SIEW 2015: SIEW VIEWS #3
Current oil and gas prices and increasing pressures to move towards lower carbon fuels are driving shifts in the global energy landscape. How will these changing dynamics impact Asia?
Dr Gal Luft
Co-Director
Institute for the Analysis of Global Security (IAGS)
While most of the attention is focused on the fall in oil prices, it is actually the attendant decline in natural gas prices that offers Asia an opening to a new energy future. Because LNG prices in Asia are indexed to oil, their prices have dropped sharply, bringing gas closer to economic competitiveness with coal, currently the work horse of developing Asia’s electricity sector.
Unlike intermittent sources of electricity like solar and wind, natural gas guarantees Asian economies 24/7 power generation. Its use also offers clear environmental benefits. Greater use of gas in the power sector – natural gas can also challenge petroleum fuels in the transportation sector provided that cars are made to run on it – will depend not only on Asia’s ability to build the infrastructure to transport the commodity from its main generating hubs – the Middle East, Russia, Australia and North America – but also on its ability to intensify domestic exploration and production activities.
Gas is now cheap and plentiful and with technological advances it can remain so for years to come. Asia would be wise to take advantage of this opportunity and like other parts of the world join the century of gas.
Gal Luft will be speaking at Roundtable F: China's One Belt One Road Initiative: Opportunities for ASEAN Energy Market
Martin Fraenkel
Global Head of Content Platts
Oil and gas prices, which are not expected to make a quick recovery in the short term, will likely cement the role of hydrocarbons in the region's energy mix. Economies have responded to lower oil prices by consuming more and Asia will be the prime mover of global oil demand growth in the near future. In China and India, for example, gasoline demand is growing at double-digits.
Gas and LNG demand also remains robust across the region, given its attractiveness as a clean fuel.
The booming economies of Southeast Asia will become increasingly important in the region's energy landscape, with power consumption expected to triple over the next three decades. This is despite the removal of fossil fuel subsidies in a number of countries. As a result, coal, which is in abundance, is still expected to be the dominant fuel in the energy mix in Asia.
However there is a clear recognition that countries must take responsibility for the environment. India most recently pledged to slow the increase in its production of greenhouse gases as well as to accelerate development of clean energy sources, while one of the Chinese government's key aims during the current decade is to clean up pollution. Many Asian countries are now looking to tighten transport fuel specifications and are actively gearing up for low-sulfur fuel consumption over the next few years.
This has sparked a wave of oil refinery upgrades in recent years while governments have also pledged to increase cooperation on clean coal initiatives. Asia proudly claims some of the most advanced refineries in the world in terms of technology and scale.
In general, the emphasis on the environment will encourage governments to drive investments not just in traditional energy sources but alternative energy as well, in order to innovate and enhance technologies to harness clean fuels and become more energy efficient, which will result in improvements in overall energy intensity. It's worth noting that with biodiesel prices holding a $300-$400/mt premium to diesel, it will make any shift towards low-carbon road fuels painful for some in the short term.
Martin Fraenkel will be moderating the “In Focus: A Turning Point for Oil?” session at the Singapore Energy Summit.
Yukari Yamashita
Board Member and Director (Energy Data and Modelling Center)
The Institute of Energy Economics, Japan (IEEJ)
The recent shifts in the global energy landscape increase the uncertainties to the already complex challenge of addressing the three factors of “Energy Security”, “Economic Efficiency” and “Environment” (3Es).
As the world’s center of growth, the short-term priority for the Asian economies is to secure sufficient energy supplies to support their growth.
The current over-supplies of energy do help for the energy security factor but, somehow, at the expense of the others. Lower energy prices always appear to benefit consumers not only in Asia but in the rest of the world as well; it would be naive, however, to assume that the benefits of lower price levels would continue forever.
Despite the low prices, it is essential that we simultaneously pursue all the 3Es. The world should embrace the benefits of sustainable development and must address climate change. We need to join our efforts to improve energy efficiencies, diversify and de-carbonize, and develop innovative technologies. SIEW is an ideal platform for all who are looking for solutions, business opportunities and collaboration.
Yukari Yamashita will be moderating Roundtable A: Oil Pricing and Outlook