ASIA IN THE WORLD ECONOMY

Transcription

1 ASIA IN THE WORLD ECONOMY Section II: Energy Classes & Topics 6. Energy Demand 7. Energy Supply 8. Case Study: China Where Supply & Demand Meet 9. Energy & The Environment

2 ASIA IN THE WORLD ECONOMY Class #7: Energy Supply Topics: 1. Sources of Energy a. Feedstocks b. Location of Stocks c. Destination of Flows 2. Value Chains a. Upstream Value Added b. Downstream Value Added c. Vertical Integration, Market Fragmentation 3. Supply Lines a. National b. Regional c. Global 4. Energy Security a. Macroeconomic b. Defense c. Risk

3 SOURCES OF ENERGY: FEEDSTOCKS World Energy Use EJ/year Gas Oil Coal Nuclear Hydro + Biomass Source: John Holdren, ENR Energy Policy: Technologies, Systems and Markets The Big 3 Feedstocks Are Oil, Coal & Natural Gas

4 QUESTION: SOURCES WHAT ARE THE PRINCIPLE DETERMINANTS OF ENERGY SOURCES?

5 LOCATION OF BIG 3 FEEDSTOCKS Global Energy Resource Distribution: Big 3 (proved reserves, 2007) Source: BP, Energy Statistical Review, 2008.

6 LOCATION OF BIG 3 FEEDSTOCKS Source: BP, Energy Statistical Review, Coal is More Ubiquitous Globally than Oil & Gas--Only Europe & the Former Soviet Union Have Abundant Reserves of All Three

7 SOURCES OF ENERGY: REGIONAL VARIATION Global Primary Energy Demand: Consumption by Fuel (% of total fuel consumption, 2007) Source: Sarah Emerson, Energy Security Analysis, Inc. Local Availability is a Major Determinant of Supply

8 DESTINATION OF ENERGY FLOWS Global Energy Markets: Domestic vs. Cross-Border Flows (% of total production, 2007) Source of Energy Hydro/Nuclear Electricity Coal Natural Gas (via pipeline & liquified) Oil Sold Domestically 95+% 83% 74% 38% Source: BP, Energy Statistical Review, Exported < 5% 17% 26% 62% The geographic markets for energy feedstocks vary widely: Among the Big 3, oil is the most widely traded across national borders given the different location of markets vs. sources of supply. Coal, by contrast, is the least traded, since it is often found near major markets. Prevailing technology also plays a role: Cross-order electricity trade, for example, requires contiguous borders.

9 DESTINATION OF FLOWS: ASIA Asia s Production and Consumption of Energy (as % of world levels) Net Imports

10 ASIA IN THE WORLD ECONOMY Class #7: Energy Supply Topics: 1. Sources of Energy a. Feedstocks b. Location of Stocks c. Destination of Flows 2. Value Chains a. Upstream Value Added b. Downstream Value Added c. Vertical Integration, Market Fragmentation 3. Supply Lines a. National b. Regional c. Global 4. Energy Security a. Macroeconomic b. Defense c. Risk

11 QUESTION: VALUE CHAIN What are the principal factors of production at each stage in the value chain? Who owns these factors?

12 OIL & GAS VALUE CHAIN: UPSTREAM Land, Capital, & Technology- Intensive National Oil Companies (NOCs) Crude Oil Production (million barrels/day, 2005) International Oil Companies (IOCs) Crude Oil Production (million barrels/day, 2005) Saudi Aramco 8.6 ExxonMobil 2.6 NIOC (Iran) 3.8 BP 2.5 KNPC (Kuwait) 2.3 Shell 2.3 National Oil Companies Currently Dominate the Upstream Value Chain

13 OIL & GAS VALUE CHAIN: UPSTREAM And in the future, National Oil Companies (NOCs) will continue to dominate upstream sources of supply

14 UPSTREAM OIL PRODUCTION Oil Production ( ) Source: BP, Energy Statistical Review, Leveling Supply Declining Supply

15 OIL & GAS VALUE CHAIN: DOWNSTREAM Capital, Technology, & Marketing- Intensive National Oil Companies (NOCs) Refining Capacity (million barrels/ day, 2005) Refining Intensity (percentage of crude production) International Oil Companies (IOCs) Refining Capacity (million barrels/ day, 2005) Refining Intensity (percentage of crude production) Saudi Aramco % ExxonMobil % NIOC (Iran) % Shell % KNPC (Kuwait) % BP % International Oil Companies Dominate the Downstream Value Chain in a System of Tapered Vertical Integration

16 DOWNSTREAM OIL REFINING Refining Capacity Refining is concentrated in downstream markets

17 ASIAN DOWNSTREAM MARKETS Variation Across Asian Energy Markets High levels of fragmentation across downstream markets

18 ASIA IN THE WORLD ECONOMY Class #7: Energy Supply Topics: 1. Sources of Energy a. Feedstocks b. Location of Stocks c. Destination of Flows 2. Value Chains a. Upstream Value Added b. Downstream Value Added c. Vertical Integration, Market Fragmentation 3. Supply Lines a. National b. Regional c. Global 4. Energy Security a. Macroeconomic b. Defense c. Risk

19 QUESTION: SUPPLY LINES WHAT ARE THE PRINCIPLE SUPPLY LINES FOR ENERGY FEEDSTOCKS?

20 DOMESTIC VS. EXPORT MARKETS Global Energy Markets: Domestic vs. Cross-Border Flows (% of total production, 2007) Source of Energy Hydro/Nuclear Electricity Coal Natural Gas (via pipeline & liquified) Oil Sold Domestically 95+% 83% 74% 38% Source: BP, Energy Statistical Review, Exported < 5% 17% 26% 62% Most energy sources are sold where they are produced.

21 INTRA-REGIONAL & CROSS-REGIONAL SUPPLY LINES 7 Largest Cross-Border Flows of Fuels Cross-National Flows* Exports (US$ million) Annual Change Middle East to Asia $ % 42% 181% Intra-Europe $ % 44% 24% Intra-Asia $ % 39% 18% CIS to Europe $ % 50% 28% Intra-North America $ % 38% 10% Africa to Europe $ % 47% 22% Middle East to Europe $ % 42% 14% Source: WTO, Notes: *This figure includes limited mining products Asia Has Limited Regional Sources of Fuels, in Marked Contrast to Europe and North America, Leaving It Exposed To The Risks of Longer Supply Lines Crossing More Unstable Parts of the World

22 REGIONAL SUPPLY LINES: US ENERGY SOURCES Source: BP Statistical Review of World Energy, June North American Sources (US, Canada, Mexico) = 50% North + South American Sources = 64% Atlantic Basin Sources (Americas + West Africa) = 79%

23 GLOBAL SUPPLY LINES: MIDDLE EAST Dependence on Middle East Oil (% of total oil consumption, 2007) Source: BP, Energy Statistical Review, Wide Variation in Relative Exposures to the Risks of Longer Supply Lines & Middle East Instability, with Asian Economies More Directly Exposed

24 ASIAN SUPPLY LINES: MIDDLE EAST & AFRICA The Source of Crude Oil Imports in the 4 Largest Asian Economies (% of total crude oil imports, 2007) Source: Energy Security Analysis, Inc., For Asian Importers, The Security of Energy Supply Lines Originating In The Gulf and, Increasingly, Africa is Essential for Continued Growth

25 ASIAN SUPPLY LINES: MIDDLE EAST EXPORTERS Source: BP Statistical Review of World Energy, June For Middle East Exporters, The Security of Long Supply Lines Is Essential to Their Continued Economic Growth

26 ASIA IN THE WORLD ECONOMY Class #7: Energy Supply Topics: 1. Sources of Energy a. Feedstocks b. Location of Stocks c. Destination of Flows 2. Value Chains a. Upstream Value Added b. Downstream Value Added c. Vertical Integration, Market Fragmentation 3. Supply Lines a. National b. Regional c. Global 4. Energy Security a. Macroeconomics b. Defense c. Risk

27 QUESTION: ENERGY SECURITY WHAT ARE THE PRINCIPLE RICKS ASSOCIATED WITH ENERGY SUPPLY? HOW ARE THESE MANAGED & MITIGATED?

28 WEALTH & ENERGY CONSUMPTION, GDP AT PPP FX RATES (US$ trillion) WORLD EU USA CHINA JAPAN INDIA GERMANY UK RUSSIA FRANCE BRAZIL ITALY BRAZIL FRANCE Source: IMF & World Bank, April 2008; US Department of Defense, OIL CONSUMPTION (million tons) WORLD EU USA CHINA JAPAN INDIA RUSSIA GERMANY SOUTH KOREA SAUDI ARABIA 3, The Geographic Concentration Of Wealth & Of Oil Consumption Are Highly Correlated--8 Of The Top 10 Are The Same-- So The Security of Oil Supplies is Essential to Economic Growth

29 WEALTH & MILITARY SPENDING, GDP AT PPP FX RATES (US$ trillion) WORLD EU USA CHINA JAPAN INDIA GERMANY UK RUSSIA FRANCE BRAZIL ITALY MILITARY BUDGETS (US$ billion) WORLD US ALLIANCES USA CHINA RUSSIA UK FRANCE JAPAN GERMANY SAUDI ARABIA SOUTH KOREA INDIA 1, Source: IMF & World Bank, April 2008; US Department of Defense, The Geographic Concentration Of Wealth & Of Military Spending Are Also Highly Correlated--Again, 8 Of The Top 10 Are The Same-- So Military Security is Essential for Economic Growth

30 MILITARY SPENDING & ENERGY CONSUMPTION MILITARY BUDGETS (US$ billion) WORLD 1, OIL CONSUMPTION (million tons) WORLD 3,953 US ALLIANCES 307 EU USA USA CHINA CHINA RUSSIA JAPAN UK INDIA FRANCE RUSSIA JAPAN GERMANY GERMANY SOUTH KOREA SAUDI ARABIA SAUDI ARABIA SOUTH KOREA BRAZIL INDIA FRANCE 91 Source: IMF & World Bank, April 2008; BP Statistical Review of World Energy, June The Geographic Concentration Of Military Spending & Oil Consumption Are Very Highly Correlated-- This Time, 9 Of The Top 10 Are Identical

31 NEXT CLASS Section II: Energy Classes & Topics 6. Energy Demand 7. Energy Supply 8. Case Study: China Where Supply & Demand Meet 9. Energy & The Environment