Asia should unite on energy
Updated: 2013-06-20 06:42
By Ho Chi-ping(HK Edition)
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Asia is being seriously short-changed when it comes to the oil-purchasing deals the region is still tied to. Because the various countries that constitute Asia are usually involved in individual deals, the collective strength of the whole region is not being capitalized as a bargaining tool to leverage more favorable terms in their purchases. Yet the fact is that since 2008, the combined nations of Asia have accounted for 29 percent of the world's oil use, thereby making them collectively the globe's biggest consumer of oil, and pushing North America into second place.
There is no reason why the present situation should be tolerated any longer. Let us look at how things can be reversed in Asia's favor. First, this year marks the 10th anniversary of the strategic partnership between China and the Association of Southeast Asian Nations (ASEAN) comprising 10 countries with a combined population of more than 602 million. Several more countries with links to ASEAN include Papua New Guinea, Timor-Leste, Japan, South Korea, Australia and New Zealand. So what would happen if, for instance, China and ASEAN joined hands to create a single authority to negotiate all their associated countries' purchases of crude oil? It would create one hard-nosed bloc driving ever-harder bargains with the Middle East and other oil cartels to its advantage!
Dealing in oil is a tough, dog-eat-dog business where might is right. If China and ASEAN bonded together as proposed, that would bring into play something the market understands - collective bargaining power. The new bloc could confront the cartels and state very bluntly: "Asia is now the biggest single force in the market. We are the world's biggest customer and we demand to be treated as such. We will no longer scramble around accepting the 'crumbs' that fall from the table of the big players. We are now the biggest player and our correct place is at the table!"
Ah, yes, brave words indeed, but we need to be able to back them up with something more solid than rhetoric - deeds. And the first step towards achieving that solidarity, and creating the much-needed China/ASEAN oil-buying bloc, has just taken place in Singapore. This was the Hainan Petrochemical International Exchange and Cooperation (Singapore) Forum held on the theme of "Empowering Asia through Energy & Economic Cooperation", hosted by the China Energy Fund Committee (CEFC).
To illustrate the importance attached to this forum the prestigious attendees included China's newly appointed ambassador to Singapore, Duan Jielong; the chief executive of Singapore's Energy Market Authority, Chee Hong Tat; the deputy director of the Financial Affairs Office of Hainan provincial government, Ma Wenfeng, and various eminent energy experts, executives, officials and academics from Singapore's Ministry of Trade and Industry, the China University of Petroleum, Peking University, Sinopec, Beijing Petroleum Exchange, Singapore Exchange and others.
Singapore was chosen as host city because it is one of Asia's most vibrant and best-connected commercial and logistics centers. As one of the world's most successful economies, it is also a large energy user and would be a powerful participant in the proposed purchasing bloc.
Meanwhile, the forum also focused on China's invitation to ASEAN member countries to take a stake in the Yangpu Economic Development Zone (YEDZ) on the northwest coast of Hainan, south of the provincial capital of Haikou. CEFC Executive Vice-President Zang Jianjun pointed out that the YEDZ faces the Qiongzhou Strait to the north and Beibu Bay to the west, and lies directly on the primary Singapore-Hong Kong-Shanghai-Osaka international shipping lane, the main route connecting China with the rest of Southeast Asia.
Since being designated by the State Council as a State-level development zone in 1992, YEDZ has grown into an important South China port as well as a comprehensive oil and gas industrial base and an oil reserve site, a modern logistics center, and a large industrial base.
Yangpu is without doubt the No 1 ideal location for a major petrochemical facility that would serve both China and neighboring ASEAN. Its potential ties in perfectly with several major infrastructure projects China is presently involved in that will bring progress and prosperity to the whole region. Easily the most significant of these is a proposed canal across the Isthmus of Kra in Myanmar and Thailand that will eliminate the present loop oil tankers from the Mideast must take down the coast of Malaysia and around Singapore before heading north to China. Once the canal opens, the tankers can take a short-cut and then head across the Gulf of Thailand and up the Vietnam coast to China, where the first port of call will probably be Yangpu.
Just think how quickly a refinery there would be working 24-7 to keep up with the demand not only for refined fuel from China but for ASEAN. A further plus in this scenario is that transport costs will be significantly reduced for the greatly shortened voyage, thereby benefiting Japan and South Korea. Let us hope this YEDZ plan can be fully developed quickly to benefit all countries concerned.
The author is vice-chairman and secretary-general of the China Energy Fund Committee, an independent think tank on China and energy-related issues.
(HK Edition 06/20/2013 page9)