Maritime Energy Resources in Asia: Energy and Geopolitics

Energy Security Concerns: The View from China and Southeast Asia

39 the national bureau of asian research nbr special report #35 | december 2011 ZHAO HONG is a Senior Research Fellow at the East Asian Institute at the National University of Singapore. He can be reached at . Energy Security Concerns: The View from China and Southeast Asia Zhao Hong EXECUTIVE SUMMARY This essay identifies the causes of increased energy consumption by China and Southeast Asian countries, assesses the potential for energy scarcity and insecurity to cause tension and conflict in the South China Sea, and concludes by considering strategies for promoting regional energy cooperation. MAIN ARGUMENT Although China and the ASEAN countries vary in resource endowments and energy consumption levels, energy security, resource scarcity, and climate change present major concerns for all countries with energy interests in the South China Sea. To meet these challenges, China and ASEAN countries are accelerating their diversification of energy resources, but significant challenges remain. China has emerged as an increasingly large gas consumer and has put great emphasis on getting as much of its future oil and gas from as close to home as possible, which increases its interest in developing energy resources in the South China Sea. ASEAN countries are also turning to gas to generate electricity and provide for industrial and home use. These trends could lead either to increasingly stiff competition or to enhanced energy cooperation. Energy cooperation between national oil companies in some specific areas could function as a confidence-building measure, laying the groundwork for a process of official regional energy cooperation in the form of an “East Asian energy community.” Such cooperation makes sense from both an economic and a security perspective. POLICY IMPLICATIONS • Given the potential for resource competition to lead to conflict in the South China Sea, China and Southeast Asian countries must enhance cooperation by forging a rational energy security partnership in general and maritime cooperation more specifically. • The prerequisite for China-ASEAN energy cooperation is mutual trust, particularly with respect to the South China Sea. • The best way to decrease energy concerns is to increase energy efficiency and develop renewableenergy.Exclusivelypursuingoilforenergysecuritywillincreaseoildependence and costs in the long term. • A framework of energy cooperation and joint research between China and Southeast Asia should be supported as a step toward a pan-Asian energy cooperation network. • China and the ASEAN countries can begin by enhancing energy cooperation in a few specific areas, such as by promoting energy conservation, increasing the efficiency of existing technologies, and modifying consumer energy-use behavior. 41 THE VIEW FROM CHINA AND SOUTHEAST ASIA u ZHAO T he past years have seen some shifts in the world energy system. The first is a shift in energy demand from west to east. The era of growing demand for oil and other fossil fuels in the industrialized countries is over; most of the future growth in demand will come from emerging countries in Asia. The International Energy Agency (IEA) projects that by 2030 the share of primary energy demand by member states of the Organisation for Economic Co-operation and Development (OECD) will decrease from 46% in 2007 to 35%, while that of nonOECD states will increase from 52% to 63% (see Table 1). The other big shift in the world energy system is growing concern about the environmental impact of energy use, especially emissions of carbon dioxide, an intrinsic by-product of burning fossil fuels with conventional technology. Worries about climate change have led more countries to undertake great efforts to diversify their energy structures, including moving away from traditional energy resources to clean, environmentally friendly energy resources. Over the past few decades, China and some members of the Association of Southeast Asian Nations (ASEAN) have undergone profound economic and social transformation. Due to expectations that the region will continue to experience high rates of economic growth and rapid urbanization, there is fear that energy problems, including energy shortages and rising CO2 emissions, will become more serious. For instance, China’s dependence on oil imports has already increased from 28% in 2001 to 50% in 2008. Likewise, ASEAN, although currently a net energy exporter, has maturing oil and gas fields, and its net oil imports are expected to grow from less than 1 mb/d (million barrels per day) today to 4 mb/d in 2030. The South China Sea, as host to some of the busiest shipping lanes in the world, is vital to the economic prosperity of China and ASEAN countries...