(Provisional translation)

Seminar on Energy Security in Asia
Hosted by the Ministry of Foreign Affairs, held on March 6 at the "Shinryoku" Room, Akasaka Prince Hotel

Opening Address by Seishiro Eto, Senior Vice-Minister for Foreign Affairs
"Asian Energy Security and Japan's Foreign Policy"

Good morning, distinguished guests, ladies and gentlemen. I am Seishiro Eto, Senior Vice-Minister for Foreign Affairs. Thank you very much for attending today's Seminar on Energy Security in Asia.

Asia is steadily recovering from the economic crisis it has been suffering from since the latter half of the 1990s. The region is expected to propel the world's economic growth in the 21st century. To meet this goal, Asia must increase its supply of energy. It has been pointed out, however, that the region's energy production is insufficient to meet growing demand. This may force Asian countries to rely increasingly on energy supplies from outside the region, weakening the energy supply-demand structure. To solve this problem, Asia must continue to strengthen its energy security programs. However, seen from another angle, this also means that there is substantial room for Asia to strengthen mutual economic interdependence, and boost the regional security, through energy as a leverage.

Before starting today's discussion entitled "Asia's Energy Security Challenges in the 21st Century," I would like to take up some of the issues and problems pertaining to Asia's energy security, and discuss them from the perspective of Japan's diplomatic policies.

If we look at energy in general, we find that there are three major issues that we face when considering how to strengthen Asia's energy security.

The first issue pertains to the supply of oil. Demand for energy is expected to continue growing dramatically in Asia, and oil will remain our primary energy resource, at least for the next twenty or thirty years. By 2020, Asia's energy demand is expected to account for 35% of world energy demand. This means that Asia will be by far the leading energy-consuming region in the world. Concerning oil, China became a net importer in 1993. Other countries, such as Malaysia and Indonesia, are also expected to become net importers within ten years or so. Clearly, Asia is fast becoming a net importing region for oil. It will need to rely on the Middle East for the majority of its oil imports. If, for some reason or other, the supply of oil is interrupted, almost all the countries in Asia will be adversely affected. Therefore, establishing preventive measures is a task which the region must work on as a whole.

The second issue is that the trend towards economic globalization has spread to the energy sector as well. For example, the IEA currently reviews the member countries' energy policies, including the status of deregulation, and provides recommendations on energy policies. Discussions are also under way at APEC on the liberalization and deregulation of energy trading. These worldwide moves to step up deregulation and liberalization aim to promote competition and reduce energy prices, thereby benefiting consumers and spurring economic activity. On the other hand, market liberalization does not necessarily guarantee stable prices and a stable supply of energy. There is a growing concern that, as a result of the development of the oil futures market, oil prices will fluctuate drastically over the short term. This, and the recent power crisis in California, are just two examples of the problems associated with market liberalization.

The third issue is that with increased energy consumption, global environmental problems seem to get worse. In Asia as a whole, coal and oil account for roughly 80% of primary energy supply. It is predicted that this share will remain virtually unchanged for the next twenty years, and that the absolute consumption volume of coal and oil will increase sharply. There are growing worries that increased energy consumption will adversely affect the environment by causing air pollution, damaging water quality, and contributing to global warming. The key challenge, therefore, is for us to think about ways of using energy efficiently while taking global environmental issues into full consideration.

In light of these projected energy problems, what should countries do to strengthen their energy security?

First, as regards the issue of securing the supply of oil and other energy sources, I have said earlier that Asia suffers from a weak energy supply-demand structure. One measure for strengthening this structure is to establish and reinforce a mechanism to counter emergency situations, based on oil stockpiling. Japan, a member of the IEA, stocks about 160 days' supply of oil, including state-owned and private-sector reserves. However, except for Japan and South Korea, most Asian countries have little or no stockpiling systems in place. In relation to this issue, at a meeting of APEC Energy Working Group held in October, 2000, members agreed to exchange, through workshops and other forums, information and experiences on a variety of issues concerning oil stockpiling. Japan intends to share with other Asian countries the experience and technology we have accumulated on petroleum stockpiling, and cooperate with them to establish a regional petroleum stockpiling system.

Giving our current dependence on oil and coal for energy, and our reliance on the Middle East for oil, it is important that we continue to diversify our sources of energy and energy supplies. In particular, we must expand the use of natural gas and renewable energy because they have fewer adverse effects on environment. These are important medium- to long-term goals in terms of energy security. For example, discussions are under way concerning the development of Siberia's and Sakhalin's abundant natural gas resources and the building of an international natural gas pipeline in Asia. I am keeping a close watch on the outcomes of these discussions, since the plan is aimed at securing a stable supply of energy within the region.

Next, I would like to talk about our efforts concerning market mechanisms. Everyone knows that markets must function effectively so that energy can be supplied in a stable manner. And, to stabilize the oil market, countries must consider ways and means to enhance market transparency. This is a task of utmost importance. Specifically, countries all over the world must ensure that their information on crude oil and oil products is completely accurate and precise. Japan welcomes that the IEA will collaborate with OPEC and other international organizations to formulate and improve the quality of a range of statistics and data. APEC, for its part, has been exchanging information on the petroleum market among its members and creating statistical data, through Japan's initiative. Based on these ongoing efforts, and by taking advantage of available opportunities, such as this seminar, I urge all Asian countries to share their awareness of the various problems we face, and to lay foundations for further cooperation. Moreover, as part of worldwide efforts to stabilize the oil market, increasing the mutual understanding between the oil-producing nations and the oil-consuming nations through dialogue is extremely important. It is based on this recognition that Japan will host the Eighth International Energy Forum in 2002.

Thirdly, with respect to harmony with the environment, countries must strive to enhance energy efficiency, conserve energy, promote the use of clean energy sources, and expand the use of renewable energy. These efforts will meet the growing need to diversify energy sources which I mentioned earlier with respect to ensuring the supply of energy. I believe Asia can vigorously promote these activities via APEC and other international frameworks. As regards the use of renewable energy, Japan took part in the G8 Renewable Energy Task Force established at the Kyushu-Okinawa Summit held in July of last year. Together with other G8 members and other countries in Asia, we are taking an active part in considering ways to encourage the use of renewable energy in the developing nations. If plans such as building an international natural gas pipeline in Asia, which I mentioned earlier, are realized, they would clearly facilitate the simultaneous attainment of economic growth, energy security, and environmental protection. These plans can also contribute to stabilizing the Asian region.

As you can see, there are a variety of policies that must be taken to reinforce Asia's energy security. Some of these policies accelerate measures that are already being implemented, while others need to be worked out slowly and carefully. In any event, they are all tasks which require individual Asian countries to cooperate with one another to implement.

I believe that Asia is a "sea of diversity." Whenever we consider all sorts of issues-not only those related to energy, but also politics, the economy, society, and culture-we must take this diversity factor into account. Otherwise, we cannot get to the heart of the matter. Similarly, when considering the issue of Asia's energy security, which is the theme of today's seminar, we must constantly bear in mind the region's diversity, and proceed in ways that are tailored to individual circumstances. We should not try to apply the same solution uniformly to all countries. I believe that it is important, while exercising flexibility in addressing diversities, we strengthen cooperation, coordination, and cohesion, that is to say three C's, to tackle issues of energy in Asia. Let us endeavour together to promote these three C's

I sincerely hope that with these perspective in mind useful discussions will be held in the pursuing sessions, and that this seminar will be of help for further strengthening Asia's energy security.

Thank you very much.