ASIA IN THE WORLD ECONOMY - PDF Free Download

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

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

SOURCES OF ENERGY: FEEDSTOCKS World Energy Use 1850-2000 EJ/year 500 450 400 350 300 250 200 150 100 50 0 1850 1875 1900 1925 1950 1975 2000 Gas Oil Coal Nuclear Hydro + Biomass Source: John Holdren, ENR-302 - Energy Policy: Technologies, Systems and Markets The Big 3 Feedstocks Are Oil, Coal & Natural Gas

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

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

LOCATION OF BIG 3 FEEDSTOCKS Source: BP, Energy Statistical Review, 2008. Coal is More Ubiquitous Globally than Oil & Gas--Only Europe & the Former Soviet Union Have Abundant Reserves of All Three

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

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, 2008. 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.

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

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

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

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

UPSTREAM OIL PRODUCTION Oil Production (1987-2007) Source: BP, Energy Statistical Review, 2008. Leveling Supply Declining Supply

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 2.5 29% ExxonMobil 5.7 219% NIOC (Iran) 1.5 39% Shell 5.2 226% KNPC (Kuwait) 1.1 48% BP 3.9 156% International Oil Companies Dominate the Downstream Value Chain in a System of Tapered Vertical Integration

DOWNSTREAM OIL REFINING Refining Capacity Refining is concentrated in downstream markets

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

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

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, 2008. Exported < 5% 17% 26% 62% Most energy sources are sold where they are produced.

INTRA-REGIONAL & CROSS-REGIONAL SUPPLY LINES 7 Largest Cross-Border Flows of Fuels Cross-National Flows* Exports (US$ million) Annual Change 2006 2000-06 2005 2006 Middle East to Asia $ 323.3 161% 42% 181% Intra-Europe $ 196.7 19% 44% 24% Intra-Asia $ 177.2 146% 39% 18% CIS to Europe $ 139.2 25% 50% 28% Intra-North America $ 120.9 120% 38% 10% Africa to Europe $ 80.9 15% 47% 22% Middle East to Europe $ 59.5 11% 42% 14% Source: WTO, 2008. 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

REGIONAL SUPPLY LINES: US ENERGY SOURCES Source: BP Statistical Review of World Energy, June 2008. North American Sources (US, Canada, Mexico) = 50% North + South American Sources = 64% Atlantic Basin Sources (Americas + West Africa) = 79%

GLOBAL SUPPLY LINES: MIDDLE EAST Dependence on Middle East Oil (% of total oil consumption, 2007) Source: BP, Energy Statistical Review, 2008. Wide Variation in Relative Exposures to the Risks of Longer Supply Lines & Middle East Instability, with Asian Economies More Directly Exposed

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., 2007. For Asian Importers, The Security of Energy Supply Lines Originating In The Gulf and, Increasingly, Africa is Essential for Continued Growth

ASIAN SUPPLY LINES: MIDDLE EAST EXPORTERS Source: BP Statistical Review of World Energy, June 2008. For Middle East Exporters, The Security of Long Supply Lines Is Essential to Their Continued Economic Growth

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

WEALTH & ENERGY CONSUMPTION, 2007 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 2007 GDP AT PPP FX RATES (US$ trillion) WORLD EU USA CHINA JAPAN INDIA GERMANY UK RUSSIA FRANCE BRAZIL ITALY 64.9 14.7 13.8 7.0 4.3 2.8 2.8 2.1 2.1 2.0 1.8 1.8 10. BRAZIL FRANCE Source: IMF & World Bank, April 2008; US Department of Defense, 2007. 1. 2. 3. 4. 5. 6. 7. 8. 9. 2007 OIL CONSUMPTION (million tons) WORLD EU USA CHINA JAPAN INDIA RUSSIA GERMANY SOUTH KOREA SAUDI ARABIA 3,953 704 943 368 229 129 126 113 108 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 99 97 91

WEALTH & MILITARY SPENDING, 2007 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 2007 GDP AT PPP FX RATES (US$ trillion) WORLD EU USA CHINA JAPAN INDIA GERMANY UK RUSSIA FRANCE BRAZIL ITALY 64.9 14.7 13.8 7.0 4.3 2.8 2.8 2.1 2.1 2.0 1.8 1.8 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 2006-07 MILITARY BUDGETS (US$ billion) WORLD US ALLIANCES USA CHINA RUSSIA UK FRANCE JAPAN GERMANY SAUDI ARABIA SOUTH KOREA INDIA 1,367 307 644 122 59 55 45 41 36 25 24 22 Source: IMF & World Bank, April 2008; US Department of Defense, 2007. 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

MILITARY SPENDING & ENERGY CONSUMPTION 2006-07 MILITARY BUDGETS (US$ billion) WORLD 1,367 2007 OIL CONSUMPTION (million tons) WORLD 3,953 US ALLIANCES 307 EU 704 1. USA 644 1. USA 943 2. CHINA 122 2. CHINA 368 3. RUSSIA 59 3. JAPAN 229 4. UK 55 4. INDIA 129 5. FRANCE 45 5. RUSSIA 126 6. JAPAN 41 6. GERMANY 113 7. GERMANY 36 7. SOUTH KOREA 108 8. SAUDI ARABIA 25 8. SAUDI ARABIA 99 9. SOUTH KOREA 24 9. BRAZIL 97 10. INDIA 22 10. FRANCE 91 Source: IMF & World Bank, April 2008; BP Statistical Review of World Energy, June 2008. The Geographic Concentration Of Military Spending & Oil Consumption Are Very Highly Correlated-- This Time, 9 Of The Top 10 Are Identical

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