GRM 2010 GRM 2011

Abstract Details

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Title of Paper:
Implications of the Emerging Energy Scenario in the Gulf : Towards a Gulf – Asia Strategic Partnership.
Paper Proposal Text :
GRM – 2014
Workshop II: The Changing Energy Landscape of the Gulf: Strategic Implications
Paper Proposal:
Implications of the Emerging Energy Scenario in the Gulf : Towards a Gulf – Asia Strategic Partnership.
- Talmiz Ahmad

The global energy scenario has experienced a major transformation in recent years due to significant increases in the availability of oil and gas resources. Future increases in conventional production will come in from Iraq, Kazakhstan and Brazil, as also from Iran following the easing of sanctions. Unconventional production, particularly tight oil and gas, has already had a dramatic impact on US hydrocarbon reserves and production, transforming the US from a longstanding net importer into a net exporter, with the possibility of the country significantly reducing its dependence on major conventional producers, particularly from the Middle East.
The energy outlook to 2035, however, does not admit of such simplistic win-lose projections. Already, studies suggest that there is a lot of unrealistic hype in regard to the American unconventional production, leading observers to suggest that the shale scenario is not so much a revolution as a “surge”, and that, from 2020 onwards, the world will again turn to conventional production to see it through to 2035.
The following are likely to be the elements of the global energy scenario in 2035:
(i) Developing Asia’s share in global GDP will rise from 26 percent in 2010 to 44 percent in 2035; in that year, China will be the world’s largest economy, while India’s GDP will be equal to the GDP of all Europe.
(ii) To fuel this growth, Asian primary energy demand will go from 4.2 billion toe in 2010 to 7.7 billion toe in 2035; China and India will represent nearly 70 per cent of Asian energy demand in 2035, with China’s share being 52 per cent and India’s 18 per cent.
(iii) In 2035, fossil fuels will dominate the global energy mix to the extent of 77 per cent, with hydrocarbons sharing 36 per cent, as against 82 per cent and 35 per cent respectively in 2009; in spite of dramatic increases in unconventional oil production, the latter will remain and small part of the global mix, and will be largely confined to the USA.
(iv) In 2035, Asia will account for 40 per cent of global oil demand, increasing from 31 percent in 2010; Developing Asia will account for 90 per cent of the increase in global demand.
(v) Asian countries will continue to be import-dependent in teams of oil and gas to the extent of 60-90%: China’s oil imports will rise from 4.8 mbd in 2010 to 13.3 mbd in 2035, a three-fold increase; India’s oil demand will go from 2.5 mbd in 2010 to 6.9 mbd in 2035, with 87 per cent import-dependency.
(vi) The oil-producing countries of the Gulf (i.e. GCC + Iran + Iraq) will provide the bulk of Asian imports; at the same time, yearly 90 percent of Gulf oil and exports will go to meet Asian demand (as a consequence of stable or declining oil demand in the advanced economies of the EU, the USA and Japan).
Thus, the energy scenario in 2035 will consist of a symbiotic energy-based relationship between the principal energy-importing countries of Asia and the Gulf oil producers. Energy supplies from the Gulf will be essential to sustain the growth rates of Asian, with these countries also being the most significant markets for Gulf production.
Recognizing the crucial importance of the Gulf-Asia energy relationship, both sides have ensured that, over the last 15-20 years, their ties have gone well beyond a buyer-seller relationship in energy into substantial connectivities that include trade, investment and joint ventures, and, in the case of India, the presence of a seven-million strong community in the GCC Countries that remits home $ 35 billion annualy. These mutually – beneficial partnerships have ensured an interest on each side in the long-term stability and prosperity of the other. Thus, the stage is set for the two sides to impart to their ties a new content that has political and strategic dimensions as well.
Before examining the political aspects of the new relationship, the paper will analyze the Gulf energy scenario over the long-term and the challenges it faces from:
(i) increasing domestic consumption due to demand from expanding populations; national commitments to value-added projects in the hydrocarbons area, and economic diversification;
(ii) the need for massive investments (estimated at $3.7 trillion up to 2035) in developing the upstream and downstream areas of the hydrocarbons sector in the GCC as also in Iraq and Iran; and,
(iii) the commitment of the Gulf expand countries to expand and diversify their domestic energy resources through development of conventional and unconventional potential and developing renewable sources, including nuclear energy.
The paper will point out that in meeting these energy-related challenges the Gulf’s Asian energy importers will seek to play a major partnership role in terms of providing technology and financial and human resources.
The paper will then examine the content and contours of the proposed Gulf- Asia “strategic partnership”, seeking not to replace or replicate the present US – led militarist and hegemonic policies, but to shape cooperative security arrangements that would bring together on a shared platform the principal regional role-players and extra – regional entities with an interest in regional security and stability. The principal Asian energy-consuming countries [China, Japan, Republic of Korea and India] will play a catalytic role in promoting dialogue and effective and consensually accepted confidence-building measures.
The paper will look at the daunting challenges this proposal faces, both from present-day regional realities (made up of competition and strife) and the limited experience of Asian countries in collaborating with each other to promote regional security. The author will assert that the energy security interests of the Gulf and Asian countries concerned and their shared interest in regional stability will encourage the shaping of new visions and ideas, as also the arrangements, structures and institutions required to realise them.