Skip to 0 minutes and 0 secondsAsian countries suffer three key vulnerabilities. No 1. Insufficient energy transit and transport infrastructure, No 2. Lack of Continental Connectivity, No 3. Asia Premium. First take a close look at the insufficient energy transit and transport infrastructure. Despite enormous amount of consumption, Asian countries do not have well-developed infrastructure for energy imports and consumption. For both oil and gas, Asian countries rely on a limited number of suppliers, mostly the Middle East region. This could be a source of a number of potential problems. Supply disruptions could occur due to political instability in the Middle East. World chokepoints for maritime transit of oil are a critical part of global energy security. About 63% of the world's oil production moves on maritime routes.

Skip to 1 minute and 1 secondThe Strait of Hormuz and the Strait of Malacca are the world's most important strategic chokepoints by volume of oil gas transit. China feels that the US choke off Chinese energy imports from these global choke points for transit. China’s seaborne routes are the most obvious source of vulnerability. The US could enforce an ironclad blockade on China’s oil supplies. Because of China is working hard to diversify its supply lines, and any serious prospect of a blockade would accelerate this process. One of the ironies of Asian energy is the fact that Asian energy consumers are not connected to nearby energy giant, Russia. Continental transit and pipelines linking to Russia and Central Asia have not been fully developed.

Skip to 1 minute and 51 secondsAs you know, 70% of Russian oil and gas are exported only to Europe. Now the Middle East exports a considerable amount of gas which is 46.8 BCM to Asia, but Russia exports only 16 BCM to Northeast Asia. So the future of Asian energy will be determine on whether or not Russia can be integrated to Asia’s energy future. As of now, Asian consumers are making an effort to link to Russia energy, but Russian energy is slowly being built with China but Korea and Japan are having difficulty with linking to Russian energy.

Skip to 2 minutes and 30 secondsOne advantage of Russian energy to Asian energy is that it takes only five days to ship Russian oil from the North Pacific port of Kozmino to the Northeast Asian markets of China, Korea and Japan, which is greatly advantageous to the shipping time of 2 weeks if you get it from the Middle East market. There have been many discussions about why Asian Premium exists. Asia last year accounted for 63 per cent of global energy demand of 245m tonnes oil per year. But most of these oil and gas purchase has been in large-volume, long-term contracts that often span more than 20 years. Because of this, Asian countries did not have negotiating power.

Skip to 3 minutes and 26 secondsSo, to reduce Asia premium, Asian countries have to diversify supply sources. In the case of Korea, for example, 64% of LNG imports and 87% of oil imports are all from the Middle East region. Japan is very similar to Korea in this respect. China feels much more insecure about this energy reality. Because China will be consuming much more oil and gas in the future.

Geopolitics of Asian energy

The profound shift in Asia’s energy consumption patterns has triggered huge changes in global energy flows and the geopolitics surrounding energy.

The fulcrum of world oil trade has shifted decisively onto a Middle East–Asia axis. Asia now relies on imported oil for nearly three-quarters of its oil and LNG needs and certain marine transport routes linking Asia and the Middle East (Herberg, p. 4).

Continued dependence on the Middle East

Because the Asia Pacific region is so fragmented geographically and oil resources are distributed so unevenly across the region, the potential for transporting oil by pipeline is extremely limited. For both oil and gas, Asian countries rely on a limited number of suppliers, mostly the Middle East region. This could be a source of a number of potential problems.

Naval arms race and territorial conflicts

Such existing marine routes have traditional security problems like naval build-up among countries and non-traditional security problems like pirates and traffic congestion. Energy transport ships pass a narrow marine route between Malaysia and Indonesia, the Strait of Malacca. China is creating conflicts with Vietnam and Philippines over naval build-up and territorial issues in the South and East China Seas in order to address the problem.

Lack of continental connectivity

One of the ironies of Asian energy is the fact that Asian energy consumers are not connected to nearby energy giant, Russia. Continental transit and pipelines linking to Russia and Central Asia have not been fully developed. 70 percent of Russian oil and gas are exported only to Europe. Now the Middle East exports a considerable amount of gas which is 46.8 BCM to Asia, but Russia exports only 16 BCM to Northeast Asia.


References:

  • Mikkal E. Herberg, “Introduction,” Mikkal E. Herberg, Ed. Energy Security and the Asia-Pacific: Course Reader (Washington DC: National Bureau of Asian Research, 2014).

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Global Resource Politics: the Past, Present and Future of Oil, Gas and Shale

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