NS4054“Japan, Southeast Asia, and

Australia”Mikkal E. Herberg

Author

• Mikkal E. Herberg

• Research Director of NBR’s Energy Security Program, University of California

• Senior lecturer on international and Asian energy, UCSD

• Specialist on energy geopolitics and economics with a special focus on Asia

• 1981-2000 Strategic planning roles for ARCO

• Publications• China’s Search for Energy Security: Implications

for US Policy• Energy Security in the Asia-Pacific Region

and Policy of the New U.S. Administration

2

Overview

• Key arguments

• Energy insecurity challenge for Japan, Southeast Asia, Australia

• Japan: a result of the Fukushima earthquake• Southeast Asia: disputes with China over conflicting maritime

territorial claims• Australia: become the world’s largest LNG exporter

• U.S. Implications

• Strengthen Asia’s energy security and cooperation

• A opportunity for a stronger and constructive US role in Asia

3

Japan (1/8)

• Poor resource, high demand

4

Japan (2/8)

5

• Efforts

• Diversification of energy sources• Cause: the two 1970s oil shocks• Contents: Oil → natural gas, coal, and nuclear power• Results: energy security, economic efficiency, environmental

protection

0il75%

Coal17%

LNG4%

Others4%

0il Coal LNG Nuclear Others

Oil42%

Coal22%

LNG19%

Nuclear13%

Others4%

Oil Coal LNGNuclear Others

1973 2010

Japan (3/8)

• Radical Improvements in Energy Efficiency

• Strengthen its domestic energy foundation• Japan has reached the highest level in the world• Industrial energy efficiency: fuel-efficient vehicles, hybrid-vehicles

• Multilateral efforts to strengthen its energy security• A founding member of the International Energy Agency• Promote regional energy cooperation in Asia

• ASEAN

• The East Asia Summit

• The ASEAN+3

6

Japan (4/8)

• Japan Energy Inc.

• The development of the Japan National Oil Company(JNOC) • The Ministry of Economy, Trade, and Industry subsidized the

company, the guidance of the government

• Despite huge subsidies and investments, the effect is low

• Koizumi dissolved the JNOC and created the Japan Oil, Gas, and Metals National Corporation (JOGMEC) in 2006

• But, rising oil and LNG prices, Beijing’s emergence in energy market• Tokyo returned to its emphasis on nationally controlled oil supplies• Target for oil imports by Japanese companies: 15% → 40% by 2030• Goal of raising overall self-sufficiency: 18% → 36% by 2030• Expand its financial support for Japanese companies

7

Japan (5/8)

• Results

• Azadegan oil field

: abandonment

• Far East oil and gas

: dissatisfaction

• Diversification in LNG

: successful, but

Indonesia has diverted

the gas to domestic

use (50%↓)

8

Japan (6/8)

• Fukushima and Its Fallout

• Results: shutdown of entire 54 nuclear power generation, the loss of 30% of normal electricity supplies, the decrease of 5% of electricity production in 2011

• Short-term Solutions: much higher imports of LNG• LNG imports: 79mmt(‘11) → 88mmt(‘12)

9

Japan (7/8)

• Tokyo’s anxieties

• Rising LNG prices

10

11

Japan (8/8)

• Tokyo anxieties

• Future nuclear power• Public: opposition to restore nuclear power• Government: energy costs without nuclear are too high

• In 2012, DPJ announced a plan that would phase out it by 2040

• But Abe announced plans to restart it gradually under new, tougher safety standards.

• Aug 11, 2015: Japan restarted first nuclear reactor• Long-term Solutions

• Expand its energy diplomacy and seek stronger access to LNG• US shale gas, participation in many LNG projects around Asia and U.S.

Southeast Asia (1/3)

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• Changing Energy Export Roles (Oil)»

• Until the 1990s, Oil supplier to Northeast Asia

• Since the 1990s, Southeast Asian domestic oil demand has increased

→ Oil importer emergence

• 75% of oil imports come from the Middle East

• Myanmar’s rising gas and oil production

Southeast Asia (2/3)

• Changing Energy Export Roles (LNG)

13

• LNG supplier to Northeast Asia

• Increasing domestic demand

14

Southeast Asia (3/3)

• South China Sea Challenges

• 2/3 of Asia’s oil supplies transit the critical sea-lanes of the South China Sea and the Strait of Malacca: Key energy sea-lanes

• In 2002, U.S. proposed a new Regional Maritime Security Initiative, but it was rejected

• Control of the energy sea-lanes is a key aspect of today’s conflict between U.S. and China in South China Sea

• Increasing conflict between China and neighboring states

• Oil and gas exploration in the South China Sea will be delayed

15

Australia (1/2)

• The Opportunities and Challenges of Energy Plenty

• 2nd largest coal exporter, 5th largest LNG exporter, uranium

• Australia takes advantage of Asia’s booming energy demand

• Challenges: Indonesia’s rising coal exports, China’s low growth, declining refining capacity

16

Australia (2/2)

• Australia LNG• LNG Boom

• Risks: increasing costs of engineering, labor, equipment

strong competition for Asian market(shale, Qatar, Russia, Africa)

17

Conclusion

• Asia’s Energy Angst

• Energy becoming key factor in Asia’s geopolitical architecture

• Energy nationalism rising with prices, the difficulty of cooperation

• Zero-sum competition for control of supplies and transport routes

• Intensifying focus on transit security, control

• U.S. Implication

• Strengthen Asia’s energy security and cooperation• Strong US-Australian strategic and economic partnership• US engagement with Southeast Asia through ASEAN, East Asian Summit• Strengthen energy security cooperation in the Pacific islands

• A opportunity for a stronger and constructive US role in Asia