Energy Security and the World Economy

By Sam Snyder, Managing Director, China
Chevron International Exploration & Production

APEC CEO Summit Meeting 2005

Busan, Korea

Thank you very much.

We are entering a new era in the energy industry.

World energy demand is expected to rise 40 percent by the year 2020. And nowhere is the demand more pronounced than in Asia.

Asia will account for 45 percent of the growth in world oil demand and approximately 25 percent of the growth in natural gas between now and the year 2025. The Asia-Pacific region is leading the world with what some are calling the greatest industrial revolution in history.

Rapid growth is a region wide phenomenon. In East and South Asia and in the Pacific, the gross domestic product is expected to climb by almost seven percent this year. Japan, too, is recovering after years of stagnation.

China is surging with an annual growth rate averaging over nine percent. Its economy is predicted to be double Germany's in just six years and to overtake Japan's, the world's second-largest economy, by 2020.

Energy is Asia's bridge to opportunity. But unless Asia acts, a lack of sufficient and affordable energy will cause a traffic jam on that bridge. The move toward freer economies is breaking the traffic jams. But more needs to be done. In a recent report, the Asian Development Bank urged that the region "move away from restrictive investment regimes to establish the right mix of institutions, incentives and infrastructure to create [an] enabling business and investment climate."

There is an enormous resource Asia already has at hand, its existing base of proved oil resources. Three Asian nations - China, Indonesia and Malaysia - rank among the world's top 25 oil producers. Together with Australia and Brunei, they account for more than 36 billion barrels in proved reserves.

Asia holds a very strong position when it comes to natural gas. In fact, the most exciting new span in Asia's energy bridge is natural gas, especially liquefied natural gas (LNG).

China plans to build an LNG infrastructure as part of a strategy to significantly increase natural gas's contribution to energy consumption. India, Indonesia, Malaysia, Thailand and Singapore are all considering or pursuing major natural gas projects.

These are complex, multi-dimensional efforts that have supply, infrastructure, marketing and technical challenges.

At Chevron, we're working to deliver clean energy in the form of natural gas to markets across Asia. We have established a reputation as a reliable and secure supplier of liquefied natural gas from our interests in Australia's North West Shelf Venture and plan to expand supplies to Asia and North America through development of the Gorgon LNG project offshore Western Australia. We have capacity, through the Bontang LNG terminal in Indonesia, to supply markets in Korea and Japan. We are also working to develop our gas-to-liquids technology that will provide an important source of clean high-performance fuels.

Success in providing markets with LNG, GTL, as well as traditional sources of energy, will require partnership. Energy security for Asian nations will only be gained when international oil companies, such as Chevron, along with national oil companies and governments work together.

My company is deeply proud of its long history of partnership in Asia. For nearly 100 years, we have operated as a trusted and honorable partner in the region.

We have many key partnerships in the region, partnerships that take many forms. Our partnership with Indonesia, where we discovered the largest oil field in Southeast Asia, dates back to the 1930s - and today we still produce nearly 50 percent of the nation's oil. In China, we are partners with CNOOC on Upstream projects in the South China Sea and Bohai Bay. And here in Korea, we have one of the largest and most successful business joint venture partnerships in the nation's history. Through GS Caltex, we provide Korea with petrochemicals, power generation, natural gas, over 30 percent of its refined petroleum products and soon LNG.

At Chevron, we believe in the value of partnership.

And we believe that each of us - IOCs, NOCs and governments - has a role to play.

Together, we can meet Asia's energy challenge of the future.

Updated: November 2005