in its dominant share in the four regional economies energy mixes ranging from 86.3% (Korea) to93.1% (Japan) as per the below table. Small, although varying, share of non-fossil energy (renewables and nuclear energy) from 6.9% (Japan) to13.7% (Korea). Exclusion of nuclear energy in Japan s energy mix from 2012 to 2014 because of the Fukushima incident. Japan has started the process to gradually reactivate most of its nuclear reactors to be discussed later. Energy Mix of Northeast Asia 2014 (Mtoe) Oil Gas Coal Fossil Energy Nuclear Hydro Other Table 3: Energy Mix of Total the& Northeast share Asia 2014 (Mtoe) Renewables Non-Fossil Energy Total & share Total China % Japan % Korea % % % % Russia % % Source: Author s creation based on data in: BP. BP Statistical Review of World Energy June London: BP, 2015, p. 41. All percentages calculated by author

4 II-Role of Gas in the Northeast Asia s Energy Mix A-Northeast Asia s gas reserves: Northeast Asia has a significant amount of gas concentrated in two regional economies (China and Russia). Gas Reserves in Northeast Asia 2014* Gas Production & Consumption in Northeast Asia 2014** Gas Production Consumption Fossil Energy Proven Reserves Trillion in Cubic Northeast Metres Asia 2014* Gas Production Billion & Consumption Cubic Metres in Northeast Billion Asia Cubic 2014 Metres (bcm)** China China 3.5 Japan - Japan Korea - Korea Russia 32.6 Russia Japan and Korea have no significant reserves of gas and import their entire demand for such fuel. 2-China has substantial gas reserves, but its production is lower than its demand to make it heavily dependent on gas imports. 3-Russia is the only regional gas-rich economy, which makes it self-sufficient in this fuel and enables it to act as a major regional and global gas supplier. *Source: Author s creation based on data in: BP. BP Statistical Review of World Energy June London: BP, 2015, p. 20. **Source: Author s creation based on data in: BP. BP Statistical Review of World Energy June London: BP, 2015, pp, 22, 23. 4

5 Role of Gas in the Northeast Asia s Energy Mix B-Gas demand projections and its share in 2020, 2030 and 2040: 1-Fossil energy will maintain its dominant role despite significant expansion of renewables in the Northeast Asian economies and also nuclear energy in all of them excluding Japan where its share will be close to that of its pre-fukushima era. 2-Japan s nuclear sector will be gradually rehabilitated as its new energy policy (July 2015) provides for nuclear energy to account for 10-11% of Japan s total primary energy and between 18% and 22% of its power mix by 2030.* Kyushu Electric Power Co. has since restarted its two 846-MW PWR reactors in Kagoshima Prefecture (Sendai 1 and Sendai 2 ).** 3-Projections for the period ending 2040 suggest a growing gas demand in all the four Northeast Asian economies to make it the largest type of fossil energy consumed in Russia, the second largest in Japan and the third largest in China and Korea. Energy Demand of Northeast Asia 2020, 2030 and 2040 (Mtoe) Year Oil Gas Coal Nuclear Hydro Bioenergy Other Total Renewables China Japan Korea Russia Source: Author s creation based on data in: IEA. World Energy Outlook 2014, pp. 635, 647, 655. All projections based on current policies (business as usual). APERC preliminary projections. Not for citation. *Ministry of Energy, Trade and Industry (METI), Japan. ** Noriyuki Ishii, JAIF (Japan Atomic Industrial Forum), Sendai 2 Re-started, 15 October 2015, 5

6 III-Role of Piped Gas in the Northeast Asia s Gas Demand A-Facts about the regional import gas pipelines 1-Russia is the only regional economy with the capability of exporting gas (piped and LNG) due to its vast gas reserves (32.6 tcm; world s second largest) and large production beyond its domestic requirements. 2-Piped gas imports are not an option for Korea and Japan for certain reasons: Korea could technically import gas via a land pipeline from Russia but only through the DPRK, which is not an option currently and in the foreseeable future given the existing hostile and unreliable bilateral relations. Russia-Korea Gas Pipeline* Russia-Japan Gas Pipeline** Japan cannot import piped gas due to its geographical situation as an island. Japan s imports of Russian gas through an offshore pipeline (1400-km Sakhalin-Hokkaido Gas Pipeline) is only a proposal with no firm plan for its realization, which will likely remain so in the foreseeable future. 3-China is the only regional economy, which can, and, in fact, does import piped gas. *Source: **Source: 6

7 Role of Piped Gas in the Northeast Asia s Gas Demand China s Gas Import Pipelines: The Central Asian Gas Pipeline (Central Asia-China Gas Pipeline): Consisting of for major lines of which Lines A, B and C are operational and Line D will go online in The pipeline will enable China to import annually 85 bcm of gas from Kazakhstan, Uzbekistan and, primarily, Turkmenistan by 2018 when it reaches its maximum capacity. Central Asian Gas Pipeline* Sino-Myanmar Gas Pipeline** The Sino-Myanmar Gas Pipeline (Southeast Asia Gas Pipeline): Constructed for importing oil-associated gas from Myanmar in operation since 2013 with the maximum capacity of 12 bcm/y. The East Route Gas Pipeline (Power of Siberia 1): Being constructed to enable Russian gas exports to China (38 bcm/y) to be operational in Proposed pipelines: The West Route Gas Pipeline (Power of Siberia 2): Initial agreement was signed in Construction pending final decision by China. The Iran-Pakistan-China: China s decision pending the construction of its Pakistani segment. *Source: 7

8 IV- Role of LNG in the Northeast Asia s Gas Demand A-Japan and Korea: LNG accounts for 100% of their gas imports as they cannot import piped gas. This will remain the case in the foreseeable future to make LNG imports as the only option for meeting their gas demand. B-China: LNG accounts for 48.8% of its imports (2014) as the economy imports piped gas from Central Asia and Myanmar (about 30 bcm in total in 2014). China could met all its imported gas demand through pipelines. It will receive 135 bcm of gas through the mentioned three pipelines by More piped gas could be imported from Central Asia, Russia and Iran should the need arise. Hence, LNG imports will not be a necessity for China s gas security. China may decide to meet some of its gas demand with LNG for the sake of supply/supplier diversification. Gas and LNG Export, Import & Consumption in the Northeast Asia Region 2014 Total Gas LNG Export LNG Import Total Gas LNG Share of Gas Imports Share of LNG of the Northeast Asian Economies (2014) Consumption Imports % BCM MTPA BCM MTPA BCM BCM China N/A N/A Japan N/A N/A Korea 47.8 N/A N/A Russia N/A N/A N/A N/A Source: Author s creation based on data in: International Gas Union. World LNG Report Edition, p. 11; BP. BP Statistical Review of World Energy June London: BP, 2015, p

9 V-Gas Pipeline and LNG Market Cooperation in Northeast Asia A-Significance of cooperation: Cooperation among China, Japan, Korea and Russia to improve the regional gas security and thereby help ensure their economic growth is beneficial to all of them. B-Regional willingness for cooperation: The Joint Declaration for Peace and Cooperation in Northeast Asia issued after the 1 November 2015 trilateral summit among South Korea, Japan and China in Seoul/Korea reflects this willingness. 19 We [the Leaders of the Republic of Korea, Japan and the People's Republic of China,] reaffirmed the necessity of trilateral energy cooperation in achieving sustainable growth and co-prosperity of Northeast Asia. In this regard, we will strengthen our cooperation on LNG to enhance the liquidity and efficiency of the LNG market in Northeast Asia.* C-Russia s readiness to supply piped gas and LNG to China, Japan and Korea. D-Limiting factors: Certain factors limit the options for regional cooperation beyond the existing bilateral piped gas and LNG export agreements and those, which could be achieved within the APEC framework. 1-Gradual decrease of LNG imports for various reasons 2-Gas/LNG-related differences among the regional economies 3-Intensifying competition among LNG exporters to give a wide-range of options to the regional LNG importers and allay their gas security concerns. *Source: 9

10 Gas Pipeline and LNG Market Cooperation in Northeast Asia 1-Gradual decrease of LNG imports for various reasons: Nuclear energy replacing LNG (1000 MW = 1,000,000 tons of LNG) Japan: 43 reactors are operable and potentially able to restart (40,4800 MW) ofwhich24 are in the process of restart approvals. Sendai 1 (August 2015) and Sendai 2 (October 2015) have been reactivated (about 1700 MW in total ).* Korea: Increasing nuclear capacity (5600 MW under construction MW planned for construction in this decade with firm dates MW planned for construction from 2018 onwards with no firm dates). * China: Increasing nuclear capacity (23,444 MW under construction + 49,992 MW planned).* Growing domestic conventional/unconventional gas production (China). Increasing piped gas imports (China). Potential piped gas imports in the medium-term (Japan and Korea). 2-Gas/LNG-related differences among the regional economies: Differences in domestic gas reserves: Japan and Korea (no reserves; 100% dependency on imports); China (large but inadequate reserves; partial but large/growing dependency on imports); Russia (self-sufficiency and large export capability). Geographical differences to practically confine their import options to only LNG (Japan and Korea) orlng and piped gas (China). Possibility of piped gas imports and/or full reliance on such imports to make LNG imports optional (China). *Source: World Nuclear Association. Power/; 10

11 Gas Pipeline and LNG Market Cooperation in Northeast Asia 3-Intensifying competition among LNG exporters to give a wide-range of options to the regional LNG importers and allay their gas security concerns. Contributing factors include: Availability of a large number of LNG exporters outside of Northeast Asia (18), namely, in descending order in terms of their export capabilities: Qatar, Malaysia, Australia, Nigeria, Indonesia, Trinidad, Algeria, Oman, Yemen, Brunei, the UAE, Peru, Eq. Guinea, Norway, PNG, Angola, Egypt and the USA. Emerging exporters (Canada and East Timor) The ongoing LNG-export expansion projects to increase supply availability by 100 million tons above the current capacity. As a result, there will not be many major common gas/lng needs among all the four economies, which cannot be addressed by them individually or through the existing arrangements. 11

12 VI- Suggested Potential Area of Cooperation Regional preparation to deal with short-term gas emergencies such as supply shortages or supply cuts for the three gas-importing economies as a result of: 1-Market factors (e.g., sudden price hikes) 2-Natural factors (e.g., tsunamis) 3-Security factors (e.g., conflicts in supplying countries/regions and/or supply routes) Potential project: Building regional LNG reserves to meet their immediate needs. 12

13 THANK YOU FOR YOUR KIND ATTENTION 13