Technology needed to keep up with demand
The
projected tripling of power demand in Asean over the next two decades will
force governments to work hard in securing new energy resources, but subsidies
are a major hurdle to foreign investments, says an industry executive.
Governments
should strengthen collaboration in their energy policies in order to handle the
region's energy hunger challenges, said Simon Henry, chief financial officer of
the global major energy company Royal Dutch Shell.
He
anticipated the future of energy demand at the 120th anniversary of its Thai
unit, The Shell Company of Thailand Ltd.
In
light of fluctuating crude prices, global energy demand in the first half of
this century would double from now, especially in Asia Pacific, fuelled by a
larger world population.
The
trend points to future energy prices: as long as demand keeps rising, oil
prices will never be cheap.
The
International Energy Agency said the world requires US$38 trillion in new
energy investments to serve demand in the next two decades.
Natural
gas, the main resource in the region, may be found in many countries in the
region such as Vietnam.
For
Thailand, since its sole deposit in the Gulf of Thailand would be depleted
within 15 years, costly liquefied natural gas (LNG) imports will be an
essential feedstock.
To
strengthen gas supply security, governments must maximise the potential of
their gas resources.
The
trans-Asean gas pipeline and regional power network should be upgraded to their
full potential and perhaps made part of the regional economic integration.
"The
private sector has been definitely playing a great role in the development all
these years, but more can be done," he said.
Governments
are required to collaborate in setting common and robust regulatory standards
and clear guidelines for regional cooperation, said Mr Henry.
While
there remains the need to promote more energy investments, it is easier said
than done.
Private
energy companies are frustrated with the prevailing subsidy policies in the
region. While it is understandable that governments want to shield people from
expensive energy costs, subsidies have become a barrier for companies to invest
huge capital in technology development.
"There
are three key issues I would say essential for the governments to reconsider to
ensure the security of energy in the region: they should remove subsidies, they
have to create a market and the last thing is to promote technology
investment," said Mr Henry.
"The
hardest is the subsidies. In 2012, the subsidy cost will reach half a trillion
dollars, which is the main factor barring companies from investing. I
understand that it happens all around the world, and it's about political
choice. It's difficult, but we need to find a balance."
Since
future demand will likely rely largely on LNG, Shell has shifted from the
scarce crude supply and committed itself to developing the technology to find
other types of fuels. The latest vast shale gas reserves in North America are
regarded as a revolution as Shell can unlock gas from new sources.
"Thailand
is regarded as Shell's potential LNG customer of great importance," said
Mr Henry.
Apart
from the mainstream fuels, biofuel is another key fuel of the future.
Mr
Henry said Shell has been invested in the development of ethanol in Brazil
worth billions of dollars.
"Asean
has great potential for biofuel for Shell too, but not now," he said.
He
explained Shell has two strategies in doing the energy business: refining and
marketing, depending on the business environment and market conditions.
After
Shell sold its refinery in Thailand to PTT Plc in 2004, its Thai unit has been
focusing on the marketing side _ operating retail oil stations and selling
petroleum products such as lubricants for vehicles.
Shell
admits the local petrol market is getting tough with narrow margins.
However,
the company vows to keep its business here, especially petroleum products,
where it has been a market leader, with an edge over other foreign oil
companies in Thailand.
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