Revisiting the Role of Fossil Fuels in the APEC Region from Japan s Viewpoint

Transcription

1 Revisiting the Role of Fossil Fuels in the APEC Region from Japan s Viewpoint Session 4: Fossil Fuels and Energy Security APERC Annual Conference 2017 May 17 th, 2017 Ken Koyama, PhD Chief Economist, Managing Director Institute of Energy Economics, Japan 2017 Institute of Energy Economics, Japan All rights reserved

2 Emerging landscape with regard to global energy market Volatile crude oil price Impacts of Unconventional Oil & Gas Development Impacts of US Shale Gas Revolution Impacts of US Energy Independence Growing energy demand in Asia and its implication to global energy security Emerging concerns for energy supply constraints Geopolitical risks, resource nationalism and issues of market power Ongoing MENA crisis, Iranian crisis, Ukraine crisis, etc. Lack of timely investment in resource development Importance of stability of energy transportation Environmental challenges for sustainability Climate change and global environmental problems Local and regional environmental problems Impacts of March 11 th and Japan s Energy Policy Review 2

3 Perceived Risks for Energy Security Contingent risks Political and military risks in main energy supply area Accidents in energy supply chain Cyber attacks Consumers panic behabior Structural risks Supplier s embargo with political objectives Market power of major suppliers Supply/demand squeeze due to insufficient investment, etc. Resource constraints and chronic energy shortage Side effects of market liberalization and environmental restrictions OECD countries have developed energy policy to enhance energy security after the oil crisis in the 1970s, but 3

4 Energy Market Gravity Shifts towards Asia World s Primary Energy Demand Increase of Primary Energy Demand 20,000 15,000 10,000 5,000 0 Mtoe Increment in Intl. Bunker Africa Middle East Europe M & S. America N. America Other Asia-Pacific ASEAN India China ,500 Global energy demand increases by 1.4 times and 60% of the growth comes from Asia. Asia is the final destination for around three quarters of oil, gas and coal traded interregionally. ASEAN has the third largest demand growth, after China and India. Source: Prepared from IEEJ Asia/World Energy Outlook

5 Outlook for Primary Energy Demand (by energy) Line Reference Dotted line Adv. Tech (ATS) World Asia %: Share Fossil Fuel Share (%) 81% ---> 78% (Reference) 70% (ATS) 29% 25% 28% Fossil Fuel Share (%) 84% ---> 81% (Reference) 72% (ATS) 41% Oil 31% 29% 24% 22% 50% 35% Coal Natural Gas 12% Other Renewables Nuclear Hydro 21% 20% 18% 14% 9% 5% 6% 3% 2% 2% 23% 13% 10% 2% 2% 24% 24% 15% 16% 14% 12% 5% 3% 2% Oil remains the most important fuel in the global energy mix for both Reference and ATS, even though the demand levels off in 2030 s in the latter scenario. In Asia, coal demand keeps the largest among primary fuels, even though declining largely in ATS. Fossil-fuel dominates the both global and Asian energy mix, with 70% share even in ATS, although reducing from today s level. Source: Prepared from IEEJ Asia/World Energy Outlook

6 Energy Import Dependence in Asia (2015) (%) Total Oil Gas Coal 3.4 Source: Prepared from BP Statistical Review of World Energy

7 Asia s Middle East Dependence (2015) Oil LNG FSU/Europe 10% South America 6% North America 3% Middle East 53% Africa 8% South America 0% FSU/Europe 7% North America 0% Middle East 37% Africa 9% Asia Oceania 19% Asia Oceania 48% Source: Prepared from BP Statistical Review of World Energy

8 Instability in the Middle East Terrorist Attacks In Paris, Brussels, etc. Uncertainty over Middle East Peace issues Gaza crisis Immigrants to Europe Russia-Turkey Tension Iraqi situations after the war Impacts of Islamic State Tensions on Iran Nuclear development Post-sanction Iran? Impacts of Arab Spring US attack on Syria Syria, Yemen, Egypt Tense Saudi-Iran Relations Impact of US policy by new administration Growing Anti US sentiments in Arab and Islam society Domestic challenges for existing rulers and regimes Terrorism, threats to energy production and exports Source: Prepared by IEEJ 8

9 Impact of new US Presidency Uncertainties and unpredictability No concrete details about policy The meaning of America First? Opposite direction to Obama policy Implication on the stability of world energy market? Policy versus Market reality? 9

10 Serious Economic Damage of Supply Disruption (10 Mb/d) Source: Prepared from IEEJ Asia/World Energy Outlook

11 Japan s 3E+S Policy Target Safety as a top-priority precondition Energy security : To increase energy self sufficiency rate from 6% to 25% Economic efficiency : To reduce electricity cost from current level Environment : To set GHG emission reduction goal in line with US and EU 11

12 Japan s Policy for Best Energy (Power) Mix Electricity Demand Economic Growth (1.7%/year) Maximum EE Improvement (196 TWh, -17%) Loss 40% : EE & Renewable Total Power Gen (1278 TWh) EE 17% Renewable 19-20% Nuclear 18-17% Electricity Generation Total Power Gen (1065 TWh) Renewable 22-24% Nuclear 22-20% Geothermal % Biomass % Wind Solar Hydro 1.7% 7.0% % 966 TWh FY2013 (actual) 981 TWh FY2030 N.B: EE stands for Energy Efficiency LNG 22% Coal 22% FY2030 LNG 27% Coal 26% Oil: 3% Base Load Share: 56% Source: METI 12

13 Policy to Enhance Energy Security Unilateral Approach Improve Energy Self-Sufficiency (Energy saving and domestic energy production) Energy Source Diversification (Promotion of Gas, Coal, Nuclear, Renewable) Oil Import Source Diversification Oil Stockpile Buildup Overseas Upstream Investment Etc. International Cooperation 13

14 Importance of Regional Cooperation Understanding that energy security is a common challenge for Asia Cooperation can be beneficial: Synergies Optimal use of existing resources, capital, technology, knowhow, infrastructure, etc. Bargaining power From national energy market to regional energy market Efficiency New business opportunity Existence of various constraints should be overcome 14

15 Importance of cooperation between Asia and the producing countries Producing countries need Asia because: Growing market for their most important commodity Crucial needs for stable and sufficient revenue flows for their sustainable development 15

16 Conclusion Energy is essential to human existence, social and economic development and civil life for every country, but emerging multiple and serious risks/threats to energy security and sustainability Energy demand in Asia is expected to grow. Security of energy supply both in terms of volume and price is a priority for Asian countries Pressed by the growing energy import dependence, Asian countries are embarking on strategy development to enhance energy supply security Pursuit of energy security by individual countries is expected to contribute to enhance regional and global energy security. Intra/Inter regional cooperation should be promoted for the benefit of regional and global economic development and prosperity 16