Economic Growth and Energy Demand Outlooks in Asia

Delivered by HE Abdalla S. El-Badri, OPEC Secretary General, to the 5th Asian Ministerial Energy Roundtable, Seoul, South Korea - 12 September 2013

[Slide 1]
Your Excellencies, Ladies and Gentlemen,
Good morning.

I would like to thank Korea’s Minister of Trade, Industry and Energy for the invitation to speak at this Fifth Asian Ministerial Roundtable. It is a pleasure to be here in Seoul.

I understand the theme of today’s session is to place Asia into perspective in terms of economic growth and energy. There is clearly much we can focus on and I hope that my comments will provide a humble contribution to this debate.

There have been many predictions about Asia in the 21st century – that it will increasingly become the world’s economic centre; and that developments in the region will have profound implications for people, businesses and nations everywhere.

In fact, all of this is already happening. The world’s economic and energy landscape is changing – and Asia is at the very heart of this.

We can see this when we look at demographic trends, economic growth rates, and energy demand and supply since the start of this century, as well as projections for the future.

In terms of population, the Asian region accounted for around 50 per cent of the world’s increase from 2000 to 2012 and is expected to account for close to 40 per cent of the growth from now until 2035. The region has a young, dynamic and expanding population.

Looking at economic growth, the region has outpaced others in the period since 2000. While the OECD has seen an average growth rate of 1.8 per cent between 2000 and 2012, Asia and Oceania – excluding China – has seen 5.5 per cent growth. China alone over this period is at 9.8 per cent. And India is at 7.6 per cent.

The region has been the most dynamic in terms of trade, with exports and imports both witnessing significant growth. This trend will continue. Within a few years, Asia will not only be the world’s largest producer of goods and services, but the largest consumer of them as well.

When we look at oil and energy demand, the numbers reflect a similar message. Of all world regions, Asia has seen the greatest energy demand increase since 2000.

In terms of oil, demand in the Americas and Europe since 2000 has fallen by 2.3 per cent and 12.4 per cent, respectively, whereas Asian oil demand has increased by 41.5 per cent. This equates to an addition of over 8 million barrels a day, with Asian oil demand currently standing at more than 29 million barrels a day.

Looking ahead, global energy demand is expected to expand more than 50 per cent by 2035, with Asia again seeing the largest increase. For example, oil demand is expected to increase from just below 90 million barrels a day in 2013 to around 109 million barrels a day by 2035, with around 88 per cent of this increase in Asia.

On the flip side, however, Asian oil supply has only witnessed growth of 1 million barrels a day since 2000, to stand at close to 8 million barrels a day.

It means that oil demand in the region today exceeds local supply by over 20 million barrels a day. And this number is expected to grow due to further domestic consumption growth.

There is no doubt that Asia will continue to be at the centre of medium- and long-term changes that are shifting the economic balance of power and altering the global energy map.

There have been suggestions that Asia’s per capita income could rise six-fold in purchasing power parity terms to reach European levels by 2050. This would nearly double Asia’s share of global GDP to over 50 per cent.

In addition there is huge potential to ease the plight of many of those billions in Asia who continue to suffer from energy poverty.

Looking outwards, Asia’s continued growth will have further implications for global trade, interdependence and cooperation, as well as a greater role for the region in global affairs.

This growing power and influence also means the region will increasingly be looked upon to take a lead, in areas such as education, technology and research, and build closer ties, particularly with other emerging economies in Africa and Latin America.

This is certainly true in the energy sector as countries in Asia look for overseas resources to meet their increasing domestic demand.

For example, we are already seeing a number of Asian oil companies engaging in overseas acquisitions and projects to help secure supplies, with many of these in other developing countries and regions.

Moreover, it will mean that over the next 20 years or so Asia will see energy and oil imports increase from almost all regions – but mainly from the Middle East, where many OPEC Members are located. And these countries are equipped and able to meet this increase.

Let me stress here for those worried about there not being enough resources to meet demand. This is not the case. There are more than enough resources to meet expected demand for the foreseeable future.

When talking of energy supply, I think it is also important to highlight tight oil. It is a development much discussed in global energy circles and one that obviously has implications for Asia and global oil trade.

I would like to make three points:

First, it is clear that tight oil developments in the US are freeing up some global supplies, many of which are now finding their way to meet Asia’s increasing demand.

Second, while some have viewed these new supplies as a threat to other producers, OPEC welcomes these developments. They support the global supply outlook and provide further proof to consumers that the world is not running out of oil.

And third, while recent developments in the US have been transformative for its energy industry, we need to see how sustainable this type of production is in the longer term. For instance, the industry is already seeing tight oil fields reach a production plateau after only a year or so, and then witness a steep decline rate. There have been reports that shale wells can drop off by more than 60 per cent within the first year.

Here in Asia, there is already much discussion about the potential for shale in the region. This leads me to a number of questions: Can developments in the US be replicated elsewhere? Or is the US a unique case? Let us wait and see.

Your Excellencies, ladies and gentlemen,

Asia will continue to be the engine of economic growth and energy demand in the decades ahead. Its ascent is already one of the defining characteristics of the 21st century.

And from OPEC’s perspective, let me finish with two important points.

First, that our Member Countries remain committed to making sure our customers receive secure and regular oil supplies to meet their demand needs.

And second, we are also committed to broadening areas of cooperation, through events like this Roundtable. It is evident today that the importance of dialogue between the world’s energy stakeholders — especially in terms of bringing together producers and consumers to discuss the various global and interdependent issues we face — has never been greater.

Thank you for your attention.

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