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Enhancing regional cooperation through ASPA

Enhancing regional cooperation and integration through APSA can further bring countries together into an interdependent network to ensure the security of the petroleum supply.

OIL and gas security issues are elevating globally, mainly caused by increasing geopolitical tension around the world.

With the imposition of economic sanctions affecting some regions, the energy market has become tight, leading to a significant increase in oil and gas (O&G) prices in 2022.

These price hikes had a significant impact on the global economy, contributing to a slowdown in gross domestic product growth, which dropped by almost half to 3.2% in 2022, according to the Organisation for Economic Cooperation and Development outlook.

South-East Asia is not an exception, increasing energy prices caused by the crisis contributed to the inflation rate increase in the region from 2% in 2021 to 5.1% in 2022.

In March and April 2022, the International Energy Agency activated coordinated emergency action to release emergency stocks of up to 120 million barrels of oil to the market from its members (the largest release in history) to respond to the energy supply instability around the world.

However, despite this intervention, the energy market remains uncertain and is predicted to remain tight well into 2023.

A disruption in the global O&G supply chain could potentially undermine Asean’s economy in the long run as the region is still heavily reliant on O&G and is expected to rely more on imported supplies in the future.

According to the Seventh Asean Energy Outlook, O&G accounted for 56% of Asean Total Primer Energy Supply in 2020 and will continue to have a significant share in the energy mix in the region by 2050.

Asean has been a net oil importer since 2005 and imports are projected to increase seven-fold in 2050 from the 2020 level.

In addition, without any significant additional gas resources, the region is projected to become a net importer of natural gas by 2025. The production of both O&G have also been in decline for the last seven years.

In the Asean region, each country has a unique policy and strategy to secure the energy supply based on each country’s conditions.

Stockpiling is one of the key strategies for ensuring energy supply. Energy stockpiling is an important aspect in providing a buffer against oil price volatility and supply disruptions, ensuring a stable supply of energy for the country.

Despite the fact that each Asean member state has its own energy security policy, such supply disruption might happen that cannot be anticipated alone within one country.

In this case, cooperation with neighbouring countries will play a pivotal role as a back-up plan to respond to any supply emergency and mitigate greater economic damage.

With the current instability in global geopolitics and Asean import reliance on O&G, an alternative supply protection system of oil and natural gas will be needed to strengthen the energy security of Asean member states.

They have initiated a coordinated emergency response mechanism under the Asean Petroleum Security Agreement (APSA) as part of enhancing petroleum security in the region.

The agreement has the main objective “of enhancing petroleum security, either individually or collectively, and minimising exposure to an emergency situation, through the implementation of short, medium and long-term measures”.

Emergency response measures

With this cooperation platform, regional Asean energy security is enhanced by each member state having in place emergency response measures that allow it to mitigate a severe disruption to its own domestic petroleum supplies when normal market operations are insufficient.

This agreement could also be a tool to strengthen regional binding power to secure additional petroleum resources from other exporting countries.

Enhancing regional cooperation and integration through APSA can further bring countries together into an interdependent network to ensure the security of the petroleum supply.

APSA, however, has not been activated since it came into force in 2013, mainly due to the absence of a functional secretariat and operational guidelines.

To bring APSA into actual operation, Asean member states and relevant stakeholders must work together to establish these essential components for the agreement to be implemented effectively.

Having a dedicated APSA secretariat is essential not only in an emergency but also in a normal situation.

In addition to its main function of responding to emergencies, a dedicated APSA secretariat could act as a centre for petroleum research and study, continuously monitoring the petroleum market to anticipate potential supply disruptions that could affect Asean.

By providing timely and accurate information to member states, the secretariat would enable them to take necessary measures to prevent or mitigate the impacts of supply disruptions; and further, equip Asean in shaping the region’s energy landscape.

Eventually, a reliable source of information and a platform for better coordination would give Asean countries greater support in managing the energy systems, enabling them to keep energy affordable and promote rapid economic growth.

By working together to establish a functioning APSA, Asean can take a major step toward achieving stronger energy security and sustainable development in the region. — The Jakarta Post/ANN

Adhityo Gilang Bhaskoro is a power, fossil fuel, alternative energy, and storage officer at Asean Centre for Energy, where Beni Suryadi is the manager of power, fossil fuel, alternative energy and storage and Nuki Agya Utama is the executive director. The views expressed here are the the writers’ own.

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