The energy dimension of the \u201cPivot to Asia\u201d strategy: moving towards a regional
\ncooperation in the Asia-Pacific geopolitical chessboard?
\nAbstract
\nThe achievement of the energy security condition – namely to preserve regular energy
\nsupplies without disruptions – is one of the main target for both energy suppliers and energy
\nconsumers (importer countries) in the global scenario.
\nIn the Asia-Pacific region, the geographical proximity and its huge oil and natural gas
\nreserves legitimize Russia as strategic gas supplier for Asian countries. As a matter of the
\ncombination between the high energy demand of China, Japan, South Korea and Russia’s
\naim to implement an eastward corridor of energy exports will draw up a strategic
\nconvergence of interests in order to achieve a shared condition of energy security.
\nFollowing the 2014 events (annexation of Crimea) and western sanctions, Russia has
\nconcretely undertaken a strategy of energy diversification more focused on Asian markets,
\nin order to reduce its dependence on gas exports to the EU markets. For Asian countries
\nRussia represents a geographically closer and reliable partner which will allow them to
\nbenefit of energy imports which don’t have to cross any maritime chokepoints (such as
\nMalacca and Hormuz) reducing their condition of vulnerability linked to the threat of
\ndisruptions along the maritime routes
\nThe aim of this paper is to analyze the potential geopolitical impact of this energy
\ncooperation between Russia and East Asian countries: does the energy dimension of the
\n\u201cPivot to Asia\u201d strategy could allow Russia to reorient its oil&gas exports to East? Can
\nRussia become one of the main energy suppliers for East Asian countries, allowing them to
\nsolve the \u201cMalacca dilemma\u201d?
\nThe development of an eastward energy corridor appears profitable especially for China,
\nwhich could benefit of both overland and maritime import routes from Russia: moreover,
\nsharing a border with Russia, China could avoid the threat of a potential interruption of the
\nenergy flows linked to the transit on third country.
\nEnergy security in the Asia-Pacific region
\nCommonly, energy security is defined as \u201cthe uninterrupted availability of reliable energy
\nsupplies at affordable prices\u201d Considering the condition of strong dependence on oil and
\ngas imports of the main economies in the Asia-Pacific region (namely China, Japan
\nand South Korea) the availability of regular energy supply – without interruptions –
\nrepresents a strategic stronghold of their energy security policy. As a matter of fact, a
\nprolonged interruption of the energy flows to these Asia-Pacific markets could be a serious
\nthreat for their economic growth, which needs huge availability of oil (and potentially gas)
\nin order to support GDP growth rate.
\nGiven the combination among current high energy consumption, the expected growth
\nof oil and gas demand and the insufficient (or inexistent) domestic production, China,
\nJapan and South Korea will be exposed to a rising dependence on energy imports,
\ndrawing up a dangerous condition of vulnerability which negatively affects their
\nenergy security status.
\nChina currently is the largest global energy consumer and the world’s second largest
\noil consumer behind the United States. According to U.S. Energy Information
\nAdministration (EIA), Japan is the third largest oil consumer in the world, while South
\nKorea is the eight-largest energy consumer in the world.
\nMoreover, these countries are in a dominant position in the liquefied natural gas
\n(LNG) markets, because Japan is the world’s first largest LNG importer while China
\nsurpassed South Korea in 2017 to become the world\u2019s second-largest LNG importer.
\nUnlike other North East Asian countries, China can rely on huge oil and gas reserves but
\nthese are not sufficient to cover the growing energy demand: in 2017 Beijing produced 3,84
\nmillion barrels of oil per day (bbl\/d), which were not enough to satisfy the domestic demand
\nwhich reached 12,79 million bbl\/d, pushing China to import nearly 8,9 million bbl\/d.
\nAccording to the World Energy Outlook 2017 following the continued increases in demand
\nfor transport fuels China will become the world\u2019s largest oil consumer by 2030, taking over
\nfrom the United States, but the declining domestic oil production will push China to
\nincrease its oil imports from current 8.9 million bbl\/d. to 13 million bbl\/d. by 2040.
\nChina holds the second largest gas reserves in the Asia-Pacific region (3.1 trillion cubic
\nmetres, tcm) and the largest shale gas reserves (unconventional gas) in the world – 31.5 tcm,
\neven if at present coalbed methane is the primary source of unconventional gas
\ncommercially produced in China – but natural gas accounts only for 6 percent of the
\ncountry’s total primary energy consumption, even if its use is rapidly increasing.
\nChina will need additional volumes of natural gas to implement its \u201cenergy revolution
\nstrategy\u201d, making gas, not coal, the primary fuel for heating, industry and power generation:
\nnatural gas demand rises to over 600 billion cubic metres (bcm) by 2040 and the share of
\ngas in China\u2019s primary energy mix rises from under 6 percent to over 12 percent during this
\nperiod.
\nGiven their geographic location, maritime routes are the main supply corridors for
\nChina, South Korea and Japan, which rely to various degrees on oil and gas imports
\ndelivered with oil and LNG tankers. Consequently, security of supply and the security
\nof the Sea Lines of Communications (SLOC’S) are one of the most strategic goals of
\ntheir foreign energy policy.
\nJapan and South Korea have not overland oil and gas pipelines, so they completely
\nrely on maritime energy routes, in order to meet their energy needs, while China has
\nthe opportunity to mitigate this weakness, also benefiting of overland routes of energy
\nimports.
\nThis strong reliance on maritime energy routes as the main supply energy corridors
\nclearly represents a dangerous factor of vulnerability especially because these energy
\nroutes obligatory cross the maritime chokepoints of Hormuz and Malacca, where
\ncolliding geopolitical interests and strategic issues could affect the global energy
\ntransit, posing serious geopolitical concerns for Asian-Pacific energy consumers.
\nIf Malacca is the strategic energy gateway for oil maritime imports shipped to Asian
\nmarkets, 16 million barrels of oil per day cross Malacca, Hormuz is equally strategic given
\nthat it is daily crossed by 18.5 million barrels of oil produced by Middle East countries, and
\n80 percent of these volumes went to Asian markets.
\nConcerning oil, more than half of Chinese oil imports cross Hormuz chokepoint but
\nover 75 percent of Chinese oil imports flow through Malacca straits (Beijing also
\nimports oil from Africa), while the dependence of South Korea and Japan on oil
\nimports from Middle East is higher, accounting for nearly 82 percent for both.
\nConsidering that Japan also imports oil from African producers, nearly 87 percent of
\nTokyo’s oil imports totally cross Malacca strait.
\nA potential blockage or a disruption of the energy transit through Malacca could be a serious
\ngeopolitical threat, which could provoke heavy economic and financial losses for Asian
\ncountries, also affecting their energy security condition.
\nAs a matter of fact, following the potential blockage of Malacca, oil and LNG tankers
\nshould be rerouted around the Indonesian archipelago, with additional shipping costs also
\nrising energy prices.
\nMainly China fears that international terrorists or hostile powers could seize control of the
\nstraits and block nearly all of China’s energy imports. However the main concern for China
\nis linked to the potential geopolitical competition and rivalry with the US: their active
\npresence in the Asian Pacific waters could also lead US to enhance their strategic influence
\non Malacca strait, allowing them to check and geopolitically contain the rise of China and
\ncontrol the flow of energy.
\nThe situation appears slightly different in the gas sector, because the dependence on LNG
\ngas imports delivered through maritime chokepoints is less pronounced. In this case, AsianPacific countries has successfully adopted a strategy of diversification, developing energy
\npartnership with several suppliers and lessening the dependence on LNG imports coming
\nfrom Qatar, Oman and African suppliers.
\nRussia and eastward route of export: a concrete reliable energy supplier in the AsiaPacific region
\nIf the availability of regular energy supply – without interruptions – represents the main
\nprecondition to achieve energy security, Asian-Pacific countries have to successfully
\nimplement a geographical diversification’s strategy of energy import routes, partially solving
\nthe so-called \u201cchokepoint dilemma\u201d.
\nIf China could be able to develop endogenous reserves and to implement overland
\npipelines to preserve its energy security, South Korea and Japan are characterized by
\na different energy scenario compared to China: in addition to the fact that they don’t
\nhave energy resources to exploit (such as conventional and unconventional gas deposits
\nor large offshore oil and gas fields), the geographical and geopolitical constraints- the
\ninsularity of Japan and the obligatory transit through North Korean territory –
\nconcretely hamper the opportunity to benefit of overland pipeline routes.
\nThe regional energy strategy must be focused to increase the shares of oil and gas imports
\nwhich don’t have to cross maritime chokepoints and to enhance energy partnerships with
\nregional energy suppliers.
\nIn the Asian-Pacific region, Russia represents the best option and the main energy
\npartner to strengthen the energy security condition of these countries.
\nAs a matter of fact, Russia is a global energy actor: in 2017 Russia was the third-largest
\nproducer of petroleum and other liquids (after Saudi Arabia and the United States), with a
\nproduction of 11,25 million barrel of oil per day, and the second-largest producer of dry
\nnatural gas (second to the United States), producing 635 bcm of natural gas.
\nRussia also holds the sixth-largest oil reserves in the world (106.8 billion barrels of oil) and
\nthe world’s largest natural gas reserves estimated at 35 tcm.
\nThe EU markets have traditionally represented the main outlet of Russian oil and gas
\nexports: the so-called western vector of export accounting for 70 percent of Russian oil
\nexports (while 26 percent of these are shipped through the eastern route to Asian
\nmarkets) and nearly 90 percent of Russian natural gas exports (while less than 6
\npercent are delivered to Asian markets).
\nHowever, after the 2014 events Moscow has progressively changed its foreign energy
\npolicy: the progressive deterioration of the relations with Ukraine – the main transit country
\nto ship Russian export to the EU – and the sanctions adopted by EU and United States
\nagainst Moscow after the annexation of Crimea have further contributed to re-orient to East
\nthe Russia’s export policy.
\nAccording to the Russian Energy Strategy 2035, Russia will increase its quote of
\nenergy exports towards the eastern markets that is estimated in 23 percent of total; in
\ndetails, there will be an increase of supply of natural gas (delivered in form of LNG)
\nfrom the current 6 percent to 31 percent , while the oil supply will reach the quote of
\n32 % percent in spite of current 26 percent.
\nThis energy dimension of the \u201cPivot to Asia\u201d strategy also reflects the Russia’s need to
\npreserve its energy security condition as supplier country, through the diversification
\nof export routes reducing the unbalanced reliance on the EU markets: furthermore,
\nthe current tensions with Ukraine (also before 2014) have clearly highlighted the risk
\nof interrupting the transit of Russian gas so exposing Russia to a condition of high
\nvulnerability.
\nIn the last decade Moscow has worked to further diversify its westward route of exports,
\nthrough the realization of the Nord Stream gas pipeline and project to create a southern
\nroute, the TurkStream gas pipeline which will be on stream in 2019: both of these corridors
\nare conceived to bypass Ukraine so avoiding the threat of interruptions and enhancing
\nnational energy security.
\nWe can observe that Russia and Asia-Pacific countries have identified a profitable
\nconvergence of strategic interests based on the energy cooperation, because Russia’s
\naim to implement an eastward corridor of energy exports can be combined with the
\ngoal of China, Japan and South Korea to strengthen relations with the main regional
\nenergy supplier in order to secure oil and gas imports which don’t have to cross
\nmaritime chokepoints
\nMoreover, the energy companies of these Asian countries can be successfully involved
\nas partners in the Arctic offshore and shale projects in order to increase Russia’s oil
\nand natural gas production, replacing Western companies which have to renounce due
\nto the sanctions. Asian energy companies are able to realize massive investments, to use
\ntheir know-how and modern technologies helping Russia to achieve the aims of the
\nnational energy strategy.
\nIn these last years, Russia and China have expanded a strategic energy partnership which
\nappears profitable for both actors. Given the geographical proximity and sharing a longborder, the development of oil and gas pipelines from the rich reserves located in the
\nSiberian and East Russia fields directly to China will strengthen Beijing’s energy
\nsecurity through massive and regular energy flows, avoiding potential disruptions
\nlinked to the transit on a third country.
\nThe Eastern Siberia Pacific Ocean (ESPO) pipeline is the main oil transport artery,
\noperating since 2009: the current transport capacity of 1.6 million barrel of oil per day will
\nbe further enhanced to 2.6 million barrel of oil per day by 2020, meeting oil needs of China
\nand other Asian economies (Japan and South Korea). Kozmino port in the Russian Pacific
\ncoast is the export terminal through which China could enhance its oil imports from Russia,
\nwhich will be delivered by a different and profitable sea route, geographically closer to
\nChinese refineries of the eastern cost and without crossing geopolitical chokepoints like
\nMalacca. Moreover, China benefits of an exclusive oil pipeline, the Skovorodino-Daqing,
\nwhich is a spur of the ESPO with a current capacity of 600,000 barrels of oil per day.
\nThe success of the Pivot to Asia energy dimension is showed by the fact that since 2017
\nRussia has become the main oil supplier for China, surpassing Saudi Arabia as China\u2019s
\nlargest source of foreign crude oil: through oil tankers and pipelines Russia is able to
\nexport 1.2 million bbl\/d to China, accounting for 14 percent of Chinese total oil
\nimports.
\nFollowing the gas deal signed in May 2014 in Shanghai, China has further improved the
\nenergy cooperation with the neighbour and border supplier: through the planned realization
\nof the \u201cPower of Siberia\u201d gas pipeline, China will receive 38 bcm per year of Russian gas
\nby 2019, exploiting untapped fields in Eastern Siberia. Furthermore, the Sino-Russian
\nMemorandum of Understanding to realize the Altai gas pipelines in November 2014
\nrepresented another relevant and strategic step in this profitable energy cooperation: by the
\nend of 2015 both parties should conclude this deal to implement the \u201cwestern energy route\u201d,
\ndelivering 30 bcm of Russian gas per year, from the Western Siberia’s fields to Xinjiang.
\nThe opening of the Arctic sea route will be profitable for China, reducing shipping
\ntimes compared to the route crossing Malacca and Indian Ocean, also solving the
\nvulnerability linked to the chokepoint transit. Chinese investments to develop Yamal
\nLNG project in the Russian Arctic aim to exploit the opportunity to increase natural
\ngas imports from a new maritime route which bypasses Malacca, even if – due to the
\nclimatic conditions – LNG exports to eastward markets are possible only in the
\nsummer months. The Chinese company CNPC holds 30 percent shares in the
\ninternational consortium led by Russian Novatek (50 percent of shares) – which also
\nincludes French Total – to develop this huge gas field (926 bcm of estimated natural gas
\nreserves) realizing a LNG plant in the Sabetta port able to export 27 bcm of natural
\ngas per year.
\nConsidering that China should import 280 bcm of natural gas – 150 bcm via pipeline and
\n130 bcm via LNG – by 2040 (according to IEA projections), imports from Russia will
\naccount for almost one fourth of Chinese total imports.
\nAlso for South Korea and Japan Russia is the only country in the Asia-Pacific region
\nwhich can play the role of energy supplier (with the exception of Australia).
\nFollowing the planned enhancement of the ESPO pipeline’s capacity, Japan and South
\nKorea will benefit of additional oil imports, which could offset a necessary reduction of
\nimports from Middle East, even if also these supply don’t totally reverse the existent
\nscenario. As a matter of fact, only 50 percent of the total future ESPO capacity could
\nbe delivered from the Kuzmino port to Japan and South Korea, because China has
\nalready ensured itself 900.000 bbl\/d on 1.6 million bbl\/d.
\nIn the gas sector, Japan and South Korea can benefit of several alternative suppliers in order
\nto geographically diversify imports, improving their energy security by means of the
\nreduction of LNG imports crossing Malacca and Hormuz straits.
\nThis is especially correct for Japan, which is reorienting its energy policy to the Asia-Pacific
\nregional dimension: at present Australia (35 bcm) and Malaysia (20 bcm) already covers 2\/3
\nof Japan’s total imports, while South Korea’s dependence on LNG imports coming from
\nMiddle East – Qatar and Oman – accounts for 45 percent of total imports.
\nThe geographical proximity and its huge gas reserves legitimize Russia as strategic gas
\nsupplier for Asian countries.
\nAt present the Sakhalin Energy’s LNG plant is the only existent source of Russian gas
\nimports to Japan and South Korea, waiting for the development of other offshore and
\nonshore fields. Sakhalin LNG exports are almost totally delivered to Japan (65
\npercent) and South Korean markets (23 percent), also considering that Japanese
\nenergy companies Mitsui and Mitsubishi are shareholders with Russian Gazprom and
\nDutch Shell in the consortium.
\nGiven the huge abundance of natural gas reserves, Russia envisages several projects of
\nLNG terminals along its Pacific Coast to meet the demand of Asian countries: Far East
\nLNG is a project (jointly leaded by Rosneft and ExxonMobil) to construct an LNG
\nplant with an initial capacity of 5m tonnes and a potential capacity of 10m tonnes,
\nfuelled with 485 bcm of estimated reserves of Sakhalin-1 fields.
\nThe project to realize the Vladivostok LNG plant could support Russian ambitions to
\nenhance gas exports to the Asian markets, even if at present the project appears temporarily
\nfrozen. According to the original project gas from the Sakhalin (Sakhalin II and Sakhalin III
\nprojects) and Eastern Siberia fields (Yakutia and Irkutsk gas production centers) will be the
\nmain source of this terminal which would have an annual capacity of 20.6 bcm.
\nIn addition to the LNG option, some Japanese energy companies supported the project
\nto realize an offshore pipeline from southern Sakhalin to Japan’s east coast, with a
\ncapacity of 16-20 bcm of natural gas per year: this project could be a strategic option for
\nJapan in terms of diversification, with the first potential natural gas supply delivered
\nnot in LNG form.
\nSouth Korea too will benefit of additional Russian gas deliveries following the realization of
\nLNG terminals along the Pacific coast, mainly opening new LNG receiving facilities.
\nFurthermore, the Korean-Russian energy cooperation has been mainly focused on the
\nimplementation of an ambitious project of overland gas pipeline (the Trans-Korean gas
\npipeline, also called PNG project) linking East Siberian gas fields to South Korea via
\nNorth Korea. In 2008 South Korea and Russia agreed to conduct a feasibility study of the
\nTrans-Korean gas pipeline and three years later \u2013 in November 2011 \u2013 South Korean and
\nRussian Presidents agreed to begin pipeline construction in September 2013, and finish in
\n2016. On November 5, 2011, the pipeline within the Russian area, the Sakhalin-Vladivostok
\npipeline, was completed. Nevertheless, there are no progress about the realization of this
\npipeline, which will have a significant geopolitical impact in the regional security relations,
\ndue to the involvement of North Korea as transit country. At the same time, this energy
\ntransit in a third country represents a factor of vulnerability, exposing South Korea to the
\nthreat of a potential disruption.
\nConclusion
\nGiven the dangerous condition of vulnerability and the potential threats to their energy
\nsecurity condition, South Korea, China and Japan have wisely undertaken strategies of
\ndiversification aimed to wide oil and gas suppliers, trying to address their unbalanced
\ndependence on energy imports from the Middle East.
\nEven if these strategies could concretely support the attempts of the North East Asian
\ncountries to avoid sudden energy disruptions, the combination between the expected growth
\nof their energy demand and the distortions and weakness of their domestic energy scenario \u2013
\nhigh dependence on energy imports, lack or insufficient domestic production \u2013 could
\nfrustrate or downplay some of the positive effects. The most complicated situation is in the
\noil sector: the largest oil reserves are located in the Middle East and an increase of oil
\nimports from Russia can reduce the dependence on traditional suppliers, however without
\nsolving the vulnerability factors.
\nThe combination between geographic proximity and the availability of huge oil and natural
\ngas reserves characterize Russia as the main reliable energy provider in the Asia-Pacific
\nregion: furthermore, most of the promising oil and gas fields are located in Eastern Russia,
\ngeographically closer to North Asian consumer markets and so reducing time of shipping
\nand costs of transports compared to imports from Middle East as well as from other
\npotential suppliers from the region such as United States and Australia.
\nUnder the Russian perspective, Asian markets represent an attractive option to diversify
\nexports, even if EU markets and the westward route of export remain important in the
\nnational energy strategy: in the next years, the energy cooperation with Asian companies
\nand their investments will allow Russia to start production in several oil and gas fields
\nlocated in Russia’s Far East, Siberia and Arctic increasing domestic production and
\npotentially achieving the strategic target of Russian authorities to double gas exports by
\n2035, also becoming the fourth largest LNG exporter in the world.
\nEnergy imports from Australia and United States could compete with Russian resources: as
\na matter of fact, both of them don’t have to cross maritime chokepoints to reach Asian
\nmarkets and these oil and gas deliveries will allow Asian-Pacific countries to further
\ndiversify the routes of imports.<\/p>\n","protected":false},"excerpt":{"rendered":"
The energy dimension of the \u201cPivot to Asia\u201d strategy: moving towards a regional cooperation in the Asia-Pacific geopolitical chessboard? Abstract The achievement of the energy security\u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_thinkrank_schema_form_data":"","_thinkrank_selected_schema_type":"","_thinkrank_additional_schemas":"","_thinkrank_canonical_url":"","_thinkrank_og_title":"","_thinkrank_og_description":"","_thinkrank_og_image":"","_thinkrank_twitter_title":"","_thinkrank_twitter_description":"","_thinkrank_twitter_image":"","_thinkrank_imported_from":"","_thinkrank_focus_keywords":[],"_thinkrank_focus_keyword":"","_thinkrank_robots_meta_enabled":0,"_thinkrank_robots_meta":"","_thinkrank_advanced_robots_meta":"","_thinkrank_primary_category":0,"footnotes":"","_ppma_block_editor_authors":""},"categories":[858,148],"tags":[],"ppma_author":[2016],"class_list":["post-8053","post","type-post","status-publish","format-standard","hentry","category-eng","category-makaleler"],"yoast_head":"\n