1. NS4054 “Japan, Southeast Asia, and Australia” Mikkal E. Herberg

2. 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

3. 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

4. Japan (1/8) Poor resource, high demand 4

5. 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 19732010

6. 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

7. 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

8. 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

9. 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

10. 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. 11

12. Southeast Asia (1/3) 12 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

13. 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 14

15. Australia (1/2) The Opportunities and Challenges of Energy Plenty 2 nd largest coal exporter, 5 th 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 15

16. Australia (2/2) Australia LNG LNG Boom Risks: increasing costs of engineering, labor, equipment strong competition for Asian market(shale, Qatar, Russia, Africa) 16

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 17