Asia should overtake North America as the world's largest oil consuming region by yearend.
Cambridge Energy Research Associates, which has launched a new publication, Asia Pacific Energy Watch, made that prediction last week.
Joseph Stanislaw, CERA managing director, said, "This represents part of the dramatic shift in the center of gravity of world energy towards Asia. Asian energy demand is the new prize. Companies both in Asia and around the world are scrambling to develop new strategies to meet this enormous growth. And if economic development is to be sustained, it must be met."
CERA said Asian economic growth will be 3.9% in 1997, down from 4.4% last year, but energy demand should grow a brisk 5.3% this year and next (7.5% if Japan is excluded).
Of course, energy analysts have long predicted tremendous energy growth for the Asia-Pacific region. Stanislaw said those predictions are proving true, because that region has 60% of the world's population, very low per capita energy use, and booming economies.
Stanislaw said, "It's really hard to see that we're going to be able to meet energy demand in Asia-Pacific in 2010."
Foreign investment
He said almost all of the Asia-Pacific countries have discovered that using their state-owned monopolies to meet energy demand "wasn't getting the job done, so now the doors are wide open" to foreign investment.
Or almost wide open. Stanislaw said that 5 years ago, the governments were anxious to draw any investments, but now they "are taking a lot more cautious approach to letting oil companies in. They are more focused on the types of investments they want, such as energy efficiency and infrastructure improvements. It makes it all the more challenging for the companies wanting in.
"Governments face the challenge of attracting adequate capital within the framework of existing political, social, and economic realities. Investors face the challenge of increasing competition for those attractive opportunities. This competition, plus the increased experience of governments, means that negotiating power in energy deals is shifting to the governments' side of the table."
In addition to getting in the door, he said companies must cope with change as governments liberalize their energy industries and environmental issues blossom.
Other challenges
And there is a political challenge. Stanislaw said, "Many of the leaders in Asia are changing. That raises questions about the pace of economic reform. But the new leaders will be under pressure to deliver economic reform to their populations."
He predicts China will continue its energy reforms but more slowly than in other industries. As Japan deregulates its energy industries, Japanese firms will become more active in other Asian energy markets. And change in India will focus on attracting capital for energy infrastructure improvements.
Stanislaw predicted there will be more large energy projects involving several Asian nations.
"Companies will increasingly need to think beyond national borders, and a company's ability to structure international projects will be a plus.
"Natural gas, the fuel of choice for much of Asia, will challenge oil and coal and cross national boundaries as countries expand their horizons for energy supplies."
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