ABSTRACT

Energy security is an issue of particular significance to ASEAN states as well as other regional states such as India, China, Korea, and Japan. Given the possibility of high oil prices, diminishing oil supplies and increased competition for resources, disputes over territories, and the strategic importance of sea lanes passing through Southeast Asia, there is much scope for competition as well as opportunities for cooperation. The paper discussed two key questions: What is the energy problem in the region and what have its consequences been?

INTRODUCTION

Eleven years ago in 1998, Ji Guoxing wrote presciently in the Korean Journal of Defence Analysis that “energy security is of particular importance in the Asia Pacific owing to its physical unavailability to meet demand, and energy security is now becoming a fundamental cornerstone of economic policy for the Asian Pacific economies”. He cited a report in the Los Angeles Times, which predicted that “some time in the next twenty years or less, global petroleum output may begin a permanent decline, even as world oil demand continues to rise … though market forces and improved oil production technology should keep petroleum flowing well into the twenty-first century, the peak of the Oil Age may come far earlier than conventional thinking now assumes”. Ji therefore concluded that world oil production would begin to decline around 2010, and oil prices would rise in real terms.

Yet, the concentration of two-thirds of the world's proven oil reserves in the Persian Gulf area means that Asia's dependence on imported Middle Eastern oil would increase. The problem, however, is that “these supplies remain potentially vulnerable to military or political events that have nothing to do with markets, but which can have an enormous impact on oil and gas”. Moreover, the fact that these oil supplies must traverse vast oceans, through long and vulnerable sea lines of communications (SLOCs) that pass through the narrow and troubled Gulf of Hormuz as well as the narrow, strategic Straits of Malacca on their way to lucrative Asian markets to fuel their explosive economic growth, has resulted in much greater vulnerabilities to any disruption.