ENERGY ISSUES AND INFRASTRUCTURE IN ASIA

ENERGY ISSUES IN ASIA

Asia is heavily reliant on coal for energy, which creates pollution problems. Many Asian countries outside of the Middle East have no oil or natural gas reserves and thus have to import them. Of the world’s total crude oil reserves only 4.3 percent are in the Far East and Oceania. Gasoline prices in many Asian countries, including China, India and Vietnam, are artificially low because governments heavily subsidize pump prices. In some parts of Africa and Asia, timber provides 80 percent of the energy needs. [Sources: World Bank, International Energy Agency, Asian Development Bank]

Daniel Rook of AFP wrote: “Every day millions of barrels of oil pass through the Indian Ocean from the Middle East to Asia, the world's busiest route for supertankers, providing energy to fuel the region's rapid economic growth. It's an intercontinental voyage that highlights the ever-increasing interdependence of the world economies and explains why the fallout from unrest in the Middle East is having an impact thousands of miles (kilometres) away. [Source: Daniel Rook, AFP, February 26, 2011]

“Asia relies on the Middle East for the vast majority of its oil imports. Resource-poor Japan for example buys 90 percent of its crude from the Middle East, while Singapore gets about 85 percent of its needs from the region and South Korea about 82 percent. But it is the developing countries that are hardest hit by oil price spikes. "India and Thailand would struggle most within Asia if oil prices were to remain at their current level," said Mark Williams, a senior economist at the London-based research firm Capital Economics. [Ibid]

High-Energy Prices in Asia

Daniel Rook of AFP wrote: “High energy prices---which also tend to push up food costs through increased transportation costs---have even triggered social unrest in Asia in the past. In the Philippines, price surges led to riots in the late 1980s as communist guerrillas burned buses amid street protests. Indonesia, an oil producer, saw violent protests in 2008 in response to a steep rise in fuel prices. Late dictator Suharto's decision to hike fuel prices in 1998 fanned unrest that eventually toppled his regime. [Source: Daniel Rook, AFP, February 26, 2011]

“Countries such as India, Thailand, Vietnam, Malaysia and Indonesia which subsidise fuel costs could face a large bill if oil prices remain at current levels. India, which imports 80 percent of its crude oil needs, mostly from the Middle East, has seen fuel and petrol prices jump four times in the past year. "By contrast, China seems relatively secure with the vast bulk of its energy coming from coal," said Williams. But Chinese demand for crude has continued to rise strongly. [Ibid]

“In Japan, the Economy, Trade and Industry Minister warned rising oil prices were the biggest risk to the nation's economic recovery. And in South Korea authorities are even considering turning off unnecessary lighting and ordering public buildings to cut back on power use if oil prices do not fall. Vietnam -- grappling with double-digit inflation -- recently raised petrol prices by 18 percent but for another reason: a currency devaluation that increased the cost of imported fuel. [Ibid]

“Not all Asian nations are net oil importers -- Malaysia produces more than it consumes, but even it is not immune to the effect of higher prices. "Higher oil prices will push up food, transport and other essential items," said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd in Kuala Lumpur. Analysts said that while Asia is particularly vulnerable to the rising oil prices, they also have an advantage because their economies are in better shape than those of the West. "In general, Asia's strong growth would enable it to cope much better than the more fragile, albeit less oil-intensive economies of Europe and the US," said Williams. [Ibid]

Alternative Energy in Asia

Environmental groups such as Greenpeace and lending agencies such as the ADB say renewable energy is crucial for Asia’s economic future. Renewables would help trim dependency on oil, minimise exposure to oil price spikes and cut pollution in a region that is home to more than half of the world’s population. The Asian Development Bank said in 2008 it would onvest $1 billion in clean energy projects to encourage the use of solar, wind and hydropower and other alternatives to fossil fuels. Japan has promised more than $2 billion in aid and loans for alternative energy. Rice, cassava , sugar other crops and especially palm oil are being pursued as sources of biofuels.

The development of renewable energy such as solar, wind, geothermal and biofuels has been hampered in many part of Asia by high costs, according to to Reuters, lack of government incentives and vested interests who believe green power is unviable or a threat to their wallets.”We have to work very hard to convince governments that this is something they should focus on,” Samuel Tumiwa, renewable energy specialist at the Asian Development Bank (ADB), told Reuters. “You have factions in governments that want renewables and others that don’t. There are a lot of vested interests be they old power companies or oil companies.”

Asia Goes Nuclear

Michael Casey of Associated Press wrote in 2006: “Led by fast-growing China and India, Asia is going nuclear in a big way to feed its ravenous appetite for energy. The strains of economic growth are already showing. Energy shortages have forced Chinese factories to scale back production, and farmers in India often have power for only half the day. Both countries say their future growth is at risk unless they diversify their energy mix. So does South Korea. South Korea, the world's second biggest coal importer and third biggest oil importer, already depends on nuclear reactors for 40 percent of its power and is talking of increasing that to 60 percent by 2035. [Source: Michael Casey, Associated Press, July 8, 2006]

"We expect Asia to become a leader in the use of commercial nuclear power," Timothy Collier, president of Westinghouse Korea, told The Associated Press. Asia needs a reliable electricity source, he says, and "Nuclear offers the opportunity to do that free of the dependence on oil." Eighteen reactors---about 70 percent of the world's total under construction---are going up in Asia, and another 77 are planned or proposed, according to the Nuclear Energy Institute, an industry advocacy group based in Washington, D.C.

Australia wants to build its first plant, and Indonesia has vowed to go nuclear, even though it's vulnerable to earthquakes, floods and landslides. According to the World Nuclear Association, a group that promotes nuclear energy, China plans to increase its nuclear capacity from 6.6 gigawatts to 40 gigawatts by 2020 with the addition of 30 nuclear plants, mostly in heavily populated, industrialized coastal regions where demand and pollution levels are highest. Before the Fukushima nuclear power plant disaster Japan depended on nuclear plants for a third of its power and planned to double its nuclear capacity by 2050.

India intends to go from just under 3 gigawatts to 20 gigawatts by 2020 with the addition of 31 plants, mostly in the west where much of its heavy industry lies. India's nuclear industry received a boost in March 2006 after it signed a civilian nuclear pact with the U.S. Under the deal awaiting Congressional approval, the United States will give India nuclear technology and fuel in return for India's permission for international inspections and safeguards at 14 reactors. "Nuclear power has to play an increasing role in our electricity generation plans," Indian Prime Minister Manmohan Singh told Parliament in 2005 "Our desire is to attain energy security to enable us to leapfrog stages of economic development obtained at the least possible cost," he said.

No country in Asia has a permanent site for the estimated 40,000 tons of toxic spent fuel produced so far, according to the International Atomic Energy Agency, the U.N.'s nuclear watchdog, which opponents say could become a target for terrorists or end up polluting the groundwater. "We think nuclear energy is inherently unsafe," said Gerd Leipold, executive director of Greenpeace International. "You have the waste problems. You have the accident problems. For all of these reasons, we think countries should invest in renewable energy and energy efficiency."

Many of the biggest concerns revolve around Indonesia, which has said that it will build its first reactor by 2015 on Java---the same island where an earthquake killed more than 5,700 people in May, and where the Mount Merapi volcano is threatening to erupt. The announcement prompted a warning from the Australian Institute in Canberra that "Although the risks of a major (nuclear) accident are very low, a cloud of radiation blowing over northern Australia would pose a severe danger to public safety." But with oil prices spiking, and fossil fuel emissions being blamed for global warming, the allure of atomic power is growing worldwide.

Another problem is what to do with the spent fuel. It took South Korea 19 years just to find a burial site for low-level waste such as contaminated clothing and spare reactor parts, and it still has nowhere to dump its 6,500 tons of fuel. Taiwan, which has three plants and is building a fourth, has been thwarted at every turn in finding a long-term solution for its waste. First it tried North Korea and the Marshall Islands but was blocked by protests. Taiwan has stored 100,000 barrels of nuclear waste on a tiny island but protests from aboriginal group are forcing it move the waste to another site, as yet unchosen, by 2013.

Infrastructure in Southeast Asia

In September 2011, AFP reported: “Southeast Asian nations launched a nearly $500 million fund to build infrastructure, pooling resources in hopes of closing the gap between the dynamic region and major wealthy economies. In a step toward an ambitious goal of regional economic integration by 2015, finance ministers of the ASEAN bloc on Saturday said the fund would offer loans to build roads, railways and other projects without direct foreign assistance. [Source: Shaun Tandon, AFP, September 24, 2011]

The ASEAN Infrastructure Fund will start with $485.2 million and aims to finance six projects a year. By 2020, ASEAN hopes the fund will offer $4 billion in loans and that its total leverage will be worth more than $13 billion. The fund will be based in Malaysia, the biggest contributor with a $150 million initial investment. Indonesia is the second-largest contributor with $120 million. Myanmar will not initially participate in the fund but may join in the future. Thailand will not take part immediately as it must go through domestic procedures but it is expected to join,

In August 2010, the Yomiuri Shimbun reported: “Economic ministers from 16 countries, including member states of the Association of Southeast Asian Nations and Japan, China and India, have unofficially approved a 2.5 trillion yen [$32 billion] plan to develop infrastructure in the ASEAN region. The plan covers 717 projects, including the construction of roads, bridges, seaports, airports, industrial complexes and power stations, to be completed by 2020. [Source: Izuru Jitsumori, Yomiuri Shimbun, August 28, 2010]

Three regions have been identified as focus points for the infrastructure projects, and are referred to under the plan as the Mekong Basin Integral Development; the Brunei, Indonesia, Malaysia and the Philippines East Asian Growth Area (BIMP-EAGA); and the Indonesia-Malaysia-Thailand (IMT) Growth Triangle. The envisioned projects include building a highway across the Indochinese Peninsula, constructing new ports and improving existing ones in Vietnam and Myanmar that will be arterially connected to the highway, and upgrading the Indian port of Chennai.

The plan was drafted mainly by the Economic Research Institute for ASEAN and East Asia, a research institute headquartered in Jakarta that was set up under the leadership of the Japanese government in 2008. It is estimated that the plan will increase the collective gross domestic product of nations involved by 55 percent, and stimulate economies across Asia. The Japanese government will offer financial support to domestic companies participating in the plan, via official development assistance funds and loans extended by the Japan Bank for International Cooperation.

Lobbying by Japanese companies to win contracts for infrastructure projects under the plan is already under way. In June, Mitsubishi Heavy Industries, Ltd. and Hitachi, Ltd. formed a partnership to strengthen their overseas railroad construction operations. Gaku Suzuki, vice president and executive officer of Hitachi, said the company hoped to participate in as many projects as possible. IHI Corp. set up a subsidiary in Vietnam in November 2009 to serve as a base for bridge construction work in Asian nations. Sumitomo Corp. has built two industrial complexes in Vietnam that are already operating. However, Japanese firms face fierce competition from companies in South Korea, China and the West, and the recent appreciation of the yen will impact on profits made overseas.

Energy Issues in Southeast Asia

Seven of ASEAN’s ten members have significant oil and gas reserves. Singapore. Thailand and the Philippines are the most dependent on oil imports. Southeast Asia also has a lot untapped hydrolectric power potential.

Southeast Asia regional national oil companies are trying to emulate the Petronas model and the group's ability to profit from international operations. Indonesia's Pertamina, Thailand's PTTEP, the Singapore Petroleum Corp, and the Brunei National Oil Corp are all angling to develop more business overseas. Southeast Asia's national oil companies are different animals from the big international private petroleum groups such as Shell, BP, ExxonMobil, Chevron and the like. Some energy analysts note that a good number of today's multinational oil companies likewise evolved from state companies, as in the case of France's Total and Italy's ENI. [Source: Andrew Symon, Asia Times, September 24, 2007]

Asia is seeing a boom in new refinery developments and expansions, the latest being plans by state-run Petronas PETR.UL to build a $20 billion oil and petrochemical complex to boost Malaysia's refining capacity by half. South Korea's four refiners are competing to upgrade their facilities, India's Reliance Industries (RELI.BO) is ramping up production and Chinese refiners are likely to add around 3.7 million bpd of new capacity between 2010 and 2015.

Before the Fukushima nuclear crisis in Japan in 2011 several ASEAN countries concluded that nuclear energy offered the best prospect for clean, reliable energy. After the crisis many had second thoughts.

Image Sources: Wikimedia Commons

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, NBC News, Fox News and various books and other publications.

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© 2008 Jeffrey Hays

Last updated November 2013

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