Asia 'must speed up liberalization' to woo oil investors

Asia 'must speed up liberalization' to woo oil investors

Eileen Ng, Agence France-Presse, Kuala Lumpur

Asia must speed up its economic liberalization to woo energy
investment and ensure sufficient and affordable long-term
supplies in a turbulent world market, oil experts said at a key
regional conference here Monday.

Asia's appetite for energy is expected to soar in line with
its economic growth but experts warned at the Asia Oil and Gas
Conference that current high oil prices and the region's heavy
reliance on oil imports from the Middle East could impede growth.

Despite OPEC's move to raise oil production, most predicted
prices would remain high at least until the end of uncertainties
such as the June 30 transition of power in Iraq and the recall
election in Venezuela on Aug. 15.

"Asia's soaring growth is straining the energy bridge ...
around the globe, experts are worried that Asia's soaring tiger
could come in for a hard landing because of energy supply
concerns," said Dave O'Reilly, chief executive of U.S. oil major
ChevronTexaco.

The region must develop a strong investment climate by
accelerating its progress towards opening up markets, building
adequate infrastructure and ensuring the sanctity of contracts
and better cooperation from national oil companies (NOCs), he
said.

O'Reilly said according to the International Energy Agency,
Asia was expected to account for up 40 percent of the growth in
world oil demand between now and 2025, and must seek to tap its
own enormous oil resources.

China, Indonesia and Malaysia rank among the world's top 25
oil producers. Together with Australia and Brunei, they account
for more than 36 billion barrels in proved reserves.

However, Indonesia, an OPEC member, recently became a net oil
importer and has to introduce new incentives to attract
investment and reverse its production decline, he said.

"Governments need to unwind the spools of red tape,
regulations and antiquated policies that have choked off power
development" to ensure predictability in terms of supply,
delivery and trading to help overcome volatility in global oil
prices, he added.

He predicted global oil prices would moderate only when "it
becomes clear that supply and demand are in better balance."

Malaysian Prime Minister Abdullah Ahmad Badawi, in his keynote
address read by his deputy Najib Razak, said Asia's energy demand
was expected to soar in line with its projected economic growth
of six percent a year by 2010, double the world's average growth
rate.

Last year, Asia imported 64 percent of its oil needs with
demand reaching 22 million barrels a day and this is expected to
grow at an average annual rate of 3.2 percent, nearly three times
higher than that of industrializing nations, he said.

"Driven by strong demand from China, oil consumption in
developing Asia is projected to reach 32 million barrels per day
by 2025, more than double the region's total consumption in
2001," he said.

Gas is also becoming an important alternative, with annual
average demand expected to increase by an average 3.5 percent to
reach 151 trillion cubic feet by 2025, he said.

Singapore Institute of International Affairs secretary Eric
Teo Chu Cheow said restricted trading regimes due to tight
control by NOCs and geopolitical risks were hampering investment
in the region.

"The greatest dilemma for Asia is to create a balance between
national interests and opening up to lure investors in terms of
production," he told AFP on the sidelines.

Teo said continued instability in the Middle East would "keep
prices high for some time" and warned this could provoke a
slowdown in the global economy in the second half of 2005.

"The $40 a barrel range will continue for some time. I don't
see that coming down," he said.

Robin West, chairman of U.S.-based consultancy group PFC
Energy, said violence in the Middle East had created growing
interest in energy projects in Asia, especially China, but the
region must deregulate its markets.

Although regional NOCs have ventured abroad and begun gaining
market power, he said, they were not ready to invest billions of
dollars in oil production and exploration nor take high risks,
and must work more openly with global oil companies.