Securing our energy future

(Photo credit: istockphoto)

If the events of the Arab Spring proved anything to the rest of the world, it was that we could no longer take cheap oil for granted. With global energy demand soaring in tandem with the need to power economic growth, securing reliable and competitively-priced energy supplies is now the top priority for most countries. Compound that with the need to fulfil climate change commitments and the uncertainty of alternative energy sources to plug the gap of need, and energy security becomes a challenging question for developed and emerging economies alike.

Ensuring energy security entails different reasons and strategies for different countries. Everything, from energy conservation to diversification, strategic petroleum reserves and even hedging, becomes part of the energy security options available to the world's economies. Yet despite the multitude of options, price remains a constant pressure point for all energy-importing nations. The implications of higher prices are clear: At a time when emerging economies need fuel to spur further growth, supplies stand to be choked off, killing economies before they have had time to mature.

Energy security in Asia

The volatile prices of Brent crude oil prices over the past year have also thrown into stark relief what emerging economies, which often have hefty fuel subsidies in place, have had to contend with. On the back of the Libyan conflict, Brent crude oil prices shot up from US$82 a barrel in September 2010 to US$127 a barrel in April 2011. The high oil prices have fuelled doubts about the near-term economic prospects for powerhouse economies such as China.

Despite a strong commitment to coal, gas and even renewables, China has still not achieved consensus with regard to reducing its reliance on oil. And though depicted as a domestic consideration, these decisions will carry considerable impact on global energy security concerns.

Singapore's strategy has been to diversify. At the heart of Singapore's efforts to secure competitively-priced energy supplies is its liquefied natural gas (LNG) terminal, due to open in mid-2013. In addition, the city-state is closely looking at electricity imports to enhance its national energy security by broadening its energy mix, both in terms of geographical source and fuel types.

Throughout the rest of Asia, a different reality exists. The Asian Development Bank (ADB) estimates that as many as 1.9 billion people in the region have limited access to modern fuels and electricity. According to IEA's estimates, providing universal access to basic energy will require an annual investment of around US$48 billion. The ADB has invested approximately US$2.8 billion in access to energy projects since 2008.

Search for regional solutions

Quite apart from problems of energy security, even a cautious implementation of pledges made at the UN Climate Change conference in Cancun requires a huge shift away from carbon-intensive fuels. The IEA's World Energy Outlook estimates that by as early as 2035, 75 percent of the world's existing oilfields will need to be replaced. In real terms, this translates to 50 million barrels a day. Combine this with peak oil projections that 68 million barrels a day in 2009 will be reduced to 16 million barrels per day by 2035, and the problem becomes pressing.

The hope lies in the rise of renewable energy use, which is set to triple by 2035. Given Asia's hunger for energy to drive its economies and sustain its populations, the region in particular is at the forefront of the hunt for alternatives.

Yet with nuclear energy expected to decline globally, natural gas is slated to pick up the slack. Ultimately to this end, Southeast Asia embarked on the Trans-ASEAN Gas Pipeline (TAGP), which aims to link the gas reserves of the ASEAN countries and is expected to be fully operational by 2020.

Energy security and an energy framework

This much is certain. Increased competition for energy resources will likely lead to the formation of security compacts, though what they form they take and who will benefit are set to be contentious issues for the region. Ultimately, there is growing recognition that nations cannot enhance energy security by putting another's at risk.

The solution for the region therefore lies in collective energy policies that see economic prosperity through the prism of green growth paradigms, incorporating energy efficiency, renewables, nuclear, electric vehicles and smart grids as all essential components of the energy whole. A focus on an energy security framework will provide equitable access to the resources that are driving the world's largest-ever growth story. 

This article is an extract of the title piece "The Big Picture: Securing our Energy Future" from EMA's Asia Energy Book 2012.

BY: Energy Market Authority