Asia energy outlook to 2030: Impacts of energy outlook in China and India on the

world

Ryoichi Komiyama
The Institute of Energy Economics, Japan (IEEJ) – EDMC

1. Introduction
The world today faces new threats and risks to the international energy security system. These
issues include: the depletion of oil and gas resources in developed nations such as the US and
European countries; rapid increase in the energy demand and national strategies to acquire
resources in countries such as China and India; growing geopolitical risks in the Middle East, which
is the world’s main oil producing region; concerns about the security of energy transportation and
sea lanes; moves to tighten international regulations on nuclear fuel cycling policies, and;
international obligations towards the reduction of CO2 emissions to counter global warming.
Reflecting on these problems, now is the most critical time to establish a comprehensive national
energy strategy in order to effectively deal with the new circumstances that surround energy issues.
That national strategy should be designed to be based on future global energy and environmental
trends. To this end, it is necessary to sketch fully consistent energy outlook for energy security in
the world, in order to implement various energy policies to assure the stability of energy supply-
demand and address environmental problems.
The objective of this paper is to develop the long-term outlook of energy demand and supply in
the world to 2030 by applying an integrated econometric model, in order to evaluate energy impacts
of Asia, especially China and India, that are expected to be the center of energy demand growth, on
the world. The second section describes the main characteristics of an integrated econometric
model, the key exogenous assumptions, such as, future economic growth adopted for this
projection. The third section identifies the reference energy projections of world and Asia, energy
impacts of China and India on the world energy market, motorization, CO 2 emissions, and supply-
demand balances of crude oil. Also in this section, future energy demand and supply in Asia is
evaluated in Technological Advanced Scenario which assumes a series of energy and environmental
policies that Asian governments are currently considering or might reasonably be expected to adopt
for ensuring energy security and global warming problems. Finally, the paper concludes with the
key conclusions and implications of this outlook.

2. Model structure
2.1 Basic framework
Energy model developed here for this world energy demand projection over forecast period is
mathematically formulated with econometric method in a country-by-country basis. Figure1
illustrates the schematic diagram of model structure. The model is composed of a macroeconomic
sub-model and an energy supply-demand sub-model, the structural specifications of which are
roughly explained as follows.
The macroeconomic sub-model is developed to mainly identify the economic indicators
influencing energy supply-demand balances. In this sub-model, numerous indicators relating to
crude oil price, population, fiscal policy, world trade, and exchange rates are assumed as exogenous
variables. Endogenous variables, implicitly determined through the model, incorporate
macroeconomic parameters such as the demand for goods and services etc.; industrial activity
indicators such as the production of steel, cement and other energy-intensive products, vehicle
ownership, passenger-kilometers and freight ton-kilometers, etc; price indicators such as deflators
for GDP and its components, WPI, CPI, and secondary energy price indexes.

MACRO Economic Model Socio-economic assumptions

GDP components GDP, Crude oil price, Exchange rate,
Population, Power generation outlook,
Price/Labor etc. World trade etc.
Industrial activities
Transport activities
Energy Demand-Supply Model World Petroleum Refining/Trade Flow Model
(LP optimization )
Energy Demand
Crude Oil and Petroleum Products Supply
Conversion Sector Crude Oil and Petroleum Products trading

Energy Supply
CO2 emissions

Figure1: Structure of energy projection model.

The energy supply-demand sub-model, playing a central role for energy projection, allows us
to specify the energy flow from final energy consumption to primary energy supply in a consistent
way, following which step anthropogenic CO2 emissions are eventually calculated[1]. Although
there have been scores of attempt to simulate world energy projections[2][3][4], Asian region in this
model is disaggregated into 14 countries or regions, more elaborate division than other energy
outlooks, in order to implement an in-depth analysis of Asia and provide the detailed picture of its
energy demand and supply[5][6], as well as world regional division is 30 countries or region.
World Petroleum Refining/Trade Flow Model[6] also covers 30 countries or regions. In the LP
(linear programming) calculation performed in this model, an optimal solution is mathematically
computed such that overall cost including crude oil price, processing cost in refinery and petroleum
trade cost becomes the lowest on a worldwide basis. In this model, seventy (70) types of crude oils,
each set with product yield ratios and sulfur content; A refinery assigned for each of the 30
countries, with CDU (crude distillation unit) and secondary unit capacities and operating costs data
assigned for each country; Three levels of tanker freight rates (i.e., VLCC, LR, and MR) for
transportation routes connecting the 30 countries; Gasoline octane restrictions set for each of the 30
countries assigned with sulfur regulation for each country.

2.2 World economic growth and population to 2030

Driven mainly by growing Asian economy, world economy is expected to exhibit moderate
growth at a steady rate of 3.1% in the year 2004 to 2030. Figure2 displays GDP and its growth rate
in the different countries of Asia, basically estimated from the Asian development bank[7] for short-
term projection, and from the IEA[8], and each government outlook for medium to long-term.
By region, North America and OECD Europe are projected to show stable economic growth at
respective annual average growth rates of 2.8% and 2.1%. In non-OECD Europe such as the former
Soviet Union, economies are getting on the path of sustained growth following the dismemberment
of the Soviet Union in the 1990s, and are forecast to achieve a growth rate at 4.8%. As for Asia
(excluding Japan), the forecast is continued astounding growth at a rate of 5.4% per annum, due to
the presence of economies with enormous markets such as China, India, and ASEAN.

6.5 2004-
Asia(exc.Japan) 5.4 [%]
2030
Hong Kong 6.3
3.7 1971- World 3.1%
Vietnam 5.0 2004
6.5 N.America 2.8%
6.3 2004-
Thailand 4.9 2030 OECD Europe 2.1%
Phillipines 3.5
4.1 Non OECD Europe 4.8%
Malaysia 6.7
5.7 Africa 3.8%
Singapore 7.2
3.9 Middle East 3.3%
Taiwan 7.4
3.2 Asia 3.9%
Indonesia 6.2
5.4 Oceania 2.8%
India 5.0
5.8
South Korea 7.0
3.5
Japan 3.0
1.5
China 9.0
6.1
0.0 2.0 4.0 6.0 8.0 10.0

Figure2: Exogenous GDP growth projection to 2030 by region and country in Asia and the world.

With the support of its surging domestic demand, the Chinese economy in particular sustained
high rates of growth throughout the 1990s, and has achieved vigorous economic growth at 7 - 9%
with the start of the 2000s. Although it is saddled with a number of problems such as internal
economic disparities, the need for reform of state enterprises, unemployment, and bad debt, China
would be able to achieve high-order growth at rates averaging 6.1% through 2030, provided that it
continues to practice proper macroeconomic management. GDP in India assumes high growth 5.8%
reflecting on improving economic efficiency by liberalization and direct investment from foreign
countries, and industrialization through, for example, IT-based service industry and automobile
industry. The forecast for Japan is comparatively low growth at somewhat mild 1.5% due to factors
such as economic maturation and the decline in the labor population accompanying population
decrease and aging.

Million 1971 1980 1990 2004 2010 2020 2030

1600
Billion 2004 2030
World 6.5 8.4
1200 Asia 3.5 4.4
China 1.3 1.5
800 India 1.1 1.5

400

0
Non-OECD
Europe
N.America

L.America

Middle

J apan
Africa

China

India

Oceania
Other
OECD

Asia
East
Europe

Figure3: Exogenous world population to 2030 by region.

 On the population front, although birthrates are tending to move downward in developing
countries as its economic progress proceeds, the world population is forecast to expand and reach
some 8.4 billion in 2030 as compared to about 6.5 billion in 2004. Figure3 shows the exogenous
projection of world population to 2030, basically derived from the United Nations forecast[9].
Among the developed countries, a sustained increase is projected in the United States of
America, but its rate would slow to a gradual level. The U.S. share of the world population is
therefore not expected to expand. Japan's population is forecast to gradually decline after the recent
peak. In Europe, too, the population is projected to peak out from 2020 to 2030. In Asia, on the
other hand, it is projected to continue growing, albeit at lower rates than past trends. In 2030, it is
estimated that the countries of China and India each have populations of 1.5 billion, and that Asia,
as the most populous region in the world, will account for almost half of the world population
increase.

2.3 Energy prices

The future trend for crude oil prices was prepared on the basis of the price estimates in
documents such as the Annual Energy Outlook (AEO) released by the EIA/DOE[10]. On the
Japan’s average crude oil import price at CIF base, it envisages a moderate rise over the long term
as oil production costs increase, with the per-barrel price reaching 57 dollars in 2030 (at 2005
values; the nominal price figure is 94 dollars) from 52 dollars in 2005, as shown in Figure4. As for
natural gas prices, the general view is that they are linked with crude oil prices. In this outlook, it
was assumed that Japan’s LNG import price gradually increases from 312 dollars per ton in 2005 to
462 dollars per ton in 2030, reflecting on globalization of LNG trade. Rapid LNG import growth in
Europe and USA, based on growing gas demand in power generation and sluggish regional gas
supply, will support the gradual increasing of LNG price. The historical trend shows that coal prices
do not have a very strong correlation with crude oil prices, and the forecast levels incorporate only a
gradual increase in production costs due to its larger scale of resource endowment.

$ / bbl $/t
70 700
Actual　← 　→ 　Forecast
60 OECD crude oil imports 2005 2010 2020 2030 Crude Oil 600
52 57
Crude Oil Real 51 50 52 56
51 53
50 $/bbl Nominal 51 55 70 92 500
462
40 402 400
364
312 LNG (Right axis)
30 300

20 200
Steam Coal (Right axis)
10 100
63 62 63 65
0 0
1970 1980 1990 2000 2010 2020 2030

*Tables in this graph indicate OECD’s average crude oil import price, CIF base.
Figure4: Japan’s import energy prices, CIF base, to 2030.
3 Results of the simulation

3.1 Outlook for primary energy consumption by region

Figure5 illustrates the world primary energy demand by region. World primary energy
consumption is forecast to increase at an average annual rate of steady 1.7% over the forecast
period under annual GDP growth of 3.1% to 2030. The volume in 2030 is expected to reach 15.9
billion tons oil equivalent (btoe), a 1.6-fold increase from the 10.2 btoe in 2004. Primary energy
consumption in Asia is projected to grow at 2.8% per annum and reach 6.2 btoe in 2030, for a 2.0-
fold increase from 3.1 btoe in 2004. Asia would account for approximately 50% of the world
primary energy increase, reflecting its sharp economic growth, and around 80% of the world energy
demand increasing would derive from the Non-OECD countries. The Non-OECD Asian countries
would represent about half of the world primary energy increase.

Mtoe World
7,000
AAGR* 2004
10.2 billion toe
6,000 ’71-‘04 ’04-‘30 ↓
Asia 2030
GDP (World) 3.1 % 3.1 %
5,000 GDP (Asia) 4.2 % 3.9 %
15.9 billion toe
(1.6-fold increase)
World 2.2 % 1.7 % Asia
4,000
Asia 4.7 % 2.8 % 2004
N.America
N.America 1.2 % 1.0 % 3.1 billion toe
3,000 ↓
* Average annual growth rate
OECD Europe 2030
2,000 6.2 billion toe
Non-OECD Europe (2.0-fold increase)

L.America
1,000
Middle East
Africa
0 Oceania
1971 1980 1990 2000 2010 2020 2030

Figure5: World primary energy consumption to 2030 by region.

Along with population increase and economic growth, the share of the primary energy
consumption of Non-OECD countries is expected to increase from 44% in 2004 to 56% in 2030.
Conversely, that of OECD countries is forecast to shrink from 56% to 44%. The Asian share is
forecast to rise from 30% in 2004 to 39% in 2030, the China’s share, from 14% to 18%, and the
share of India, from 3% to 6%.
Figure6 shows primary energy demand in Asia by country. Stronger growth is anticipated in
countries achieving fast-paced economic growth, such as China, India, Vietnam, Thailand,
Malaysia, and Indonesia. Primary energy consumption in China is projected to increase at an
average annual rate of 2.8%, and would amount to 2.9 btoe, around 2.1 times more than 1.4 btoe in
2004. Primary energy demand in India is forecast to increase sharply at 4.0% per annum, and would
reach 1.0 btoe, around 2.8 times more than 0.4 btoe in 2004.
China alone accounts for 25% of the incremental increase in world primary energy, which
surging is the biggest on a country basis. China is currently the world's biggest energy consumer
after the United States, and it would reach near the U.S. consumption level by 2030. India also
explains 11% of the world primary energy increase, equal growth to USA, which primary energy in
2030 eventually achieves almost double of current Japan’s energy demand. However, energy
consumption per person of China and India in 2030, each 1.9 toe and 0.7 toe per capita, remains
well under the level of developed countries, for instance, 5.4 toe per capita in OECD average at
2030. As such, China and India have large potential of energy demand expansion even after 2030
and its presence in the global energy market would become even larger.

Mtoe
Asia
7000
AAGR China Japan South Korea India Indonesia Taiwan Singapore 2004
1971-2004
2004-2030
5.5%
2.8%
2.1%
0.0%
8.0%
1.8%
5.5%
4.0%
8.4%
3.6%
7.2%
2.0%
6.8%
2.7% 3.1 billion toe
6000
Malaysia Philippines Thailand Vietnam Hong Kong Other Asia
↓
7.6% 4.2% 7.9% 4.0% 5.0% 3.6% 2030
5000 4.5% 4.2% 4.1% 4.4% 1.4% 4.6%
6.2 billion toe
4000
16% (2.0-fold increase)
China
South Korea
Japan
India
India 6% China / India
3000 Indonesia Taiwan South Korea 9%
Singapore Malaysia
12% 2004
Philippines Thailand Japan
2000 Vietnam Hong Kong 7%
1.4 bil. toe　0.4 bil. toe
Other Asia
17% ↓
1000
China 46% 2030
45% 2.9 bil. toe 1.0 bil. toe
(2.1-fold inc.) ( 2.8-fold inc. )
0
1971 1980 1990 2004 2010 2020 2030

Figure6: Asia primary energy consumption to 2030 by region.

In Asia, about 50% of the consumption increase over the period should derive from expanded
consumption in China, followed by India at 20%, Indonesia at 6%, Thailand at 5%, South Korea at
4%, and Malaysia at 3% each. The share of the primary energy consumption in Asia occupied by
China is forecast to expand from 45% in 2004 to 46% in 2030. The outlook also envisions an
expansion from 12% to 16% for India, 4% to 5% for Indonesia, and 3% to 4% for Thailand. In
contrast, the share of Japan is predicted to decline from 17% in 2004 to 9% in 2030 owing to factors
such as economic maturation and population decrease, thereby ranking the country third in this
connection, behind China and India in Asia.

3.2 Outlook for primary energy consumption, final energy demand, and power generation by
energy source

Asia
Figure7 shows primary energy demand in Asia by energy source, and Figure8 illustrates
comparison of primary energy mix between world and Asia. Fossil fuels (coal, oil, and natural gas)
are expected to contribute about 90% of the increase in primary energy consumption over the years
2004 - 2030, and therefore would continue to play an important role as energy sources. Primary coal
demand is predicted to show the largest increase of all fossil fuels and account for 35% of the
increase in primary energy consumption, followed by oil at 33%, and natural gas at 19%. In Asia,
coal and oil will play a central role in primary energy supply while gas, nuclear and renewables
gradually diversifying supply sources, to 2030. Meanwhile, in the world, oil will remain the single
largest fuel whereas natural gas will overtake coal as the world’s second-largest energy source
around 2030.
Mtoe
3,000
AAGR*
’71-’04 ’04-’30 Coal
2,500 48%→ 42%
GDP(Asia) 4.2% 3.9%
TPES ** 4.7% 2.8%
2,000
Coal 4.8% 2.2%
Oil 3.6% 2.6%
1,500
Oil
Gas 10.5% 4.3% 35%→ 34%
* Average annual growth rate
1,000 * * Total Primary Energy Supply
Gas
10%→ 14%
Hydro
1.8%→ 1.6% Nuclear
500 4.4%→ 5.7%
Other renewables
0.9%→ 3.0%
0
1971 1980 1990 2004 2010 2020 2030

Figure7: Asia primary energy consumption to 2030 by energy source.

Figure9 shows the increase in fossil fuel consumption of world and Asia by sector between
2004 and 2030. Coal consumption in Asia is projected to rise at 2.2% per annum, with its share of
primary energy consumption declining from 48% in 2004 to 42% in 2030, but coal would
nevertheless remain the single-largest energy source in Asia. By sector, 99% of coal increase is
projected to come from the power sector.
Oil consumption is forecast to increase at an average annual growth rate of 2.6%, with its share
in primary energy demand forecast to remain unchanged from 35% in 2004 to 34% by 2030. By
sector, it is estimated that 56% of oil increase will derive from transportation sector, 20 % from
residential and commercial sector, and 16% from industry sector.

World Asia
% %
60 60

Coal
50 50
Oil
40 40
Oil
Coal 30
30

20 Gas 20
Renewables etc. Gas
Renewables etc.
10 Nuclear 10
Nuclear
Hydro Hydro

0 0
1971 1980 1990 2004 2010 2020 2030 1971 1980 1990 2004 2010 2020 2030

Figure8: Comparison in share of primary energy by energy source between world and Asia.

Consumption of natural gas is anticipated to increase at an average annual rate of 4.3%, the
highest among the fossil fuels, where the installation of combined-cycle power generation steadily
proceeds due to its technological advances and considerations of environmental compatibility. By
sector, 56% of the increase in natural gas consumption would derive from the fuel input into the
power sector, 28% from industrial sector, and 15% from residential and commercial sector.
Expanded utilization in power sector is expected to drive an increase in the natural gas share of
primary consumption, from 10% in 2004 to 14% by 2030.

Oil Gas Coal

100%

Non-energy
12 20
80%
59 56

60%
98 99
61 56
40% Res/ Power
Transport 14 Com 15
generation
20%
25 28
18 16
Industry
0%

World Asia World Asia World Asia

Figure9: Incremental increase in fossil fuel consumption of world and Asia by sector, 2004-2030.

Nuclear is forecast to rise at an average annual growth rate of 3.8%. The nuclear share of
primary energy in Asia is expected to increase from 4.4% to 5.7% owing to the fast-paced
expansion of electricity demand particularly in China and India. Nuclear power will also continue to
play a vital role in Japan, South Korea, and Taiwan, which have few domestic energy reserves.
Nuclear capacity over the world is projected to grow from 385GW in 2005 to 499GW in 2030,
achieving 114 GW growth, as illustrated in Figure10.

GW Actual　← 　　　→ 　Forecast World

600
Incremental increase,2005-2030 2005
110
GW
8 2 -31 21 4
114 GW growth 385 GW
↓
2030
L.America

East・
N.America

Europe

OECD

Asia
OECD

Middle
Non-

400 38%
499 GW
21% Asia Middle
East
(1.3-fold increase)
・Africa Asia
11% Non-OECD 1%
13%
Europe 2005
200 36% OECD Europe 22% 82GW
↓
L.America
2030
1%
30% N.America 25% 191 GW
(2.3-fold increase)
0
1971 1980 1990 2005 2010 2020 2030

Figure10: Nuclear capacity outlook in the world.

Particularly in Asia, where electricity consumption is expected to grow sharply, nuclear power
generation will expand rapidly. Of the 114 GW increase in the installed capacity for nuclear power
generation expected in the world to 2030, 110 GW of capacity will be added by new nuclear power
plants in Asia. Thus, Asia will contribute most to the expansion of nuclear power generation in the
world. The growth will be highest in China and India: the installed capacity for nuclear power
generation will expand to 50 GW in China and to 32 GW in India by 2030.
There are high expectations for the diffusion of renewable energy sources with little
environmental burden, such as hydropower, geothermal energy, and new energy. Their share of
primary energy consumption in Asia is forecast to increase from 2.7% in 2004 to 4.6% by 2030.
They are, however, not going to become a major supply source the same as fossil resources, due to
their higher supply cost and supply instability deriving from natural influences, such as the
intermittent nature of photovoltaics and wind power, the maximum potentials of which are also
constrained in order to maintain a supply reliability of power system.

TWh
8,000
AAGR*
7,000
’71-‘04 ’04-‘30
Coal-fired
56%→ 55%
6,000 Total 6.4 % 3.7 %
Coal 8.8 % 3.6 %
5,000
Oil 0.8 % 0.4 %
4,000 Gas 13.8 % 5.2 %
* Average annual growth rate
Gas-fired
3,000 Oil-fired 14%→ 20%
7.4%→ 3.2%
2,000 Other renewables Hydro
0.9%→ 4.4%
12%→ 9% Nuclear
10%→ 10%
1,000

0
1971 1980 1990 2004 2010 2020 2030

Figure11: Power generation in Asia to 2030 by energy source.

Figure11 illustrates power generation mix by energy source, and Figure12, comparison of
power generation mix between world and Asia. In Asia, fast-paced economic growth is being linked
to an upgrading of the industrial structure, rising living standard, and rapid increase in electricity
consumption. Electricity demand in Asia increased at 6.2% per annum from 1971 to 2004, and is
forecast to increase at 3.6% per annum from 4,200 TWh in 2004 to 10,600 TWh in 2030. By sector,
the rate of increase is expected to be the highest in the residential and commercial sector at 4.8%.
By region, China will have vigorous increasing rate at 3.5% from 1,700 TWh to 4,200 TWh, and
India, at 5.3% from 400 TWh to 1,700TWh.
At 2004 in Asia, coal-fired power accounted for the single-largest share at 56%, followed by
natural-gas-fired power, hydropower, and nuclear power. The outlook for the projection period
envisages a shift to natural-gas-fired plant along with the spread of new technology such as
combined-cycle gas turbine and efforts to alleviate environmental burden, with the share of natural-
gas-fired power forecast to increase from 14% in 2004 to 20% in Asia by 2030. Since the share of
coal-fired generation in Asia is projected to hold 55% even as of 2030, it would remain the single-
largest power supply source, based on regional abundant resource endowment, and, in accordance
with the policy for effective use of other domestic resources to conserve domestic oil and gas in
energy producing countries.
Particularly in both China and India, coal is projected to acquire even more weight as the
major source and become the key source for power generation. Meanwhile, the share of oil-fired
power is likely to continue declining, especially in the developed countries. It is estimated that the
installed capacity of nuclear is projected to increase in countries including China, South Korea,
Japan, and India, which stabilizes the nuclear power share in Asia around 10% to 2030.

World Asia
% %
60 60

Coal-fired
50 50
Oil-fired
Coal-fired
40 40

30 30
Hydro Gas-fired
Hydro Gas-fired
20 20

Oil-fired Nuclear
10 10
Nuclear
Renewables etc. Renewables etc.
0 0
1971 1980 1990 2004 2010 2020 2030 1971 1980 1990 2004 2010 2020 2030

Figure12: Comparison in share of power generation mix between world and Asia.

China
Figure13 shows primary energy demand outlook in China to 2030. In China, the modernization
of energy demand and supply would gradually induce fuel switching and sector configuration of
energy demand.

3,000
Mtoe Actual　← 　　　→ 　Forecast Other TPES
Incremental Increase,2004-2030 Hydro 2004
2,500 595 1.5bil. toe 3% Nuclear
1.4 billion toe
492 7% Gas
↓
41%
33% 151 130 2030
2,000 28%
10%
71 28 Oil 2.9 billion toe
Coal Oil Gas NuclearHydro Other (2.1-fold growth)
1,500
AAGR,% 2004-
2030
Oil
1,000 GDP 6.1 22% 2004
56%
TPES 2.8 6.5 mb/d
500 Coal ↓
71%
2030
0 16.7 mb/d
1971 1980 1990 2000 2010 2020 2030 (2.1-fold growth)

Figure13: Primary energy consumption in China to 2030 by energy source.

Concerning fuel switching, the share of coal declines from 71% in 2004 to 56% by 2030 in
primary energy consumption, from 43% to 13% in final energy demand, and from 78% to 70% in
power generation, which decreasing will be offset, in primary energy sphere, by the increasing share
of natural gas from 3.0% in 2004 to 6.8% by 2030 and that of oil from 22% to 28%, in final energy
sphere, by the growing proportion of electricity from 18% in 2004 to 24% by 2030, reflecting its
rapid industrialization and urbanization. Although coal-fired power plants will remain the single
largest power supply source through 2030, gas and nuclear are projected as main sources to replace
coal in power generation. Electricity consumption, in particular, is projected to rise at average
annual rate of brisk 3.5% with achieving a 2.4-fold increase, and expected to replace also coal in
final energy demand. Although nuclear and renewables in primary energy are projected to increase
sharply, the share will still remain only 3.0% and 4.5% respectively both in 2030.

India
Figure14 shows primary energy demand outlook in India. As in China, diversification of coal
supply is likely to be gradually proceeded.
Mtoe Actual　← 　　　→ 　Forecast TPES
1,200
Incremental increase,2004-2030
2004
Hydro 0.4 billion toe
1,000 236 261
Nuclea ↓
6% r 2030
800
37%
40% 82 650mil.toe Gas

13%
54 11
8% 4 10% 1.0 billion toe
Coal Oil Gas Nuclear Hydro Other
(2.8-fold growth)
600
39% Oil
AAGR、% 2004- Oil
2030
400
GDP
2004
5.8% 7%
TPES 4.0% 36%
2.6 mb/d
200 43% Coal ↓
55% 2030
0 8.1 mb/d
1971 1980 1990 2000 2010 2020 2030
(3.1-fold growth)

Figure14: Primary energy consumption in India to 2030 by energy source.

With respect to energy source switching, the share of coal will decrease from 55% in 2004 to
43% by 2030 in primary energy demand, from 19% to 12% in final energy demand, and from 69%
to 62% in power generation. Instead, the share of natural gas is forecast to increase from 6.5% in
2004 to 10% by 2030 and that of oil from 36% to 39% in primary energy demand. In final energy
consumption, the proportion of electricity will grow from 20% in 2004 to 26% by 2030, reflecting
its rapid increase of living standard. Though, like in China, coal-fired power plants will remain the
center of power generation through 2030, gas is projected as main source to replace coal in power
generation. Electricity demand is projected to grow at 5.3% annually with accomplishing a 2.4-fold
increase, and to substitute coal in final energy demand. Although nuclear and renewables in
primary energy would rise each at 10.4% and 7.0 % per annum, the share will still amount to only
5.8% and 0.3% both in 2030.

3.3 Outlook for energy impact of China and India on the world energy market
Figure15 illustrates the incremental increase in world primary energy demand by energy
source and by region from 2004 to 2030. It is, then, instructive to examine the impact of energy
increase in China and India over the world by energy source. China and India together would
account for 36% of world total primary energy increase, and China only, for 25%, and India, for
11%, which have a enormous influence on the international energy market.
World oil consumption is forecast to rise from 80 million barrels per day (mb/d) in 2004 to 117
mb/d in 2030, for an increase rate at 1.5% per annum. Oil demand in Asia, which was on 22 mb/d in
2004, is anticipated to increase by an average annual rate of 2.6% and hit 44 mb/d in 2030, as
illustrated in Figure16. By region, China and India as a whole would account for 39% of world oil
increase, China alone, as world energy giant, for 26%, and India, for 13%, which position could
eventually have a large impact on the international oil market.

100%
Non-
23 22 OECD*
80% 40 43 40
58 21
20
60%
OECD
24 16 18 20
24
40%
13 12 India
11 56 29 57
China +
20% 40 39 40 India
36
26 33 28
25 4
9 13 China
0%
TPES Coal Oil Gas Nuclear CO2

Figure15: Incremental increase in world primary energy consumption by energy source and by
region, 2004-2030.

Natural gas demand in the world, which came to 2,630 billion cubic meters in 2004, is
projected to reach 4,580 billion cubic meters in 2030 at an average annual growth rate of 2.1%. By
region, China and India contribute 13% of world natural gas increase, most of which derives from
municipal gas use and power generation.
World coal consumption is anticipated to rise from 4.0 billion ton of coal equivalent (btce) in
2004 to 6.1 btce in 2030 at 1.6% per annum. By region, China and India together would account for
56% of world coal increase, China alone, for brisk 40%, and India, for 16%, which increase is
boosted almost all by the input for power generation.

Mtoe
2500 2004
AAGR
1971-2004
China
6.4%
Japan
0.7%
South Korea
7.1%
India Indonesia Taiwan Singapore
5.4% 6.4% 6.0% 6.0%
1.07 billion ton
2004-2030 3.7% -1.0% 1.0% 4.4% 3.3% 1.0% 2.3% (22 mb/d)
2000
Malaysia Philippines Thailand Vietnam Hong Kong Other Asia ↓
5.5% 2.1% 6.2% 2.2% 2.7% 4.1% 2030
2.6% 3.7% 3.2% 4.5% -0.1% 4.1%
2.11 billion ton
1500
China Japan
(44 mb/d)
South Korea India 19%
Indonesia Taiwan 2.0-fold growth
1000 Singapore Malaysia India 6%
(22 mb/d growth)
Philippines Thailand
Vietnam Hong Kong 12% South Korea 9%
2004　　 2030
Other Asia Japan
500
10% China
24% 38% 6.5 mb/d 16.7 mb/d
China Japan
29% 5.3 mb/d　4.1 mb/d
0
India
1971 1980 1990 2004 2010 2020 2030
2.6 mb/d　8.1 mb/d

Figure16: Primary oil consumption in Asia to 2030 by region.

Nuclear power generation in the world is forecast to rise from 2,800 TWh in 2004 to 3,500
TWh in 2030 at 0.9% per annum. China and India, with its rapidly growing demand for electricity
on the basis of improved living standard, accounts for vigorous 57% of the world nuclear increase,
the construction plan of which is based almost on the Eleventh Five Year Plan.

3.4 Outlook for motorization

Figure17 shows vehicle ownership to 2030. In Asia and other largely developing regions,
consumption of gasoline, gas oil, and other transportation fuel is rapidly expanding. Among the
developed countries, motorization has already run its course and the demand is more or less
saturated.

World
Million cars
350 2004
China India
300 Vehicle Ownership Vehicle Ownership
China(High) 0.83 bil.
↓
(mil.cars) rate (mil.cars) rate
250 2030
2004 27 2.1% 15 1.4% China(BAU)
BAU（2030） 233 14% 73 5.0%
1.7 bil.
200
High（2030） 301 20% 96 6.6% China(Low) (2.0-fold)
150 Low（2030） 180 12% 55 3.8% Asia
100 Vehicle ownership, Owne rship rate (2004) India(High) 2004
Japan ：74 million、58%
South Korea ： 48 million、31% India(BAU) 170 mil.
50 USA ：234 million、80% ↓
India(Low)
2030
0
1971 1980 1990 2000 2010 2020 2030
510 mil.
(3.0-fold)

Figure17: Prospect of vehicle ownership to 2030 in China and India.

The developing countries of Asia, China and India in particular, currently stand at the threshold
of motorization, which is projected to gather momentum over the coming years in parallel with the
living standard rising. The expanded consumption of oil associated with motorization in China and
India would be a major factor characterizing its structure of energy supply and demand over the
medium and long terms. In 2030, automobile holdings in China could surge to about 233 million
vehicles (about 3.1 times as many as in Japan today), but the ratio of China’s automobile holdings
per capita in 2030 is forecast to remain only about 14%, which would still be lower as compared to
the average in developed countries (55% in 2004). In other words, China is projected to have
tremendous motorization growth potential even after 2030, hence posing an enormous impact on
the international oil market in the long terms.

3.5 Outlook for CO2 emissions

Figure18 shows the future trajectory of CO2 emissions to 2030 in world and Asia. Since fossil
fuels would be the source for about 90% of the incremental increase in world primary energy
consumption through 2030, CO2 emissions, which came to about 7.4 billion (carbon-equivalent)
tons in 2004, are forecast to reach about 11.4 billion tons by 2030. World CO2 emissions would
consequently expand at an average annual rate of 1.7%, about the same as for primary energy
consumption, and exhibit a 1.5-fold increase to 2030, with approximately 30% and 60% of the
world increment projected to be accounted for by emissions in China and in the whole Asian region,
respectively. Large share of the world incremental CO2 emissions in China results from expanding
shares of coal and oil in its primary energy supply mix for 2030.
 5000
Mt-C 4.8 Gt-C World
Incremental increase,2004-2030
2004
1134
4000
2.3 Gt-C
27%
7.4 Gt-C
748 ↓
482 2030
49% Other Asia
32% 2.5 Gt-C
3000 ▲ 47 21% 16% 11.4 Gt-C
Japan China India Other Asia
India (1.5-fold growth)
0.31 Gt-C→ 0.79 Gt-C
2000 22% Asia
12% China 2004
50% 2.5 Gt-C
1.3Gt-C→ 2.4Gt-C
1000
52% ↓
2030
Japan
14% 6% 4.8 Gt-C
0 0.31 Gt-C→ 0.30 Gt-C
1971 1980 1990 2004 2010 2020 2030 (1.9-fold growth)

Figure18: Asia CO2 emissions to 2030 by region.

3.6 Oil demand and supply outlook in Asia to 2030

Figure19 depicts oil demand and supply balance in Asia, and Figure20 shows net oil import
and import dependence in Asian countries. Most of Asian countries will become even more
dependent on oil imports over the forecast period. In this projection, the shortfall of oil supply will
increase to 39 mb/d in 2030 under the sluggish oil production in Asia from 6.3 mb/d in 2005 to 4.1
mb/d.

Mtoe Net Oil Import

2,500
89% 2005
Demand Production Net import 2,105
14.8 mb/d
2,000 84% 1,865
↓
1,650
73% 2030
Rate of import dependence
1,500
1,243
1,389
38.9 mb/d
58% (2.6 -fold growth)
54% 941 910
1,000 60% 2005 　　 2030
70% 625
548 China
486
500 329
393 3.1 mb/d 14.7 mb/d
291 289336 333
261
232 239
195 Japan
98
5.1 mb/d　4.1 mb/d
0 India
1971 1980 1990 2000 2010 2020 2030 1.7 mb/d　7.5 mb/d

Figure19: Oil demand and supply balance in Asia to 2030.

This expanding demand-supply gap results in the rate of import-dependence to go up to 89%

by 2030, which situation basically derives from the increasing oil shortfall in China from 3.1 mb/d
in 2005 to 14.7 mb/d by 2030, outstripping the current volume of imports into the Europe or United
States. As such, the increase in dependence will be most dramatic in China, which only became a
net oil importer in 1993. By 2030 imports will satisfy 88% of China’s oil demand. As a result,
China is forecast to be the biggest oil import country in Asia, going beyond Japan’s net oil import
by 2010. Also India oil import is likely to surpass Japan by 2020.
Figure21 shows the dependence rate of oil import from Middle East in Northeast Asia.
Currently in the three countries in Northeast Asia (Japan, China, and South Korea), the dependence
rate of oil import on Middle East would steadily deepen. Specifically, by 2030, dependence level on
the Middle East is forecast to reach about 93% in Japan and 92% in South Korea.
Mtoe
800
【Oil import dependence in Asia】
China
700 2004 2010 2020 2030
China 49% 62% 82% 88%
600 Indonesia ▲ 0.1% 35% 56% 71%
Malaysia ▲ 74% ▲ 26% 5% 23%
Thailand 76% 80% 91% 94% Other
500
India 68% 78% 89% 93% Asia
Vietnam ▲ 76% ▲ 52% 40% 63%
400
Asia 55% 73% 84% 89% India
( ▲ denotes net oil export position)
300
200 Japan
South
100
Korea
0
1971 1980 1990 2000 2010 2020 2030
-100

Figure20: Net oil import and oil import dependence in Asian countries.

In China, too, it is forecast to jump from 46% in 2004 to 74% by 2030 due to the sharp increase
in the oil demand. In the process, the rate in Northeast Asia is expected to rise from 72% in 2004 to
83% by 2030, mainly driven by the rapid expansion of oil import in China. Thus, the sizable
increase in oil import of China is believed certain to increase its reliance on Middle Eastern oil,
hence posing a serious energy security problem to the world oil importing countries, especially to
those in Northeast Asia. In order to mitigate this rising Middle East dependence, Canadian oil sands
would play an important role as one of key measures. Dependence on Middle East oil is reduced by
nine percentage points from 83% to 74% through the import of Canadian Oil Sands, export of
which to Northeast Asian market is assumed to reach 1.3 mb/d by 2030.
％
100
Japan 93
92
90 90
Korea 83
9%
80 down
78
74
70 72 74
Oil Sands
Northeast 1.3mb/d Northeast Asia(2030)
60 Asia Crude Oil Import
China 14.4 mb/d
Import from Middle East
50 12.0 mb/d (Reference)
46 10.7 mb/d (Oil Sands)
40
2004 2030

Figure21: Dependence rate of oil import from Middle East in Northeast Asia to 2030.

With the increasing dependency of Asia on oil import from Middle East, the transportation of
oil through the Malacca/Singapore Strait (i.e. the Strait of Malacca), the strategic oil transportation
channels through which much of the Middle East oil flows to East Asia, will grow from 11.7 mb/d
in 2004 to 24 mb/d in 2030. Expanding oil demand in China and other East Asian countries will
cause a considerable increase of traffic through the Straits, boosting its strategic importance.
Accordingly, the number of very large crude carriers (VLCCs) passing through the Strait will
increase from about 4,200 vessels per year in 2004 to 8,300 vessels per year in 2030. Thus, the
congestion problem in the Strait of Malacca is expected to become much more serious. To tackle
with this problem, introducing Canadian oil sands into East Asia is effective option to alleviate the
congestion. Oil Sands import will reduce VLCC passage at Malacca Straits by 500 passing in 2030.

2004 2030 (Reference) 2030 (Canadian Oil Sands)

Oil Sands
1.3 mb/d

11.7 mb/d 24.0 mb/d 22.7 mb/d

VLCC: VLCC: VLCC:

4,200 / year 8,300 / year 7,800 / year

Figure22: Oil traffic in the Strait of Malacca.

3.7 Technological Advanced Scenario

Technological Advanced Scenario assumes a series of energy and environmental policies that
countries are currently considering or might reasonably be expected to adopt, contributing to more
stability of energy supply and the reinforcement of global warming countermeasures. The objective
is to provide a consistent future of how Asian energy markets might evolve if Asian governments
decided to strengthen their environmental and energy-security policies. The policy measures
analysed have not been selected according to their cost-effectiveness, but rather to reflect the
current planning energy-policy in each Asian country. Table1 shows selected energy and
environmental policies considered in the Technological Advanced Scenario, for example, in
China[11] and India[12].

Table1: Main energy and environmental policies included in the Technological Advanced Scenario
in both China and India at 2030.

Increased thermal e
C
G
In Technological Advanced Scenario, primary energy consumption in Asia in 2030 is expected
to achieve 5,266 Mtoe, 943 Mtoe or 15% less than in the Reference Scenario. The amount of saved

Increased share in
energy in 2030 is roughly equal to 1.8 times of total primary energy demand currently in Japan.
Energy demand is projected to grow by 2.1% per year, 0.7 percentage points less than in the
Reference Scenario.

Primary Energy Demand CO2 Emissions

Mtoe Mt-C
7,000 6,000
AAGR(%) 2004- 6,209 AAGR(%) 2004-
6,000 2030 2030 4,843
5,007 5,000
GDP 3.9 GDP 3.9 4,015
Reference Reference
5,000 Reference 2.8 Reference 2.5
TA 2.1
3,828 5,266 4,000 TA 1.6 3,157
4,460
4,000 3,748
3,063 2,526
3,000 3,396
3,636
3,000 2,954
Technological
Advanced 2,000 1,422 Technological
2,000 1,684 Advanced
1,060 914
669 1,000 589
1,000 940 Mtoe decline 1.1 Gt-C decline
(15% decline) (23% decline)
0 0
1971 1980 1990 2000 2010 2020 2030 1971 1980 1990 2000 2010 2020 2030

Figure23: Primary energy demand and CO2 emissions of Asia in Technological Advanced Scenario.

The reduction in demand for fossil fuels is even bigger, due to the use of more efficient
technology and switching to less carbon-intensive fuels. Demand for fossil fuels is 1,094 Mtoe, or
20% lower. On the other hand, the supply of non-hydro renewables increases. The use of other
forms of energy is expected to increase by the following percentages: 14% for nuclear power, 34%
for hydro power and 63% for renewables. The impact of energy conservation policies on
energy demand deepens throughout the forecast period, as the stock of energy
capital is gradually replaced. Energy conservation in Asia achieved by 2010 is only
5%.

Renewables
Coal Oil Gas Nuclear Hydro etc.
200
52 86
34
0
-84 14% 34% 63%
-200
-235 -9%
-400 Decreasing of fossil fuel
-11% consumption by 20%
-600 (1.09 billion toe decrease )

-800 -776 Rate of Change from Reference

-30% Mtoe
-1000

Figure24: Change in energy demand by energy source between Reference and Technological
Advanced Scenario in Asia.

Coal demand declines in the Technological Advanced Scenario. Primary coal demand rises to
1,803 Mtoe in 2030 in the Technological Advanced Scenario. In 2030, energy conservation in coal
achieves about 30% or 1,100 Mtce, the scale of which corresponds to 3.6 times of coal demand in
India, 0.7 times in China. The saving is bigger than for any other fuel, both in absolute and in
percentage terms. The average annual growth rate of coal demand is 0.8%, 1.4 points lower than in
the Reference Scenario. Almost all the growth takes place during the first decade, with demand
leveling off in the second half of the forecast period. About 93% of the saving in primary coal
demand comes from power generation. Coal use in that sector is driven down by electricity demand
savings, by the improving thermal efficiency of coal-fired power plants – especially in China and
India – and by switching to other fuels. Promoting clean coal technology in Asia has tremendous
significance in order to ensure coal supply and environmental protection.
Primary oil demand increases to 1,870 Mtoe (39mb/d) in 2030 in the Technological Advanced
Scenario, 230 Mtoe (4.9mb/d), or 11% lower than in the Reference. This saving volume is roughly
equivalent to the annual oil production of Iran and Oman together. Particularly in East Asia, oil
savings amount to about 4.0 mb/d, which means that the same volume of oil traffic at the Malacca
Straits would be mitigated. The transport sector accounts for 55% of the savings. Increased fuel
efficiency and faster penetration of alternative-fuel vehicles, such as biofuels, or gasoline-powered
hybrids etc., are the main factors behind the decreasing in transport oil demand. Residential and
commercial sectors explain 21%, industry sector, 14%, and power generation, 9% of oil savings.

Coal Oil Gas

0

-200

-400

-600

Industry Res/Com Transport Power Gen.

-800

Figure25: Change in energy demand by fossil fuel and by sector between Reference and
Technological Advanced Scenario in Asia.

Natural gas demand is 80 Mtoe, or 9% lower in 2030 than in the Reference Scenario, the
volume of which is equal to 1.2 times of current LNG imports in Japan. Power sector accounts for
most of the savings, 66% by 2030. Industry sector represents 18%, residential and commercial
sectors account for an additional 15%. High efficient technology such as MACC - More Advanced
Combined Cycle etc. - is expected to contribute largely to ensure gas demand and supply in Asia.
In the Technological Advanced Scenario, energy-related CO2 emissions are 3.7 Gt-C in
2030, 48% higher than current emissions. This is about 1.1 Gt-C, or 22% lower than in the
Reference Scenario. The reduction is comparable to the current emissions of China or 3.2 times of
Japan. The annual growth rate of emissions falls from 2.5% in the Reference to 1.6%. The gap
widens in the last decade of the projection period, during which the annual emissions growth rate is
almost halved, from 1.9% to 1.0%. An increase in the share of carbon-free sources in the fuel mix
makes a crucial contribution to the reduction in emissions. By 2030, carbon-free fuels hold 16% of
Asian primary energy demand in the Technological Advanced Scenario, four percentage points
more than in the Reference Scenario. Among the fossil fuels, coal experiences the biggest decline in
market share from 42% to 34%. On average, CO2 emissions per unit of energy consumed are 14%
lower in 2030 than in 2004 and 9% lower than in the Reference Scenario.
Change of Total
South Primary Energy
China Japan Taiwan Korea Indonesia India Others Demand in 2030
200
China
100
2.9 bil. toe
0
↓
-100 2.4 bil. toe
-200 (17％ decr.)
-300
-400
India
Mtoe 1.0 bil. toe
-500
↓
-600
Coal Oil Gas Nuclear Hydro Renewables etc. 0.8 bil. toe
-700
(19％ decr.)

Figure26: Change in Energy Demand by Asian Country between Reference and Technological
Advanced Scenario.

In China, coal consumption is dramatically reduced through improving the efficiency of coal-
fired power plant, promoting nuclear and renewables. Also in India, coal is largely decreased with
improving the coal-fired efficiency, accelerating hydro and renewables. Primary energy demand in
China will be 2.4 billion toe in 2030 - 487 Mtoe, or 17%, lower than in the Reference Scenario.
China alone will account for almost half of Asian energy conservation in 2030. Its share in the
Asian reduction in coal use is even bigger, at about 60%. More than 90% of the reduction in China’s
coal demand will come from the power sector. This is the result of lower final electricity demand,
switching from coal to gas and nuclear. Improvement in the efficiency of coal-fired plants will push
down coal demand. The primary fuel mix in 2030 is substantially different from that in the
Reference. The share of coal is nine percentage points lower. The share of renewables is up by three
points, to 8%. The saving in energy demand and the change in the fuel mix towards less carbon-
intensive fuels result in a 621 Mt-C, or 25%, drop in CO2 emissions in 2030.
India’s primary energy demand in 2030 is 187 Mtoe lower than in the Reference Scenario, a
difference of 19%. As in China, most of this conservation is in coal. Coal demand is 179 Mtoe
lower in 2030. The power sector accounts for almost all of this reduction. Electricity demand
saving, the increased efficiency of coal-fired plants and more reliance on renewables and nuclear
power explain the reduction. More use of biofuels in the transport sector contributes to changes in
oil demand in India. In 2030, the primary fuel mix in India is seemingly different from the
Reference Scenario. The share of coal decreases, while those of gas, oil, nuclear and other
renewables increase. Total CO2 emissions are 201 Mt-C, or 25%, lower.

4. Concluding remarks
In this paper, consistent energy projection in the world and Asia are developed by an integrated
econometric model in order to analyze energy impacts of China and India on world energy market
to 2030. This projection is essentially devoted to describe consistent evolution of world energy
demand in Asia across different Asian countries.
Strong economic growth and progressive motorization are likely to expand the energy demand
in Asia, especially China and India, which eventually increase oil-import dependence, reliance on
oil import from Middle East, and the oil traffic through the Malacca Straits, because regional oil
supply would not be able to commensurate with the swift demand expansion. While it is naturally
important for the individual countries to make efforts to secure their own energy supplies, excessive
pursuit of the national interest by any single country could damage the energy security of the rest of
the region. It is, hence, increasingly important for the issue to be treated as one where all Asian
countries have a common stake and can elaborately commit themselves.
To this end, it is important for the Asian countries to pursue the following major tasks: 1) fuller
exercise of bargaining power given their collective position as a massive regional consumer of oil,
and strengthening of ties of dialogue and cooperation with oil producing countries; 2) strategic
construction of a shared reserve scheme for response to emergencies to deal with short-term crises
such as oil supply disruptions; 3) promotion of cooperative resource development and procurement
inside and outside the region; 4) enhancement of regional partnership on effective use of surplus
petroleum processing capacity and on enhancing quality standard in petroleum supply; 5) ensuring
security at the Straits of Malacca and establishing emergency program including securing
alternative transport route; and 6) development of regional cooperation on diversification of fuels
with oil sands and bio-fuel etc.

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