Distinguished Guests,

Ladies and Gentlemen,

 

It is the winter of extreme cold, made glorious summer by the candid discussion and your insightful contributions on the theme of today. I can say that the mission of this meeting has been accomplished with sincere effort and genuine intention to establish a track-two multilateral dialogue mechanism, to build international trust, to advance regional economic integration, to enhance comprehensive connectivity, and to promote energy cooperation. Your active participations have provided important support not only to us, China Energy Fund Committee, but also food of thought and inspiration to further peace and stability of the whole region.

 

 

Alike the rapid transformation in political and economic spheres, the focus and general situation of global energy security have changed dramatically in recent years. A new global energy landscape is emerging, creating new opportunities and challenges for many governments and administrations, developed or developing.

 

On the supply side, the shale boom has started to revolutionize the energy market in the U.S., if not the entire world. The U.S. Energy Information Administration (EIA) projects a continued growth in U.S. energy production, at rate exceeding growth in energy consumption through 2040. ^[1] The U.S. is overtaking Russia as the world's largest producer of oil and natural gas. ^[2] Moreover, recent signs are positive for lifting the International sanctions against Iranian oil export, a possible shift that will reshape both markets and international relations.

 

On the demand side, Asia’s economic growth is increasingly steering the path of global energy industry. According to EIA, China’s steady growth in oil demand has led it to become the world’s largest net oil importer, exceeding the U.S. in September 2013 and this trend will continue through 2014. ^[3] Furthermore, the shutdown of 54 nuclear reactors in Japan after the Fukushima incident has caused a sudden increase in Japan’s energy import dependence, making her the world's largest importer of LNG, which accounts for about 37% of global share. ^[4]

 

This change in the energy equation has transformed the global energy landscape affecting geopolitics and foreign policies in many countries.

 

For decades, the US has been heavily dependent on imported oil. They responded by forging ever closer, more militarized ties with the Middle Eastern oil producers. However, given the prospects of the shale revolution in the US homeland, it will no longer need to deploy so many troops in the Middle East to safeguard its energy security, and may shift its attention to the Asia-pacific. This may explain how the Obama administration can afford the rebalancing strategy in the Asia-Pacific.

 

At the same time, Japanese foreign relations are being shaped by the demand for energy resources. Japan's long-frosty relations with Russia are a case in point. The two have been at odds with each other since 1945 over the ownership of four islands off northern Japan, which Russia seized and annexed after World War II. In 2012, after being devastated by earthquakes and tsunami, Japan has unveiled a "resource-diplomacy strategy", which calls for doubling up the diplomatic efforts at key resource-rich countries, such as Russia and Mongolia by providing economic assistance. As part of this strategy, Japan is discussing with Russia the possibility of constructing a gas pipeline along the sea bed linking the two countries. This glaring example illustrates the point that sometimes, energy cooperation might transcend politics.

 

 

Yes, the word 'energy security' is always associated with geopolitics, economics and national security. However, we should resist the temptation of viewing energy security as a zero-sum game, driven by narrow nationalistic interests. Energy belongs to the entire human race, present and future generations included. And we all have the right and duty to use it justly, wisely, and responsibly.

 

In fact, while the world's energy demand has undoubtedly grown significantly, the planet's total endowment of even conventional energy, if managed properly and used wisely, should be sufficient to meet current and future demand for a long time to come.

 

Most importantly, as I addressed this morning, since energy is a common denominator in our developmental goals and national interests, energy cooperation can be regarded as a means of mutual reassurance and a measure of building trust.

 

 

It is well known that the origin of “the peaceful use of nuclear energy” was part of “Atoms for Peace,” a policy that U.S. President Dwight D. Eisenhower launched at the UN General Assembly in December 1953. But, the real atoms for peace came only after the end of the Cold War decades later.

 

In February 1993, the Russian Federation and the United States signed a 20-year, government-to-government agreement for the conversion of 500 metric tons of Russian highly enriched uranium from 2000 nuclear warheads to low-enriched uranium to fuel about half of U.S. nuclear reactors and power one of every 10 light bulbs in the US. The agreement became known as the “Megatons to Megawatts program”.

 

This scheme provided a channel for Russia to process its large reserve of high-enriched uranium from warheads. On the other hand, it helped the U.S. stabilize the supply of uranium for electricity generation. In fact, the scheme showed a way of successful cooperation between yesterday rivals through the fresh interpretation of “the peaceful use of nuclear energy”.

 

 

On the other hand, the number of nuclear reactors in the world is increasing steadily, with over 60 being built this year, added to an existing 435 (an increase of around 14%)[5] , 156 more will be here by 2020, and 343 more still by 2025. China and India alone will account for 260 of them. The coming years are expected to see a shortage of uranium supply. In 2010, the world needed about 65,000 tons of uranium to power its 430 plus operating reactors. But globally, only 53,663 tons were mined. The remaining chunk came from repurposing Russian nuclear warheads, but that supply will soon be exhausted. The cogent question is: Where's all the uranium going to be coming from?  

 

It has been estimated that the US holds 8500 nuclear warheads which are generally considered more than enough to keep peace in the world and to destroy the world many times over. Would the US consider converting the weapons-grade uranium in the bombs into fuel for their nuclear-power plants and contribute to the fuel reserve of the world?

 

After the Fukushima incident, Japan has shut down its 54 nuclear reactors. Given that Japan operates roughly an eighth of all the world’s nuclear reactors, and the country relied on nuclear for about 30% of its energy before the incident, it is a source of significant demand for and thus also supply of the radioactive material.

 

As reactors have come off-line in Japan and the country is moving away from nuclear power entirely, will the Japanese government and corporations consider selling their uranium reserve and technology to other nuclear thirsty countries such as China and South Korea? In return, China and Korea can export a price equivalent of electricity or other raw materials to Japan. If this is success, it will create a new oriental version of “Megatons to Megawatts program” in Asia.

 

 

When we talked about international energy pricing system, we cannot omit the role of one organization: The International Energy Agency (IEA). Last year marked the 40^th anniversary of this energy watchdog of the West, which was founded by members of the Organization for Economic Cooperation and Development (OECD), or developed countries, as major oil consumers then, following the 1973 oil shock to manage supply crises.

 

Over the past 40 years, IEA has developed an energy strategy which enabled the developed world to act as an engine for the global economy and feature more prominently in the global political and economic landscape. However, China, the world's top energy consumer today, which accounting nearly 12 percent of total global oil demand in 2013, as well as other emerging economies such as India, Russia, South Africa, Brazil and Indonesia, though are invited to attend some emergency response exercises, are still not full members of this organization.

 

On the other hand, the US, a founder of the original IEA, is gradually changing its role from an oil importing country to an exporting one, and therefore should more appropriately join the OPEC than remaining in the IEA.

 

Surely, to change Asian developing countries’ passive role regarding world oil pricing and to raise the region's oil trading platform would not only call for active support and participation of the governments, but of the various groups, businesses stakeholders, professionals and academics, and NGOs in the region. It is time that an Asian version of the IEA be formed to safeguard the interests of energy consumers in this region. And I would hereby, formally propose that we establish here in Hong Kong, an Asian Energy Cooperation Organization to align our visions, goals, and interests.

 

In order to enhance regional energy cooperation, I would like to share with you some of my preliminary thoughts about an Asian Energy Cooperation Organization, AECO for short. This supranational organization can be instrumental in:

 

1.         Promoting all-round energy cooperation in both official and civil levels in the region;

2.         Coordinating cooperation on energy pricing, and organizing regional trading platforms;

3.         Establishing regional strategic energy (oil) reserves and a system of sharing and distribution;

4.          Integrating energy infrastructure within the region to achieve the integration of an Asian electric Super- grid;

5.         Establishing funding platforms for the development of unconventional energy sources and to share the latest achievements of energy and renewable energy technology;

6.         Developing an Asian clearing system of energy trade utilizing alternative currency to replace petrodollars, such as a currency basket; and

7.         Serving as a common platform to align commercial interests to jointly develop the resources and energy potential of the East China Sea, and of the South China Sea.

 

 

Ladies and gentlemen, as I said in the very beginning, we live in an increasingly interconnected and turbulent world. With our interests so intertwined, we rise and fall together. And there is either security for all or security for none. A unilateral approach is no longer appropriate to make or maintain peace and stability. Therefore, multilateral cooperation is becoming a central theme and major trend of our time.

 

At the beginning of 2014, we should uphold the new spirit of cooperation in the post Rio+20 era, and stay convinced that our world is big enough to accommodate the development of all parties.

 

Although we sometimes have different views on specific issues, I believe one voice stood out - that the people of different countries all expect their leaders to demonstrate goodwill to one another to achieve greater harmony in those multilateral relationships. I am sure this hope will be heard by the governments on various continents and can be translated into constructive decisions and positive actions that can be implemented in the future.

 

As the host of this colloquium, I promised you that CEFC will continuous to work with all of you to turn challenges into opportunities, to build small gains into major accomplishments, and to promote international cooperation and mutual respect, which is essential to the sustainable growth and prosperity to our societies. I hope that when we meet in this room again next year, we will be able to come up with a long list of deliverables and take a new step forward in the pursuit of common development of our planet!

 

See you again, same time, same place, next year!

 

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