Strong Oil Demand In Asia.

Demand for crude oil in Asia and the OECD Pacific from 1972 to 2002 rose by 3.62% per annum, which meant this was the fastest growing oil market in the world and it seems it will remain so in the coming years and decades. To compare, oil demand in 1972-2002 grew by 1.38% in North America, 2.17% in Central and South America, 0.87% in West Europe, 3.33% in the Middle East and 2.16% in Africa. In East Europe and the former Soviet Union (FSU) oil demand between 1992 and 2002 fell by an annual average of 2.66%.

This is one of the observations made by Nourah Abdul Rahman Al-Yousef, assistant professor at King Saud University and deputy chairwoman of the university's Politics Department, in her presentation to the IRAEE international oil and gas conference held in Tehran on May 25-27. The following are excerpts from her presentation (with bracketed words and underlining by APS):

Introduction: "Oil and energy markets have experienced dramatic changes over the past three decades - steep price increases in the 1970s and 1980s followed by a decrease in 1986 and stable prices during the period 1992-1996 followed by a sharp decline in 1998, and increase in oil prices from 1999 up to now.

"Despite considerable uncertainty about future developments in the world oil market, demand for oil has been increasing on average by 1.39% per year for the period 1971-2002 particularly by Asia and OECD Pacific, which were led by increasing incomes, population, industrialization, investment, and trade.

         The Share of Asia & Pacific Oil consumption

                1972    1982    1992   2002
North America   36.2    31.9    31     31.4
Western Europe  27.4    21.8    21.1   19.5
Asia/Pacific    15.3    17.1    22.9   27.2
Latin America    4.8     5.4     5.4    6.1
Middle East      2.2     3.9     5.2    6.3
Africa           1.6     2.6     3      3.2

Source: OPEC Secretariat

"Asia/Pacific, generally, is divided into three major regions, OECD Pacific which includes Japan, Korea, Australia and New Zealand. The second region is China and third is other Asia, which includes: India, Indonesia, Taiwan, Thailand, Singapore, and Malaysia, Philippines, Pakistan, Hong Kong, Vietnam and others.

"In 2002 OECD Pacific accounted for 11% of the region's oil consumption, China accounted for 6.5% and the others in Asia accounted for 9.7%. Total Asian/Pacific oil consumption in 2002 amounted to 21.002m b/d... China has become the fastest growing economy in the region (except for Korea) and has maintained this position in the 1990s as well... Notably, Indonesia, Malaysia, Philippines and Thailand in 1997 faced a major financial crisis causing a slow down in their economy. Nevertheless, most of these countries recovered by 1999.

"Oil demand in Asia has increased concommitantly with the high economic growth rate in the region. Oil consumption (in Asia) has increased from 8,196m b/d in 1972 (15.3 % of world total) to reach 21.007m b/d (27.2% of world total) in 2002. The growth comes mainly from other Asian countries, where it grew from 1.749m b/d (3.3%) in 1972 to 7.474m b/d (9.7 %) in 2002. China's (oil) consumption quadrupled from less than 1m b/d in 1972 to reach 5.033m b/d (6.5%) in 2002.

"...Japan is the world's fourth largest energy consumer and second largest energy importer (after the US). It has been experiencing...slow economic growth, and has taken important steps towards economic deregulation and restructuring. As a result of slow economic growth, Japanese demand for energy has been stagnant in recent years. Oil consumption has stabilized after several years of decline, In 2002 Japan consumed an estimated 5.32m b/d of oil. Most (75%-80%) came from OPEC, particularly (from) Persian Gulf countries like the UAE, Saudi Arabia, Kuwait, Qatar, and Iran.

"South Korea is second (most) important country in regard to oil imports. It is important to ?world energy markets as (it is the region's) fourth largest (oil) importer, and the second largest importer of liquefied natural gas (LNG). With no domestic reserves, South Korea must import all of its crude oil. Oil makes up the largest share of South Korea's total energy consumption, though its share has been declining in recent years. Oil accounted for 56% of primary energy consumption in 2000. South Korea consumed more than 2.1m b/d down from high 2.3m b/d in 1997, all of which was imported. South Korea is the seventh largest oil consumer and fourth largest crude oil importer in the world.

"Australia is one of few OECD countries that are a significant net energy exporter. Coal is Australia's largest export commodity, and accounts for 44% of the country's total energy needs. Australia is a net exporter of natural gas (LNG). However, the country is becoming increasingly dependent upon foreign oil. A rapidly expanding economy and declining domestic production have led some observers to forecast an energy supply crisis in the next 10 years.

"Australia produced 0.736m b/d and consumed O.870m b/d (of oil) in 2001 resulting in net imports of 0.134m b/d. Australia's expanding oil deficit is primarily a ?result of demand (rising) quickly to outpace supply. Oil consumption had grown by only 3% since 1995, but is expected to rise alongside with Australia's growing economy over the next 20 years. Oil production had increased gradually since 1980, peaking in year 2000 at 805,000 b/d. In 2001, oil production fell dramatically. According to Australia's Ministry of Industry, Australia is using oil three times faster than it is finding. By 2010, the country is expected to slide from 80% sufficiency to 40%.

"China is the world's most populous country and the second largest energy consumer (after the US). Production and consumption of coal, its dominant fuel, is the highest in the world...China surpassed Japan as the world's second-largest oil consumer in 2003. As a net oil importer since 1993, China's petroleum industry is focused on meeting domestic demand, but it does still export a modest amount of crude oil... With China's expectation of growing dependence on oil imports, China has been acquiring interest in exploration and production...in countries such as Kazakhstan, Venezuela, Sudan, Iraq, Iran and Peru. For major exports, Russia is seen as potential source of China's crude oil import, depending on the feasibility of pipelines to make such exports possible. Downstream infrastructure development in China centers primarily on upgrading existing refineries rather than building new ones, due to over-capacity, while small refineries have been shut down. Several existing refineries are being upgraded to handle heavier and more sour grades of crude oil. With China's domestic reserve of natural gas standing at 53.3 Tcf at the beginning of 2003, China has embarked on a major expansion of its gas infrastructure....Coal it makes up 64% of China's primary energy consumption. China is both the largest consumer and producer of coal in the world. China's (coal) consumption in 2001 was 1.38 bn short tons (over 26% of the world total).