WATCHING THE WORLD: Diversifying Asian energy

Sept. 17, 2007
The leaders of Asia-Pacific countries last week agreed to set an “aspirational goal” of improving the energy efficiency of economic output by at least 25% by 2030 from the 2005 level.

The leaders of Asia-Pacific countries last week agreed to set an “aspirational goal” of improving the energy efficiency of economic output by at least 25% by 2030 from the 2005 level.

They also agreed to create an Asia-Pacific Network for Energy Technology aimed at strengthening collaboration on energy research in the region by achieving technology breakthroughs in areas such as clean fossil fuel and renewable energy.

Their statements followed the Sept. 6 meeting of Asia-Pacific Economic Cooperation foreign and trade ministers, who called for ensuring a “diversified mix of energy sources,” including nuclear energy, in order to pursue long-term economic growth while reducing dependence on fossil fuels.

Diversified mix

In a joint statement issued after their 2-day meeting in Sydney, the ministers said the diversified mix includes “the use of natural gas, biofuels from sustainably farmed crops and residues, renewable energy, and nuclear energy for interested economies.”

Their call for a diversified mix of energy sources was especially timely as news emerged that the July shutdown of Tokyo Electric Power Co.’s Kashiwazaki-Kariwa nuclear power plant will strain Asian LNG and oil markets.

In a report, Tomoko Hosoe, senior consultant at Facts Global Energy, Honolulu, said: “An additional 2-3 million tonnes of LNG, which need to be secured from the spot market in 2007-08 in a very tight LNG market, is a serious problem.”

The APEC leaders’ calls for diversification also came as Russia’s OAO Gazprom, now facing financial constraints on the Sakhalin-2 LNG energy project, resumed negotiations with the Japan Bank for International Cooperation (JBIC) to secure funding.

EBRD withdraws

The European Bank for Reconstruction and Development, which had been central to Sakhalin-2’s initially planned lending syndicate, withdrew in August due to concerns over the heavy-handed manner in which Gazprom gained control of the development.

Absent financial aid from the EBRD, Gazprom is seeking new backers to meet the project’s 2-trillion-yen cost. Gazprom Deputy Chairman Alexander Medvedev said his firm and the three minority partners have reached a memorandum of understanding for JBIC financing.

Medvedev also said JBIC would consider financing other oil and gas development projects in such areas as East Siberia, a region of key concern to Japan. In fact, the Russians have long been trying to twist Japan’s arm for such investment.

In February, Russian Minister of Industry and Energy Viktor Khristenko made clear that his country would “like” Japanese investment in East Siberian oil and gas development as part of the East Siberia Pacific Ocean pipeline project.

The APEC leaders could not have been any more timely in their call for diversification of energy. Apart from the normal squeeze in supplies, due to increasing demand throughout the region, sources of energy are becoming even less reliable due to the machinations of countries like Russia.

But the APEC leaders could hardly say that, could they? After all, Russia is an APEC member.