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Voices from the 2015 Pacific Energy Summit: The Geopolitics of Oil and Gas in Asia

Media Roundtable


On May 28, 2015, NBR hosted an on-the-record media roundtable discussion in Beijing, China, as part of the 2015 Pacific Energy Summit. Panelists discussed oil and gas markets in Asia, a cooperative approach to energy security, and the China-Russia relationship. Satya Widya Yudha, Indonesia House of Representatives, Ken Koyama, Institute of Energy Economics, and Mikkal Herberg, NBR, served as panelists for this session. Select highlights from the event are published below.



ENERGY SECURITY



"Asia, generally China, Japan, Korea, probably Vietnam, and India, have fundamentally common energy security interests, especially oil security interests. The region is deeply dependent on imported oil from the Middle East. And so, the region, including the U.S., has some mutual common interests in stable supplies and reasonable, affordable prices. But the challenge for the region is that the environment for energy security is deeply independent."

—MIKKAL HERBERG, NBR, USA


"In terms of joint regional collaboration on a strategic level, we still don’t see very much going on. China gets 60% of its imported oil from the Middle East. For Japan and South Korea, it’s 85-90%. So Asia and the U.S., particularly Congress, need to be collaborating on security challenges in the Middle East."

—MIKKAL HERBERG, NBR, USA


"If China can successfully reduce its dependence on fossil fuels, it will standardize the global energy market. Growth in Chinese energy markets is a key component to stability in the international energy market, and Japan will continue to depend on supplies from the international energy market. So, if China and Europe contribute to the stability of the international energy market, this will be beneficial for Japan."

—KEN KOYAMA, Institute of Energy Economics, Japan




GEOPOLITICS OF OIL AND GAS MARKETS



"Today, the two biggest growing oil consumers in the world, China and India, are not a part of the International Energy Agency (IEA). They are outside the system. It is important that they become more closely associated with the IEA and play a role in helping to stabilize supplies in an emergency. The problem is that China is still very reluctant to embrace involvement with the IEA, as many feel that the IEA is a U.S.-dominated institution. But if there’s a political will to do this, there’s a way of creating a different membership status of some sort for China, India, and Russia. On the IEA side, there’s problems with China’s involvement because there’s a lot of small European countries that would see their influence in the IEA diluted by bringing in some of these major new consumers. To put it simply, if China were part of the IEA, it would instantly have the second-largest voting power, and proposing that to all these European countries is a difficult thing."

—MIKKAL HERBERG, NBR, USA


"We are now seeing the easing, or the softening, of the global energy market. In other words, we are entering into a buyer’s market. This is true for the oil market, gas market, coal market, and commodity market. Generally speaking, low energy prices are a good thing for the global economy. However, I personally have some questions about how long this situation can last. In the international energy market, there is always a big cycle, and the pendulum can swing quickly."

—KEN KOYAMA, Institute of Energy Economics, Japan


"There are three major ways China and Japan can cooperate with regard to clean energy development and promotion. One is clean coal technology. China and Japan can work toward that in a big way. The Chinese government is trying to reduce its dependence on coal. The second way is through nuclear power. However, it is very important that we demonstrate the lessons learned from the big accident in Japan, not only in terms of safety, but also in terms of safeguarding and security, or what we call the three “S” concept for nuclear power. The final is through energy conservation and energy efficiency."

—KEN KOYAMA, Institute of Energy Economics, Japan


"Each country is going to secure its own oil supplies abroad by sending its national oil companies out to invest all over the place. And so what you have is a situation where countries have common interests in stable supplies, particularly in the Middle East to secure sea lanes, but at the same time, the overlay of strategic rivalry in the region between Japan and China, China and India, and Korea and Japan is relatively toxic."

—MIKKAL HERBERG, NBR, USA




INDONESIAN ENERGY POLICY



"The good thing with Indonesia’s energy development strategy is that the government has been able to lift the subsidies. Subsidized fuel has been in Indonesia for more than 30 years, and we were able to lift the subsidy three months ago, so that’s quite important for the government. We have managed to use the money and reallocate the budget for a subsidy for the poor."

—SATYA WIDHA YUDHA, House of Representatives, Indonesia


"The other key energy development in Indonesia is on gas policy. We are no longer using what’s called a revenue-based system. In the past, we would sell gas overseas, and we would export it as long as we got a good price. Now it’s no longer that kind of revenue-based approach because we are also trying to improve our economic growth. We ask the countries that import gas from Indonesia to participate in the development of Indonesia."

—SATYA WIDHA YUDHA, House of Representatives, Indonesia




NUCLEAR ENERGY IN JAPAN



"We are now finally seeing the restart of nuclear power. All of the nuclear power in Japan is offline, except for two plants that can be restarted before this summer, sometime in July. This will be followed by another plant, so we will see a possible nuclear restart. Japan’s nuclear power share is targeted to reach 22% in the year 2030."

—KEN KOYAMA, Institute of Energy Economics, Japan




ENERGY AND THE SOUTH CHINA SEA



"China seeks to assert what it believes are its sovereign rights to the islands in the region of the South China Sea. And the U.S. resists being encroached upon in terms of its ability to operate through what it believes are international waters through the South China Sea—the Malacca Strait. About 60% of Asia’s oil comes through the South China Sea and the Malacca Strait, so it’s pretty strategic for the whole region. With the current environment, I think you’re kind of at a standoff right now. It’s critical in the sea lanes and for transportation that we have some common ground, particularly between the U.S. and China, about what are these sea lanes, what’s open in the sea lanes, and what isn’t."

—MIKKAL HERBERG, NBR, USA




CHINA AND RUSSIA



"From my viewpoint, the energy crisis is very unfortunate for both Russia and Europe. Though the Russian gas price is the most competitive gas price in the region, Russia is at risk of losing the European market because of the rising conflict with Ukraine and Crimea. Under these circumstances, I think that Russia needs to look east at this particular moment, particularly toward China."

—KEN KOYAMA, Institute of Energy Economics, Japan


"Russia views China as a growing market. I think Russia-China energy cooperation is inevitable under these international conditions. I think that Russia needs to diversify its trade with Japan and Korea, and I think there is an avenue to promote regional cooperation in Northeast Asia that includes Russia. Of course, for Japan, as an ally of the United States, it is currently difficult to take these steps. But from my personal viewpoint, Russian involvement is very important for economic and energy development in the region."

—KEN KOYAMA, Institute of Energy Economics, Japan


"One of the things that Japan and Korea are most importantly looking for is additional liquefied LNG supplies coming from the far east of Russia. To the extent that the standoff between the West and Russia remains, the technology needed for those LNG projects won’t be available because it is Western technology. So, as long as the standoff remains, those LNG supplies that East Asia was hoping to see will not be available. What that leaves are pipeline options, which don’t require LNG technology."

—MIKKAL HERBERG, NBR, USA


More than 200 leaders from government, business, and research and 60 energy journalists gathered in Beijing, China, on May 27-29, 2015 for the 6th annual Pacific Energy Summit. The 2015 Pacific Energy Summit was co-hosted by the National Bureau of Asian Research and the China Energy Research Society. Lead sponsorship was provided by Chevron, and the Asian Development Bank served as a partner for the Summit. Additional sponsors included Accenture and ExxonMobil, as well as collaborating institutions The Center for Energy Governance & Security at Hanyang University and the Korea Energy Economics Institute. Under the theme, “Strengthening Markets for Energy and Environmental Security,” the forum explored collaborative solutions to the dual challenges of rising energy demand and a changing climate.


Learn more about the 2015 Pacific Energy Summit.



For all audio from the 2015 Pacific Energy Summit, held in Beijing on May 27—29, see "2015 Pacific Energy Summit Media Wrap-Up."