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Ministerial Meeting: Golden Opportunity for ASEAN Energy Connectivity

Energy plays a crucial role in economic development and will remain critical to the continued economic growth of the ASEAN region. Recognised this issue and the greater volatility in global energy markets due to economic uncertainty in several developed countries, political instability in the Middle East and North Africa, and renewed concerns over the use of nuclear power following the March 2011 earthquake and nuclear accidents in Japan, ten Ministers on energy from ten ASEAN Member Countries were met in Jerudong, Brunei Darussalam, on 20 September 2011, on the occasion of the 29th ASEAN Ministers on Energy Meeting (AMEM). This meeting was very crucial as this was the first ministerial meeting since the adoption of the Master Plan on ASEAN Connectivity by the ASEAN Leaders at the 17th ASEAN Summit on 28 October 2010. As ASEAN steps up efforts on regional integration and connectivity activities, the Ministers re-affirmed the ASEAN Leaders’ statement to collaborate on more concrete and action oriented programs to boost energy efficiency and conservation, and find viable renewable energy sources, so as to reduce the region’s dependence on oil and other fossil fuels.

ASEAN was located at the crossroads of an economically vibrant and growing region bounded by India in the west; China, Japan, and the Republic of Korea in the Northeast; and Australia and New Zealand in the South. ASEAN thus has the potential to physically anchor itself as the hub of this region. ASEAN recognized by enhancing intra-regional connectivity within ASEAN and its subregional grouping would benefit all ASEAN Member States and would significantly narrow the development gap within ASEAN. Hence it is important for AMEM to discuss directions and targets of key energy matters crucial to the realisation of both the ASEAN Connectivity and eventually the aspiration of an ASEAN Community by 2015.

All of these works have been guided by a series of Plan of Action including the ASEAN Plan of Action for Energy Cooperation (APAEC) 1999-2004, APAEC 2004-2009 and APAEC 2010-2015.

Under the first Plan of Action (1999-2004), the conclusion of the Trans-ASEAN Gas Pipeline (TAGP) Master Plan by ASEAN Council on Petroleum (ASCOPE) and the ASEAN Interconnection Master Plan Study by Heads of ASEAN Power Utilities/Authorities (HAPUA) has paved the way for an enhanced regional energy security framework while promoting efficient utilisation and sharing of resources.

In the second Plan of Action (2004-2009), significant achievements were realised including the signing of the Memorandum of Understanding for the ASEAN Power Grid (APG), the establishment of APG Consultative Council and the establishment of ASCOPE Gas Centre (AGC).

The current Plan of Action (2010-2015) placed greater emphasis on accelerating the implementation of action plans to further enhance energy security, accessibility and sustainability for the region with due consideration to health, safety and environment, especially in relations to APG, TAGP, clean coal technology and renewable energy amongst others.

APG is a flagship programme mandated in 1997 by ASEAN Leaders, which aims to help ASEAN Member States to meet increasing demand for electricity and improve access to energy services by enhancing trade in electricity across borders, optimising energy generation and development and encouraging possible reserve sharing schemes.

Challenges for the APG remain since a significant number of the future interconnection projects will either require marine/undersea cable interconnections or inland interconnections involving the grids of the CLMV countries. The economic viability of the planned grid interconnection projects are yet to be established and accepted by participating economies even as the projects have been assessed by HAPUA to be technically feasible. In particular, economic viability will affect prospects for financial viability. Issues regarding the need to introduce an effective regulatory framework and a mechanism for raising capital also need to be addressed.

In this regard, the Ministers welcomed regional efforts in the finalisation of the guidelines to speed up the implementation of the ASEAN Power Grid, notably on the following issues: reliability of operation; safety standards and procedures in generation and transmission; the reference model for investments in the interconnection projects; and issues concerning cross-border sales and transmission of electricity. The Ministers also noted that bilateral and sub-regional arrangements would play a key role in realising the ASEAN Power Grid. The Ministers further acknowledged that private sector involvement would catalyse the implementation of the ASEAN Power Grid, and tasked HAPUA to recommend steps to enhance private sector engagement

TAGP aims to develop a regional gas grid by 2020, by interconnecting existing and planned gas pipelines of Member States and enabling gas to be transported across borders. By 2013, there will be a total of 3,020 kilometres of pipelines in place, with the completion of the M9 pipeline linking Myanmar to Thailand. The region is also looking into establishing infrastructure for the transportation of liquefied natural gas (LNG), as countries such as Malaysia, Singapore and Thailand undertake construction of LNG terminals. The challenges are in obtaining adequate supply of piped natural gas, increasing investment costs, synchronising national technical and security regulation requirements, and differences in the processes of supply, distribution, and management for natural gas across the countries.

The realisation of TAGP is expected to encounter substantial financial and legal complexities. The challenges here include increasing investment costs, synchronising national technical and security regulation requirements, and differences in the supply, distribution, and management procedure of natural gas across the countries. Rivalry between the pipeline-delivered natural gas and other energy sources, such as coal and liquefied natural gas, also needs to be addressed. In addition, there is also a need to overcome the issue of political trust common in energy markets cooperation, which can be a huge barrier to trade of pipelined gas and electricity.

To date, eight bilateral gas pipeline interconnection projects are currently operating, with a total length of some 3,200 kilometres.

The Ministers noted the progress in the implementation and realisation of the Trans-ASEAN Gas Pipeline Infrastructure Project, including infrastructure for LNG trading, and ratification of the ASEAN Petroleum Security Agreement and its operationalisation plans, and other cooperation modalities, such as the establishment of a common regional framework, to facilitate more oil and gas trading and marketing within the region. This will ensure greater energy security of gas supply for the region. The Ministers further noted the necessary extension of the TAGP Memorandum of Understanding (MoU) to another term of 10 years in view of the new strategic directions TAGP has to undertake.

The Ministers were cognisant of the need to boost infrastructural connectivity to open new market opportunities and boost overall energy security. The Ministers agreed to expedite regional connectivity projects in the power, oil and gas sectors; to facilitate energy trade, investment and services; and to enhance cooperation with partner countries to promote robust East Asian energy connectivity.

The Ministers stressed that this was a golden opportunity for the energy sector to seize the momentum of ASEAN Connectivity. To further strengthen energy cooperation within ASEAN and with Dialogue Partners, international organisations, Ministers expressed that greater private sector participation is needed for the implementation of the energy connectivity projects.

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