Asia and Global Oil & Gas Markets and Geopolitics Mikkal E. Herberg The National Bureau of Asian Research Independent Petroleum Association of America “Mid-Year Meeting and Executive Conference” Naples, Florida June 14, 2006

Asian Oil and Gas Trends to 2020 Oil demand, imports will drive global market Oil demand, imports will drive global market 67% of recent growth, 50% of future growth 67% of recent growth, 50% of future growth Economic growth, rising per capita incomes Economic growth, rising per capita incomes Motorization, vehicle boom Motorization, vehicle boom Poor oil production prospects Poor oil production prospects Weak demand management policies Weak demand management policies Largest future incremental natural gas market Largest future incremental natural gas market China to account for 20% global energy demand growth, largest incremental oil market (20-25% of global growth) China to account for 20% global energy demand growth, largest incremental oil market (20-25% of global growth) India oil and gas demand growth second only to China India oil and gas demand growth second only to China Energy security concerns growing, Asia-ME nexus Energy security concerns growing, Asia-ME nexus Asia NOCs becoming serious competitors, partners Asia NOCs becoming serious competitors, partners

Source: IEE Japan Asia to Dominate Global Energy Demand Growth

Source: IEE Japan Oil and Coal Largest Shares, Gas Growing Rapidly from Low Base

Asia = 67% Global Oil Demand Growth (MBD) WorldAsia China WorldAsia China , ,459 1, , , , , , ,464 1, ,714 10,557 4,424 15,714 10,557 4,424 Source: BP

Asia Will Drive Oil Demand Growth Source: DOE 2005 Total = 41 MMBD

Source: IEE Japan China and India to Account for 70% of Asian Oil Demand Growth

Asia’s Oil Demand Increasingly Met by Imports from Outside the Region Demand Production Imports Source: BP MBD

Asia’s Future Oil Imports Will Grow by More than Current PG Exports Source: IEA WEO 2004 Imports Demand Supply

Mid-East Oil Exports and Asia (MMBD) Change Total ME Asia North America Western Europe Other Asia Share 58% 67% Source: IEE Japan 3-04  60% of current ME oil exports go to Asia  80% of future export growth will go to Asia

China’s Oil Imports Rising Source: IEA WEO 2004

Cumulative Gas Demand Growth  Asia’s gas demand to nearly triple by 2030 Source: IEA WEO 2004

Source: IEE Japan 3-04 Gas Demand Growth Strong Across the Asian Region

Total Asian Natural Gas Imports Nearly Triple LNG and Pipeline Supplies to Grow Dramatically SE Asia to NE Asia Persian Gulf to NE Asia Alaska to NE Asia 1 0 SE Asia to China 0 10 Persian Gulf to China 0 13 Persian Gulf to India 0 44 Russia to NE Asia 0 22 Russia to China 0 19 Total of which Persian Gulf Russia 0 41 Southeast Asia  Imports from outside region rise five-fold  Outside import share rises from 29% to 58% IEA WEO 2004

Some Conclusions Asia, China to drive global oil demand, markets, prices Asia, China to drive global oil demand, markets, prices Huge rise in gas consumption, thriving LNG, pipeline gas projects in Asia Huge rise in gas consumption, thriving LNG, pipeline gas projects in Asia Asia only modest upstream oil play – India, SE Asia, E. Siberia; stronger upstream natural gas play Asia only modest upstream oil play – India, SE Asia, E. Siberia; stronger upstream natural gas play Asia NOCs inflating prices in global E&P market Asia NOCs inflating prices in global E&P market NOCs changing competitive landscape for IOCs NOCs changing competitive landscape for IOCs China, Asia to become big players in global energy geopolitics China, Asia to become big players in global energy geopolitics Persian Gulf Persian Gulf Central Asia Central Asia Russia Russia IEA IEA

Background

Source: IEE Japan