1 THE CHALLENGES OF ENERGY SECURITY IN OUR TIME 2nd ASEAN Regional Forum Session I : Energy Security Risks and Strategies (Part 1) 16 April 2008 Singapore.

1

THE CHALLENGES OF ENERGY SECURITY

IN OUR TIME

2nd ASEAN Regional Forum

Session I : Energy Security Risks and Strategies (Part 1)

16 April 2008Singapore

Elspeth Thomson

Senior Fellow

Energy Studies Institute

National University of Singapore

2

Purpose/Outline

To set the stage for this Forum by providing an overview of:

• Definition of energy security• Review of energy security indicators • The world’s (non-country specific) energy security

risks (the “dilemma”)• The security risks of each form of energy• The link between climate change and energy security• The main strategies to lower a country’s energy

security risks

3

What is Energy Security?

Definitions generally include all of these:security of energy supply in terms of quantity security of energy supply in terms of timeliness security of energy conveyance to final consumer security of energy price security of safe consumption, etc.

At each stage there are physical, capital and labour constraints, the potential for accidents, “Acts of God”,

political manipulation and acts of terrorism.

4

Energy Security Indicators

Great variety in use: They differ in terms of -i) the range of [often difficult to quantify] political

factors that they attempt to capture ii) The econometric techniques, sensitivity analyses

employedBottom line is the need to measure: i) diversification of energy supply sources (geographical

origin and type) ii) net energy import dependency iii) net oil import dependency

5

Indicators (con’t) –The Imperatives of

Climate Change

Any responsible energy security strategy today must also accommodate the imperatives of climate

change, making policy-making in the energy arena even more complex and challenging.

Governments must be creative and have a flexible,

more diverse portfolio of options.

6

Today’s Global Energy Security Dilemmas

Summarised

Transport Sector- how to fuel road, air and water transport

• Lack of viable substitutes for oil products• Proven, largest and easily accessible oil reserves

are concentrated in geopolitically sensitive areas• Climbing oil prices reflect various supply- and

demand-related factors • Pressure on the prices of gas (and coal)• Role of oil consumption in climate change

7

Dilemma cont’d

• High cost and questionable viability of biofuels• High cost and impracticalities of electric, hydrogen,

etc. vehiclesPower Sector- how to generate large quantities of

electricity• Most countries are diversifying electricity

production – oil, gas, coal, hydro, biomass, nuclear. Some countries have more options than others

• Worries about nuclear power plant disasters, proliferation and waste disposal

8

Relative Risks

All energy types have security risks associated with their extraction/generation, conveyance and/or use. Governments must weigh the relative advantages

and disadvantages of each type given their country’s particular circumstances and make tradeoffs.

9

Oil Security Risks

• Depletion of easily extractable reserves, though potential for new discoveries does exist

• Non-conventional resources are becoming commercial

• Geopolitical risks at point of extraction and in conveyance

• Concern over dominance of OPEC• Major capital and specialised labour requirements• Concern over affordability• Concern over current and future effects of GHG

emissions

10

Oil Security Risks (con’t)

A fairly new development (though it has been some years in the making):

• the trend for oil (and gas) assets, especially upstream assets, to be increasingly in the hands of governments.  Unlike, say a decade ago, when the oil/gas majors controlled a large share of energy assets, the reverse is true today.  One consequence is that an already imperfect energy market is now more unpredictable (and even less transparent) as more political considerations come into play. 

11

Gas Security Risks

• Ample supplies still available and promising exploration outlook

• Geopolitical risks at point of extraction and in conveyance

• LNG considered a positive option• Major capital and specialised labour requirements• Considerable opposition to construction and routing

of pipelines• Concern over current and future effects of GHG

emissions

12

Coal Security Risks

• Abundant reserves on all continents• Lower extraction and conveyance risks• Lower capital and specialised labour requirements• Higher concern over GHG emissions: function of

integrated gasification combined cycle and carbon capture and storage carbon capture and storage

• Coal option may be eliminated depending on GHG regulation

• Climbing prices

13

Hydropower Security Risks

• Inflexible geographical constraints• Climate change already affecting water flows• Major capital and specialised labour requirements• High initial costs but relatively low operation costs• Potential annihilation of local ecologies, societies,

historical heritages

14

Nuclear Power Security Risks

• Uranium resources are readily available but processing is not

• Requirement of large geographical area• Major capital and specialised labour requirements• High initial costs, but relatively low operation costs• No GHG emissions, but waste disposal, safety and

proliferation risks• NIMBY- sometimes major demonstrations

15

Biofuel Security Risks

• Questions over potential for sufficiently large-scale production

• Production is a function of land, soils, water resources, climate, etc.

• Significant capital and specialised labour requirements

• Potential competition with food crops• Potential high ecological damage from fertiliser use,

water depletion, deforestation• Questions over energy consumption per unit of

output• Price of output from large-scale production unknown

16

Renewables Security (Solar, Wind, etc.) Risks

• Insufficient scale for modern economies• Potential high land-use and ecological impacts• Currently high costs though could decline• No direct emissions

17

Climate Change and Energy Security

• The environmental consequences of burning large quantities of fossil fuels are increasingly being regarded as a security issue.

• Many countries would be very badly affected by rising sea levels, extreme wind storms, etc.

• Potentially hundreds of thousands of homeless people

• Loss of prime agricultural land• Increased incidence of diseases

******These are all ingredients for instability, if not conflict

18

Climate Change and Energy Security (con’t)

The task of enhancing energy security, challenging as it already is, is further complicated by the need for governments to take on the concerns of the wider international community with respect to their emission of GHG.

This factor limits the reliance on the softer, cheaper

energy options, e.g. coal.

19

Climate Change and Energy Security (con’t)

Although the vast majority of countries (non-Annex 1 countries under KP) do not have binding obligations to reduce their GHG emissions, governments are under increasing pressure from the international community, NGOs, and sometimes their own publics, to do their bit to reduce the growth rate of their GHG emissions, or better still, to reduce their levels of

emissions altogether. 

20

Common Strategies to Reduce Energy Security Risks

1. Increase the number of fuels and technologies in the energy mix

2. Increase the number of suppliers for each fuel

3. Raise energy consumption efficiency

4. Set conservation goals

5. Build storage capacity

21

Concluding Remarks

• It is important for countries/regions to develop national energy policies that are comprehensive, and which go beyond ensuring the flow of oil/gas and to avert short-term disruptions.  

• Countries/Regions need to develop energy policies that address the main concerns arising from the larger global threat of climate change.

22

THE END