Impact on Security and Diversity of Oil
Supply in the Asia Pacific Region
Conference on Non-conventional Oil
Prospect For Increased Production
25- 26 November, 2002
Hyatt Regency Hotel
Calgary, AB, Canada
Yonghun Jung, Ph.D
Vice President
Asia Pacific Energy Research Centre, Tokyo
• APEC Member Economies
• Summary of Findings from AEO 2002
• Total Primary Energy Supply in APEC
– Regional Outlook
– Oil
– Natural Gas
– Coal
• Electricity Demand Outlook
• Oil Import Dependency
• Correlation between per capita GDP and TPES
• Investment in Energy Infrastructure
• Implications
• Challenges for Non-conventional Oil
Russia
Canada
USA
Korea
Japan
China
Chinese Taipei Mexico
Hong Kong, China
Thailand Viet Nam
Philippines
Malaysia
Brunei Darussalam
Singapore
Papua New
Indonesia Guinea Peru
Australia
Regional Groupings
Chile
Southeast Asia: Brunei Darussalam,
Indonesia, Malaysia, Philippines, New Regional Groupings
Singapore, Thailand, Viet Nam Zealand North America: Canada, USA
Oceania: Australia, New Zealand, Papua
New Guinea Latin America: Chile, Mexico and Peru
Russia Northeast Asia: Hong Kong, China, Japan,
China Korea, Chinese Taipei
• Long-term energy demand growth of 2.1 % p.a.
– Southeast Asia (3.6 % p.a.), Latin America (3.1 % p.a.)
and China (2.8 % p.a.)
– Transportation to lead oil demand and power generation
to lead natural gas and coal demand
• Greater oil import dependency
– Asian oil import dependency will reach 80 % in 2020
from 60 % today
– Natural Gas is also from the Middle East
• Massive investments to secure sustainable
energy supply
– 2.2 to 2.8 trillion US dollars will be needed in the next
two decades
• Climate Change and local environment
– Serious impact on local and global environment
Total Primary Energy Supply in APEC
(1980-2020)
TPES growing at an annual rate of 2.1 percent (1999-2020)
Mtoe
10000 NRE 1.1 % p.a.
9000 Nuclear 1.7 % p.a.
8000 Hydro 2.7 % p.a.
7000 Natural Gas 2.6 % p.a.
6000
5000
Coal 2.1% p.a.
4000
3000
2000 Oil 2.1% p.a.
1000
0
1980 1990 1999 2010 2020
Oil Coal Gas Hydro Nuclear New and Renewables
(Source) APERC (2002)
Population, GDP, TPES
Fast energy growth for Southeast Asia, Latin America and China
8.0%
7.0% Population GDP TPES
Annual Average Growth Rate (1999-2020)
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
North Latin Northeast Southeast Oceania China Russia APEC
-1.0% America America Asia Asia
(Source) GDP and Population: DRI-WEFA (2001), TPES:APERC (2002)
Oil: Incremental Growth by
Sector and Region
(1999-2020)
Transportation will lead North America and China are by
oil demand growth far the largest contributors
Russia
Mtoe 7%
900
North America
800 China 34%
27%
700
600
500
Oceania Southeast Asia
400 16% Latin America
3%
3%
300
Northeast Asia
10%
200
100
0
Power Industry Transport Commercial Residential Other
-100 generation
(Source) APERC (2002)
Natural Gas: Incremental Growth by
Sector and Region
(1999-2020)
Power sector will drive North America, Russia and
natural gas demand growth China absorb two-thirds
Mtoe
600 Russia
19%
North America
500
34%
China
14%
400
Latin
Oceania America
300
2%
Northeast 12%
Southeast Asia
200 Asia 10%
9%
100
0
Power Industry Transport Commercial Residential
generation
(Source) APERC (2002)
Coal: Incremental Growth by
Sector and Region
(1999-2020)
Power sector will lead coal China will take the largest share of
demand growth due to cost- the increment building on its 40 %
competitiveness share of APEC consumption today
Mtoe
800
Russia North America
17% 13%
700 Latin America
3%
600
500
Northeast Asia
400 11%
300
China
43%
200 Southeast Asia
12%
100
Oceania
0 1%
Power Industry Transport Commercial Residential Other
-100 generation
(Source) APERC (2002)
Outlook of Electricity Demand in APEC
GW h
16,000,000
14,000,000 3.2 % p.a.
12,000,000
10,000,000
8,000,000
6,000,000
1.9 % p.a.
4,000,000
4.7 % p.a.
2,000,000
1.4 % p.a.
- 5.6 % p.a.
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
USA Japan Korea China APEC
(Source) APERC (2002)
Oil Demand Outlook
for Selected Economies in APEC
Mtoe
1400
1200
USA
1000
800
600
China
400
Japan 2007
200
Russia
Korea Chinese Taipei
HKC
0
1980 1990 1999 2000 2005 2010 2015 2020
China Hong Kong, China Japan Korea Chines e Taipei Rus s ia USA
(Source) APERC (2002)
China: Energy Demand Forecast by Fuel Type
Power sector is expected to lead coal demand and transportation to oil demand.
1000.0
Coal
900.0
800.0
700.0
600.0
Mtoe
500.0
Oil
400.0
Electricity
300.0
Natural Gas Heat
200.0
100.0
0.0
Industry Transportation Residential Commercial Power
(Source) APERC (2002)
Vulnerable supply structure in Asia
Asian import dependency will reach 80 % in 2020 from 60 % today
90%
80%
Asia
70%
60%
APEC
50%
40%
North America
30%
20%
10%
Latin America
0%
-10% 1990 1999 2010 2020
Russia
-20%
North America
Latin America
Asia (Northeast Asia+Southeast Asia+China+Oceania)
Russia
APEC
(Source) APERC (2002)
Average
Share of oil in Oil import
Grow th
TPES dependency
Rate
1999 2020 1999-2020 1999 2020
China 19% 26% 4.3% 22% 69%
Hong Kong, China 63% 61% 3.7% 100% 100%
Japan 52% 46% 0.4% 100% 100%
Korea 55% 45% 2.4% 100% 100%
Chinese Taipei 49% 36% 1.4% 100% 100%
Russia 21% 19% 2.1% 0% 0%
(Source) History: IEA (2001), Projection: APERC (2002)
Inter-area Movements of Crude Oil in 2000
600
500
400
Million Tonnes
300
200 Latin Am e rica
M iddle Eas t
100
0
USA W estern Europe China Japan Other Asia
Pacific
North America Latin America Europe Former Soviet Union
Middle East Africa Australasia Others
(Source) BP Statistical Review of World Energy (2001)
orrelation between per capita GDP and
TPES by Regions (1980-2020)
Income is the main determinant of per capita TPES
toe per capita
10.0
9.0
8.0
North America
7.0
6.0
Russia Oceania
5.0
4.0 Northeast Asia
3.0
APEC
2.0
China
Latin America
1.0
Southeast Asia
0.0
0 5000 10000 15000 20000 25000 30000 35000 40000 45000
GDP per capita (1990 US$)
(Source) APERC (2002)
(Note) Data for Russia is provided from 1992
Energy supply will not be sustainable 2.2 to 2.8 trillion US dollars will be
without massive investments needed in the next two decades
US$ Billions
2000 2010 2020
Coal + delivery costs
Annual 2.5 - 3.3 0.5 - 0.7 0.9 - 1.2
Cumulative 2.5 - 3.3 8 - 10.5 16 - 21
Oil & gas production, processing
and petrochemical installations
Annual 29 - 63 26 - 56 29 - 62
Cumulative 29 - 63 239 - 514 506 - 1082
Oil and gas international trade
Annual 20 - 22 13 - 15 11 - 13
Cumulative 20 - 22 192 - 207 288 - 321
Electricity generation and
transmission
Annual 21 - 22 65 - 69 89 - 94
Cumulative 21 - 22 549 - 568 1352 - 1422
Total
Annual 73 - 111 105 - 140 130 - 170
Cumulative 73 - 111 979 - 1300 2162 - 2844
(Source) APERC (2002)
Sulfur Dioxide Nitrogen Dioxide
micrograms micrograms
Economy City Economy City
per m 3 per m 3
1 China Guiyang 424 1 Italy Milan 248
2 China Chongquing 340 2 China Guangzhu 136
3 China Taiyuan 211 3 Mexico Mexico City 130
4 Iran, Islamic Rep. Tehran 209 4 Bulgaria Sofia 122
5 China Zibo 198 5 China Beijing 122
6 China Quingdao 190 6 China Lanzhou 104
7 China Jinan 132 7 China Dalian 100
8 Brazil Rio de Janeiro 129 8 Argentina Cordoba City 97
9 Turkey Istanbul 120 9 China Zhengzhou 95
10 China Anshan 115 10 China Anshan 88
11 Russia Moscow 109 11 Brazil Sao Paulo 83
12 China Lanzhou 102 12 Australia Sydney 81
13 China Liupanshui 102 13 Chile Santiago 81
14 Japan Yokohama 100 14 Poland Katowice 79
15 China Shenyang 99 15 United States New York 79
16 China Beijing 90 16 United Kingdom London 77
17 Poland Katowice 83 17 China Chengdu 74
18 China Tianjin 82 18 United States Los Angeles 74
19 Korea Taegu 81 19 China Shanghai 73
20 China Chengdu 77 20 China Shenyang 73
(Source) World Bank (2001), “World Development Indicator”
• Growing energy demand
– Natural gas will be the preferred fuel of choice
– Oil and coal will maintain dominant position as sources of energy
– Power and transport sectors will be leading the growth of energy
consumption
– Share of NRE will be still marginal compared to other
conventional fuels
• Energy security
– High import dependence on the Middle East will make energy
supply more vulnerable not only in volume, but also in price, e.g.
Asian Premium.
– For the Northeast Asian Economies, diversification of sources
and types of energy will be more valued with time. Trans-
boundary energy projects are under
– Time of complacency about energy supply will come to an end
sooner the higher the economic growth of the region.
• Environment
– CO2 emissions will increase substantially over the
next two decades and all APEC Annex B economies
under the Kyoto Protocol are likely to miss each
individual targets of emissions reduction except
Russia.
– Steady and marked deterioration of local and
regional environmental quality is expected as
emissions of NOx, SOx, and soot would rise, e.g.
Acid rain in the Northeast Asia and China.
Interest of Importing Economies
• Energy security
– Strong desire of importing government
for diversification of sources and types
• Deregulated oil and other energy
markets
– Seeking low-cost fuels, in particular, in
power market
Challenges for Non-conventional Oil
• Price Competition with Other Fuels
– Coal for power sector, GTL for transportation
– Long-term stability.
• Eg. Orimulsion in Korea
• Environment
– China: Only for asphalt – road construction
• Social cost
– Fishery in Hokkaido, Japan
• Raised opposition to the transportation of orimulsion for the
power station in 1996
• Restart transportation in 1998
Fuel Prices (CIF) in Japan
5.0
4.5
4.0
3.5
3.0
$/MMBtu
2.5
2.0
1.5
1.0
0.5
0.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
LNG Heavy Fuel Oil Coal
(Source) IEA (2000-2001), "Energy Prices & Taxes"
Emissions from different fuel type
Orimulsion Heavy Fuel Oil Bituminous Coal
Particulate inlet concentration
175 150 11,500
to ESP, mg/Nm3
ESP particulate outlet
5 10 50
concentration, mg/Nm3
Nox outlet concentraion, low
390 450 650
Nox burners, mg/Nm3
SO2 inlet concentration to FGD
6,800 1,750 - 6,900 940 - 6,000
mg/Nm3
(Source) Homepage of Bitor at http://www.bitor-europe.co.uk