Asia Requires $200 Billion Energy Investment To Support Regional Economies

Tokyo, May 20: | Updated: May 21 2002, 05:30am hrs
Asia will need some $200 billion in the next 10-15 years to build enough gas and power infrastructure to underpin fast growing regional economies, the head of an Asia Pacific research group said on Monday.

But competition for investment will be tough with other regions and industries, and governments will have to be proactive in deregulation and liberalisation to attract capital resources.

“Investment is by far the biggest issue for Asia and it is going to be difficult to get domestically and internationally. There is no guarantee energy investment is the most profitable and there is plenty of competition from sectors such as information technology and communications,” said Mr Tatsuo Masuda, president of the Asia Pacific Energy Research Centre (APERC).

“Most important will be to deregulate and liberalise if we are going to get the private sector to come in, and to have legal and regulatory transparency.

A level playing field for all involved is also critical,” Mr Masuda told Reuters in an interview. He said harmonisation of regulations for cross-border projects also was imperative.

APERC, which comprises members of the Asia Pacific Economic Cooperation (APEC), is an affiliate of the Institute of Energy Economics of Japan.

Mr Masuda estimated that $100 billion would be needed for liquified natural gas (LNG) terminals and pipelines to sate a tripling in demand for natural gas in Asia in the next 20 years. Asia-Pacific, excluding the Indian sub-continent, consumed roughly 190 million tonnes of gas in 2000.

“North America has 520,000 kilometres of gas pipeline networks, Europe has 220,000 km, but there are virtually none in Asia where gas demand is expected to rise faster than anywhere else,” he said.

Investment in power projects should be at least $50 billion on a 15 year horizon, but would largely depend on demand growth.

Masuda, who spent five years with the Paris-based International Energy Agency until 2001, reckoned an economy achieving seven per cent growth in energy supply would need to double existing energy infrastructure every 10 years.

“Our job is to alert political leaders of the need to open up and deregulate this sector to attract much-needed investment,” he said.

Transport and then industry are expected to drive oil demand in Asia by an annual rate of 3.7 percent to 28 million barrels per day (bpd) by 2020 with the region becoming increasingly reliant on the Middle East and swing supplier West Africa.

Only two countries — Japan and South Korea — have strategic oil reserves based on IEA parameters of 90 days of consumption.

Mr Masuda said any severe supply disruption that caused IEA nations to release strategic stocks would attract “free riding” by other Asian countries.

“But the long-term danger is that the proportion of IEA demand versus world demand is shrinking and as those (strategic) stocks are based on consumption, total strategic stocks will shrink,” Mr Masuda said.

He added that the September 11 attacks in the United States had triggered some serious thinking on strategic supplies and China appeared to be considering possible inventories.

Two of the region’s biggest producers, Indonesia and Malaysia, will cease to export in about 2012 and 2016, respectively.

He said the Association of South East Asian Nations (ASEAN) were discussing at government level modifications to the ASEAN Petroleum Security Agreement signed in 1986 and ratified in 1988.

“They are talking about how to cope with the new security situation and looking at holding stocks.

But so far it is unclear whether the discussions are about own stocks or joint,” Mr Masuda said, adding that ASEAN energy ministers are due to meet in early June to discuss the revisions.