INTERNATIONAL BITS AND PIECES
Energy Demand Forecast To Grow 41 pc From 1995 To 2010
Energy demand in the Asia-Pacific region is expected to grow 41% by 2010 from the 1995 level, according to a paper presented at a meeting of the region's energy ministers Friday.
But the paper projects energy production in the 18 member economies of the Asia-Pacific Economic Cooperation (APEC) forum will grow at a slower pace of 31%, with the result that the region will be more dependent on energy imports.
Demand in 2010 in APEC is projected to grow to an equivalent of 6.12 billion tons of crude oil from 4.35 billion tons in 1995, while production within the region is forecast to increase to 4.79 billion tons from 3.66 billion tons.
As a result, energy supplies from outside APEC must roughly double to 1.33 billion tons, according to the paper, produced by the Asia-Pacific Energy Research Center in Tokyo.
These projections are based on the assumption that the region's combined gross domestic product (GDP) will grow at an annualized 2.68%. The paper takes into account the impact of the economic crisis thus far, but it does not factor in a serious impact from the current economic crisis in the years to come.
The paper was prepared for the two-day APEC energy ministers' meeting that began Friday in Ginowan, Okinawa. It is intended to provide a basis for the member economies to draw up plans for policy coordination.
The region includes the world's two biggest economies, the United States and Japan, the most populous country, China, oil producers like Indonesia and Mexico, and emerging economies in Southeast Asia.
But assuming the current economic crisis remains in place until 2002 and the region's combined GDP grows at a slower pace of 2.46% in annualized terms, energy demand will grow at 34% to 5.82 billion tons by 2010 from 1995, as opposed to 41% without such assumptions.
Still, the region's energy supply is projected to rise at a much slower rate of 26% to 4.62 billion tons, resulting in net energy imports rising around 54% to 1.06 billion tons, the paper showed.
APEC Calls For Increased Energy Production
Energy ministers from Asia-Pacific economies on Friday affirmed the importance of securing energy resources in the region to cope with growing energy demand, Japanese officials said.
''While energy consumption in the APEC region is expected to grow very slowly in the short term due to sluggish economic growth, it will increase in the medium- to long-term,'' Japan's International Trade and Industry Minister Kaoru Yosano said in his opening address at the meeting of the Asia-Pacific Economic Cooperation forum.
''To meet this increased energy demand, economies will dramatically increase imports from outside the region, further deteriorating the region's energy vulnerability,'' he said, summarizing research by the APEC-affiliated Asia Pacific Economic Research Center in Tokyo.
Yosano is a co-chair of the third meeting of APEC energy ministers in Ginowan, Okinawa.
According to a long-term outlook for energy demand and supply produced by the center for the meeting, energy demand in the 18 APEC economies will grow some 41% over 1995 levels by 2010.
But energy production within APEC is forecast to grow at just 31% in the same period, making it likely that the region will become more dependent on energy imports, particularly from the Middle East.
Participants in the meeting recognized the need to diversify energy sources, improve energy efficiency and develop infrastructure to support increased production and use, the Japanese officials said.
They did not announce specific measures, but they decided to share information on energy markets, they said.
The Japanese officials said the decision is a step forward for the region, which must face a wide variety of energy issues.
The region includes oil exporters such as Indonesia and Mexico, and importers such as Japan, which meets more than 99% of its petroleum needs with imports, and the United States.
The ministers also approved recommendations for accelerating investment in natural gas supplies and infrastructure, and they agreed to take up this natural gas initiative at a meeting of APEC leaders in Kuala Lumpur in November, the Japanese officials said.
Approval for these recommendations is perhaps a result of a trade-off between the United States and Canada, which have advanced technology for natural gas development and are keen on investing, and Indonesia and Malaysia, which produce gas but which have been hit by the economic crisis and need foreign capital, they said.
Meanwhile, many economies represented in the conference said the 14 energy policy principles drawn up in Osaka in 1995 are basically still valid, the Japanese officials said.
The 14 nonbinding principles include endorsements for developing free, efficient energy markets and cooperation in reducing greenhouse gas emissions and in using environmentally sound energy technologies.
In view of the currency crisis, Asian participants at the latest conference also called for the development of financial techniques to fund investments in energy infrastructure projects, such as financing plans denominated in local currencies to shield them from the impact of currency speculation, the officials said.
On Saturday, the ministers are expected to discuss energy efficiency and to adopt a joint declaration before closing the conference, the Japanese officials said.
The first meeting of APEC energy ministers took place in Sydney in August 1996 and the second was held in Edmonton, Canada, in August 1997.
The Okinawa meeting came at a time when the Asian financial crisis, which began in the summer of 1997, is still adversely affecting the regional economy.
The 18 APEC members are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan, Thailand and the U.S.
Russia, Vietnam and Peru, which will join the forum in November, also sent officials as observers.
APEC Energy Ministers Back Equal Treatment In Natural Gas Development
Energy ministers from the Asian and Pacific region on Friday endorsed a US-Japanese proposal for treating domestic and foreign enterprises on an equal footing in development of natural gas fields.
The proposal, aimed at promoting development and use of natural gase, will be submitted to an annual summit of the Asia-Pacific Economic Cooperation (APEC) forum in Kuala Lumpur in November.
It was approved by energy ministers from 21 APEC member nations when they sat down for the first day of a two-day meeting in Okinawa, southern Japan, according to Japanese news reports.
The 21 participating nations included three countries -- Russia, Peru and Vietnam -- due to formally join the forum in November.
They also reaffirmed the importance of state involvement in efforts to encourage private sector investment in development of regional energy infrastructures, which would "contribute to economic recovery," the reports said.
On the agenda of the meeting was an outlook of energy supply and demand for the region amid the economic crisis which has spread through such nations as Indonesia, South Korea and Thailand.
The topic will serve as the basis for drawing up plans for energy security, ways to improve efficiency in energy use and environmental issues including reduction of carbon dioxide emissions, the reports said.
At the meeting, the Asia-Pacific Energy Research Center in Tokyo, an APEC think tank, presented a report forecasting energy demand in the region would grow 41 percent by 2010 from the 1995 level.
But the paper projected energy production in the current 18 APEC member economies would grow at a slower pace of 31 percent, with the result the region would be more dependent on energy imports.
Demand in 2010 in APEC is projected to grow to an equivalent of 6.12 billion tonnes of crude oil from 4.35 billion tonnes in 1995, the report said.
In the meantime production within the region is expected to reach 4.79 billion tonnes from 3.66 billion tonnes.
Gulf Arab Gas Producers Pin Hopes On India, China To Ease Gloom
Gulf gas producers have seen their traditional markets eroded by economic turmoil in Asia and hopes for a recovery in the next decade are pinned on India and China.
Asia was until last year seen as the major market for Gulf liquefied natural gas (LNG) producers like Qatar and Oman. But most Asian clients have since been hit by economic crises that have stalled or even reversed growth.
Expectations that demand for gas from these markets would absorb increased output from Gulf states have not materialised, said analysts at a Middle East gas summit which opened in Abu Dhabi on Sunday.
"The industry has turned upside down as the effect of Asia's economic and financial crisis have filtered through the energy sector ...
"The list of potential new buyers is now effectively reduced to two: India and China," said Chris Holmes, senior downstream and gas consultant with Gaffney, Cline and Associates' office in Singapore.
South Korea, Thailand, Japan, Taiwan, Singapore and the Philippines have all experienced slowdowns in demand that range from slight growth in the case of Taiwan to negative demand for South Korea.
Middle East gas producers, which account for a third of the world's proven natural gas reserves, are also facing stiff competition from Asian producers like Indonesia, Malaysia and Australia.
"Demand growth in traditional LNG has all but stalled and exploitation of new markets has been painfully slow ... The industry faces a somewhat uncertain future," Holmes said.
Amid the gloom, Korea in particular is of concern to Gulf LNG producers.
Oman has agreed to supply Korea Gas Corp. (Kogas) with 4.1 million tonnes a year (mty) for 25 years from 2000, while Qatar's Rasgas has a 4.8 mty sales commitment to Kogas from 1999. But further deals may be a long way off.
Korean LNG imports have risen from 1.7 mty in 1987 to 11.6 mty in 1997 and some were predicting a further growth to 30 mty by 2010. But total LNG imports for the first five months of 1998 have been at about 80 percent of their 1997 level.
This downturn has worried Gulf producers, despite bullish statements from the Koreans themselves.
"Decline in the demands for natural gas will last only a few years and after 2000 those demands will pick up," said Yonghun John Jung, a senior fellow at the government's energy economics institute.
Japan, the world's largest buyer of LNG, has experienced a period of economic stagnation. Despite some small growth in demand, "energy demand in total will, at best, stagnate and, at worst, contract," Holmes said.
The only two Asian markets remaining with substantial growth potential are China and India.
China has still not explicitly said it wants to import LNG, although analysts at the Abu Dhabi summit said there were three projects that could potentially require large LNG imports.
Some estimates for demand to these LNG projects in the provinces of Guangdong, Fujian, and a third in Jiangshui and Zhenjiang have estimated demand as high as 2.52 billion standard cubic feet per day by 2005.
Only a fraction of this could be met through domestic production with the rest coming either from LNG or pipeline.
India is still seen as the brightest star for LNG exports to Asia. But even with the Indian market, so far largely unscathed by the Asian crisis, analysts are being cautious.
There are about 20 LNG projects planned in India, but the final figure may only be a fraction of that.
"It is not as good as it looks on paper. In the end, about three of those projects are feasible -- many do not have electricity markets to go to," said Vishvjeet Kanwarpal, a consultant from Asia Consulting Group.
But he remained upbeat: "The potential is certainly there and historically speaking India has had a good LNG development," he said.
India is already an important market to Qatar. Last month, Qatar's Rasgas said it would supply 7.5 mty to India's Petronet, although no mention was made of how long the contract was for.
In August, Oman LNG said it had sold 1.2 mty to India's Metropoli Gas Co. starting in late 2001.
Others were also optimistic about the potential of the Indian market.
"The Gulf is the most obvious source for India for natural gas, said Mukesh Butani, a consultant from Arthur Andersen's New Delhi office.
"India has had a traditionally friendly relationship with the Gulf, but India needs to be more committed in terms of implementation of projects and there are still a lot of obstacles to overcome."
Oil Companies Offer Hope To Pre-Election Azerbaijan
Foreign oil companies, which have already invested some 40 billion dollars in Azerbaijan, offer the best hope for economic stability in the country on the eve of its presidential elections Sunday.
Many Azerbaijanis will vote for the prospect of a better tomorrow, as President Heydar Aliyev has banked that the country's extensive oil reserves will transform the tiny Caspian republic into a 21st-century El Dorado.
Business in the capital is experiencing a minor boom, thanks to oil internationals that have set up shop here, hoping to reap profits from the country's considerable on-shore and off-shore reserves.
More than 20 international oil majors, including French firms Total and Elf Aquitaine, have sealed some 14 production sharing agreements since the first, "the contract of the century" with the Azerbaijani International Operating Company (AIOC).
British Petroleum-led AIOC unites 11 international oil majors with Azerbaijan's state oil company SOCAR in a 8.5-billion-dollar quest for some 630 million tonnes of potential reserves.
Oil came online in October 1997 and has now reached the level of 70,000 barrels per day (bpd) from six wells. AIOC hopes that by peak production in 2008, over 800,000 bpd will be flowing to western markets.
Most recently, Aliyev signed two contracts worth a some six billion dollars during a visit to London. UK-based firms British Petroleum, Ramco and Monument Oil and Gas participate in the projects.
The money to be made from the local oil industry is considerable. Officials estimate that the AIOC alone will have contributed 1.6 billion dollars to the economy by the end of this year and five billion dollars by 2005.
Total foreign investment in 1997 alone, by comparison, was 1.2 billion dollars. The oil sector makes up more than 80 percent of total investment, internal and external, officials said.
"The oil sector is the base of our economy. It specifically attracts the large part of our investment," said Ali Asadov, presidential advisor on energy issues.
Azerbaijan has also benefited from the 500-600 million dollars experts estimate the country has received as signing bonuses.
"The bonuses fill out our hard currency reserves. Because of the bonuses, in the course of three years our reserves have grown from two million dollars to 500 million dollars," Aliyev said Tuesday.
Questions remain, however, over the actual size of the country's reserves, which were once thought as high as 10 billion tonnes.
Three exploration wells by the Caspian International Petroleum Company and the North Absheron Operating Company (NAOC) failed to discover oil.
NAOC's first attempt in February this year struck oil, but possibly not in commercial quantities. Industry experts are closely following now a third consortium, Shah Deniz, to determine the region's true capacity.
A worldwide drop in oil prices and general uncertainty over the routing of oil when it finally goes online have also dampened the initial optimism over Azerbaijan's potential as a oil-producing state, analysts say.
As a result, the majority of Azerbaijan's 7.5 million inhabitants must wait until 2002, when the bulk of the AIOC's crude begins to flow, before they begin to see the benefits of the oil boom.
Although government statistics paint a rosy picture of the country's economic situation, with near-zero inflation and a strong national currency, most Azerbaijanis are barely getting by on an average salary of 43 dollars per month.
Heavy industry is at a standstill, still suffering from the slump that hit the country after the breakup of the Soviet Union. Officials figures place unemployment at 400,000, but observers say the figure is three times higher.
"They all said that the oil would make us rich," said Ashraf, a local taxi driver, expressing the sentiment of many. "So where's the money?"
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