I. Introduction: Demand Outlook
Southeast Asia faces very large growth in energy demand to fuel electricity generation, industrial processes, transport, and households in the coming decades. The Toyko-based Asia-Pacific Energy Research Centre (APERC) projects that energy demand in the region (excluding Cambodia, Laos, and Myanmar) will double from 252 million tonnes of oil equivalent (mtoe) to 525 mtoe between 1999 and 2020 (Table 1). (1) How to best meet this demand poses a range of policy challenges for the region's governments.
Energy supply is a crucial component for economic growth and improving living standards. Governments, therefore, have the task of ensuring: (1) that energy supply is provided to industries and households as efficiently, reliably, and as securely as possible; (2) that the environmental impact of supply and consumption are acceptable; and (3) that supply is consistent with social and equity objectives, for example, promoting the supply of electricity to isolated rural areas. In 2002, the International Energy Agency in Paris reported that as many as 200 million people in Southeast Asia do not have access to electricity. (2)
Energy sector development also has implications for inter-governmental relations. Pursuit of domestic energy goals can affect neighbouring countries, for example, the construction of dams for hydropower in shared river systems in the Greater Mekong Subregion (GMS). Many of these goals could be better met if governments work together. Furthermore, domestic gas and power systems will be increasingly supported by pipelines and transmission links with other countries. This opens up the possibilities of system integration to meet demand at lower cost. Co-operation over energy matters can help foster economic integration and should be an important aspect of ASEAN's endeavours.
II. Can Southeast Asia's Energy Resources Meet Demand?
Southeast Asia's primary energy resources--oil, gas, coal, and hydropower--are unevenly distributed and relatively limited compared with the scale of demand. The latter may be a contentious point. The region does have plentiful reserves of natural gas, large coal reserves in Indonesia, and generous hydropower potential especially in the GMS. The scale of Southeast Asia's future energy demand may not be as spectacular as that of China, where energy demand is projected to grow from 754 mtoe to 1,322 mtoe during this period. Nevertheless, Southeast Asia's needs are still very large. In 1990, the region's total demand was a mere 170 mtoe. APERC projects it to be three times as great by 2020. APERC's analysis may also be conservative and understate demand. It assumes declining energy intensity in Southeast Asia compared with pre-1999. Energy demand grows by 3.6 per cent per year between 1999 and 2020 as against annual average GDP growth of 4.9 per cent. Even assuming that APERC's projection is fulfilled by 2020, per capita energy consumption in Southeast Asia (excluding Myanmar, Laos, and Cambodia) will still be less than one-sixth that of North America, and a quarter that of industrialized Northeast Asia (that is, excluding China). Southeast Asia's energy consumption will still be low on a per capita basis compared with today's economically advanced regions. (3)
Southeast Asia as a whole enjoys a much greater energy resource endowment than Japan, South Korea, and Taiwan, which have little or no indigenous energy supplies. Historically, this wealth, set against tiny domestic demand, resulted in Southeast Asia becoming a major energy exporter.
Southeast Asia's resource bounty is not evenly spread. The Philippines, for example, has long relied heavily on energy imports. For energy-rich Indonesia, Malaysia, and Brunei, petroleum exports played an important role in their economic development in the 1970s and 1980s, contributing a large share of foreign exchange and government revenue. Unlike many other resource-abundant developing countries, these governments generally managed the returns on their resources developments wisely. …