South Korea sends $2.4 billion to Washington to finance an energy project

Southeast Asian energy ministers meeting in Manila this week face the prospect of a prolonged war in the Middle East that has exposed the vulnerabilities of their region stemming from its dependence on energy imports.

As the US-Israeli war with Iran continues, the urgent need for the Association of Southeast Asian Nations (ASEAN) to implement its proposed energy security plans and reduce its exposure to price shocks resulting from attacks on infrastructure and shipping routes in the Middle East increases.

ASEAN countries import more than half of their crude oil needs for their refineries from the Middle East, amid a rise in record global oil prices to about $100 per barrel. This conflict has increased concerns about energy security risks on a broader scale, as Chinese refineries have suspended exports of petroleum products for the month of October.

Against this backdrop, during their meeting in Manila, energy ministers are expected to review the region's fuel security measures launched after emergency talks earlier this year, including efforts to put into effect coordinated emergency responses under the ASEAN Framework Agreement on Petroleum Security.

The agenda also includes long-term initiatives, including the ASEAN energy grid and the deployment of renewable energy.

Philippine Energy Undersecretary Felix Fuentebla said, according to Reuters, on October 1: “What the crisis has brought is a greater focus on durability,” adding that energy security has shifted from a technical issue to a priority for ministers and leaders of ASEAN countries.

Decreased profits

High prices increase costs for families in the region and negatively affect the income of workers in the transportation sector.

The ASEAN Energy Center warned, in a policy paper, that a severe disruption to Middle East supplies could endanger quantities of oil equivalent to about 28 percent of final oil consumption in ASEAN. This underscores the need for stronger regional arrangements for oil security.

Energy Secretary Sharon Garin said that the Philippines, which remains under a national energy emergency, is exploring regional fuel storage arrangements and could host future storage projects.

But analysts warned that such measures are unlikely to affect the current crisis.

Ministers are also expected to discuss ways to reduce long-term dependence on imported fuel. Renewable energy, electric vehicles and energy efficiency are expected to receive significant attention.

Estimates from the International Energy Agency indicate that Southeast Asia's energy import bill could rise from more than $80 billion in 2024 to about $245 billion by 2035 if no structural change is made.

The International Energy Agency said that expanding the use of electricity, including electric vehicles and biofuels, will help reduce demand for oil and reduce exposure to fluctuations in fuel imports, while cross-border lines within the ASEAN energy grid, which would integrate the region's electrical grid, will require an investment of $27 billion by 2040.

Japan is seeking to agree with its Asian partners on joint action plans to enhance crude oil reserves in the region, as part of a move aimed at increasing energy security and confronting the risks of supply disruption, against the backdrop of the repercussions of the US-Israeli war on Iran.

Japanese Minister of Economy, Trade and Industry Ryusei Akazawa said on Tuesday that Tokyo aims to reach an agreement on support measures during the ministerial meeting of the “Zero Emissions Asia Community,” which is led by Japan and will be held in the Philippines on Thursday.

The step comes within the “Asia-Broad Partnership to Enhance Energy and Resource Resilience” initiative proposed by Prime Minister Sanae Takaichi in April, and includes financial support worth $10 billion to help Asian countries secure energy resources and increase their reserves.

Akazawa explained that Japan will discuss with the participating countries possible support measures, with the aim of agreeing on practical plans during the meeting, at a time when supply disruptions related to the war on Iran have increased concerns about energy security in Asia.

The initiative is particularly important given the dependence of a large number of Asian economies on oil and gas imports, which makes the region highly vulnerable to any disturbances in crude flows from the Middle East or a sharp rise in prices.

In parallel with the ministerial meeting, Japan intends to host a special session with Saudi Arabia and the UAE, aimed at strengthening cooperation between oil-producing countries and Asian consumers, and supporting the global energy system’s ability to confront shocks.

Akazawa said that Japan seeks to play a “central” role linking oil-producing countries in the Middle East and Asian consuming countries, thus enhancing supply security and coordination between both sides of the market.

The move comes after a series of Japanese measures to confront oil market turmoil. Tokyo has previously released quantities of its national reserves as part of coordinated international movements.

The new initiative indicates Japan's move towards expanding its response from managing its domestic reserves to building a regional network more capable of dealing with energy crises, by increasing reserves and enhancing cooperation with major producers in the Middle East, at a time when supply and price risks remain one of the most prominent challenges facing Asian energy-importing economies.