Asia’s Access to Energy: Challenges in the IOR Cdr (Dr.) Kapil Narula National Maritime Foundation

Scope and Flow ‘Access’ + Challenges + IOR Drivers Growing Energy Demand Shifting Patterns of Energy Flows Challenges: Barriers, Energy Sources Maritime Choke Points and Impact of Disruptions Conclusion

4A’s of Energy Security Availability Affordability Acceptability Accessibility Geopolitical Geographical Technological Economic/Financial Human resource

Growing Energy Demand Source: BP Energy Outlook (2015)

Changing Patterns of Energy Flows Source: BP Energy Outlook (2015)

Energy Import Dependence Energy Trade Top five oil importing countries and their oil trade (2014) Crude imports Product Imports Crude exports Product exports (thousand barrels/day) U.S. 7338 1883 339 3760 China 6209 1331 8 539 India 3809 415 1 1281 Japan 3383 950 - 278 South Korea 2590 * Top five coal exporting and importing countries (2013) Exporters Million tons Importers Energy Import Dependence Indonesia 426 China 320 13% Australia 336 Japan 196 94% Russia 114 India 178 31% US 99 Korea 127 83% Columbia 74 Chinese Taipei 68 - Data Source: IEA Key World Energy Stats (2014)

Challenges Barriers Oil/Natural Gas Coal Nuclear Renewables Geopolitical NOC vs IOC (81%, 11% E, 8% F) X Fuel Technology Transcontinental grid Geographical Mapping Exploration Offshore Land Scale Technological Shale Enhanced Recovery Extraction efficiency Productivity HWR Power density Intermittency Storage Financial Investment Relative cost Infrastructure Capital cost Market barriers Capital Subsidies Transportation Choke points Pipe vs ships Stranded fields Re/Gasification Port capacity Domestic tpt Electricity corridors Capacity Human resource

Volume affected (mbbd) Maritime Choke Points Data Source: EIA (2013); Graphics: The Fuse Choke point Share of oil trade Disruptions (%) Volume affected (mbbd) Pipelines (mbbd) (%) 20 % 50 % 100 % Hormuz 30 3.4 8.5 17 5 Malacca 27 3.0 7.6 15.2 - Bab el-Madeb 6.7 0.76 1.9 3.8 2.5 Data Source: The Economic Implications of Disruptions to Maritime Oil Chokepoints, CNA (2011)

Bypassing Choke Points

Impact of Disruption Spike in oil price (volatility) Physical shortages in short term Economic impacts Duration (days) that would cause GDP to drop by 1% in the 1st Q after disruption (w/o mitigation efforts) Strait of Hormuz Strait of Malacca 20% D 50% D 100% D 20% 50% Singapore 28 11 6 39 15 8 Indonesia 120 48 23 160 64 32 ROK 143 57 192 76 38 India 347 139 67 China - 229 114 171 84 Japan 239 119 177 87 Data Source: The Economic Implications of Disruptions to Maritime Oil Chokepoints, CNA (2011)

Conclusion Accessibility Challenges in IOR Impact Short term (not a concern) Long term (needs continued attention) Challenges in IOR Threats: Persistent High Uncertainty Impact Disruptions: Unlikely Short term: Price volatility Long term: Can be mitigated

Discussions