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Asia-Pacific countries need to monitor energy trends with caution, S&P warns

Standard & Poor's Ratings Services has advised Asia-Pacific countries to plan carefully for their energy needs as demand outside the region rises fast.

Because this region is relatively energy-poor, it will depend more and more on imports to satisfy its rising energy appetite, and the rise of new energy-trading partners ranging from Central Asia to Africa to Latin America has been evident.

In an economic research paper on "Asia-Pacific Energy Trade: A Hungry Region Extends Its Global Footprint", the energy trade in 13 countries and territories was monitored. These were Japan, Australia, and New Zealand plus the emerging economies of mainland China, India, Hong Kong, South Korea, Singapore, Indonesia, Malaysia, the Philippines, Thailand and Vietnam.

At the individual economy level, Vietnam, Australia, Indonesia and Malaysia are net energy exporters, while the others including Thailand are net importers. Energy trade balances across the region in 2012 ran the gamut from a deficit of 17 per cent of gross domestic product for Singapore to a surplus of 6 per cent of GDP for Malaysia.

In Thailand, the deficit was about 8 per cent of GDP.

Malaysia ran the largest energy trade surplus in the region of more than 6 per cent of its GDP in 2012, almost fully accounted for by gas.

Indonesia and Australia have energy surpluses of about 2 per cent of GDP; both are coal and gas exporters and oil importers.

Vietnam has historically run an energy surplus but this has been dissipating in recent years.

To give a sense of scale relative to the importers, the sum of the energy trade surplus in 2012 for these four economies was about US$70 billion (Bt2.27 trillion).

The relative positions Asia-Pacific economies held with respect to energy trade balances have not changed much over the past decade when measured in terms of GDP.

"Singapore, Korea and Thailand have remained at the top for the deficit countries, and the four net-surplus countries have not changed either. But in US dollar terms, China's share of the region's energy trade has risen significantly, to more than 30 per cent of net energy imports in 2012, from about 10 per cent in 2002," the report said.

The rating agency also cautioned that the region's ability to meet its own energy demand was declining. The trends are apparent from the share of intra-regional imports as a percentage of energy imports from all countries. S&P contrasted this result with the manufacturing sector, where Asia-Pacific intra-regional trade is still on the rise.

The Asia-Pacific region's growing reliance on "non-traditional" supply countries shows up clearly in its crude-oil imports. Imports into the region are still dominated by economies in the Middle East (including Qatar), with a relatively steady share at about 60 per cent. But new suppliers need to be found as the reliance on supplies within the region (mainly from Indonesia and Malaysia) has declined.

Crude-oil imports from the Middle East, excluding Qatar, accounted for 56 per cent of the total. In the past 12 years, imports from Latin America and Russia have risen significantly, from 0.8 per cent and 0.5 per cent in 2000 to 5.6 per cent and 4.8 per cent in 2012 respectively.

On the demand side, China has passed Japan as the largest oil importer in Asia-Pacific, but, as a share of GDP, its imports have not increased much since 2007, rising by 0.4 percentage point to 2.9 per cent. The fact China's import growth lags its GDP growth suggests rising domestic production is able to meet the bulk of marginal oil demand.

India's imports leapt past South Korea's and passed the $100 million mark in 2012, although, as a share of GDP, Korea continues to have the highest import bill in the Asia-Pacific region at 7 per cent.

Concerning natural gas, intra-regional imports accounted for only 31 per cent of total imports in 2012, down from 52 per cent in 2000. Of total imports, 24.6 per cent in 2012 came from Qatar.

The region also relied more on external coal. The share of Asia-Pacific coal imports coming from within the region had been rising steadily, to 80 per cent in 2000 from about 60 per cent in 1990. However, since the 2006 peak, the share of coal imports coming from within the region fell to 73 per cent in 2012.

"Although energy-demand growth in Asia-Pacific and elsewhere looks reasonably strong and stable going forward, the patterns of global energy supply are in flux. Developments include the ongoing shale-oil revolution as well as alternative sources such as solar and wind, which continue to move toward commercial viability. These will alter the supply-demand balance of key economies as well as bring potentially new players into the market.

"All of this suggests to us that blind extrapolation of Asia-Pacific's recent energy trends needs to be treated with the appropriate degree of caution," it concluded.



Asia-Pacific crude oil import sources

Percentage of total crude oil imports

2000 2007 2012

Middle East* 53.4 59.1 55.8

Africa 5.2 10.1 13.1

Asia-Pacific 12.6 9.3 6.4

Qatar 5.9 5.7 6.1

Latin America 0.8 1.5 5.6

Russia 0.5 3.7 4.8

Note:* Excluding Qatar

Sources: Standard & Poor's, UN COMTRADE


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