Singapore Energy Conference 2006: Summary Report 9789812307279

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SINGAPORE ENERGY CONFERENCE 2006

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The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the many-faceted problems of stability and security, economic development, and political and social change. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. An Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute’s chief academic and administrative officer.

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First published in Singapore in 2006 by ISEAS Publishing Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: bookshop.iseas.edu.sg All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2006 Institute of Southeast Asian Studies, Singapore ISEAS Library Cataloguing-in-Publication Data Singapore Energy Conference (2006 : Singapore). Singapore Energy Conference 2006 : summary report / Institute of Southeast Asian Studies. 1. Power resources—Asia—Congresses. 2. Energy development—Asia—Congresses. 3. Energy consumption—Asia—Congresses. 4. Renewable energy sources—Asia—Congresses. I. Title II. Institute of Southeast Asian Studies. HD9502 A82S61 2006 ISBN-13: 978-981-230-423-0 (soft cover — 13 digit) ISBN-10: 981-230-423-1 (soft cover — 10 digit) Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Seng Lee Press Pte Ltd

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SINGAPORE ENERGY CONFERENCE 2006 Summary Report

Institute of Southeast Asian Studies

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CONTENTS

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Executive Summary 1.

Energy: A Strategic Necessity K. Kesavapany

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Developing a Holistic Energy Policy S. Jayakumar

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Dawn of a New Age: Global Energy Scenarios to 2030 James Burkhard

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Geopolitics of Oil and Gas: Challenges in a Turbulent Oil and Gas Industry Moderator: Robert A. Hefner III

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Regional Outlook on Energy Security: Who Wins in the Asian Scramble for Oil? Vince Pérez

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Sustainable Development and Energy Efficiency Moderator: Mike Allen

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World Energy Outlook Claude Mandil

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Prospects for Renewable Energy in Asia and Its Role in Energy Security Moderator: Weerawat Chantanakome

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Enhancing Energy Security in Asia: The Role of Governments R. K. Pachauri

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10. Closing Remarks K. Kesavapany

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11. Conclusions

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Conference Programme

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EXECUTIVE SUMMARY

Energy is a key enabler of economic development. Its use has been steadily growing among developed and developing countries, increasing pressure on oil producing countries to increase and maintain a sustained supply. Also, supply bottlenecks and finite fuel resources against rising demands can result in higher prices with severe consequences on economic growth. This could unduly affect those developing economies least able to absorb rising costs. The use of energy is also strongly associated with rising greenhouse gas concentration in the atmosphere. Thus, the current global energy direction is not sustainable. To help mitigate these risks, governments must adopt effective policies to enhance energy security that includes energy efficiency, viable and effective conservation measures, diversification of sources, and the development of renewable sources of energy. There is a huge opportunity for the incorporation of energy efficiency into infrastructure, especially new infrastructure. Not only does this lower energy costs, it also enhances environmental sustainability and energy security. However, innovation is still required in the technology, design, and business model aspects of energy efficiency. Governments could also endeavour to reduce regulatory and financial deterrents to greater energy efficiency. Diversification of energy sources must include both fossil and non-fossil fuels. Today, more investments in renewable energy sources such as wind, solar, sustainable biomass, geothermal and other alternative energies such as nuclear are being undertaken in places where they are viable. However, most renewable and

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Executive Summary

alternative energies are currently still at a technological and cost disadvantage to fossil fuels. Nuclear plants, for example, are costly to build and maintain, and enriched uranium carry attendant safety and security risks. Governments could adopt policies that support research and development, and provide incentives to support the deployment of renewable energy or provide clear guidelines for alternative energy solutions. Climate change is one of the most important global environmental concerns. The Stern Review released by the U.K. Government highlights the severe economic costs of failure to mitigate global warming. There can be no real energy security unless there is a clear understanding of the negative effects of climate change. A comprehensive climate and energy security plan should include climate change mitigation measures. The right balance between aiding the poor to gain access to energy and allowing the market to set energy prices is an important issue. Developing countries are beginning to recognize that existing fuel and electricity subsidies distort economic signals and can have adverse effects. Ill-designed subsidies have negative effects that could overwhelm the social benefits of improving accessibility for the poorest segment of the population. Thus a comprehensive approach to alleviate fuel poverty is essential. Strategic storage, cooperative storage agreements and public/ private coordination can help to ensure open markets. Strategic reserves also build capacities in internal distribution and create security of oil supplies that would, for a limited period of time, help maintain industrial and economic activities during crisis, while the cumulative engagement of political, diplomatic, economic and military instruments of the state are deployed for the restoration of the affected supply chains. A regional approach to build strategic oil reserves can mitigate unforeseen crisis and

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thwart sudden vulnerabilities, either nature-induced or humaninduced disruptions. Finally, the globalized nature of energy markets, rising oil and gas prices, and concerns over sufficiency of future supplies can significantly impact national economies and global partnerships. Multilateral dialogue and cooperation is essential in achieving energy security as governments have a crucial role in creating the appropriate market mechanisms and financial frameworks for energy investments, and by specifying clear legal and contractual mechanisms.

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Energy: A Strategic Necessity

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1 ENERGY A Strategic Necessity K. Kesavapany Director Institute of Southeast Asian Studies

I am very pleased indeed to welcome you all to the Singapore Energy Conference 2006. The significance of the energy-security nexus was very starkly underlined by the oil crisis of 1973, the ramifications of which haunted the region throughout the 1970s. It also triggered the early ISEAS research interest in energyrelated issues. Between 1973 and 1994 ISEAS published twentytwo studies in this subject area. In the late 1980s it helped launch the Asia-Pacific Petroleum Conference (APPEC) which has since evolved into a useful and significant networking event. Today’s conference is a continuation of ISEAS’ desire to raise consciousness on energy and energy-related issues. We have been thinking of a broader-based approach towards energy issues, one that recognizes energy as a vital, strategic element. Such an approach would translate into an energy conference which is policy-relevant, which discusses and analyses international energy issues in terms of implications for international and national security. This is our hope for the Singapore Energy Conference or SEC to evolve into the equivalent

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of the Shangri-la Dialogue on security. Our focus is much more on quality, rather than quantity, with selected speakers noted for thoughtfulness and expertise. Energy is a very basic need for the economy and also for civilization. Nothing moves and no machine operates without an energy source, whether it is manpower, animal power, natural (wind, water, solar) or fossil fuels (oil, coal, gas, bio-mass) or scientific/technological (nuclear, ion-drive, fusion). When an adversary cuts off energy supplies, this is clearly a hostile act, and is recognized as such. Thus strategists understood why Imperial Japan reacted in military terms to the U.S. action in imposing an oil embargo on Tokyo. This is also the reason why India and China today are concerned about the security of energy supplies, needed for their booming economies. Energy security has thus moved to the top of the international and national agendas. It is therefore very timely that ISEAS and three government agencies have cooperated to organize and launch the Singapore Energy Conference. And we are doubly fortunate to have Professor S. Jayakumar, Deputy Prime Minister, Co-ordinating Minister for National Security and Minister for Law, as our Keynote Speaker today. We hope that the SEC will become a major event in the circuit of energy conferences, differentiated by its high quality of analyses and discussions. We also hope that the SEC will be supported and accompanied by institutional mechanisms for research and analyses into energy and its handmaiden, namely, environmental studies. As a nation that aspires to become an intellectual hub, we need to build a sound eco-system of institutes, culminating in a Singapore Academy of Science. Lastly, let me conclude with my three energy wishes:

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First, that we shall set up a centralized energy agency, which is inter-ministry in scope and able to take a broader policy view, and capable of issuing a coherent Energy White Paper and of proposing strategic energy policies; Secondly, that we shall set up a competent, active and knowledgeable Energy/Environment Institute, which is able to draft policy-relevant studies, research papers and organize sought-after seminars and conferences; Thirdly, that Singapore will over time, become a hub for regional research into energy and environmental issues, and be a recognized venue on the international conference circuit for these critical issues.

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Developing a Holistic Energy Policy

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2 DEVELOPING A HOLISTIC ENERGY POLICY S. Jayakumar Deputy Prime Minister Co-ordinating Minister for National Security and Minister for Law

Introduction I am pleased to be here today to launch the inaugural Singapore Energy Conference. This conference is a timely initiative as energy plays a key role in enabling global economic growth and development. It is useful to bring together experts from around the world to share insights into the challenges posed in the areas of energy security, sustainable development and energy efficiency.

Today’s Energy Challenges: Growing Interdependence For over two decades since the 1970s, we have been accustomed to cheap energy. Even as our consumption of energy has risen steadily with our rapidly growing economies, we have concurrently taken for granted that the supply of energy will continue to be cheap and sustainable. Recently, however, this idyllic state of affairs has been disrupted. Between January 2004 and August 2006, the price of oil increased by almost 300 per cent to more than US$75 per barrel. Strong demand growth by the surging

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economies of China and India; the lack of spare capacities in oil production and refining; concerns over “peak oil”*; geo-political uncertainties; as well as natural disasters, were all contributing factors. Arguably, the continued growth of the global economy will depend on a sustainable supply of oil and gas to the energyhungry emerging economies like China and India. At the same time, the energy supply-demand relationship has grown in complexity over the years. First, the scale of global oil trade has doubled in the past two decades. Instead of declining, U.S. dependency on oil imports has climbed from 32 per cent in 1985 to 65 per cent in 2005. A fast developing Asia now accounts for a much bigger share of Middle East oil and gas exports, and it is looking into new supplies from Africa, Latin America and Central Asia. As such, energy security cannot be divorced from the strategic interests of the major powers. With greater inter-dependency due to globalization, the need for stable oil markets and reduced price volatilities will expand the scope for cooperation over time. The emergence of climate change as a major societal and political concern, particularly in Europe and increasingly in the United States, is the second major factor that has started to impact energy use in a significant way. According to the United Nations Framework Convention on Climate Change, by 2050 Asia will contribute up to 37 billion tonnes of emissions, or 43 per cent of the global emissions. This will be twice that of OECD countries. The focus in future will be on Asia’s efforts to reduce greenhouse

* Also known as “Hubbert’s peak”, where the rate of oil production globally will decline due to resource depletion after passing a peak. See M. K. Hubbert, Techniques of Prediction as Applied to Production of Oil and Gas, 1982.

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gas emissions while meeting the energy demands of growing economies. Striking an appropriate balance will be a major challenge for Asian policy-makers. An alternative would be to diversify away from fossil fuels to renewable sources like hydro-electric and wind power as well as nuclear power. However, nuclear power brings with it the spectre of nuclear arms proliferation.

Singapore’s Approach to Energy Policy As an energy importer, Singapore is acutely aware of the challenges posed by energy supply and security. For the government, energy issues cut across different ministries and agencies. An interministry Energy Policy Group (EPG) has been established to consult, formulate and coordinate new energy-related initiatives. Consisting of several key Ministries and agencies led by the Ministry of Trade and Industry, this “whole-of-government” approach will look at energy issues from the four perspectives of Economic Competitiveness, Energy Security, Environmental Sustainability and Energy Industry Development. Five key action areas have been identified.

Five Key Action Areas First is the diversification of energy sources. Today, about 80 per cent of Singapore’s electricity is generated by gas imported from Indonesia and Malaysia. To ensure that we are not over-reliant on piped natural gas for our energy needs, we will pursue the import of liquefied natural gas (LNG) to meet future demand for energy. The establishment of an LNG terminal will allow us to obtain gas supplies from more sources in the region and beyond. Second is the long-term development of new energy sources. Due to geography and our physical limitations, geothermal, hydro,

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wind and tidal sources are not viable at present. Solar energy is feasible but not cost-effective as compared to conventional fuels even at today’s oil prices. Nevertheless, cheaper and more efficient ways of harnessing solar, wind and other renewable sources are shortening the lead time for new products to become commercially viable. Environmental-conscious consumers also appear willing to pay a slight premium for “green electricity”. We will continue to keep a close eye on developments and encourage the testing and trials of new technologies in these areas. The third action area is in energy efficiency. Improving the efficiency in how we use energy will translate into tangible cost-savings and contribute to environmental sustainability. Programmes like the Energy Efficiency Improvement Assistance Scheme to help support the cost of energy audits and Green Vehicle Rebates for hybrid vehicles are already in place. Going forward, areas to further improve energy efficiency include key sectors such as buildings, industry and transport. The fourth area is industry development as there are tremendous opportunities in the energy sector. Singapore is already the third largest oil trading and refining hub. There is private sector interest in alternative energy as well. The Economic Development Board (EDB) has secured commitments from worldleading companies such as SolarWorld, Conergy and Vestas to set up operations in Singapore. Several Singapore-based companies have also formed the Greenhouse Gas Emissions Reduction Group under IE Singapore’s International Partners programme to look into emission-reduction technologies. Drawing on our strengths in R&D, there will be opportunities to develop exportable solutions in the energy sector. Finally, international cooperation on energy issues is also important. Greater global interdependence is a permanent feature

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of international relations. Given our open economy and high dependence on energy imports, Singapore will need to engage different players and organizations to secure our energy supply. To be effective, we will have to develop a good understanding of geopolitical trends in energy, the dynamics of the global energy market, national energy policies, and their implications for Singapore. Understanding how the competition for energy sources is influencing the policies and strategies of major energy suppliers and consumers will be useful. To better understand developments in the energy field, a new Energy Studies Centre will be established next year.

Concluding Remarks For better or worse, the energy sector will be an exciting and active one in the years ahead. It is incumbent upon us as analysts, advisers and policy-makers to keep abreast and adopt a holistic approach to the challenges posed by energy security, sustainable development and energy efficiency.

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Dawn of a New Age: Global Energy Scenarios to 2030

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3 DAWN OF A NEW AGE Global Energy Scenarios to 2030 James Burkhard Managing Director, Cambridge Energy Research Associates (CERA), Global Oil Group

Mr Bukhard outlined key trends and challenges facing the AsiaPacific region and deliberated on three issues: energy security, increasing oil prices, and global energy scenarios.

Energy Security Mr Burkhard illustrated the significance of energy security as a global issue and the need to understand it along with poverty and terrorism. Referring to historical examples, the speaker emphasized that energy security was a much broader issue today. Against the backdrop of the International Energy Agency’s (IEA) role to manage oil supplies since the 1973 oil crisis (wherein prices quadrupled overnight) and in face of Middle Eastern turbulence, Mr Bukhard noted that energy security was narrowly understood through the lens of supply management and argued that a broader understanding of energy security was essential. Mr Burkhard highlighted the growth in natural gas industry and that liquefied natural gas (LNG) was fast emerging as a globally traded commodity thus facilitating expansion of global trade. The

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growing importance of this source of energy will be led by the gradual opening up of North American markets to natural gas, a process that its European and Northeast Asian counterparts had already begun. Another major change was in regard to the energy infrastructure wherein a much broader perspective of energy security was being understood. Consequently, governments were focusing on all aspects of the energy supply chain, from production to delivery. Of special concern for Mr Burkhard was how China and India viewed energy security and their initiatives to gain access to different sources of supply. He noted that there was a significant shift in these countries from self-sufficiency to dependence on global markets. In less than a decade, China had moved from selfreliance to dependence on external sources with more than half of its energy supplies being imported. Mr Burkhard stated that the notion of energy independence and self-sufficiency, whether in the United States or in Singapore was in conflict with reality wherein there was a complex interdependence. Also, the complexity of energy security lay simultaneously in how it was intertwined with geopolitics and the environment. Mr Burkhard highlighted four universal principles that affected any country (Singapore/U.S.) today regardless of their particular characteristics, size of the market or geopolitical position. These principles are: • • •

Diversification of the sources of energy supply resulting in decreased vulnerability to scenarios of supply disruption. Resilience in having a security margin, that is, cushion of spare capacity. Oil prices tend to increase due to low security margin. Recognize that there is a globally integrated market and there is no exit from it. Discussing the massive disruption of

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supply in the post-Hurricane Katrina context, Mr Burkhard observed the benefits of market integration as a solution to a potential disaster and recession. There is a scarcity of information of the oil market despite its immense relevance. While lauding the IEA’s role in energy information-flow, the speaker noted that China and India were not part of the Agency. Free-flow of information was imperative in a crisis such as a sudden flow disruption where policies were likely to be based on rumours and fears.

The speaker pointed out the urgent need to bring China and India (particularly China) into the “global energy system” under the IEA umbrella or alternatively a new organization. Mr Burkhard dismissed the rumour that there exists a “clash” between the United States and China over energy issues, emphasizing that this was not inevitable. China is playing a constructive role in meeting the global demand for energy supply and there is no need to fear China; instead the better option is to embrace it as a stakeholder in the energy security system. Illustrating the IEA’s role in alleviating the 1973 tension and strains within the Western alliance (Western Europe, the United States and Japan), the speaker stressed that bringing China and India into an updated system may bear similar dividends.

Rise in Oil Prices Mr Burkhard noted that the fundamental reason for increases in oil prices was due to the thin cushion of spare crude oil capacity, that is, “market’s shock absorber” and explained that when there was a “shock” in the system, spare capacity balanced it. The increase in oil production in 2004, for example, was balanced by an increase in spare capacity.

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The speaker pointed out that geopolitical events also created anxieties within markets, asserting that there was a fear-premium in the price of oil. This is not an issue of a supply shortage, but one of market security. It is best exemplified by the peak oil prices in early August 2006 due to concerns over the security situation in the Middle East. Iran exports 2.5 million barrels daily and the spare capacity in 2006 has been merely 2 million barrels. If Iran decides to stop exports, there is bound to be a lack of spare capacity to offset losses. Nigeria’s political turbulence was another source of key concern especially as the 2007 presidential elections approached, threatening further violence in oil-producing centres. Simultaneously, the speaker noted how the Iranian nuclear issue, the political violence in Iraq and politicking in Venezuela bore implications for the increase in prices. However, in spite of these, there will be an increase in production as well as the spare capacity in the following years. The speaker noted that these developments were dependent on the global economy and how organizations like OPEC played an important role in managing the oil market.

Global Energy Scenarios Mr Burkhard highlighted the CERA’s “Dawn of a New Age: Global Energy Scenarios to 2030” project completed in late August 2006 on three long-term views about the future of energy. This globally integrated study covers aspects such as geopolitics, economics, oil, gas, coal, nuclear, renewable fuels, and electric power in major regions. Issues like ramifications of China’s demand for LNG on the U.S. gas price outlook are covered in this study. The three global energy scenarios covered are: 1.

Asian Phoenix Scenario: This deals with rise of Asia and its ramifications on the global balance of power, geopolitics and the energy industry. Mr Burkhard noted that this scenario

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encompassed the centre of economic and political gravity shifting to Asia, with Chinese and Indian growth placing them on a path to eventually challenge the U.S. global economic pre-eminence. Break-Point Scenario: This deals with the extent of increases in oil prices and the global reactions to such developments. The speaker noted that in this scenario, oil supply difficulties could limit production growth, and oil prices might even reach approximately $120 per barrel. The fear of “peak oil” encourages measures to enhance energy efficiency and accelerate the growth of alternative fuels, and oil loses its monopoly on transportation. Global Fissures Scenario (or anti-globalization): This highlights the reaction of the global community facing a sustained slowdown in global economic growth. While there has been regular economic growth in the past years, Mr Burkhard cautioned against pre-supposing that economic growth was inevitable in globalization. The speaker admitted that the voices of protectionism could proliferate, and warned how a widespread political backlash against free trade and globalization impeded economic growth and weakened energy prices.

Mr Burkhard noted that in CERA study, the Asian Phoenix Scenario scored highest in terms of “Global Real Economic Growth”. While the Break-Point Scenario bore a sharp downturn due to high oil prices and eventually recovered, the speaker represented the Global Fissures Scenario as an extremely pessimistic outcome. Discussing global demographics, the speaker drew attention to Asia (especially India) and sub-Saharan Africa that constituted half of the global working-age population and therefore, these

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would emerge as main energy consuming markets. Also, Asia’s importance in the global energy market is evident from that fact that China’s working population will peak in 2015. Rich regions and mature markets like Europe, the speaker noted, were however experiencing low population growth and would not be a major source of energy demand. Optimistically, Mr Burkhard proceeded to predict the growth of oil production capacity over the next twenty-five years in areas of Africa, the Middle East and the Caspian region.

Discussion The speaker highlighted the historical difficulties OPEC faced in managing the market in line with price objectives due to memberstates’ sovereignty concerns. While predicting a surge in nonOPEC production in the next few years, Mr Burkhard was optimistic that the Cooperation would attain price objectives beyond 2010. In response to the necessity of mechanisms for the energy market’s resilience, the speaker noted that actors such as Saudi Arabia were fully committed to “cushioning” spare capacity. However, this was more complicated in the case of electrical power markets that were regional/country-specific and lacked the spare capacity to balance a margin offset and thus the need for governmental collaboration with the power industry. With regard to environmental issues, the speaker responded that an educational focus on conservation was essential. He was critical of the United States, noting that conservation has been detrimentally uniform through the past five decades and required higher fuel efficiency standards.

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4 GEOPOLITICS OF OIL AND GAS Challenges in a Turbulent Oil and Gas Industry

Moderator: Robert A. Hefner III, Founder, Owner and Managing Partner, The GHK Company Panelists: Paul Young, Managing Editor, Platts Dr Jeff Brown, Managing Director, FACTS Global Energy Prof Xu Xiaojie, Institute of Geopolitics and Energy Economics, East China Normal University, China

Presentation by Robert A. Hefner III, Founder, Owner and Managing Partner, The GHK Company

Geopolitics and the Age of Energy Gases Robert Hefner stated that energy input to an economy was more fundamental than money and pointed out that current energy supply and demand levels would lead the world on an unsustainable path stricken with severe pollution and weather related catastrophes. For instance, China averaged one new coal plant per week and this trend, coupled with vehicle usage at current energy efficiency levels, would develop China and India “just in time for them to be plunged into environmental chaos”.

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Hefner proceeded to quote Minister Mentor Lee Kuan Yew, who said that China needed “internal stability and external peace”. Energy use at status quo would not achieve this. Hefner stressed that China, India and the rest of Asia have to be proactive and should not count on the West and the United States in particular for energy leadership. This was because the West had locked itself into 19th and 20th century energy technologies and had invested trillions of dollars in unamortized energy infrastructure. The speaker noted that 154 coal plants “lack long-term planning in a short-term democracy”. Asia must instead lead the West into the “Age of Energy Gases”. Robert Hefner argued that world primary energy substitution in terms of three great waves, was based on the three forms of matter in the universe — solid, liquid and gas. The first wave was solid coal, the second liquid oil and the third, the “Age of Energy Gases” with gaseous fuels such as natural gas and hydrogen. Hydrogen, in particular, would be highly sustainable later in this century. While moving towards gases, he advised that governments must include the total costs of externalities. For example, in the case of coal, the World Bank estimated that 8 to 10 per cent of China’s GDP would be lost due to the resultant pollution. Citing another example, Hefner compared centralized power plants and decentralized plants with high efficiency smart technologies. If the centralized plant was run on coal, then the true cost would include the cost of mining and transporting coal, and the cost of grid transmitting electricity. This would work out to less than 10 per cent efficiency. Finally, he asserted that Asia could lead the world towards new directions in energy security, and quoted former Chinese premier Zhou Enlai, who once said “the helmsmen must guide the boat by using the waves, otherwise the boat will be submerged by the wave”.

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Presentation by Dr Jeff Brown, Managing Director, FACTS Global Energy

Constraints and Uncertainties: Which are real and What can be done? Dr Jeff Brown focused his presentation on liquefied natural gas (LNG) highlighting the fact that upstream and downstream considerations had real and perceived constraints. With regard to “Upstream”, he noted that the Sakhalin project in Russia was slowing down due to rising costs (costs doubled from US$10 billion to US$20 billion). This trend would only be reversed in September 2008 and would cause anxiety as LNG markets would be tight in years to come. Similarly there are risks in Indonesia and Nigeria, too. He stated that the world over, difficulties lay in getting to the upstream. International oil companies (IOCs) invest heavily, but upstream investments were going down. China had a strong and growing appetite for oil, and non-OPEC oil production was stagnant. With that, it remained to be seen if OPEC could keep up with demand. Qatar, he added, had made substantial investments but had then imposed a moratorium. He cited Australia as a potential “next Qatar”. However, Western Australia maintained that 15 per cent of production must be for local use, which could have a negative impact on some projects. In the region, Indonesia’s supply was a concern as it is uncertain whether or not the current project would supply regionally, or be consumed domestically. As far as Downstream is concerned, Dr Brown emphasized that refining capacity would not be a constraint, as it had exceeded demand growth. There are major expansion plans in India and the Middle East that exceeded demand. Regasification constraints were also not an issue, as there was plenty of regasification in the

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U.S. market. He advised against government deregulating the gas market, as Korea had done as the government had underestimated the amount of LNG needed. It had not allowed Cogas to import additional gas, causing current high prices, as only Qatar was able to supply LNG to Korea. In terms of the role of government with regard to energy security, Dr Brown spoke affirmatively of strategic storage, cooperative storage agreements, better public/private coordination and ensuring open markets. He explained that LNG market risks for Asia was less exposed than it was before, and that Asia could tap into liquid markets of the United States and United Kingdom. He does not support upstream acquisitions, as practised by China, since the oil market was an open “swimming pool”. Thus, assets acquisitions are tantamount to national oil companies (NOCs) overpaying for developing assets.

Presentation by Paul Young, Managing Editor, Platts

Crude Oil Price Review and Outlook for Asia Mr Young noted that 5 per cent of the developed world was using 25 per cent of the world’s total energy. With that, he challenged the Chairman’s assertion that China and India had to be “taken on” to mitigate the global energy situation. He explained the sharp rise in oil prices in a relatively short period of time due to a sharp increase in world demand. Although China contributed a sizeable proportion to this increase, the developed economies also had a role to play. Thus, huge spikes in demand coupled with a lack of supply and less than a million barrels in spare capacity were cause for the increase. He noted that the difference

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between this “rally” and that of the 1970s oil shock was this time it was purely demand driven. High oil prices had recently dropped by about US$20 per barrel. Mr Young opined that there were several reasons for this: (a) BP Prudhoe Bay cuts were less severe than expected; (b) Israel’s invasion of Lebanon did not spiral; (c) slow U.S. hurricane season; (d) fears of economic slowdown; and (e) no fresh outages in Nigeria. Mr Young explained that “old oil” meant oil from old and aging fields. Fourteen of the largest old fields currently provide 20 per cent of daily production, but the average age of these fields is 43.5 years, with supplies quickly depleting. There was a fear that “old oil” production could fall dramatically as over fifty countries had already peaked in oil production. Those who dispute this, explained Young, cited that most of these fifty countries were not major oil producers. However, the reality is that at least twenty of them are major oil producers. Mr Young then went on to discuss Saudi Arabia’s “old and failing” oil fields, Kuwait’s purported inflated reserve figures, and how U.K. oil production had fallen 13 per cent year on year to June 2006. As regards new oil, the situation is not gloomy and there are at least 3 million barrels per day (mbpd) of new production coming onstream each year until 2010. This will offset the capacity erosion of about 1.5 mbpd. The issue, however, is that this “new oil” will come from relatively unstable regions of the world: (a) the Middle East — threat of war and terrorism; (b) Africa — threat of civil war and ethnic strife; (c) Central Asia — threat of potential power struggle developing between Russia, China, Iran and the United States; and (d) Russia — unlikely to significantly increase exports. There will be increasing pressure to drill in stable but

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environmentally sensitive regions and countries but the speaker is sceptical about deep drilling, as substantive returns had yet to be seen. Mr Young concluded his presentation by stating the stark reality that Asia will increasingly rely on oil imports from the Middle East.

Presentation by Professor Xu Xiaojie, Institute of Geopolitics and Energy Economics, East China Normal University, China

Geopolitical Concerns in a Turbulent World Professor Xu noted that the “global dilemma” is due to a contradiction between abundance of resources and availability of resources. The challenges thus facing China and its neighbours were: (a) competition for Russian resources (between China, Japan, Korean and India); (b) tackling pressures from Russia in Central Asia; (c) competition, or perhaps cooperation with India; (d) lack of LNG and gas pipeline negotiation experience; (e) developing energy strategies and diplomacy; (f) security measures such as stockpiles and sea lane security; and (g) cross investments with major producers. Professor Xu concluded his presentation by asserting that the “eventual way out” of these challenges is by energy saving, increasing efficiency and a change in lifestyle.

Discussion During discussions, Hefner opined that “clean coal” was an oxymoron, and expressed doubt on the workability and cost of carbon capture and sequestration. He admitted that the hydrogen economy was still in need of major technological breakthroughs, but stressed that currently not all costs of energy consumption had been taken into account.

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To a question on the feasibility of Canadian tar sands or oil shales, the panelists were not optimistic. Young felt that the infrastructure costs were extremely prohibitive, and the processes were energy intensive, such that it would take “10 barrels of oil to produce 11 barrels of oil from oil shales”. Brown agreed that with tight gas markets, there would be little margin to provide energy for these oil shale processes. With regard to energy conservation efforts in China and how it could be financed, Professor Xu explained “money was no issue” for China. Young noted that China was not as wasteful as the United States and it used two-thirds of its oil consumption to produce consumer goods, while the United States used most of its oil to drive “large gas guzzlers”. The statistics show that an average U.S. citizen used 20 times more oil than the average Indian, and 10 times that of a Chinese. Hefner opined that one should not count on the United States to change its patterns of consumption. With regard to the role of government, Brown was of the view that high taxes on fuels would cause consumers to consume less. However, the reality was that it was “politically painful”. He remained hopeful, as countries like Indonesia and Thailand were taking steps by moving away from subsidizing petroleum products.

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5 REGIONAL OUTLOOK ON ENERGY SECURITY Who Wins in the Asian Scramble for Oil? Vince Pérez Former Philippine Secretary for Energy

Mr Pérez noted that many oil companies in Asia now owned or operated their own oil fields abroad (known as equity oil). He briefly summarized the current oil demand trends in Asia. China, Japan, India and South Korea were the four Asian countries in the list of top ten oil-consuming countries. In terms of oil import, five out of the top ten economies were Asian: Japan, China, South Korea, India and Taiwan. However, not a single Asian country was in the list of top ten oil exporter.

Strategies of Asian Oil Importing Countries Mr Pérez said that Asia’s largest oil consumer China was currently the second largest oil consuming country in the world, and if the trend continued, China could be the largest oil consuming country by 2020. To fuel this thirst, China had been seeking foreign oil assets since 1997 when then Premier Li Peng gave such a mandate to the Chinese oil companies. Its lead companies, China National

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Petroleum Corp (CNPC) and CNOOC had projects in many countries in Latin America, Africa, Middle East, Central Asia and Southeast Asia. China had also been very active in oil diplomacy. President Hu’s visits to Canada, Brazil, Mexico, Algeria, Gabon, Russia, Kazakhstan and Australia since assuming post in March 2003 had been all related to oil diplomacy. Moving on to Asia’s second largest oil consumer, Mr Pérez pointed out that it imported 99 per cent of its oil needs. With previously competing Japanese oil firms coordinating its bidding efforts, Japan managed to win a significant block of oil exploration in Libya in October 2005. As third largest oil-consuming Asian nation, Mr Pérez added that India’s biggest problem was the subsidy for the domestic petrol. In 2004 alone, the government spent US$9 billion in subsidizing local petrol prices. Under the former petroleum Minister, Manu Shankar Ayer, India undertook “pipeline diplomacy” with neighbouring countries, Pakistan and Bangladesh. India’s leading arm for overseas expansion, OGNC Videsh, had however not been very successful in its overseas forays as they had constantly been out-bidded by Chinese oil companies. Mr Pérez then moved on to ASEAN. He noted that Indonesia (the only ASEAN OPEC member), Malaysia and Thailand had recently removed their oil subsidies. Thailand also took the extra step by actively promoting alternative fuels like ethanol, compressed natural gas and energy conservation measures. The Philippines had had a fully deregulated oil industry since 1998 and was 93 per cent dependent on imported oil. There was no fuel subsidy in the country and the government introduced a 12 per cent VAT on petroleum in November 2005. Its oil diplomacy

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efforts included forging strategic alliances with Thailand in ethanol and closer ties with Saudi Arabia.

The Seven Lucky Winners According to Mr Pérez, the winners for Asia’s scramble for oil were the producers. The top winner was Africa. Though Africa accounted for only 9.4 per cent of world oil reserves, it offered half the global opportunities for Asian oil firms. Second was Kazakhstan, which had the largest oil reserve at US$29 billion. Russia, which was being courted by China and Japan for its Siberian oil with proposals from both sides to build extensive pipelines, came in third. The fourth possible winner was Myanmar. A pipeline from Myanmar to India via Bangladesh had been proposed, although it was unlikely to take place. Nonetheless, to date, there had been significant exploration by oil companies from China, India, Korea, Malaysia and Thailand in Myanmar. Next winner was Vietnam. It was the third largest oil producer in Asia and produced 403,000 bpd with a net export of 193,000 barrels. The sixth winner was the group of countries around the South China Sea because of its proximity to China and ASEAN. The three oil companies from China, the Philippines and Vietnam had completed their first stage of seismic research in the South China Sea, and made an assessment on the potential in the region. Seventh was Timor Leste. Australia and Timor Leste had decided to defer the finalization of the sea boundaries between them for fifty years, and instead to split the revenue (with 90 per cent in favour of Timor Leste; possibly getting as much as US$10 billion) for various fields under the Timor Sea in areas like Troubador, Maminaria and Sunrise.

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Regional Energy Security and the Delimitation of Maritime Boundaries

Dr Clive Schofield, Centre for Maritime Policy, University of Wollongong Dr Schofield provided an overview of the overlapping claims to maritime jurisdiction and their energy security dimension. In order to meet increasing regional energy demand, regional economies were dependent on seaborne trade for the vast majority of their supplies. Maritime boundaries were therefore important because disputes over sovereign rights had significant potential to cause friction and confrontation between nations, leading to supply disruption. Although supply disruption might not be likely given the current climate, in recent years, there had been a vast extension in claims of maritime space and claims to continental shelves. In addition, as a consequence of the introduction of the Exclusive Economic Zone (EEZ) concept, which was codified in the 1982 United Nations (UN) Convention on the Law of the Sea, the number of potential maritime boundaries throughout the world had also significantly increased. With coastal states making unilateral claims, this had resulted in a proliferation of overlapping claims between competing EEZs. Dr Schofield explained that in East Asia and Southeast Asia, there were broad areas that were also subjected to overlapping claims to jurisdiction that remain unresolved due to the lack of legal and physical certainty. In this case, the energy security dimension was that access to potential resources in the seabed in the regional vicinity was being prevented. This problem was exacerbated by disputes between states concerning the sovereignty over particular islands, as well as the role of islands in maritime boundary delimitation. Uncertainty over the presence of

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hydrocarbons in contested areas further complicated the problem. The question of seabed resources could work both ways in maritime delimitation. The prize of seabed resources provided the major incentive to delimit boundaries. However, boundaries tended to be compromises, and in an area of overlapping claims with a compromised line, fear was created that the majority of the unknown resources would end up on the “wrong side of the line”. Hence, this provided an impediment to delimitation, and it was here that maritime joint development often came into play.

Legal Aspects The speaker noted that just under 50 per cent of the world’s oceans could be subjected to national coastal state jurisdiction in one form or another. However, despite this potential, the vast majority (close to 60 per cent) of the maritime boundaries had not been delimited. This was not surprising given that maritime delimitation was a young process, with 85 per cent of maritime boundary agreements being signed post-1970s. Dr Schofield said that islands had therefore gained considerable significance. According to the Article 121, Regime of Islands, of the UN Convention of the Law of the Sea, islands were to be treated like any other land territory, implying that they were capable of generating a suite of maritime zones. The difference between being classified as an island or a rock was significant. An island, with a 200 nautical mile EEZ claim created an area of 125,664 square nautical miles (431,014 km2), while a rock, with its 12 nautical mile territorial sea claim, only created an area of 452 square nautical miles (1,550 km2). Hence small and remote features suddenly took on a considerable significance, as they had the potential to generate very broad claims to maritime jurisdiction with significant resource implications. This therefore led to the

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problem of how islands and rocks could be differentiated from one another. Dr Schofield observed that the definitions of islands and rocks were found in Article 121, which consisted of merely three paragraphs. The first two paragraphs were generally uncontroversial. However, paragraph 3 created something of a conundrum. Paragraph 3 stated that “rocks which cannot sustain human habitation or economic life of their own shall have no exclusive economic zone or continental shelf”, and this was the entirety of the definition of “human habitation” or “economic life of their own”. Dr Schofield explained that in order to clarify the ambiguity in paragraph 3 of Article 121, legal experts could turn to the option of Travaux préparatoire, or the legislative history of the Convention. However, the drafting history merely pointed to the fact that Article 121 was deliberately kept ambiguous in order to achieve consensus on the Convention. The other options were to turn to the building up of law over time through cases brought before international courts and tribunals (that is, case law), and through state practice. However, these two options did not fully solve the problem as the courts and tribunals, as well as states, had been able to sidestep the issue, and almost all cases and practices did not help to clarify Article 121.

North Atlantic Sea: Rockall Dr Schofield then highlighted Rockall, which was the only instance in which a state, the United Kingdom, unilaterally reclassified an island as a rock. Prior to acceding to the Convention in the 1970s, the United Kingdom claimed that Rockall was not capable of human habitation and it rolled back its fisheries zone claim with

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the Outer Hebrides as the base point, thus causing the United Kingdom to lose significant amount of maritime space.

East Sea/Sea of Japan: Kuril Islands, Tokdo/ Takeshima (Liancourt Rocks) Using the examples the Kuril Islands and Northern territories disputes between Russia and Japan, as well as the Tokdo/ Takeshima (Liancourt Rocks) dispute between South Korea and Japan in the Sea of Japan (East Sea), Dr Schofield argued that the difficulty was not in deciding how to classify a feature as an island or as a rock. There were sufficient model cases on the treatment of difficult features found in East Asia. There were also many examples in state practice of islands being given reduced effect. However, it was the sovereignty issue that polluted the relationship.

East China Sea: Diaoyu/Senkaku Islands and Okinotorishima In the East China Sea, the broad zone of potential overlapping claims was created by the Diaoyu/Senkaku Islands. In this case, the dispute between China and Japan, was not only over the islands, but there was a fundamental disagreement over the methodology that should be used for maritime delimitation. Using the example of Okinotorishima, Dr Schofield illustrated how states, in this case, Japan, would go to extraordinary lengths to protect their 200 nautical mile EEZ claim. Although states could and had in reality made whatever claims they wanted, Dr Schofield reminded that other states did not necessarily accept that viewpoint. Other states, particularly China, had challenged Japan’s claim of Okinotorishima.

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Southeast Asia: Ambalat, Gulf of Thailand and the South China Sea Dr Schofield also raised the Ambalat dispute between Malaysia and Indonesia — arising from overlapping oil and gas concessions — as an example of a dispute that had turned ugly, with both sides having rushed military forces to the area. The domestic political components to these disputes also had to be taken into consideration. At that time, hikes in petrol prices had occurred in Indonesia, and Ambalat was a reliable pressure valve for the Indonesian government to reduce domestic pressure off itself. In terms of resources, Dr Schofield highlighted that the Gulf of Thailand was one of the most prospective seabeds in the region, with lengthy ongoing negotiations between Cambodia and Thailand. Dr Schofield revealed that there had been progress in the August/September 2006 meetings and there was broad agreement for joint development in the disputed area. However, there was still a degree of dispute in the maritime boundary of the landward part of the disputed area. Dr Schofield pronounced significant progress on the South China Sea dispute. The 2002 Declaration on a Code of Conduct had proven to be an effective mechanism for conflict management, and the Joint Marine Seismic Undertaking (JMSU) has been hailed as a diplomatic breakthrough which had turned the South China Sea from a sea of conflict into peace and security. However, Dr Schofield was of the view that it was still premature to conclude that it was a significant breakthrough. As yet, resources had not been discovered and thus many of the contentious issues, such as the degree of sharing and between which parties, and the geographical boundaries around those islands, had not been brought to the fore. Dr Schofield also reminded that currently, the

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dispute had only three parties, and there was the possibility of other disputants coming into the picture, further complicating matters.

Regional Outlook on Energy Security

Mr Steve Puckett, Chairman of British Chamber of Commerce — Energy Group, Managing Director of Tri-Zen International Pte Ltd and Chairman of the Institution of Chemical Engineers The next speaker, Mr Steve Puckett, started off by stressing that energy security meant different things to different people. Moving on to discuss regional oil trends, Mr Puckett reiterated that China would be the main leader in consumption, and while Singapore’s consumption is very modest, its oil refining and trading industries depend heavily on Middle Eastern imports. With regard to oil production, the Middle East would continue to be the leading producer by far. Mr Puckett chose to focus next on Singapore and what those trends meant for Singapore. He remarked that Singapore was the largest fuel oil storage location and bunkering port, as well as the third largest oil refining and trading centre. According to Mr Puckett, oil delivery and oil security was not an issue for Singapore in terms of its physical oil quantities. Moving on to the old price trends, Mr Puckett observed from the path of oil prices over the few decades that prices were generally stable, and disruptions had been short-lived. What these statistics indicated was that oil had always been available for those who were willing to pay for it. Although strategic reserves had been in place since 1974, there had only been twelve supply disruptions, lasting only a matter of days, and with supply

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disruption of a mere 5 per cent. Mr Puckett thus concluded that the complexity of the market could help ensure energy security by adjusting supply and demand through oil prices. In other words, market forces work. Mr Puckett claimed that the future of the energy market would lie in gas. Singapore was moving to gas, and the Southeast Asian region, together with Australia-Asia, was rich in gas reserves. However, Puckett believed that the potential for developments in the gas industries, particularly in countries with high demand was limited by investment, pricing and affordability. Investment required good integrated policies and solid commercial frameworks. Pricing had to be high enough to attract investors, and gas had to be affordable enough to sustain demand. Mr Puckett pointed out that there were plans for cooperation within ASEAN, and then moved on to discuss the development of the ASEAN gas grid from existing bilateral gas agreements between many ASEAN countries. He argued that while the gas grid had been discussed over many years, most lines are developed only for point-to-point transfer of gas without onward transmission and many of these pipelines had not been designed for extra capacity to allow for hook-ups or a grid to come into place. Other constraints included limited commercial incentives to fill in the gaps, the absence of common agreements between national, legal and regulatory frameworks, a lack of a common technical standards, and pricing schedules. Mr Puckett also questioned the assumption that Indonesia would be the main supplier of gas to the region. As for the ASEAN power grid, Mr Puckett claimed that just like with the gas grid there had been successful bilateral agreements between countries, but completing a comprehensive power grid was still something only achievable way into the future.

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Mr Puckett remarked that there was some degree of competition for energy supply between countries in the region and because the region was lacking a coordinated regional energy security programme, supply security remains a complex challenge. Mr Puckett concluded by emphasizing that the greatest security came from maintaining open and free energy markets, and that cooperation between Asian countries was most needed in ensuring that this was the case in order to promote the greatest degree of energy security within the region.

Discussion Questions were raised about cost competitiveness in transporting energy resources through pipelines as mentioned in the ASEAN gas grid, or as LNG. Mr Puckett answered that without significant investment, the ASEAN grid would have limited effectiveness. Ultimately, the choice between LNG and gas pipelines was purely one of economics. Once distance increased to over 1,000 miles, LNG would always win hands-down. Following this, a related question of whether the grids are about interconnections, or if they are about laying out the foundations for an ASEAN market was raised. Mr Pérez felt that the grid project was driven more so by the latter. In his opinion, Singapore made a good energy hub, with its good regulatory framework. The Bangkok area would make a feasible second hub, with two major pipelines flowing into the area from Myanmar. Mr Pérez also pointed out that besides LNG and pipelines, there was also the technology of marine-compressed natural gas, something not yet used at present. The next question probed Mr Puckett’s claim that the markets would be resilient and would continue to be the method by which access to energy resources were secured. In this case, would this

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conclusion change and if so, what could change it? For instance, could equity oil change the conclusion? Mr Puckett responded to say that if the past was anything to go by, if trading remained free and if the market became more complex as more oil got transported, then disruptions would be better handled in the future. Mr Puckett then added that when speaking about energy security, addressing the demand side was of greater importance for national governments, such as Japan. On whether equity oil affects the functioning of the market, Mr Puckett explained that it made little difference. Demand would still have to be serviced, equity oil or not, and for a small country like Singapore, it did not matter whether the money pumped into the oil industry was out of national interest or free enterprise. The discussion also weighed the increased risk to maritime security as traffic along the Straits of Malacca increased due to the growing number of LNG terminals. Dr Schofield thought that there was an over-emphasis in maritime security literature on the Straits of Malacca. There were other important maritime corridors such as the Lombok-Makassar corridor, and there would be an eventual shift in the emphasis on different straits. Mr Pérez commented that for many consumers in North East Asia as well as the Philippines that were located at the end of the shipping line, maritime security was important as resources would have to pass through two major choke-points — the Straits of Malacca and the Straits of Hormuz. Therefore, in the short term, security in these corridors was paramount. However, the longterm strategic solution for countries in this area would be oil from Russia. Mr Pérez then asked for Dr Schofield’s opinion on whether there would be an increasing number of maritime disputes

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resulting from increasing energy demand and rising oil prices. Citing the example of the maritime dispute between Malaysia and Indonesia, two countries which shared many similarities in culture, heritage and language, Dr Schofield asserted that only when territory was at stake that maritime disputes arose. Without the issue of sovereignty, there was greater scope for resolution and compromise. The discussion then turned to the options of oil-consuming countries when oil prices are high due to price-controlling cartels such as OPEC. Mr Pérez responded to say that one solution was for national oil companies to collaborate more. In fact, companies were doing so at present, with major Indian and Chinese companies cooperating to bid jointly for oil in the Middle East, as well as regional companies like Petrol Vietnam and TTT Thailand working together to hold exploration activities in Algeria. Mr Pérez argued that there was currently a pragmatic approach to oil diplomacy. Mr Pérez then suggested that Singapore, as an oil-consuming nation could play two leadership roles. The first was through sharing of energy consumption-saving technology. The second was to lead the way in energy-saving architectural design through the use of its intellectual wealth, by perhaps offering degrees in this field. Finally, the discussion focused on the progress of the ASEAN grids as well as the proposed ASEAN Energy Charter. Mr Pérez started off by pointing out that ASEAN was not a homogeneous energy community with well-endowed members on one end and oil-hungry net importing countries on the other. The question was, therefore, could ASEAN countries rely on each other in times of an oil crisis. Mr Pérez quipped that the “spirit was there but the devil was in the details”. Issues that required ironing out

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included how the oil would be allocated in a crisis should there be more than one country seeking demand, and how the oil should be priced, given that the sellers would seek market price while the buyers would expect a “neighbourly” price in such times of crisis. There were however, as Mr Pérez explained, little steps being taken towards the bigger goal of the ASEAN Energy Charter. For instance, ASEAN countries had agreed to increase renewable energy consumption to at least 5 per cent within the next five years.

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6 SUSTAINABLE DEVELOPMENT AND ENERGY EFFICIENCY

Moderator: Dr Mike Allen, Finance Advisor to the Renewable Energy and Energy Efficiency Partnership (REEEP) Panelists: Dr Richard Bradley, Head of Division at the International Energy Agency (IEA) Dr David Jhirad, Vice-President for Science and Research at the World Resources Institute (WRI) Dr Joel Swisher, Managing Director for the Rocky Mountain Institute’s (RMI) Research and Consulting Group

Presentation by Dr Mike Allen, Finance Advisor to the Renewable Energy and Energy Efficiency Partnership (REEEP)

Sustainable Development and Energy Efficiency Dr Allen began the session by citing a powerful statistic: energy efficiency can reduce energy demand by up to 50 per cent. He laid out the key issues which were to be covered by the panel, namely policy issues, the potential for using energy efficiency to achieve energy security and cost competitiveness, opportunities for energy efficiency in buildings and industries, and standards and labels.

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Presentation by Dr Richard Bradley, Head of Division at the International Energy Agency (IEA)

Energy Efficiency: The Indispensable Component in any Energy Policy Dr Bradley, speaking first, noted that energy efficiency is an essential component of any energy policy. Given the reality of climate change, there was a need to reduce emissions to net zero, which meant that the capital structure for energy needed to change. Governments would thus need to factor externalities into energy policy. Dr Bradley stated that a successful carbon emissions policy must address four aspects, namely: • • • •

The ensuring of energy security, Maintaining strong economic growth, Implementing environmental protection, and Bridging the welfare gap.

Dr Bradley commented that the IEA was committed to the view that energy efficiency was a large resource that can be tapped. He pointed to the example of the 1973 oil embargo, when the supply shock resulted in a movement towards improving energy efficiency. Under IEA projections, current energy demand would have been 50 per cent higher if the energy efficiency movement had not occurred. IEA predicted that current policies in energy efficiency would reduce energy demand by 15 per cent by 2030. Dr Bradley also pointed out that the use of efficient technologies tended to result in cost savings. As an example,

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the potential for energy savings in lighting, which made up 19 per cent of global electricity demand, was enormous and highly cost-effective. IEA studies showed that current lighting systems were often inefficient even with the use of efficient lighting technologies. A large amount was wasted due to over-lighting, the poor use of daylight, and inadequate lighting controls that were not in line with the science of how people read. IEA also estimated that energy consumption due to standby power would significantly increase to 2–6 per cent of residential electric use. It was thus championing a 1W initiative to limit the amount of electricity consumed by appliances in standby mode. On energyefficient buildings, Dr Bradley highlighted IEA’s work on the refurbishment of high-rise residential buildings, noting that the slow turnover of building stock meant that building energy efficiency policy had to address the existing stock of buildings. Dr Bradley believed that the market failures that resulted in such inefficient use of energy could be overcome through public policy. Public policy was needed to internalize environmental costs in energy prices, adopt norms and standards, and stimulate the development of more efficient technologies. Small countries such as Singapore that are takers of technology, for example, in appliances would need to work together to coordinate policies. For example, governments could come together to agree to the 1W standard for standby power, and negotiate any exceptions. Similarly, governments could work to phase out incandescent light bulbs by 2020. Dr Bradley noted the need for governments to protect companies making the transition to energy efficient technologies by keeping out competitors using less energy efficient technology.

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Presentation by Dr David Jhirad, Vice-President for Science and Research at the World Resources Institute (WRI)

Accelerating Sustainable Energy Development through Efficiency, Innovation, and Enterprise Dr David Jhirad then delivered a presentation on accelerating sustainable energy development through efficiency, innovation, and enterprise. He pointed out that the world faced four global energy stability challenges: • • • •

Achieving climate stability; Mobilizing the large amounts of capital required for energy infrastructure investments; Enhancing energy security; and Eradicating energy poverty.

Dr Jhirad’s evaluation was that the current global energy direction was not sustainable. He believed a huge opportunity existed to use energy efficiency for industrial competitiveness and innovation and profitability. This opportunity was being tapped by financial leaders such as Citigroup and Goldman Sachs, which have started factoring in carbon risk into their investments. Dr Jhirad identified the transport sector as a major oil consuming part of the economy. Based on WRI’s research on scenarios for sustainable transport, oil demand could be reduced by a factor of four through the use of more fuel-efficient vehicles, clean-fuel vehicles, and public transport. Dr Jhirad noted that there was opportunity for Singapore to export technology in energy efficiency. He described WRI’s work with General Electric to develop clean energy (both energy efficiency and renewable energy) as a core strategic positioning,

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even though not all stakeholders were in favour of such a positioning. GE’s Ecomagination initiative led to $18 billion in extra revenue in the past year alone, far exceeding all expectations. However, Dr Jhirad noted that while voluntary private sector action was good, there would need to be clear government policy on energy efficiency. He noted that efficiency, enterprise and technological innovation are vital for climate stability, capital mobilization, industrial competitiveness and energy security. Therefore, an exclusive policy focus on the supply-side alone cannot address key long-term energy challenges. Dr Jhirad ended his presentation by calling on governments to reduce the regulatory and financial risks that act as deterrents to companies looking to work on energy efficiency. Innovation in markets, policy, finance, and technology would help firms capture a larger share of massive Indian and Chinese investments in energyrelated infrastructure. He warned that price subsidies distort the market and needed to be removed, and added that there was a need to establish price signals for carbon. Governments could play a role in energy efficiency innovation by establishing public–private partnerships to speed innovation and allow the commercialization of energy efficient products. He also pointed out that governments could also stimulate innovation through procurement policies.

Presentation by Dr Joel Swisher, Managing Director for the Rocky Mountain Institute’s (RMI) Research and Consulting Group

Clean Energy for a Sustainable Singapore: Old Lessons and New Frontiers in Energy Efficiency Dr Joel Swisher closed the panel with a presentation on old lessons and new frontiers for clean energy for a sustainable

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Singapore. He emphasized that consumers do not benefit directly from consuming energy, but from the product of the appliances that use the energy. Dr Swisher pointed out that energy efficiency is the largest, cheapest, cleanest, and safest energy resource available. There was still much opportunity to reduce energy waste — for example, only 1 per cent of the energy used in a car went to actually transporting the passengers, while energy was wasted on illumination in buildings during hours when daylight was available. Dr Swisher believes that the technological expertise in Singapore can be tapped as a resource to aid energy efficiency. Dr Swisher noted that not only would energy efficiency help save costs over time, paying attention to efficiency at the design stage could help to reduce capital costs as well, for example by requiring fewer chillers. He cited RMI’s work with data centres and with Wal-Mart on its buildings and transport fleet as examples of significant cost savings achieved through energy efficiency. However, innovations were needed in not just technology and design but also business models to provide a means to capture energy efficiency gains. Dr Swisher then discussed the role of government policy in energy efficiency. He noted that energy efficiency standards had been universally successful. For example, refrigerator standards in the United States had saved the equivalent of forty coal-fired plants. Governments could also facilitate technology developments by partnering with large procurers to aggregate demand for more stringent specifications, in order to guarantee a market for efficient appliances to suppliers. Other models of government policy that had worked included voluntary partnerships with industry such as the Energy Star programme on power management for computers, “feebates” which gave an incentive for consumers to choose more efficient products coupled with a disincentive for

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those who chose inefficient products, and working with utility companies so that their goals were to reduce the total amount consumers paid for energy, rather than the price of electricity. While energy labelling was necessary for energy efficiency, it was not sufficient without standards. However, standards would need to be enforced as well as updated regularly.

Discussion During the question and answer session, the panel was asked to comment on the transportation sector in Asia. Dr Jhirad commented that well-designed public transportation systems can provide the mobility demanded while reinforcing energy security. He pointed out that the mega-cities in Asia would be eventually uninhabitable if they are not sustainable. Dr Bradley warned that government policies needed to be carefully crafted and brought up the example of how Australia’s vehicle tax policies resulted in the inefficient use of the vehicles there. The panel then discussed the role of government regulation in pushing efficiency policies. The panel all agreed that while labelling was a good initial step to educate people about efficiency, mandatory minimum performance standards were necessary. Standards, however, should be monitored, enforced, and periodically updated. Dr Jhirad pointed out that well-designed regulations could stimulate design and innovation by appliance and automobile makers and thereby work through the markets. Dr Swisher cautioned that governments should take a performance-based view as governments have had a poor track record when pushing specific technology platforms. Dr Allen opined that Singapore’s initiatives on energy efficiency needed to engage the private sector from the outset. He felt that the leadership shown by the public sector could be

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wasted if the private sector did not have the opportunity to participate in these initiatives. Dr Jhirad concurred, citing examples from the Department of Energy. The panel concluded with a question from the floor about whether public transportation should be run as a social institution rather than a private enterprise. The panel agreed that the existing commercial models show that commercial ventures in public transportation can succeed in providing the social benefits of public transportation at reasonable costs, citing the famous example of the bus rapid transit in Curitiba, Brazil. Dr Jhirad noted that the social benefits of public transport need to be factored in, for example, the savings in healthcare from reduced particulate emissions.

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7 WORLD ENERGY OUTLOOK Claude Mandil Executive Director International Energy Agency, France

In his keynote address, Claude Mandil, explored the implications of increased energy demand from developing regions and focused on three pillars in the formulation of sound energy policy and key objectives in the pursuit of energy supply security. He also highlighted the recently released IEA publication, World Energy Outlook 2006. Mr Mandil prefaced the core messages of his speech by outlining two alternative visions of the energy future. Using the reference scenario of the current global primary energy demand, the speaker presented an under-invested, vulnerable and poor energy future and argued for a clean, clever, and competitive outlook. He highlighted that current energy consumption patterns indicate that global energy demand was set to grow by more than 50 per cent over the next twenty-five years, reaching more than 17 billion tonnes of oil equivalent (compared to 11.2 in 2004). By 2030, fossil fuels (oil, coal, and gas) would retain the lion’s share of the energy mix — with oil remaining as the single largest fuel in the global primary energy mix. Projections of energy demand by region indicate that within a decade developing countries will become the biggest consumers accounting for two-thirds of the

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increase in demand. Against this backdrop, global community is faced with a choice in charting new directions for future energy needs. Countries must modify policy-making process and alter the dark trajectory of global energy future.

The Three E’s of Formulating Sound Energy Policy Mr Mandil stressed that current energy consumption was not sustainable and there was an ugent need to formulate sustainable energy policy at national and international levels. Policy-makers need to adhere to a three-pillar approach: energy security and supply, economic growth, and environmental protection. With the projected surge in energy demand over the next twenty-five years, the existing policy is not sustainable since it is inconsistent with the three pillars.

Environmental Protection Based on projections of energy-related CO2 emissions by fuel type, there will be a 55 per cent increase in CO2 emissions within next twenty-five years. Half of the projected increase in emissions will derive from new coal power stations, mainly located in China and India. Mr Mandil reminded the audience that the ultimate goal was to reduce CO2 emissions to zero in order to stabilize the concentration of CO2 in the atmosphere. China could account for 39 per cent of the increase between 2004 and 2030, overtaking the United States as the world’s biggest emitter. However, Mr Mandil cautioned against singling out China as the main contributor to the increased CO2 emissions, due to the low per capita emission levels.

Security of Energy Supply The world appears set to become increasingly dependent on suppliers from a shrinking number of major oil and gas producers.

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Within the next twenty-five years, OPEC’s share of world supply will increase from 40 to 50 per cent. The Middle East and North Africa (MENA) will supply 45 per cent, up from less than 40 per cent currently. This continued trend towards having fewer suppliers for oil and gas presents twin threats: it not only threaten security of energy supply, it also is a problem for economic growth. With fewer suppliers, there are bound to be market abuse by opportunists, and the experience of OPEC’s artificial buoying of oil prices is a case in point.

Economic Growth Despite surging levels of electricity consumption, many parts of the world do not have access to electricity. If new policies are not implemented by 2030, there will be 1.4 billion people living without electricity. Populations without access to electricity will be concentrated in Africa and the Indian subcontinent. Electricity pervades all aspects of economic life and restrictions on accessing it excludes many from participating in economic development. Another dimension that is of concern is the use of traditional fuels for cooking in energy poor areas. Such methods of cooking cause health problems particularly among women and children and result in more fatalities per year than malaria.

Impetus for Change Mr Mandil observed that governments are aware of energy security problems and have accepted different scenarios. However, change was slow. Crises of many hues — political, meteorological, energy — may shake world governments out of such inertia. The governments must be in the driver’s seat and should map out a different future. The Communiqués released by leaders at the G8 Summit appear promising, and the leaders have recognized the

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urgency and pledged to act with resolve. The G8 leaders took an important first step by agreeing to reduce greenhouse emissions, improving the global environment, and enhancing energy security. Significantly, leaders around the world have chosen to prioritize energy efficiency and offer an immediate policy option that can be easily implemented. There are no complex and difficult technology transfers required, and does not translate to sacrifices in quality of life. Incorporation of high-performance buildings, least life-cycle cost appliances, energy labelling and certification, and use of day-lighting into energy policy is an increasingly popular policy option. Energy efficiency offers substantial energy and greenhouse gas savings at low or negative cost, decreases reliance on scarce energy supplies, and also enhances business competitiveness and social welfare. This type of energy policy is consistent with the three E’s. Most of these energy efficient solutions are cost-effective and would contribute to increased competitiveness and consequently economic growth. However, in order to reduce energy consumption in the long run, technology breakthroughs would be needed. Long-term goals should include moderating consumption growth. The second component of policy change is CO2 emission reduction. A reduction in CO2 emissions can be accomplished by replacing coal power plants with “zero-emission” power plants. The installation of CO2 sequestration plants, and the gradual replacement of fossil fuel energy sources with wind, solar, and nuclear energy would also propel efforts in CO2 emissions reduction.

Energy Supply Security: A Balancing Act Ensuring energy supply security has been another significant energy concern for policy-makers. Mr Mandil pointed out that the aim of self-sufficiency in energy supply was often unrealistic.

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Instead the focus should be on investment in energy supply chains. Energy supply security is often a difficult balancing act to moderate between managing capacity, striving for energy diversity, transparency, and maintaining a supply buffer for emergencies. Based on the IEA’s World Energy Outlook 2006, $20.2 trillion in investment is needed along the energy supply chain. In addition, an acceleration of investment in energy sources — electricity, oil, biofuels, gas and coal — is needed. The excessive reliance on one type of fuel, one supplier, or one form of transport has its own perils. To facilitate management of sophisticated policy-making process, it is important to have access to information. The Joint Oil Data Initiative (JODI) is one of the nascent efforts to address such concerns. Compiling information on oil companies, countries, and analysts, JODI draws from over 90 countries and provides periodic reports on oil consumption and production. These result in harmonization and coordination of information among seven international organizations, namely APEC, Eurostat, IEA, IEFS, OLADE, OPEC and UNSD. Finally, the creation of safety buffers for emergency preparedness is crucial in maintaining energy security. In the event of a major disruption in energy supply chain, countries should be able to draw on public stocks. The IEA monitors 1.48 billion barrels of public stocks to enable national governments to dispense such reserves in times of severe disruptions in supply. The IEA could support an oil supply disruption of up to 1 million barrels per day for four years. Buffer stocks thus result in a rapid and effective response to oil and gas supply emergencies.

Discussion Responding to the issue of harnessing nuclear power and the impact of energy subsidies, Mr Mandil reiterated his view that the

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most cost-effective, immediate, and plausible energy strategy for any country would be pursuing energy efficiency. Singapore would be no exception. He expressed concern about the readiness to harness nuclear power, but also acknowledged the wide range of benefits nuclear energy would bring. With the exception of a few glaring disasters, nuclear energy track record of safety is among the highest and is comparatively clean. Although there are concerns of the proliferation of nuclear technology such as uranium enrichment, nuclear waste disposal, and legal regulation of such technology, nuclear energy remained an attractive option. Subsidies in the energy market always signal inefficiencies. Although subsidies are difficult to retract, it is not a sound energy policy to subsidize energy consumption. When costs of energy are high, it distorts the price of energy even further. Besides, increased levels of energy consumption produce adverse effects for pollution levels and increasing dependence on scarce supplies.

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8 PROSPECTS FOR RENEWABLE ENERGY IN ASIA AND ITS ROLE IN ENERGY SECURITY

Moderator: Dr Weerawat Chantanakome, Executive Director, ASEAN Centre for Energy Panelists: Mr Randal Goodfellow, President, Goodfellow Agricola Consultants, Inc. Mr Thorbjon Rasmussen, President, Vestas Asia Pacific Wind Technology Pte Ltd. Mr Rabi Satpathy, General Manager, SolarWorld Asia Pacific Pte Ltd.

Presentation by Dr Weerawat Chantanakome, Executive Director, ASEAN Centre for Energy

Prospects for Renewable Energy in Asia and its Role in Energy Security: ASEAN Regional Perspectives Dr Weerawat outlined the ASEAN perspectives for renewable and energy security. He explained that the ASEAN Energy Centre was established in 1999 as an inter-governmental organization guided by the Governing Council comprising of Senior Officials

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on Energy (SOE Leaders) of ASEAN countries. Funding was through the energy endowment fund, with equal contributions from all ASEAN members. The ASEAN Vision 2020 aimed to establish Interconnecting Agreements in the field of energy utilities for electricity, natural gas and water within ASEAN through the ASEAN Power Grid and the TRANS-ASEAN Gas Pipeline, and to promote cooperation in coal trade, energy efficiency and conservation, as well as new and renewable energy sources. Dr Weerawat highlighted that the ASEAN Plan of Actions for Energy Cooperation (APAEC) for 2004–09 was to: (a) strengthen the coordination/participation in all programme areas to narrow the development gap amongst ASEAN members; (b) encourage a conducive environment for greater private sector involvement and participation; (c) enhance human resources and capacity-building skills; (d) develop and expand the energy mix and supply source through utilization of full energy potential of the region to include frontier natural gas, coal, hydropower, geothermal and renewables. In particular, to increase the share of renewables in ASEAN to at least 10 per cent of power generation; and (e) develop transparent, legal, regulatory, and technical frameworks in various energy projects, particularly the cross-border ASEAN Power Grid and the Trans-ASEAN Gas Pipeline. The ASEAN Member countries have also adopted the Bogor Initiative for “Making Fuels a High Agenda” in March 2006, and would be organizing the 25th ASEAN Ministers on Energy Meeting (AMEM) in Singapore in July 2007 to visualize a pathway towards Sustainable Energy Development and Security, Energy Efficiency and Alternative Energy in the long term.

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Presentation by Mr Randal Goodfellow, President, Goodfellow Agricola Consultants, Inc.

Bio-Based Energy and Co-Products Mr Randal Goodfellow opined that energy security, environmental concerns such as climate change, the need to strengthen agricultural resources and economic development in the rural areas were the energy drivers for bio-based energy development and pointed that bio-based energy made use of the available feedstock, including agricultural leftovers and municipal solid waste. He highlighted that the challenge was to make the maximum use of the feedstock and reminded the audience that there are many chemical co-products that are formed as part of the biobased energy process which are of value to the industries. Companies such as DuPont were experimenting with starchbased biomass (triticale grain, corn grain) and lignocellulosebased biomass (corn slover, wheat and forestry waste) to manufacture high valued bio-composites, biodiesel, fuel additives and polymers via bio-refineries and secondary processing processes. Mr Goodfellow added that the motivation for such companies were to move beyond the simple dichotomy of “market pull” and “technology push” to set up internal structures to balance both the need for innovation and the need to focus on marketing existing products. Mr Goodfellow used examples from Canada to illustrate that a cooperative approach between the private and public sectors was needed. He classified the policies into several categories: (a) establishment of organizations of companies to develop the bio-products sector; (b) eco-industrial networks to allow companies to work together on various portions of the value

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chain; (c) market development and green procurement policies; (d) establishment of sector-specific capital pools to provide the funding required; and (e) alignment of research and training capacity. Mr Goodfellow argued that innovations in the relationships between academia, industries, and the government were needed and suggested that both the innovation and the commercialization processes needed to be integrated and mutually supporting so that incremental value is created. He also outlined the APEC Roadmap for future fuels: (a) 2000–10: Fossil fuel-based economy in transition to a gas-based economy. LNG overtakes oil as the dominant source, with the development of biogas, biodiesel and bio-oil applications; (b) 2010–20: Transition to an economy characterized by polygeneration of energies. Biomass-integrated gasification combined cycles and coal-gasification combined cycles that meet environmental constraints become commonplace; and (c) 2020–30: Transition to a biofuel and hydrogen economy where coal bed methane hydrates become a dominant hydrogen source. Mr Goodfellow concluded that all economies will have an integrated mixed fuel strategy and the mix will vary regionally, depending on cost competitiveness and governmental policies. He added that distribution infrastructure was costly and secondary fuels would be cost competitive by adapting to existing infrastructures or deployed in a distributed generation manner.

Presentation by Mr Thorbjon Rasmussen, President, Vestas Asia Pacific Wind Technology Pte Ltd

Vestas’ Experience in Wind Energy Development Mr Thorbjon Rasmussen provided a brief background of his company Vestas. It was established in 1898, and put the first wind

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turbine in the market in 1979. After floating Vestas in the Copenhagen Stock Exchange in 1998, Vestas experienced strong growth in recent years due to its strong focus on technology, favourable EU policies and feed-in-tariffs. Vestas’ turnover grew from 869 million euros in 2000 to 3.58 billion euros in 2006. To tap into Asia’s growth, Vestas had decided to setup a regional HQ in Singapore to complement their Research and Development HQ in Denmark, and both centres would be supported by a centre in Chennai, India. Mr Thorbjon noted that Vestas was the top manufacturer for wind turbines in 2005, accounting for about 35 per cent of global production. Till date, Vestas had installed more than 30,000 turbines in over fifty countries. Several factors that contributed to Vestas’s future plans include: (a) design, manufacture, and installation of wind turbines that generated sustainable energy; (b) consideration for environmental aspects and foundation; (c) reduction of impact on the external environment and the need to improve occupational health and safety; and (d) minimization of noise impact for Vestas’ wind turbines. In conclusion, Mr Thorbjon highlighted that while Europe and the United States remained the key markets with 41 GW and 10 GW installed capacities, Asia was a high growth market with 5.6 GW installed thus far with over 1.8 GW installed in 2005 alone. Vestas was increasing their global footprint and operations to tap into the growing Asian demand.

Presentation by Mr Rabi Satpathy, General Manager, SolarWorld Asia Pacific Pte Ltd

SolarWorld’ s Experience Dr Rabi Satpathy highlighted that the global energy portfolio was diversifying and there exist at least seven renewable energy sources

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in 2005, and this was expected to double by 2060. For solar PV applications, Germany and Japan continued to dominate, with 30 per cent and 39 per cent of the total installed capacities globally. Dr Rabi opined that the growth in the adoption of renewable technologies in the United States and Asia would fuel future growth. In addition, renewables would bring about environmental benefits in the reduction of carbon emissions, which is a growing concern in the global community. PV would not contribute to global carbon emissions, compared to 1.02 kg CO2/kWh for coal, 0.76 kg CO2/kWh for oil and 0.5 kg CO2/kWh for natural gas. He argued that PV-generated power is competitive with peak power prices and estimated that cost of PV-generated power for Singapore is ~ S$0.5/kWh and up to 35 per cent of Singapore’s total electricity demand may be provided by PV installations. In calculating this figure, Dr Rabi assumed: (a) built-up area in Singapore exceeds 260 sq km; (b) conservative estimate for 100 sq km of roof and some façade space for PV installation; (c) 10 GW of peak capacity to be generated annually; and (d) compared to the 2005 Singapore’s electricity consumption of ~ 34761 GWh, up to 35 per cent of electricity can be generated by PV. Dr Rabi concluded that he was keen for Singapore to deploy PV for solar applications and this would be another growth area that Singapore can look into for energy security, industry development, and the solar industry as a provider of jobs and technologies for export.

Discussion The participants were concerned with the longer payback period and the lack of clear guidelines for the deployment of alternative energy solutions. Panelists opined that Germany mitigated these

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issues and had strong growth in renewables due to clear, banksupported structures with strong governmental policies. Biomass and solar were potential options for Singapore. Global companies such as SolarWorld and Vestas were keen to tap into Asia’s growth, using Singapore as a springboard into the region and would be developing capabilities and expertise for further research and development, and also deployment of technologies in the local Singapore market. The panel pointed out that Singapore had the technology and capability to work on renewable energies like solar, wind, and biomass. It was suggested that in the case of biomass, Singapore could work with the ASEAN region to create the technology and facilities necessary to use biomass in Singapore. Mr Satpathy highlighted the fact that companies were unwilling to invest in renewable energies due to the high start-up costs and that government policies had to be enacted to increase the uptake of renewable energies. Mr Rasmussen added that most renewable energy installations in the world were subsidized. He believed that price incentives had to be put in place so as to create a suitable environment for businesses to take initiatives in.

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9 ENHANCING ENERGY SECURITY IN ASIA The Role of Governments R. K. Pachauri Director-General The Energy and Resources Institute (TERI), India, and Chairman IPCC

The contemporary politics of energy have witnessed the foregrounding of governments as central actors in efforts to secure national and global energy security priorities. Governments are not only engaged in securing energy resources including the demand-supply dynamics, but are also expanding their efforts at developing alternative renewable sources including the enabling technologies. Dr R.K. Pachauri’s presentation highlighted ways by which governments in Asia could enhance energy security in a holistic manner.

Energy Demand and Supply Challenges in the Future The speaker noted that an analysis of current global energy demand and supply dynamics indicate some crucial trends. Rapidly growing economies of China and India have resulted in a significant increase in the global energy demand and this would have to be supported

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by OPEC that will play a crucial role and may even have to double their current oil production. This raises the issue of the ability of the Middle East region to raise its production levels in such short time, especially in light of discussions on peak oil production. Dr Pachauri highlighted the current global nature of petroleum consumption currently pegged at nearly 80 million barrels per day (MBD), of which two-thirds (53 MBD) is used by the transport sector alone. He argued that any major plans to change future energy consumption would have to be predicated on substantial changes to the transport sector.

The Role of Governments Dr Pachauri elaborated on the ways by which governments in Asia could enhance their energy security policies. These were discussed under three broad rubrics. 1.

2.

Preparation of a Level Playing Field: It was argued that governments have a crucial role in creating appropriate market mechanisms by following rational energy pricing, creating appropriate financial frameworks for energy investments, and by specifying clear legal and contractual terms for private sector participation. Further, governments must seek to diversify their energy supplies by reaching out to a wider geography, tapping new sources and by integrating markets and electricity grids on a regional basis. Importantly, they could reduce the risk of disruption by creating adequate strategic reserve capacity and by providing security to their supply lines. Effective Management of Demand: governments should promote energy audits and energy reporting, establish regulatory measures such as benchmarks for technology, and facilitate appliance labelling based on energy efficiency.

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Importantly, governments must provide incentives and disincentives for promoting energy efficiency, especially in the transport sector. Creation of Innovative Energy Models: This constitutes an important area for government action. The need for greater innovation is particularly instructive for the transport and housing sectors, both of which are projected to grow significantly in the future. Governments could facilitate the application of bio-climatic architectural principles, the incorporation of “passive features”, and the application of the highly beneficial principles of natural day lighting and passive cooling.

Energy Options for the Medium to Long Term Apart from developing new sources of energy, the speaker stressed the importance of creating a new economic structure based on efficient energy use. He added that this was an area that merits greater attention, and it is important to address the issue in countries where consumption has been growing and the consumers can get locked into a pattern of consumption that will be very difficult to change once the infrastructure has been established. Thus, measures such as energy efficient housing, low energy intensive industries, efficient public transport systems, among others, ought to be developed. Further, it is important to exploit synergy with environmental goals, derive benefits from low carbon technologies and meet global goals for the reduction of greenhouse gases.

Energy Security is not an Elitist Issue Dr Pachauri argued that energy security must not be understood as an elitist issue as it can greatly benefit the security of the poor in the world that account for nearly 2 billion people. Besides,

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there exists a well-established inverse relationship between poverty and access to electricity, and it is important to devise energy solutions for the poor by using local resources and developing local institutions.

The Need for Enhanced Research and Development The speaker pointed out that in the United States investments in R&D have been falling since 1980, as evidenced from the declining number of patents in renewable technologies. The decline in patent activity has also been significant in the development of photovoltaics and wind power. There is thus a pressing need to reverse this trend.

Discussion In response to a question on the problem of subsidies, Dr Pachauri argued that generous subsidies had created major distortions leading to irrational uses of energy. He urged the economists to undertake detailed studies to establish social costs of using different energy sources. The use of cars, for instance, includes costs incurred by governments by building roads and highways, apart from the environmental and health costs of air pollution. These cumulative costs have made the case for the increased use of public transportation systems. A more detailed study should be undertaken and presented to governments and publics would have the potential to evoke a strong positive response for change. With regard to the implementation of energy policies, Dr Pachauri stated that as institutions, governments were best placed to bring about the transition from fossil fuel to more efficient forms of energy. Governments should encourage R&D funding in a focused and goal-oriented manner while taking the

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attendant risks. Importantly, governments can make a major impact by dealing with pricing issues. He concluded saying that innovation is not only confined to changes in technology but also extends to partnerships and alliances between the private and public sectors.

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10 CLOSING REMARKS K. Kesavapany Director Institute of Southeast Asian Studies, Singapore

Mr Kesavapany observed that the Singapore Energy Conference, spanning over a day and half, had provided valuable exposure to new ideas and thinking on energy-related issues. In assessing the success of the conference, Mr Kesavapany referred to the three principal objectives that had guided its early conceptualization. The first objective, he explained, was to bring together academics, policy-makers and private sector operators to collectively cogitate on energy issues. The presence of leading thinkers and practitioners at the conference was testament to the realization of this goal. He noted, however, the need to provide more space for industry players. Second, the conference was an attempt to engender an Asian consciousness on energy issues, especially with the prospect of China becoming the largest energy consumer in future, with India not far behind. It was thus essential to have a forum where Asian countries could discuss energy matters in a concerted manner, and move towards assuming major decision-making roles. In this regard, the conference had indeed succeeded as ISEAS and the Institute of Energy Economics in China had decided to hold joint discussions on energy, marking a first step to this end.

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The third objective was to establish a forum for sustained dialogue on energy issues. On this front too the conference had succeeded, as it would be held on an annual basis with funding from ISEAS till the time it would be handed over to the Energy Studies Center that will be established by the Singapore Government next year. Mr Kesavapany closed the conference by reiterating that this was only the first step in a larger endeavour to understand energyrelated issues.

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Conclusions

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11 CONCLUSIONS

The Conference highlighted three key issues that can be considered further: 1.

2.

Energy Efficiency has great potential to reduce energy costs, emissions and enhance energy security. The promotion of energy efficiency leads to a reduction in the amount of energy required for a given usage. This leads to lowered energy costs and reduced emissions. With less energy needed, energy security could be enhanced. There are opportunities to incorporate energy efficiency measures into infrastructure, especially the new infrastructure being set up in developing countries. Cost-effective energy efficiency technologies are already available now. However, there remains a need for business-model innovation to make energy efficiency measures viable both technically and economically. Renewable Energy adoption will require government support. Developing renewable energy resources leads to a diversification of energy sources and thus contributes to energy security. However, renewable energies such as wind, solar, sustainable biomass and geothermal and alternative energies such as nuclear energy are still more expensive than conventional energy sources. Nuclear energy also carries attendant safety and security risks. Government policies to support research and development as well as deployment of

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renewable energy are thus required to bring costs down and make these sources economically viable. Regional and International energy cooperation is essential. The energy and energy-related situation is a regional and global situation. Thus, the response must also be a concerted regional and international response. Several areas that were highlighted include: (i)

Regional and International Energy Markets. Regional and international energy markets that promote liquidity and thus facilitate the “free flow” of energy resources. This could enhance energy security. In this area, governments have an important role in multilateral dialogues that strengthen international cooperation in energy issues. These could include cooperation in the areas of promoting renewable energy; development of new energy resources; diversification of energy supplies; encouraging energy industry development; promoting energy efficiency; and creating innovative energy models. (ii) Emergency Measures. A regional approach to measures such as physical storage, cooperative storage agreements and public/private coordination that ensure open and transparent markets would be more strategic and effective if implemented. (iii) Climate Change Mitigation. Efforts in this area require a comprehensive international plan that aims to prevent dangerous anthropogenic interference with the Earth’s climate system by mitigating global emissions of greenhouse gases (GHG).

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Conference Programme

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SINGAPORE ENERGY CONFERENCE 2006

CONFERENCE PROGRAMME

DAY ONE: WEDNESDAY, 8 NOVEMBER 8.00am

Registration begins

8.30am

INTRODUCTORY REMARKS Amb K. Kesavapany, Director, ISEAS

8.40am

OPENING ADDRESS Prof S. Jayakumar, Deputy Prime Minister, Co-ordinating Minister for National Security, Minister for Law

9.00am

KEYNOTE ADDRESS Dawn of a New Age: Global Energy Scenarios to 2030 James Burkhard, CERA Managing Director, Global Oil Group, Cambridge Energy Research Associates (CERA)

10.00am

Morning refreshments

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PANEL DISCUSSION Geopolitics of Oil and Gas: Challenges in a Turbulent Oil and Gas Industry Moderator: Robert A. Hefner III, Founder and Owner, The GHK Company Panelists: Paul Young, Managing Editor, Platts Dr Jeff Brown, Managing Director, FACTS Global Energy Prof Xiaojie Xu, Chief Professor, Institute of Geopolitics and Energy Economics, East China Normal University

12.00pm

Luncheon

2.00pm

PANEL DISCUSSION Regional Outlook on Energy Security Moderator: Khoo Chin Hean, Chief Executive, Energy Market Authority Panelists: Vincent S Pérez, Chairman, Merritt Partners Pte Ltd Dr Clive Schofield, QEII Research Fellow, Centre for Maritime Policy, University of Wollongong Steve Puckett, Managing Director, TRI-ZEN

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International — Energy Consultants, Chairman of the British Chamber of Commerce — Energy Group, Chairman of the Institution of Chemical Engineers 3.30pm

Afternoon refreshments

4.00pm

PANEL DISCUSSION Sustainable Development and Energy Efficiency Moderator: Dr Mike Allen, Finance Advisor, Renewable Energy & Energy Efficiency Partnership Panelists: Dr Richard Bradley, Head of Division, International Energy Agency Dr David Jhirad, Vice President for Science & Research, World Resources Institute Dr Joel Swisher, Managing Director, Rocky Mountain Institute

5.30pm

End of Day One

6.30pm

Conference Dinner

DAY TWO: THURSDAY, 9 NOVEMBER 8.25am

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Welcome by Session Chairman Prof Tommy Koh, Chairman, Institute of Policy Studies

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8.30am

KEYNOTE ADDRESS World Energy Outlook 2006 Claude Mandil, Executive Director, International Energy Agency, France

9.30am

Morning refreshments

10.00am

PANEL DISCUSSION Prospects for Renewable Energy in Asia and Its Role in Energy Security Moderator: Dr Weerawat Chantanakome, Executive Director, ASEAN Centre for Energy Panelists: Randal Goodfellow, President, Goodfellow Agricola Consultants Inc. Rabi Satpathy, General Manager, SolarWorld Asia Pacific Pte Ltd Thorbjorn Rasmussen, President, Vestas Asia Pacific Wind Technology Pte Ltd

11.30am

KEYNOTE ADDRESS Enhancing Energy Security in Asia: The Role of Governments Dr Rajendra Pachauri, Director-General, The Energy and Resources Institute (TERI)

12.30pm

Closing Remarks and End of Conference Amb K Kesavapany, Director, ISEAS

12.40pm

Luncheon

12 SINEnergyConference

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11/28/06, 10:53 AM