1. Muhamad Izham Abd. Shukor
APERC Workshop at EWG 50
Hawaii, The United States, 15 December 2015
2. APEC Energy Demand and Supply Outlook 6th Edition
2-2 BAU Energy Supply
Muhamad Izham Abd. Shukor
Researcher, APERC

2. Preliminary results (under review by economies)
Please do not cite

3. APEC’s Total Primary Energy Supply
Outline
Key Messages
APEC’s Total Primary Energy Supply
Oil Supply
Coal Supply
Natural Gas Supply
Nuclear Energy
Renewable Energy
Conclusion

4. Key Messages
Fossil fuels will continue to dominate energy supply in APEC, with Oil and Coal representing around 82% of fossil supply. Drive for cleaner fuels leads to robust growth in natural gas through-out the forecast period.
Asia will see tremendous growth in Primary Energy Supply due to economic expansion.
Renewable Energy, including hydro, is expected to have the highest growth rate among primary energy supply at 2.4% annually.
Energy production will grow in tandem with demand. However, due to high demand growth, the supply gap in APEC rises by more than 40% in 2040 which will need to be sourced from outside APEC.
In 2013, the fossil fuel contributes about 86% of fossil fuel in APEC

5. Fossil-fuels continue to dominate energy supply
Total primary energy supply by fuel,
Growth Rate
1.3%
2.6%
1.6%
1.9%
0.6%
0.4%
2013: 86% Fossil Fuel
2040: 82% Fossil Fuel
Total TPES: 1990 – 4935 Mtoe, Mtoe and 2040 – Mtoe
Total primary energy supply (TPES) will continue to rise in the Asia Pacific Economic Cooperation, by million tonnes of oil equivalent (Mtoe) in 2040 compared to 2013 levels. From 1990 to 2040, TPES will increase by 115%, with contribution from renewable energy rising from 10% in 1990 to 14% in 2040.
Fossil fuels will continue to play the major role–above 80% of TPES–in the APEC region, with oil and coal dominating supply while natural gas shows robust growth throughout the Outlook period.
Tremendous growth in TPES is seen in China (53%) and the Southeast Asia region (129%) reflecting increasing population and rising incomes. These economies thus hold potential to optimise their energy supply in service of demand.
Coal shows an average annual growth rate (AAGR) of 0.4% to 2040, slightly lower than oil (0.6%) but lower than natural gas (1.9%). Renewable energy has the highest AAGR at 2.4%, adding 680 Mtoe by Nuclear's AAGR is modest (1.3%), reflecting the reality that from 2030 to 2040, it enters a declining trend such that it share in TPES shrinks from 5.7% to 4.8%.
Energy supply production grows across all fuel type (except nuclear). Due to high demand projection, however, APEC as a region will have a supply gap of more than 10%, meaning dependence on imports will increase.
Natural gas will see the highest growth amongst all fossil fuels, rising from 1638 Mtoe in 2013 to just under 2700 Mtoe in Oil demand sees a more modest 437 Mtoe increase from slightly above 2200 Mtoe in 2013 to around 2650 Mtoe in 2040, while coal is expected to rise by only 150 Mtoe from 3014 Mtoe in 2013 to 3165 Mtoe in 2040.
China’s total primary energy supply will see a major shift whereby fossil fuel shares decline from 88% in 2013 down to 78% by 2040 subsequently improve China’s energy security with lesser import.
The US fossil fuel share rise slightly from 83.5% in 2013 to 85.5% by 2040 due to the development of unconventional oil and gas resources that led to an abundance of domestic oil and gas production and is expected. This will significantly change the energy landscape in the US.
Renewable energy is projected to increase from 768 Mtoe in 2013 to 1318 Mtoe in Asia, which offers great economic potential in deploying renewable energy, will continue to lead the region’s renewables deployment with nearly 80% of all development occurring in China and Southeast Asia.
Nuclear energy supply is projected to rise from 368 Mtoe in 2013 to more than 560 Mtoe by 2040 where nearly 80% of nuclear plants new deployment will occur in China. In the US, the abundance of cheap gas makes nuclear less competitive particularly the older generation fleets and it can be translated into a decline from 214 Mtoe in 2013 to 115 Mtoe by 2040.
Source: IEA statistics 2015 and APERC analysis
Energy supply in APEC region will more than double by 2040 from 1990 level.

6. Net energy supply gap continues to widen in the future
Net primary energy supply,
Net energy supply is defined by subtracting domestic fossil fuel production from fossil fuel demand. Positive value shows domestic production is not enough to meet the demand, which the value indicates the amount of imported energy that needed to satisfy the demand. Economies that fall under this category are considered as net energy importers. Negative value indicates there is a surplus in energy production, which can be sell or exported to other user and economies that fall under this category are considered as net energy exporter.
The next 2 decades will see major changes in APEC’s primary energy supply trend. APEC net energy production projected to increase from around 1000 Mtoe in 2013 to nearly 1400 Mtoe by 2040 while within the same period, the net energy import increase from around 1500 Mtoe in 2013 to slightly above 2300 Mtoe in 2040.
This makes APEC, as a region, continue to be net energy importer where the energy import is expected to double from nearly 300 Mtoe in 2013 to more than 600 Mtoe by 2040.
Seven of APEC members will continue or starting to become net energy producer by 2040, a dropped from nine economies in Among factors identified that will make the supply gap to shrink are the new production coming from conventional and unconventional energy resources, especially in economies with huge energy reserves such as Russia, the US, China, Canada and Australia.
The development and deployment of renewable energy and nuclear power too helps in reducing the energy supply gap, as both sources are considered as indigenous.
Source: IEA statistics 2015 and APERC analysis
APEC will continue to be net energy importer in 2040 as demand increase at faster rate than production.

7. Asia will drive oil demand in APEC
Oil demand in APEC, 2013 and 2040
Oil supply in APEC is expected to record a modest growth as share of oil in APEC’s energy mix falls from over 28% in 2013 to about 25% in 2040 due to government policies in curbing oil consumption such as implementing efficient technology in transportation.
Oil supply will increase by 20% in 2040 from 2013 level where China, Indonesia, the Philippines, Thailand and Vietnam will be the demand growth centre.
On the other hand, the US, Russian Federation and other Northeast Asia economies except Hong Kong will see their oil demand decrease totalling 172 Mtoe from 2013 to The biggest demand reduction will comes from the US and Japan by over 65 Mtoe each.
Source: IEA statistics 2015 and APERC analysis
However, APEC wide oil shares in energy mix will fall from 28% in 2013 to 25% by 2040

8. Oil import will continue to grow at 1.1% annually
Net oil import in APEC,
Based on APERC projection, APEC net oil import will increase from around 700 Mtoe in 2013 to about 1000 Mtoe in 2040.
China’s net oil import is expected to increase from around 310 Mtoe in 2013 to over 560 Mtoe by 2040 while Southeast Asia net oil import will increase from about nearly 150 Mtoe in 2013 to about 480 Mtoe by Two economies, which are Malaysia and Viet Nam, will become net oil importer in 2015 due to declining production and rising demand.
With huge reserves available in certain economies, there is a huge opportunities to increase the trade volumes across Pacific as the US is expected to reduce its net oil import from as high as 660 Mtoe in 2005 to about 190 Mtoe by This will release some of the crude oil supply in North America which can be diverted to Asia region, particularly China and South East Asia.
Most economies in APEC will see declining trend in oil demand post-2030 where China oil supply will decrease by nearly 70 Mtoe while Oceania and Other Americas region are expected to see almost flat growth rate at less than 1% between 2030 to Oil demand is expected to peak in 2030.
However, Southeast Asia economies are projected to have a strong growth at 2.1% annually between 2030 to 2040 and this trend is expected to continue post 2040 with an aggregated Indonesia, the Philippines and Vietnam oil supply will triple from above 105 Mtoe in 2013 to more than 290 Mtoe due various factors.
Source: IEA statistics 2015 and APERC analysis
Russia and Other Americas are the only regions with net oil production while Southeast Asia net oil imports will more than double in 2040

9. Electricity demand will expand coal supply in Asia-APEC…
Coal demand in APEC, 2013 and 2040
Over the Outlook period, coal supply in the APEC is expected to have a slow growth, averaging at only 0.4% annualy. Coal supply will reached slightly over 3100 Mtoe or about 5% higher from 2013 level, which China will continue to contribute a sizeable shares on coal demand in the region.
As China is expected to focus more on cleaner fuel options, coal demand in China is expected to peak in 2031 to 2182 Mtoe before coming down to 2090 Mtoe in 2040.
Demand for coal in the US is expected to decrease by more than 40% due to abundant resource of unconventional gas.
Source: IEA statistics 2015 and APERC analysis
… But coal is expected to show the weakest growth among primary energy sources at 0.4% annually

10. Majority of net coal importers are in Asia
Net coal import for selected economies,
According to IEA’s Key World Energy Statistics 2014, 5 out of 10 biggest coal exporters in the world are located in APEC region. Those economies are Indonesia, Australia, Russian Federation, the US and Canada.
At the same time, 5 out of top 10 coal importers are APEC members too, namely China, Japan, Korea, Chinese Taipei and Malaysia.
Statistically, APEC members can help each other in ensuring the coal supply security and at the same time, improve the energy trades in the region.
Special attention to Southeast Asia economies should be given as coal demand, particularly in Indonesia, Malaysia, the Philippines, Thailand and Vietnam, will increase tremendously totalling nearly 300 Mtoe, equivalent to 3 fold increase from 2013 level.
Indonesia, as one of the biggest coal producer in the world will start to use more coal produced domestically from around 30 Mtoe in 2013 to over 120 Mtoe by 2040 while Vietnam, that used to be coal exporter in the past two decades, is expected to import about two-third of its coal supply in 2040 as coal demand is expected to increase by 5 times from around 16 Mtoe in 2013 to 95 Mtoe in 2040.
Source: IEA statistics 2015 and APERC analysis
Potential intra-APEC coal trades that can help to fill the import gap between APEC members

11. All regions will show increase in natural gas supply
Gas demand by region,
Seven APEC economies will account for 85% of the region’s total natural gas demand throughout the forecast period: China, the US, Mexico, Indonesia, Japan, Russia and Canada.
The US, with high reserves of unconventional gas, will see demand reach around 900 Mtoe in 2040 while China, with the second highest natural gas demand in APEC is expected to consume about two-third that of the US at 580 Mtoe.
Chile, Indonesia and Peru will have the highest annual growth rates at around 5.1%, 4.6% and 4.5%, respectively.
Source: IEA statistics 2015 and APERC analysis
China will show the strongest growth with 5.4% annual growth rate followed by Other Americas at 2.6%

12. APEC: From net gas exporter to net gas importer
Net gas supply by region,
APEC will continue to be net gas importer despite that natural gas production in APEC is expected to increase 1.6% annually.
However, the amount of gas import is less than 10% of total supply.
The US, with its vast shale gas reserves, is expected to increase the natural gas production from 567 Mtoe in 2013 to 920 Mtoe in 2040 making it the region’s largest producer of natural gas.
Production in the Russian Federation is also expected to increase from 563 Mtoe in 2013 to around 630 Mtoe in 2040 while China, the second largest natural gas consumer is expected to increase the production from around 100 Mtoe in 2013 to above 340 Mtoe in 2040.
Source: IEA statistics 2015 and APERC analysis
China to overtake Other NE Asia as largest gas importer, while US becomes a net exporter and SEA becomes a net importer

13. China overtakes the US as largest nuclear energy producer
Nuclear energy demand,
APEC nuclear energy demand is expected to increase nearly 200 Mtoe from 370 Mtoe in 2013 to slightly above 565 Mtoe in 2040.
There will be a big shift in APEC where China will overtake the US as the leader in energy production from nuclear.
Under the BAU projection, the nuclear energy supplied around 215 Mtoe of primary energy in the US and the amount will decrease to 204 Mtoe in 2030.
However, between 2030 and 2040, the nuclear energy will see a huge reduction by around 77 Mtoe.
China’s nuclear energy supply will expand by nearly 8 times from around 29 Mtoe in 2013 to 240 Mtoe in 2040.
Source: IEA statistics 2015 and APERC analysis
4 economies (China, Russia, the US and Korea) will make up 95% of nuclear energy production in APEC and peak in 2030

14. 80% of renewables are from China and Southeast Asia
RE supply and shares in APEC,
By 2040, APEC is expected to add another 70% of renewable energy supply, reaching 1320 Mtoe in 2040 from around 770 Mtoe in 2013.
With all economies are expected to expand their renewable energy supply, more than two-third of increase will occur in China.
This will make China’s share in total renewable energy supply in APEC to increase from around 43% in 2013 to 51% in 2040.
Southeast Asia and the US are expected to add more than 70 Mtoe and 130 Mtoe in renewable energy respectively by 2040 while other APEC members will add a combination of 68 Mtoe over the Outlook period
Electricity generation will be the main driver of renewable energy increase with 56% of renewables demand is for electricity production in 2040, up from 40% in 2013.
Source: IEA statistics 2015 and APERC analysis
Shares of renewables in primary energy supply will increase from 11% in 2013 to 14% by 2040

15. Conclusion
Fossil fuels will continue to dominate the energy mix in APEC
Achieving an optimal energy mix that meets energy security criteria while limiting impacts on the environment and providing energy at affordable prices will continue to be a challenge for governments
An integrated energy market in APEC will help to facilitate further energy trade, which subsequently can help to reduce energy import dependencies from outside APEC, particularly from the Middle East
Closer cooperation can help to foster better understanding among APEC members on how to address future energy supply and demand challenges
Fossil fuels will continue to dominate the energy mix in APEC.
Balancing the right energy mix that meet the energy security criteria without much impact to the environment at affordable price will continue to be a challenge for governments in APEC.
Investing in energy supply in order to meet future demand should be prioritised in APEC
An integrated energy market in APEC will help to facilitate the energy trade further, which subsequently can help to reduce energy import dependencies from outside APEC, particularly the Middle East
Closer cooperation (dialogue, conference) can help to foster better understanding among APEC members in meeting the primary energy supply and demand

16. Thank you for your kind attention