ASEAN energy cooperation: Facts and challenges

[The Jakarta Post]

President Susilo Bambang Yudhoyono at the 18th ASEAN Summit 2011 (May 7-8, 2011) stressed the importance of ASEAN addressing energy security issues, including strengthening energy cooperation.

ASEAN has the factors that provide opportunities for developing energy cooperation: Its members are geographically close, there is uneven distribution of energy resources and demand, the members are at different stages of economic and energy development, etc.

A secure, highly efficient energy interconnected system will surely prove to be key to the realization of ASEAN Economic Community to begin in 2015.

The region is relatively rich in energy resources, even though only a few countries are genuinely self-sufficient. The stages of resource development and infrastructure have been built to facilitate energy processing and distributions vary widely across the countries. Access to modern energy is limited in Myanmar and Cambodia, but is at 100 percent in Singapore.

Oil, gas, coal, hydro, geothermal and biomass are available in Indonesia. There are oil, gas and coal reserves in Malaysia and Thailand. Brunei has quite large reserves for oil and gas. There are potential reserves of oil, gas and hydro in Myanmar, while oil and hydro are found in Cambodia. Laos has quite large hydro potential.

Vietnam has oil, gas, coal, hydro and biomass; whereas the Philippines has oil, gas, coal, hydro and geothermal. Singapore has no indigenous energy resources, but the country is very important as a major processing center for oil and petrochemical, and oil bunkers.

The use of primary energy for generating electricity is largely different across ASEAN. Brunei uses natural gas exclusively. The use of gas for electricity is notably large in Thailand and Malaysia, whereas Singapore has shifted its dependency from oil-fired to natural gas.

Indonesia’s electricity is still fueled dominantly by fossil fuels (coal, oil and gas), Laos generates its electricity based dominantly on hydro, while the Philippines has developed geothermal to contribute a significant share. Vietnam and Myanmar fuel their electricity using a better balance of fossil fuels and hydro.

Nuclear power plant have so far not been used in ASEAN. Indonesia, Vietnam, Thailand and Malaysia are, however, planning to build nuclear power plants; whereas the Philippines is considering resuming its Batan power plant project which was postponed in 1998.

ASEAN energy consumption is characterized by its still-low consumption per capita (compared to Northeast Asia), low efficiency, high growth (among the fastest in the world) but is lagging far behind in developing renewable energy.

Although the individual countries’ energy makeups vary considerably, ASEAN is an oil dependent region (accounting for 40-60 percent of the region’s energy mix). Indonesia, a former OPEC member, has since 2004 been a net oil importer while Malaysia and Vietnam (the other oil exporting countries) will be joining that status soon. The Philippines and Singapore have for a long time depended on oil imports for more than half of their energy consumption.

The region’s high economic growth which led to the increase in oil consumption will surely increase the region’s dependency on oil from other sources. As oil prices are highly volatile, scarcer and getting more expensive (influenced by geo-political tensions, etc.), one may expect that the future of ASEAN’s energy will be vulnerable to oil imports and prices.

Energy cooperation is actually not a new issue for ASEAN; energy trades and cooperation projects have been implemented.

These are examples: Indonesia delivers natural gas through a pipeline to Singapore and Malaysia. Laos sends electricity to Thailand, Vietnam and Cambodia, while Cambodia also imports electricity from Thailand and Vietnam. A joint development area for energy resources development was established between Malaysia and Thailand. ASEAN crude oil is sent to Singapore for refining and parts of the products are sent back to the producing countries. Coal is traded among ASEAN countries, with volumes much smaller than exports to other regions.

There are agreements on energy cooperation that have been settled under the framework of ASEAN cooperation.

ASCOPE (ASEAN Council on Petroleum) was established in 1976. It agreed on APSA (ASEAN Petroleum Security Agreement) obligating members to work mutually in the event of an oil supply shortfall.

The TAGP (Trans ASEAN Gas Pipeline) concept – aiming to integrate ASEAN’s gas fields and consumption centers – was discussed early 1990s and a task force to develop TAGP master plan was established in 1999.

Interconnection of ASEAN electricity grid had been discussed earlier and HAPUA (Heads of ASEAN Power Utilities/Authorities) forum was formed in 1981 to create the ASEAN Power Grid, taking into account a TAGP plan and other resources (hydro in particular) within the region.

Efforts are also being made to promote energy conservation and develop renewable energy cooperation.

The road to developing APSA, TAGP, ASEAN Power Grid, and other energy cooperation projects, however, has been quite slow, due to financial constraints, technical difficulties, differences in the industry regulatory frameworks among ASEAN countries, and some other factors.

Energy cooperation within ASEAN is challenged by its individual member’s energy priorities, bilateral trade partners and development dynamics beyond the borders.

Indonesia is a case in point. The largest ASEAN country was a net oil-exporter and previously the world’s largest exporter of LNG, and is currently the world’s largest exporter of coal. However, the world’s fourth-largest country by population now needs energy to fuel the domestic economy. Pressure is increasing to reduce the country’s fossil fuel exports which traditionally go to North Asia.

Singapore is another case. To reduce dependency on importing gas from Indonesia and Malaysia, the country has sought to diversify its imports of natural gas/LNG from other sources outside of the region and develop itself as a hub for natural gas trade for ASEAN and beyond; as it has been doing for oil and petrochemicals.

The fast development of other regions (including neighbors Northern Asians and India), cross border disputes, and internal rivalry are factors influencing whether ASEAN members will be faithful in maintaining and realizing their energy cooperation agreements.