World oil market shifts from West to Asia

World oil market shifts from West to Asia

The world's fastest growing region is also getting
increasingly dependent on oil. Yojana Sharma of Inter Press
Service reports.

HONG KONG (IPS): The center of gravity of the world oil market
has shifted from Western industrialized countries to Asia as the
region imports more fuel to fire the furnaces of its booming
economy.

But Asian governments are worried that this means increasing
dependence on the Organization of Petroleum Exporting Countries
(OPEC), particularly Middle Eastern producers that supply 75
percent of Asian imports of oil.

Including Japan and Australia, the Asia Pacific is now the
second largest oil consuming region in the world with a total
demand of 15.9 million barrels per day last year.

By the turn of the century, it is projected to overtake the
United States to become the largest oil consumer in the world,
says economist Ranjan Pal of Jardine Fleming Brokering in Hong
Kong.

But he warns that Asia itself is has become more vulnerable
that other regions to threats of higher oil prices or supply
disruptions.

Last year, more than 70 percent of the oil consumed in Asia
was imported, and the figure is projected to climb to 85 percent
by the year 2000. Three-fourth of the imports come from the
Middle East, and this may rise to 90 percent by the end of the
century.

"In terms of security of supply, Asia will be in an even more
precarious situation should there be another disruption like the
Gulf War," says Pal.

"OPEC will be critical for Asia and Asia will be critical for
OPEC," former OPEC secretary general Subroto also said at the
organization's 97th conference in Bali in November.

Fast-growing Asian economies are expected to be instrumental
in propping up flagging OPEC oil prices, giving them some
bargaining power over the price tag slapped on the commodity.

Conversely, any dramatic rise in OPEC prices could severely
affect growth prospects in Asia because the region's own oil
production is unable to keep up with its rocketing demand. Last
year alone, Asia accounted for almost a quarter of the world's
demand for oil but supplied just a bit more than 20 percent of
it.

In addition, the supply and demand imbalance is widening
rapidly with consumption growing at 4.7 percent a year in the
last decade, running far ahead of output growth of 2.7 percent.

"These trends are projected to continue with demand climbing
inexorably while production is expected to decline slightly by
the year 2000 in the absence of any major new discoveries," notes
Pal.

At the end of 1993, Asia had only 4.4 percent of the world's
reserves.

In particular, Chinese oil product imports are expected to
more than triple over the next decade and its insatiable demand
would push oil prices higher throughout Asia says Fereidum
Fesharaki, head of energy programs at Hawaii's East-West Center.

China is already the world's fourth largest oil consumer with
demand growing at 10 to 15 percent a year, fueled by fast
economic growth. Oil-product imports estimated at about 340,000
barrels a day this year are expected to surge to 850,000 by 2000
and 1.4 million by 2005, if no new refineries are opened up in
the country.

Refinery development is being hindered by Chinese reluctance
to allow foreign investment in the sector. Points out Michael
Cannon of the Asia Pacific Energy Center. "There is enough oil in
China to make the products that it needs but it is not in the
right place."

China has opened up the Tarim Basin in Xinjiang province for
development but infrastructure from this area to major industrial
areas is poor, and the Tarim Basin project is unlikely to have
any major impact on China's oil imports before 2004.

The search for cheap oil imports had led to Chinese
involvement in exploration projects in Peru, Papua New Guinea and
Thailand as well as to negotiations for longer-term oil contracts
with several Arab states.

Meanwhile, the oil crunch is seen in part as contributing in
the recent thaw in relations between China and Vietnam. There are
indications of an agreement between the two countries on joint
exploration of the oil-rich South China Sea after the visit to
Vietnam this week by Chinese President Jiang Zemin.

The experts add that the lifting this year of the U.S. trade
embargo against Hanoi has led to rapid development of oil
resources in Vietnam by U.S.-based oil companies. In October,
Vietnam for the first time began selling oil on the international
spot market.

Much of Vietnam's oil is sold to Japan to earn valuable
foreign exchange. But Vietnam's output of some 130,000 barrels a
day is considered too small to make a dent in demand in Asia.

According to Fesharaki, it would be the way China handles its
energy sector -- particularly the amount of investment in
developing exploration and refining -- that will be crucial not
just for China but for the entire Asia-Pacific.