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On March 29, 2016, the Asan Institute held a roundtable with Dr. Leo Lester, Research Fellow at King Abdullah Petroleum Studies and Research Center (KAPSARC). The title of the roundtable was “Connecting East and West Asia: KAPSARC and regional energy governance in Northeast Asia.”
As an independent energy research center in Riyadh, KAPSARC is leading an international, collaborative project to investigate the current state and possible future of energy relations between the Gulf Cooperation Council (GCC) and North East Asia (NEA). Building upon the One Belt One Road (OBOR) initiative of Chinese President Xi Jinping, the project aims to examine the dynamics of bilateral energy relations and explore approaches to mutual interdependence between the GCC and NEA.
Four key points were highlighted in the talk:
1) Existing relationships are driven by energy, through trade, investment, and joint ventures;
2) Trade relationships are vulnerable to shocks;
3) Energy supply and demand fears lead both sides to fear energy security; and
4) Interacting with the new environment, and responding to environmental pressures.
[Existing Relationships]
At present, Dr. Lester highlights that there is a “massive GCC trade surplus, but [it] is poorly diversified.” The total trade from NEA to GCC amounts to $104 billion, whereas total trade from GCC to NEA is as much as $367 billion. Yet, “opportunities exist for reduced trade/investment barriers and further exports to GCC” if issues with bureaucracy, ownership and/or labor laws can be overcome.
[Trade Relationships]
Oil price volatility have a significant inverse correlation on trade relationships and economic growth. The China-Saudi Arabia, China-UAW, and China-Oman oil trade relationships all demonstrate this trend. NEA has the potential to lead its own unconventional revolution in methane hydrates. At the same time, Russia has its own Pivot to Asia with East Siberia-Pacific Ocean exports to China under long term contracts. From 2000-2010, Russian exports for oil has increased 70% and gas has increased 15%.
[Energy Supply and Demand Fears]
Although Chinese gas production is below target, Dr. Lester emphasized that the country is increasing pipeline and LNG capacity. Qatar has also shifted export markets to Asia following a drop in demand in the US and Europe. As such, the GCC has growing influence over China’s energy insecurity. Although political unrest often reduces oil exports, non-political variables are often the major factors.
[Interacting and Responding to Environmental Pressures]
Joint GCC-NEA stockpiling can help integrate energy security concerns, and accounting for embodied energy and emissions provides a fuller understanding of a country’s real energy demand. Ultimately, renewable and energy efficiency technologies present new opportunities for GCC-NEA cooperation.
Date/Time: Tuesday, March 29, 2016 / 2:00 pm – 4:00 pm
Place: Conference Room (2F), The Asan Institute for Policy Studies
Written by: Rachel Leng
⇨ Dr. Leo Lester is a Research Fellow at King Abdullah Petroleum Studies and Research Center (KAPSARC). He is working to improve understanding of the political energy economy of the People’s Republic of China. Before joining KAPSARC’s research department in July 2013, Leo worked for BG Group, a multinational oil and gas E&P company with operations in over twenty countries. Whilst there he had a variety of roles including within their Strategy and Portfolio Development department, first as a Portfolio Analyst and later as the Group’s China specialist and Principal Macroeconomist.