East Asia’s State-Led Search for Energy Security

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East Asia’s State-Led Search for Energy Security

Instead of collective efforts, states are increasingly taking unilateral steps to secure access to energy.

East Asia’s State-Led Search for Energy Security
Credit: Flickr/ Mohan R

After two decades of rapid industrialization and unprecedented population growth, the demand for energy in East Asia is soaring. This has resulted in the emergence of the notion of energy security, marked by states across the region stepping up their efforts to secure the energy supplies needed to sustain their rapidly expanding economies and burgeoning populations. Despite fears of energy shortages across the Asia-Pacific, states appear to have rejected a collective effort to satisfy regional energy requirements, instead opting to pursue individual state-centered, nationalistic approaches.

In particular, energy demand has been driven up by population and GDP growth. In 2007, China’s population was 1.31 billion, and is expected to reach up to 1.45 billion by 2020. Aside from China, the population in Southeast Asia has also expanded rapidly, growing at a rate of 1.5 percent annually over the last 25 years and now totaling over 620 million people – more than the entire population of the European Union. This remarkable growth has been accompanied by rapid urbanization and industrialization, with energy consumption being fueled by the expanding residential, commercial, and transportation sectors. The transport sector is an especially important source of demand: the number of vehicles in China has risen from 2 million in 1980 to 150 million in 2014, and is expected to come close to 300 million by 2020.

As a result of these developments and trends, energy demand in East Asia is expected to increase by an average of 2.5 percent each year between now and 2030. The region is thought to be especially poorly-adapted to the shift to renewables, which are deemed largely unsuitable to maintain current levels of economic growth, meaning that fossil fuels such as oil and gas are likely to remain the dominant energy sources in East Asia for decades to come. By 2035, oil is expected to still account for around 26 percent of China’s energy consumption, and 31 percent in the wider region.

Amidst the drive to maintain economic growth, energy security concerns are spiraling. There is now an increasing gap between supply and demand: East Asia was once a net exporter, but that historical pattern is changing fast. Since peaking in the mid-1990s at around 3 million barrels per day, regional oil output has been falling, with the International Energy Agency predicting that production will drop to just 1.4 million barrels per day by 2030. East Asia is now a net oil importer, depending on supplies from unstable regions such as the Middle East and sub-Saharan Africa.

Another primary concern is the security of sea lanes, which are vital in transporting energy supplies from other areas of the world such as the Middle East, Africa and Latin America. The South China Sea – a source of recent tensions amidst unresolved territorial disputes – is an essential transit area for the oil and gas, with the majority of imported supplies passing through just four narrow chokepoints including the Malacca Strait, Sunda Strait, Philippine Sea, and Lombok Strait. As a result of its geographical location, reliance on imports and the current tensions in the South China Sea, the region’s collective energy security is looking increasingly vulnerable. When considering that 70 percent of China’s oil imports come from the Middle East and Africa, and thus have to pass through East Asia’s narrow sea corridors in order to reach destination ports on the mainland, it becomes clear that even a temporary disruption could cause a sharp rise in oil prices and severely restrict economic growth. Piracy, terrorism, and climate change are other sources of concern to shipping companies, adding to an atmosphere of tension and energy insecurity among East Asia’s importing states.

In order to reduce dependence on politically unstable countries, states are beginning to look closer to home for new reserves –particularly in offshore zones in the South China Sea, where there are predicted to be up to 213 billion barrels of oil according to some estimates, along with extensive natural gas reserves. China has suggested joint development of energy reserves in the South China Sea; other states have been wary as a result of the unresolved territorial disputes, fearful of China furthering its economic leverage to strengthen their claims. The disputes ( involving China, Vietnam, the Philippines, Taiwan, Malaysia and Brunei) consist of multiple, complex, and overlapping claims based on historical rights and international law. The contentious nature of the disputes has been a key sticking point in the search for a collective solution to the region’s energy security problems, resulting in a distinct lack of trust and regional consensus.

Despite these divisions, there have been significant attempts to regionalize resource cooperation in order to achieve mutual benefits for the Asia-Pacific as a whole. During the last decade, various intergovernmental bodies such as ASEAN, ASEAN+3, and the East Asia Summit have launched energy cooperation initiatives aimed at further integration of national resource markets, with differing degrees of success. In general, these attempts have been successful in improving dialogue and information sharing, but have not resulted in any substantial changes. Governments have generally taken a more inward-looking approach, remaining highly conscious of protecting their sovereignty over decision making and wary of liberalization initiatives.

Some of the notable successes include the 2002 Trans-ASEAN gas pipeline, and the 2008 launch of an “Oil Stockpiling Roadmap” in order to improve the region’s capacity to respond to an oil supply crisis. There have also been strong rhetorical commitments such as the 2007 Cebu Declaration on Energy Security. These plans seemed promising at the outset; however, overall they constitute more informal agreements rather than binding mechanisms for cooperation, with states maintaining only a weak commitment to these statements of collectivism. The primary reason for this has been the maintenance of nationalist resource policies from domestic governments, which often exercise tight control over resource markets and national economies. This desire has the knock on effect of constraining attempts at closer cooperation on a regional scale, as political leaders attempt to find solutions to the pressures of energy security at a national level.

The regional institutional landscape in East Asia needs further work if it is to achieve greater success in advancing the collective energy security needs of the region’s population. At present, it appears complex and overlapping with no overall strategy, whilst agreements are often voluntary or non-binding in nature.

East Asia’s largest nation, China, is a particularly strong example of a country which has opted for the continuation of a state-centered approach over a regional one. China’s approach largely relies on bilateral diplomacy to build relationships with far flung resource-producing nations, along with the use of state-owned enterprises to invest in overseas energy infrastructure. The Chinese leadership conceive of energy security as too strategically important to be left to market forces alone, seeing it as a key issue of national security which must be handled almost exclusively by the government. In addition to being of strategic importance, the securitization of oil and gas reserves is also seen as being crucial to economic development, social stability, and regime legitimacy.

China’s search for energy security has been distinctly global in scope, especially since it became a net importer of petroleum in 1993 and more recently the second largest oil-consuming country behind the United States. In an effort to match the growing demand, China reorganized its energy ministry into three state-owned corporations, including the China National Petroleum Corporation (CNPC), and the China National Offshore Oil Corporation (CNOOC). In the 1990s, these companies internationalized their operations, developing key links with oil-producing nations such as Iran, Sudan, and Venezuela in an attempt to diversify supplies and minimize the risk from political instability in some parts of the world. This strategy has operated successfully over the past two decades, with China having invested heavily in a collection of oil-rich African states including Algeria, Nigeria, and Angola.

It its more immediate neighborhood, China has fostered mutually beneficial energy partnerships with Laos, Myanmar, and Kazakhstan, financing large-scale infrastructure projects such as the construction of pipelines and dams. China has also stepped up exploration for new reserves in the South China Sea, stoking tensions with surrounding nations. One prominent example came in May 2014, when anti-China street protests erupted in Vietnam after China moved an oil rig into contested waters which Vietnam considers its Exclusive Economic Zone (EEZ). Overall, China has unilaterally pursued an assertive strategy of “energy diplomacy” in order to secure supplies for its own population.

This approach is indicative of the wider regional trend: governments are taking unilateral responsibility to acquire the resources needed to ensure continued economic growth and prosperity. Despite concerted attempts to push countries toward viewing energy security as a collective and regional issue, state-based resource policies have continued to dominate East Asia’s energy landscape. States have largely rejected collective solutions, and have continued to closely link resource security to the traditional idea of national security. At present, the largest barrier to greater energy cooperation comes in the form of the on-going territorial disputes in the South China Sea, which have made joint exploration extremely difficult and have discouraged international companies from becoming involved in projects in disputed waters. However, cooperation could still be possible in the long-term: if the South China Sea disputes can be resolved peacefully and mutual trust restored, then it may be realistic to envisage a future multilateral drive toward achieving regional energy security in East Asia.

Michael Hart is a freelance writer in international politics, focusing primarily on civil conflict in Africa and the geopolitics of Southeast Asia. He is currently studying an MA in International Relations at the University of Westminster.