How ASEAN countries deal with evolving energy landscape

ASEAN’s energy sector is facing major challenges.  Demand for energy is expanding on the back of economic and population growth and greater urbanization, while indigenous resources are steadily shrinking.

These trends are playing out against a backdrop of evolving global energy dynamics and a more challenging environment for policymakers in navigating bilateral and regional relationships.

To ensure that energy supplies going forward are secure, affordable and environmentally sustainable, ASEAN governments have embarked on several initiatives. Individually, they are moving towards diversifying their energy mix away from traditional fossil fuels and relying more on natural gas and renewables.

Indonesia and Malaysia are set to begin importing LNG this year. Singapore is among the emerging new LNG importers, with its new LNG terminal potentially turning into a trading hub for the Asian region.

The region’s energy supplies could receive a boost if domestic regulatory issues in the United States are ironed out and its shale gas exports head west towards Asia. Collectively though, ASEAN countries should ensure that they fully optimise the region’s energy resources.

The Southeast Asian states should strive toward smooth implementation of their energy projects, and further promote renewable energy growth. Regulations – such as tariff and non-tariff barriers – impacting domestic and intra-region investment in new energy sources should also be eased.

Optimising regional cooperation

The ASEAN Power Grid (APG) and the  Trans-ASEAN Gas Pipeline Project (TAGP)are crucial projects to address the imbalance in the distribution of power-generating resources in the region. The APG connects countries with surplus power generation capacity to those who face a deficit.

The aim is to link up power lines in the 10 ASEAN member states by 2020, but  there is still a need to further harmonise business regulations, and technical standards and systems, that impact the interconnection of national power grids.

It has also been challenging to secure firm commitment - and funding - for such projects, as the economic viability of connected power grids has yet to be proven, and governments understandably have diverse and sometimes conflicting national priorities.

The TAGP links ASEAN’s gas suppliers and producers to member states who need to purchase gas. There are now 11 cross-border gas pipelines in operation with a total  pipeline length of 3,020 km.

The 12^th cross-border gas pipeline, anew 298-km  connection from Myanmar to Thailand, is scheduled for operation  by mid-2014, and more pipelines are in the planning stage. Despite more ASEAN countries becoming LNG importers, intra-ASEAN gas pipelines continue to be important to ensure the region’s energy security and economic connectivity.

Existing challenges to cross-border pipeline development projects will need to be addressed. For instance, several cross-border projects in Indonesia have been delayed due to heightened nationalist sentiment with calls for the Indonesian government to channel available gas supplies to the domestic market.

Rising energy demand across Asia is inevitably leading to inter-state competition for available resources. Overlapping claims in several disputed areas within the region pose a threat to  unimpeded cross-border energy supply. 

And due to geographical diversity and uneven economic development, funding and integrating the region’s TAGP infrastructure continues to be an issue. ASEAN members have much on their plate – including working towards developing relevant technical expertise to operate an integrated regional pipeline system, and harmonising regulatory, legal and pricing frameworks to facilitate the sale and provision of energy.

The importance of looking inward

While efforts are made to smooth out the kinks in a regional energy-sharing framework, ASEAN members should engage in some housekeeping.

Domestic policies to encourage the development of cleaner fuel sources and green buildings should be high on the policy agenda –Indonesia for instance is working towards enlarging the role of renewable energy sources such as solar energy in its fuel mix, while in its capital Jakarta, authorities are enforcing environmentally-friendly building codes on new buildings.

The removal of tariff and non-tariff barriers and harmonisation of standards to facilitate intra-ASEAN trade and investment in renewable energy and energy efficiency are necessary, as are ongoing efforts to reduce energy intensity via stricter regulations on household appliances for instance.  Additionally on the policy front, the impact of energy subsidies needs to be carefully considered.

Thailand’s energy reserves are now anticipated to last only for another 20 years due to rising oil demand driven by fuel subsidies. Malaysia cut fuel subsidies in early September to reduce its budget deficit while Indonesia did the same in June, in a move to ease the pressure that its bloated fuel subsidy bill put on its current account deficit, the stock market and the rupiah this year.

Innovation in the energy sector will need to be encouraged – whether through joint regional cooperation on the development of smarter green buildings or multi-lateral and private funding in research and development in bio-fuels for instance.

Lower carbon bio-fuels have immense potential globally to reduce carbon dioxide emissions from transport fuels in a practical,  and commercially-viable way. ASEAN can reach out to its Dialogue Partners like Japan and Korea for assistance in this area.

Forging ahead with certainty

The world’s energy outlook mirrors global developments in the nexus between economics and security. We are living in an increasingly untidy and uncertain world, with an evolving combination of regional powers bearing divergent interests shaping global and regional trends.

ASEAN countries should leverage their existing and long-standing cooperation to ensure certainty in regional energy security.