Impacting Asia’s Energy Landscape: Low Oil Prices, 'One Belt, One Road', and Singapore's Living Lab Concept

Impacts on Asia: How low oil prices, “One Belt, One Road,” and Singapore’s living lab concept are changing the region’s energy landscape

Recap of China Energy News interview with Dr. Gal Luft (IAGS) and Jonathan Goh (EMA)

Global energy transitions including oil price volatility, market interconnectivity and growth in sustainable options are increasingly changing the energy landscape.

With these changes come opportunities to be captured and challenges to be overcome. They are especially noticeable in Asia, given its high energy demand.

Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS) and senior advisor to the United States Energy Security Council, and Jonathan Goh, External Relations Director, Energy Market Authority of Singapore (EMA), recently discussed these global transitions and their impact on Asia.

They specifically focused on three: low oil prices, One Belt, One Road, and Singapore’s future as an Asian energy hub.

I. The Role of Inexpensive Oil on Asian Energy

The price of oil – high or low – has significant impact on the energy landscape worldwide. Looking within Asia, the recent decline in oil prices has had a positive effect. It has improved competitiveness, lowered operating and production costs and changed the energy security conversation. For example, consistently low oil prices may remove the need for nuclear investment in some countries.

It has also slowed down the replacement of traditional energy with alternative and renewable energy – though

it is not solely responsible for this deceleration. It is often forgotten that the transportation sector is fed by different energy sources from the electricity sector. Transportation – such as cars, ships and planes – is all about oil. So if oil prices fall, so too does petroleum at the pump.

But cars do not run on solar power. Renewable energy applies more to the electricity sector, where oil plays a very small role. The main sources in power generation are coal, natural gas, uranium (nuclear), and renewables.

Low oil prices may distract from investment in renewables, but it can never replace it. The two must coincide. Renewables will always have a role. Energy security demands a variety of sources, no matter how cheap and plentiful a single source is. Likewise, renewable energy requires a backup source, given its intermittent nature. The sun does not always shine and the wind does not blow 24 hours a day, so there is a sustained need for both intermittent sources of power and base-load power.

II. Opportunities along One Belt, One Road

The One Belt, One Road initiative is China’s most important and strategic plan today. It is set to connect 65 countries and 4.4 billion people, and will greatly impact the global energy environment – including ASEAN.

Within the region, One Belt, One Road will help reduce the pronounced disparity between the energy-rich and energy-poor and will link disconnected mountains, islands and other forbidden terrains.

If successful, this will create new opportunities for China and surrounding nations like Singapore. For example, added corridors to the Western and Southwestern side of China will result in more development and efficiencies in the region. Singapore companies – especially those in logistics management, project development and infrastructure – can contribute to the growth of these areas.

There will also be a broader role for the private sector in bringing this initiative to life. One Belt, One Road will not be successfully implemented with government financing alone; it will also require private investment and agreement among markets for consistent exchange through a currency that is widely accepted and easily converted.

III. Singapore as an Asian Energy Hub

Singapore is set to continue its role as a regional – and increasingly, global – energy hub. It can serve as a stable investment platform for its neighboring countries and offers a strategic regional base for the operations of international companies.

Singapore is a true “living laboratory”. It is no longer just a market for energy companies to come and sell – it’s an experimental platform where pilot projects for energy development and innovation can be introduced. If successful, these projects can be implemented on a larger and broader scale.

This is currently happening in the renewable energy space with photovoltaic and biomass energy, despite natural gas being the source of 95% of Singapore’s power generation.

The country’s natural gas operations continue to progress. Many energy companies have moved their regional bases to Singapore. Singapore is also actively consulting the industry and working towards a transparent and fair platform, which will facilitate companies opening operations in the country.

In addition to natural gas, Singapore continues to build its position as an Asian energy hub. It has become an important global oil refinery despite not having any oil resources. It is one of the top three international currency trading markets (along with London and New York), further enabling energy financing. And it offers a comprehensive and transparent system for multinational companies to freely enter and exit the market.

Singapore is also seeking to develop its alternative and renewable energy sectors. If that is successfully achieved, Singapore’s contribution to Asia’s energy landscape will continue – but in a much different way.

To learn more about global energy transitions and their impact on Asia click here.

By : EMA