Thread Content
On December 5, 2007, the Economic and Technical Research Institute of China National Petroleum Corporation and the Energy Economics Research Institute of Japan jointly held the first conference on oil market research findings in Beijing, in accordance with the exchange and cooperation agreement reached by the two parties earlier. About 100 representatives from relevant **departments, organizations, and research institutions in China and Japan, as well as companies in the oil and petrochemical, power, automobile manufacturing, and financial sectors, attended the exchange meeting. Koichi Ito, executive director of the Japan Energy Economics Research Institute, pointed out that both Japan and China are major energy consumers; Japan relies heavily on imports for its oil, while China’s oil import volume is also increasing year by year. Given that the two countries are communities sharing a common destiny, they should leverage their own strength to speak out on behalf of the oil-producing countries. Mr. Ito also pointed out that currently, environmental protection issues are becoming increasingly prominent, and global warming requires countries around the world to make greater efforts in energy conservation. Through long-term and tremendous efforts, Japan has achieved world-leading levels of energy conservation. Japan is willing to deepen mutual understanding through exchanges and share the outcomes with countries around the world. Mr. Ito explained that the Institute for Energy Economics, Japan (IEEJ) conducts rolling studies on the world energy outlook every year. Since Japan is located in Asia, Asia is given a more prominent position. Given the remarkable development in China and India, both the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have focused their recent research in World Energy Outlook on these two countries. The Japan Energy Economics Research Institute has long paid attention to China, and its forecasts regarding China’s energy prospects are to a certain extent more detailed and thorough. I. Key Points of Prediction According to Mr. Ito, the goal of this research project is to conduct a thorough investigation into the current socioeconomic and energy infrastructure conditions in the world and in Asia, particularly in China and India, with the aim of creating a quantitatively realistic energy scenario in a logical and consistent manner. The forecast period is 2006–2030. The forecasting method is based on econometric models; macroeconomic models and energy demand and supply models are developed, and the world is divided into 31 regions to forecast aspects such as crude oil and refined oil demand and trade. Two scenarios were established for the forecast: one is the “reference scenario”, which involves making the most likely assumptions based on the current economic and **conditions, in order to determine the future evolution of energy supply and demand under normal circumstances ； The second is the “technological progress scenario,” which assumes that Asia takes significant actions in terms of technological progress to ensure energy supply security and reduce environmental problems. II. Basic Assumptions Mr. Ito focused on the projections of the “reference scenario”. 1. GDP Growth From 2005 to 2030, China’s average annual GDP growth rate was 6.2%, India’s was 6.1%, Asia (excluding Japan)’s was 5.3%, the OECD’s was 2.4%, non-OECD countries’ was 4.8%, and the world’s was 3.1%. Among them, world economic growth is primarily driven by the economic growth of developing **countries. China’s GDP continues to grow at a rapid pace, with the driving forces gradually shifting from investment and exports to domestic private consumption. India’s high GDP growth is primarily driven by improved economic efficiency resulting from liberalization policies and foreign direct investment. 2. Population In 2005, the world’s population was 6.4 billion, of which 3.5 billion were in Asia. By 2030, the world’s population will reach 8.2 billion, of which 4.4 billion will be in Asia. China’s population was 1.31 billion in 2005, and it is expected to rise to 1.45 billion by 2030. India's population was 1.09 billion in 2005 and is set to reach 1.49 billion by 2030. Nearly 90% of the world’s population growth between 2005 and 2030 will come from non-OECD countries**. 3. Primary energy prices From now until 2010, high crude oil prices (CIF import price) will gradually decline. After 2010, driven mainly by rising oil demand in Asia and the stagnation in investment in the upstream sector, international oil supply and demand will once again become tight, leading to further increases in oil prices. It is expected that the price of LNG (liquefied natural gas) will rise along with crude oil prices ； Coal prices remained almost unchanged (see Table 1). III. World demand for primary energy In 2005, the world’s demand for primary energy was 10.3 billion tons of oil equivalent, and this figure is expected to rise to 16.5 billion tons of oil equivalent by 2030, with about 50% of this increase coming from Asia. Asia’s demand for primary energy was 3.2 billion tons of oil equivalent in 2005, and it is expected to rise to 6.5 billion tons of oil equivalent by 2030. By 2030, Asia’s demand for primary energy will double the current level. China’s demand for primary energy in 2005 was 1.5 billion tons of oil equivalents, and it is expected to reach 3.1 billion tons of oil equivalents by 2030 ； India’s figure was 400 million oil equivalents in 2005, and it is expected to reach 1.1 billion oil equivalents by 2030. Driven by strong economic growth, China’s share of Asia’s primary energy demand will rise to 48%, with China and India together accounting for 65%. Due to slow economic growth and a declining population, Japan’s share of Asia’s primary energy demand will fall from 17% in 2005 to 8% by 2030. In Asia, due to the growing demand for electricity, coal will still account for the largest share of primary energy by 2030. However, as China, India, Japan, and South Korea are all actively building nuclear power plants, the share of nuclear power will gradually increase. IV. World Oil Demand The world’s oil demand in 2005 was 3.8 billion tons (80 million barrels per day), and it is expected to rise to 5.6 billion tons (118 million barrels per day) by 2030. Of the increase between 2005 and 2030, Asia is expected to account for 970 million tons, representing 53% ； North America: 258 million tons, accounting for 14% ； Europe: 98 million tons, accounting for 5% ； 493 million tons in other regions, accounting for 27%. By 2030, Asia will become the center of global oil demand, with China and India together accounting for 56% of Asia’s oil demand, up from 42% in 2005. The major **oil demand and average annual growth rates in Asia from 2005 to 2030 are shown in Table 2 and Table 3, respectively. The growth in China’s oil demand will be driven primarily by the increasing number of vehicles owned each year. China had 32 million cars in 2005, and this figure is set to reach 230 million by 2030, representing a six-fold increase. India had 15 million cars in 2005, and this figure is expected to reach 86 million by 2030, representing a 4.6-fold increase. During this period, China will account for 57% of the increase in automobiles in Asia, India for 20%, and other **regions for 23%. V. World Oil Production By 2030, OPEC’s share of world oil production could exceed 50%. It is estimated that from 2006 to 2030, OPEC will account for 77% of the increase in global oil production (28 million barrels per day), while non-OPEC countries will account for 23% (8 million barrels per day). Oil production in Asia will decline slightly while remaining stable (see Table 4). In resource-rich countries such as those in the Middle East that produce oil, legal restrictions and more severe socioeconomic conditions will limit the involvement of international oil companies in their oil exploration and development activities. Unless there is sufficient upstream investment to enter the global oil production sector, international oil supply is expected to become tight in the future. VI. World demand for natural gas and coal In 2005, the world’s demand for natural gas was 2.4 billion tons of oil equivalent, and it is expected to rise to 4.4 billion tons of oil equivalent by 2030 (3.6 billion tons in the form of LNG). Of the increase from 2005 to 2030, Asia accounts for 743 million tons of oil equivalent, representing 36% ； North America is 100 million tons of oil equivalent, accounting for 5% ； Europe: 526 million tons of oil equivalents, accounting for 26% ； Other regions account for 668 million tons of oil equivalents, or 33%. World coal demand was 2.9 billion tons of oil equivalent (4.1 billion tons of coal equivalent) in 2005, and it is expected to rise to 4.4 billion tons of oil equivalent (6.3 billion tons of coal equivalent) by 2030. Of the increase from 2005 to 2030, Asia accounts for 1.131 billion tons of oil equivalents, accounting for 75% ； North America: 292 million tons of oil equivalents, accounting for 19% ； 30 million tons of oil equivalent in Europe, accounting for 2% ； Other regions account for 56 million tons of oil equivalent, or 4%. VII. World Carbon Emissions In 2005, the world’s carbon emissions amounted to 7.5 billion tons, of which Asia accounted for 36%, North America for 24%, Europe for 25%, and other regions for 15%. It is estimated that by 2030, global carbon emissions will rise to 11.7 billion tons, with Asia, North America, Europe, and other regions accounting for 43%, 20%, 20%, and 17% respectively (see Figure 1). By then, China’s carbon emissions will rise from 1.5 billion tons in 2005 to 2.6 billion tons by 2030, while its share of Asia’s total carbon emissions will drop slightly from 54% in 2005 to 53%. VIII. Implications for Japan Mr. Ito pointed out that the rapid increase in carbon dioxide emissions in developing countries in Asia indicates that transferring advanced energy-saving and environmental protection technologies to these countries is effective in reducing environmental burdens. He believes that progress in energy conservation by China and India is key to curbing global energy consumption and addressing global warming. He pointed out that both China and India have huge potential for energy savings, but there are also many problems that need to be addressed. In this regard, Japan can play a very significant role. To coordinate and realize interests both domestically and globally, Japan should make full use of the expertise and technology it has accumulated, and in line with its own international energy strategy, transfer energy-saving and environmental protection technologies to China and India. It should also assist these countries in building capacity in the area of statistical data collection, share knowledge and experience in legislation and the development of other institutional frameworks, and provide training focused on energy management. Author: Hiroyoshi Ito, Executive Director of the Japan Energy Economics Institute. Source: International Oil Economy, Issue 12, 2007