The future of oil and gas in Asia: Lessons for transitions in energy politics - Regional Programme Energy Security and Climate Change in Asia and the Pacific
Event Reports
Addressing a numerous and high-ranking audience, Professor Paul Stevens argued against the “conventional wisdom“ that the future growth of the global oil and gas markets is concentrated in the developing and emerging nations of Asia. Such predictions consider tendentiously and short-sightedly a rapidly rising demand on energy resources in the region, but do not take into account other essential factors.
These include:
- a currently increasing instability in the Middle East which still produces the biggest share of oil globally;
- a high volatility in the oil production with possible massive setbacks;
- a predicted increase of the oil and gas price;
- technological progress in using and storing renewable energies which thereby become more competitive in comparison to fossil resources and
- requirements and incentives by the international climate change agreements to reduce the emission of greenhouse gases.
Declining prices for oil and gas in recent times cannot be taken granted for the future; an increasing trend of the prices is already clearly visible. Professor Stevens does not exclude the possibility that new “price shocks" or even a new oil crisis may occur in the near future.
Asia is the region with the most rapidly increasing demand for energy worldwide. The growing volume of traffic and transport results in a enormous consumption of mineral oil. The huge demand for electrical energy is currently to large parts covered by fossil fuels. The cheap coal is on top of electricity sources, but oil and especially gas are gaining ground. Indeed, due to the above mentioned political reasons and the steadily progressing depletion of natural reservoirs, a reliable supply is in question. If the demand cannot be supplied, the economies in Asia will have to build more extensively on other energy sources.
Due to these and other reasons, the countries in Asia are very interested in renewable energies (along with nuclear energy). However, several obstacles have so far been hindering an implementation on a broad range: High investment costs in the beginning, the low efficiency of existing systems, missing concepts for transforming existing grids, poorly conceived energy storage technology and the lack of experiences in an off-grid implementation covering large areas – but also resistance by the monopolists of national energy sectors. However, all these factors are subject to rapid change. By now, one kilowatt hour of electrical energy generated by solar or wind power in some places is already as cheap as if conventionally generated. These prices are projected to further decline in future so that the economic profitability will be with renewable energies. If further technological progress increases the energy earn of these systems and if energy storage broadens their operational flexibility, the renewable energies can provide a reasonable alternative to fossil resources in the large scale for many Asian countries.
Active climate protection policy in Asia is no longer subject to discussions, but it is implemented at an increasing pace. China is presenting itself as the global driver of climate politics. The country is taking this role even more ambitiously since Donald Trump decided the United States' withdrawal from the Paris Agreement. The decisions of COP21 also put pressure on all the other countries of the region to enhance their use of renewable energies. Therefore, according to Paul Stevens, a stagnation of the oil and gas consumption in Asia making room for alternative energy sources is quite possible.