Statement at the Forum on Trans-ASEAN Gas Pipeline and Power Grids
organized by the ASEAN Council on Petroleum
Kuala Lumpur, 5 October 1999

Energy has always had an important place in ASEAN cooperation. The beginnings of a Southeast Asian power grid date back to 1966, when Laos and Thailand concluded a power-exchange agreement. Similar agreements were signed in 1978 between Malaysia and Thailand and between Malaysia and Singapore. In 1981, ASEAN established a task force involving the heads of ASEAN power utilities and authorities to cooperate in setting up the ASEAN Power Grid.

In 1994, ASEAN commissioned a regional study on the Master Plan on Natural Gas Development and Utilization. The study was completed in June 1996 with technical assistance from the European Union. The study showed that trade in gas by pipeline could bring high returns on investment and recommended a trans-ASEAN gas transmission network of 8,000 to 10,000 kilometers requiring an investment of US$10-15 billion over the period from 2000 to 2020. Work on the Trans-ASEAN Gas Pipeline project is spearheaded by ASCOPE, through a task force chaired by Petronas.

Two of the fourteen power interconnection projects envisioned between ASEAN countries are now operational. They are the ones between Malaysia and Singapore and between Malaysia and Thailand. In addition, Laos has long-term contracts to sell hydropower to Thailand and Viet Nam, and Cambodia is to import power from Laos, Thailand and Viet Nam.

Now, more than ever, energy has taken a vital part in Southeast Asia's economic integration. Partly as a response to the financial crisis, ASEAN has been pushing that integration with ever-greater vigor, and energy is part of it. ASEAN is convinced that the way to stimulate economic activity and draw investments back into the region is not to constrict the regional market but to integrate and thus enlarge it. The way to deal with the challenge of globalization is for national economies to coalesce into regional markets.

Contrary to the predictions of instant analysts, ASEAN has accelerated the implementation of the ASEAN Free Trade Area. AFTA is now to be officially completed by the beginning of 2002 for the first six signatories to the AFTA treaty and shortly thereafter for the rest of ASEAN. Indeed, for all practical purposes, AFTA is now with us, with ninety percent of goods covered by AFTA to be subject to no more than 0-5 percent tariffs in less than three months from now.

The ASEAN Industrial Cooperation scheme, under which the products of companies operating in two or more ASEAN countries enjoy full AFTA treatment immediately, has been made even more liberal. ASEAN's leaders have directed the launching of a new round of negotiations on trade in services. Each ASEAN country has resolved to extend national treatment to investments in its manufacturing sector from other ASEAN countries. Any exceptions are to be phased out by 2003. Capital for investments in manufacturing is now to flow freely within ASEAN.

Binding ASEAN Together

In ASEAN's view, however, regional economic integration does not stop at policy measures. Integration does not stop at cutting tariffs, removing non-tariff barriers, reducing obstacles to investment, and easing restrictions on trade in services.

For ASEAN, integration also means binding its members together through infrastructure facilities, principally in transport, communications and energy. These are the lifeblood and nervous system of an integrated regional economy. They make trade in goods and services and capital flows possible and easier. Their availability and efficiency are a major factor in investment decisions. They themselves are the subjects and objects of trade and investment. Their construction and operation stimulate economic activity.

Energy is a natural area for linking ASEAN countries to one another. Some ASEAN countries are energy exporters; others are importers. Some have the capital to develop energy resources and facilities; others lack it. Energy technology can be profitably shared.

ASEAN has proven reserves of 22 billion barrels of oil, 227 trillion cubic feet of natural gas, 46 billion tons of coal, 234 gigawatts of hydropower, and 20 gigawatts of geothermal capacity. One estimate says that ASEAN accounts for two percent of the world's oil reserves and three percent of global coal and gas reserves. In 1996, ASEAN contributed about four percent and consumed about 2.5 percent of the world's energy production.

Energy makes up a large chunk of the export earnings of Brunei Darussalam, Indonesia and Malaysia. These three ASEAN countries account for 55 percent of the world's production of liquefied natural gas. Singapore is a leading oil-refining and -trading hub. It is the third largest refining center after Rotterdam and Houston and ranks third behind New York and London as an international oil-trading hub.

ASEAN already has the fourth largest electricity network in Asia, after China, Japan and India, with installed capacity of 76 gigawatts, which is now expected to resume its rapid growth. ASEAN can profitably utilize up to US$90 billion between now and 2005 in capital expenditures for power generation, transmission and distribution. In addition to the 5,565 kilometers already built in ASEAN, some 7,000 kilometers of gas pipelines are being planned in anticipation of the expected demand for natural gas of 38-69 billion cubic meters per year by 2020.

Requirements and Opportunities

Such mammoth requirements offer great opportunities for profitable investments. These investments, in turn, together with the expanded availability of energy, would spur economic activity and employment, which would hasten Southeast Asia's economic growth. At the same time, as the day approaches when reserves of fossil fuels run low, alternative sources of energy will have to be developed. This will require massive investments and tremendous opportunities in terms of equipment, human resources, and technology.

ASEAN's energy sector obviously presents enormous opportunities and requires huge resources. Intra-ASEAN linkages in this sector offer much potential benefit, both in themselves and as a component of ASEAN economic integration. It is in this light that ASEAN's leaders placed heavy stress on energy linkages in the Hanoi Plan of Action that they adopted last December. The leaders directed ASEAN to ensure the security and sustainability of energy supply. They urged the efficient utilization of natural energy resources and the rational management of energy demand, with due consideration of the environment. In concrete terms, they called for the early realization of trans-ASEAN energy networks, specifically the ASEAN Power Grid and the Trans-ASEAN Gas Pipeline.

In compliance with the leaders' directives, the ASEAN Energy Ministers, in their 17th meeting last July, adopted the ASEAN Plan of Action for Energy Cooperation 1999-2004. For the first time, all ten Southeast Asian countries are involved in ASEAN energy cooperation.

The ASEAN Plan of Action for Energy Cooperation covers six areas -- the ASEAN Power Grid, the Trans-ASEAN Gas Pipeline, coal, energy efficiency and conservation, new and renewable sources of energy, and energy policy and the environment.

The plan of action envisions fourteen power interconnection projects to be developed to form the bulk of the regional grid. The integrated approach that has been worked out for planning electricity interconnections in the Greater Mekong Sub-region is to be expanded to all of ASEAN. The energy ministers project a master plan for the short-term development of the Trans-ASEAN Gas Pipeline, with feasibility studies of individual interconnection projects between ASEAN countries as an initial step. This would include addressing the legal, institutional and technical issues involved.

An ASEAN Forum for Coal has been formed to promote the use of clean-coal technology for rural electrification, private investments in the development of coal resources, and trade in coal within ASEAN. The energy plan of action seeks to set up a system for labelling electrical products manufactured and marketed in ASEAN to reflect their energy efficiency. This would be part of the program to promote energy efficiency and conservation.

The plan of action sets out measures to foster the exchange of expertise and technology among ASEAN manufacturers of products using new and renewable sources of energy and to foster their utilization, particularly in the rural areas. Finally, the plan includes a comprehensive energy cooperation program and a regional energy outlook and analysis. It envisions joint studies on energy issues and ways of building the capacity of member-states to put together energy outlooks and policy analyses.

The newly-established ASEAN Centre for Energy, which is located in Jakarta and works closely with the ASEAN Secretariat, is spearheading the implementation of the ASEAN Plan of Action for Energy Cooperation. ASCOPE, of course, the re-named ASEAN Forum on Coal and the Heads of Power Utilities/Authorities are at the center of these efforts.

The ASEAN Secretariat is happy to support the work of ASCOPE, ACE, and the rest. This is in compliance with the ASEAN leaders' mandate to hasten the integration of the ASEAN economy and to make energy linkages part of that integration. It is in keeping with the leaders' directive for ASEAN to cooperate in mobilizing the energy sector to spur the region's lasting recovery and sustained growth.