Fuelling Southeast Asia's Growth: The Energy Challenge

ASEAN Economic Bulletin Vol. 21, No. 2 (2004), pp. 239-48 ISSN 0217-4472 Fuelling Southeast Asia's Growth The Energy Challenge Andrew Symon I. Introduction: Demand Outlook Southeast Asia faces very large growth in energy demand to fuel electricity generation, industrial processes, transport, and households in the coming decades. The Toyko-based Asia-Pacific Energy Research Centre (APERC) projects that energy demand in the region (excluding Cambodia, Laos, and Myanmar) will double from 252 million tonnes of oil equivalent (mtoe) to 525 mtoe between 1999 and 2020 (Table I).1 How to best meet this demand poses a range of policy challenges for the region's governments. Energy supply is a crucial component for economic growth and improving living standards. Governments, therefore, have the task of ensuring: (1) that energy supply is provided to industries and households as efficiently, reliably, and as securely as possible; (2) that the environmental impact of supply and consumption are acceptable; and (3) that supply is consistent with social and equity objectives, for example, promoting the supply of electricity to isolated rural areas. In 2002, the International Energy Agency in Paris reported that as many as 200 million people in Southeast Asia do not have access to electricity.2 Energy sector development also has implications for inter-governmental relations. Pursuit of domestic energy goals can affect neighbouring countries, for example, the construction of dams for hydropower in shared river systems in the Greater Mekong Subregion (GMS). Many of these goals could be better met if governments work together. Furthermore, domestic gas and power systems will be increasingly supported by pipelines and transmission links with other countries. This opens up the possibilities of system integration to meet demand at lower cost. Co-operation over energy matters can help foster economic integration and should be an important aspect of ASEAN's endeavours. II. Can Southeast Asia's Energy Resources Meet Demand? Southeast Asia's primary energy resources — oil, gas, coal, and hydropower — are unevenly distributed and relatively limited compared with the scale of demand. The latter may be a contentious point. The region does have plentiful reserves of natural gas, large coal reserves in Indonesia, and generous hydropower potential especially in the GMS. The scale of Southeast Asia's future energy demand may not be as spectacular as that of China, where energy demand is projected to grow from 754 mtoe to 1,322 mtoe during this period. Nevertheless, Southeast Asia's needs are still very large. In 1990, the region's total demand was a mere 170 mtoe. APERC projects it to be three times as great by 2020. APERCs analysis may also be conservative and understate demand. It ASEAN Economic Bulletin 239 Vol. 21, No. 2, August 2004 TABLE 1 East Asian Energy Demand (million tonnes of oil equivalent) 7990 79992010 (est) 2020 (est) Northeast Asia China4937541,0021,322 Other Northeast Asia Hong Kong China7 142231 Japan294342376409 South Korea67125190250 Taiwan32496786 Sub-total401530655777 Southeast Asia Brunei. John Vidal, "Dams reduce mighty Mekong to a trickle", Guardian (London), 26 March 2004. Michael Richardson, "If oil-crunched Indonesia goes nuclear", Straits Times (Singapore), 5 June 2004. Asian Environmental Outlook 2001 (Manila: Asian Development Bank, 2001). Speech by the Thai Minister of Energy, Prommin Lertsuridej, at the opening ceremony of the Thailand Petroleum Trading Centre, Chon Buri Province on 29 January 2004. Also available from . National Hydrogen Study, Australian Government Department of Industry, Tourism and Resources, Canberra, 2003. ASEAN Economic Bulletin 247 Vol. 21, No. 2, August 2004 14.Energy Investment Outlookfor the APEC Region 2003 (Tokyo: Asia Pacific Energy Research Centre, 2003). 15.Bangkok Post, "Half Year Economie Review 2004", (energy sections), . 16."Chairman's Press Release on the Asian Bond Market Initiative", ASEAN Secretariat, Jakarta, August 2003. Available at . 17.Fereidun Fesharaki, "Energy Security in Asia Pacific: Implications for Southeast Asia's Refining, Oil Storage and LNG Sectors", paper presented at a public lecture at the Institute of Southeast Asian Studies, Singapore on 8 June 2004; Ken Koyana, International Oil Markets and ASEAN Energy Security (Tokyo: International Energy Economics, June 2002); Energy Security Initiative: Some Aspects of Oil Security (Tokyo, Asia Pacific Energy Research Centre, 2003). 18.Rosli Abidin Yahya, "PPKB welcomes Malaysian statement on oil...