1. Click to edit Master title style A R EVOLUTION IN A SIA -P ACIFIC E NERGY M ARKETS E NERGY E XPORTS S UMMIT Washington, D.C. | May 6, 2015 Meredith Miller Senior Vice President

2. The National Bureau of Asian Research (NBR) is a nonprofit, nonpartisan research institution dedicated to informing and strengthening policy. NBR conducts advanced independent research on strategic, political, economic, globalization, health, and energy issues affecting U.S. relations with Asia.

3. The Opportunity of Asian Markets Developing Asia will account for 65% of global energy demand growth – four times the combined growth of Latin America and Africa Global Perspective: Sources: BP Energy Outlook 2035; OECD/IEA World Energy Outlook 2014

4. Asia’s Energy Mix (Regional Level) Source: “Energy Outlook for Asia and the Pacific 2010-2035,” Asian Development Bank. October 14, 2014.

5. Country and Sub-Regional Views While China is looking to shift its mix from coal to gas, SE Asia will see the reverse. Meanwhile: uncertainty in Japan continues to impact markets. China SE AsiaJapan Sources: BP Energy Outlook 2035; OECD/IEA World Energy Outlook Special Report: Southeast Asia Energy Outlook; Nature

6. W HAT IS AT S TAKE ? Increasing access to electricity and to energy overall is vital to sustaining the region’s economic growth. Yet if current trends continue, the Asia-Pacific’s CO 2 emissions are likely to more than triple by 2050 (ADB). Countries are looking for supplies that best provide for three core needs – economic security, environmental security, and geopolitical security. “Climate change will cut agricultural crop yields and hike food prices – every 10% rise will push another 64 million Asians into poverty.” Source: “Energy Outlook for Asia and the Pacific 2010-2035,” ADB. October 14, 2014.

7. Asia’s Search for Energy Supply Security Declining energy self-sufficiency is a regional trend. By 2020, Asia will be a net importer of fossil fuels. Japan, South Korea, and Taiwan are already 100% import dependent for oil, gas, and coal. Indonesia is seeing domestic demand rise steadily, and is looking for strategies to sustain the role of energy in promoting its economic growth. China is a top global producer of both oil and gas, yet rising demand means that import dependence will climb through 2035 (oil: 80%; gas: 40%). Australia, Russia, others continue as regional suppliers, yet overall demand pushes Asian consumers to also look outside of the region. Source: BP Energy Outlook 2035

8. Index for evaluating Energy Security A View from Japan’s Ministry of Economy, Trade and Industry, Agency for Natural Resources and Energy The degree to which stable fuel procurement is possible in the face of contingent/unforeseen risks that impact supplies The extent to which an environment is in place that allows the fuel to be stably supplied Specific variables: Past production record of supplier country Conflict frequency of supplier country Disruption risk of transport routes Overall portfolio of the importing country - diversification of suppliers, transportation routes and fuel mix E VALUATING E NERGY O PPORTUNITIES

9. K EY P RIORITIES & Q UESTIONS FOR A SIA Strengthening Markets for Energy and Environmental Security Expand energy access to the 700 million people in Asia still without electricity Develop and strengthen infrastructure to avoid energy becoming a bottleneck to economic growth Buffer against geopolitical and market shocks that can disrupt access to supplies or increase price volatility Address rising environmental concerns with air quality and pollution Pairing technology and policy to improve energy consumption What role can U.S. exports play in supporting these goals?

10. What Role Might the U.S. Play in Meeting Asia’s Demand? U.S. Energy Revolution: A Major Reversal in a 40+ Year Energy Narrative Since 2006 hydraulic fracturing and horizontal drilling technology has reversed the historical decline in U.S. oil and gas production. Key factors fostered the necessary environment for this breakthrough: Tight markets Innovation from industry Favorable investment and regulatory climate Infrastructure U.S. oil import dependence peaked in 2005; China surpassed U.S. as largest importer in 2013. Source: The National Bureau of Asian Research Asian Investments in U.S. Energy Resources Selected transactions greater than $1 billion, 2008-2012

11. G ROWING S ELF -S UFFICIENCY IN O IL U.S. oil production has hit a 40+ year high, and crude inventories are the highest on record Sources: U.S. Energy Information Administration, The Wall Street Journal. Total U.S. energy production & consumption in the Reference case, 1980-2040 (quadrillion Btu) U.S. net petroleum product imports in four cases, 2005-40 (million barrels per day)

12. A N E VEN M ORE D RAMATIC S TORY FOR G AS The United States has emerged as the top producer of natural gas. Anticipated to maintain this distinction for at least the next 20 years. By 2035, shale gas supplies will account for 63% of North American gas output, up from 2% ten years ago (BP). Estimates continue to be revised up Sources: U.S. Energy Information Administration.

13. A R EVOLUTION WITH K EY I MPLICATIONS FOR C OAL The United States is the second largest producer of coal globally, and has the largest reserves in the world. Cheap, abundant gas has led to a decrease in U.S. consumption of coal, freeing up supplies in global markets. Meanwhile, U.S. coal producers are also looking for new markets.

14. R ETHINKING U.S. E NERGY P OLICIES New Considerations for: Achieving reductions in CO 2 emissions Assessing how big a role the United States will play as an important supplier Crude oil export ban LNG National Interest determination Social license issues Climate change policy Revitalizing global commitments to energy and environmental security Source: OECD/IEA World Energy Investment Outlook 2014

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16. Current Status of U.S. LNG Exports By the end of 2015 or early 2016, the United States will begin exporting First batch will be to India, Japan; other markets expected to emerge Important consideration for U.S. policy: Asian consumers are combining their LNG purchases, forming pacts for securing supply Source: U.S. Federal Energy Regulatory Commission