Malaysia proposes ‘energy diplomacy’

Associated Press

Kuala Lumpur, June 13:

Malaysian prime minister Abdullah Ahmad Badawi today called for “energy diplomacy” in Asia to ensure long term supply of fuel to sustain economic growth amid the threat of decreasing global reserves. Abdullah noted that by 2020, Asia is expected to need up to 33 million barrels of oil a day — or 30 per cent of total world’s oil consumption — and 23 trillion cubic feet of gas, or roughly 17 per cent of total global gas consumption. “A viable strategic option for Asia lies in political commitment to cooperate in energy diplomacy,” he said, opening the two-day Asia Oil and Gas Conference being attended by some 1,200 industry experts. Abdullah said Asian fuel needs will be driven by the strong economic growth expected in the region.

Asia’s collective economy grew at an average of 4.7 per cent over the last eight years, higher than the combined annual growth of both the US and the EU economies, he noted. “However, robust economic growth also means Asia needs secure supplies of energy to sustain itself,” he said. He explained “energy diplomacy” as a mutually beneficial agreement to persuade oil importing countries such as Japan and South Korea to ease reliance on stockpiling oil and gas, which could in turn “remove critical pressure points affecting the commodities’ price level.” Asian countries should also reduce their reliance on fuel from outside the region, which has left them vulnerable to price shocks, he said. But to do this, Asian national oil companies must pursue more joint investments in production sharing ventures across Asia to “secure long term energy supply,” he said.

Abdullah said cooperation among Asian countries would minimize territorial disputes that rise due to oil and gas exploration prospects, such as an ongoing one between Malaysia and Indonesia in the Sulawesi Sea. He said the International Energy Agency has estimated that some $3.0 trillion investment would be made over the next 25 years on boosting global oil production. “As governments and companies continue to pour in more and more money to secure additional oil and gas assets, some of these assets may also unfortunately lead to various geopolitical maneuverings, disputes and conflicts,” he warned. The Royal Dutch/Shell group chief executive Jeroen van der Veer told the conference that by 2030, the bulk of Asia’s energy demand would likely be met through imports. He said the current tight supply situation was not because the world was running out of oil, but because many new reserves were located in “difficult conditions.”

“At this moment, if you look around the world, stock positions are quite normal,” he said, but added that international geopolitical tensions have added to the volatility in oil prices.

Mohamad Hassan Marican, chief executive of Malaysia’s national oil firm Petronas, said the lack of investment in sophisticated refining capacities and the declining supply of sweet crude could aggravate capacity shortages in the global industry. “Over the last five years, there has been a noticeable decline in the amount invested by the industry in new technology, which will no doubt further impact our ability to address the supply capacity,” he said. The industry is also faced with a ‘significant shortage’ of experienced and skilled human capital, and he warned this could become a key setback to growth if companies fail to invest in the development of human resources.