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Thomas NgChairman, The Global Ports
Forum
Game-Changers in Oil & Gas: Implications for Asia Tank Storage
I Recent Oil & Gas Trends
II AIIB, RMB Internationalisation, One Belt-One Road Strategy, etc
III Implica-tions
Table of Contents
Asia Oil & Gas game-changers• Changing dynamics, game, players and
rules• New demand map, changes in energy
mix, and unconventional supply sources• Shift in trading and investment patterns• Volatility in prices, technological
breakthroughs• Environment, efficiency and climate
change• Is energy security a national security
matter?• Heightened geopolitical, cyber and other
risks
Complex dynamics in Asia• Substantial deposits of rich natural
resources • The prizes of the new Great Game -
Pipelines, tanker routes, petroleum consortiums and PSCs
• AIIB, One Belt-One Road, South China Seas, China Silk Road Fund
• East of Baku – it is China and Russia to play
• Sanctions against Russia hurt Central Asia
• Intra-Central Asian conflicts, political succession risk
Russia to China
Russia pivot to Asia
Central Asia and China…• “Pan-Asian global energy
bridge” from Persian Gulf to China
• Kazakhstan, Turkmenistan and Uzbekistan in China’s energy security nexus
• China to reduce dependence on ME oil, avoid “Malacca Dilemma” and address Xinjiang’s unrest
• Kazakhstan and Uzbekistan’s uranium deposits for China’s 30 new nuclear power plants
A showdown between Moscow and Beijing over Central Asia?
China-Europe “Silk Railway” and “Maritime Route”
Some of Asian Oil & Gas projects
• China’s energy “Silk Road” over Central Asia
• $45 bn Southern Gas Corridor by 2018• Iraq’s Kurdish gas from early 2018 • Iran is back in the oil and gas game• Turkmen gas to the Caspian and
Afghanistan• China’s claims in the South & East China
Seas• Mynamar’s new pipeline to Yunan, China• Pakistan’s China Pakistan Economic
Corridor
11
Roles of individual members
ASEAN: facilitate economic integration through AEC and ASEAN+1 FTAsASEAN’s economic role is reinforced by political consid-
erations;
strategic location astride East Asia’s critical trade routes
neutral position in the traditional tensions of Northeast
Asian countries
intermediary role between China/US and China/IndiaChina, Japan and Korea: pursue a high level of liberalization
for CJK FTA
High standards as a platform for RCEP
China needs to pursue comprehensive economic reforms
Peaceful and Prosperous Regional Economic Order
12
The Asian Infrastructure Investment Bank (AIIB)
Could be a rival or/and a complement to ADB and the Washington institutions
A countermeasure to the western-dominated development banks(World
Bank, IMF, ADB)
A complementary source for infrastructural funds in Asia
Expected to contribute to the regional economic integration in the Asia-Pa-
cific Need to adopt international best practices
AIIB would need to implement practices of governance, environmental and social safeguards, procurement, etc.
work with or add values to multilateral development institutions (ADB and WB) Address concerns for China’s infrastructure lending history and practice
in Africa China’s growing economic stature should be reflected in the governance structure
of global institutions - Reforms of global institutions are needed
Forms of Regional Economic Competition
Authorized Capital in AIIB
AIIB Share Allocations
Signing Ceremony of AA of AIIB, Jun 15
Infrastructure Lending in Asia
17
Internationalization of the RMB By the end of 2014, RMB ranked 5th as the most traded currency
According to SWIFT's report, at 2.2% of SWIFT payment behind JPY (2.7%), GBP
(7.9%), EUR (28.3%) and USD (44.6%)
The average monthly RMB trade settlement up from CN ¥ 320 billion in 2013 to
¥ 480bn in 2014
The Renminbi Qualified Foreign Institutional Investor (RQFII) quotas extended to five
other countries UK (15 Oct 2013), Singapore (22 Oct 2013), France (20 June 2014), Korea (18 July 2014),
Germany (18 July 2014), and Canada (8 Nov 2014), each with the quotas of ¥ 80bn except for Canada and Singapore ( ¥ 50bn)
Previously, only Hong Kong was allowed, with a ¥ 270bn quota The path of RMB internationalization can be divided into three phases
Trade finance
Investment
Reserve currency (in the longer term)
Other Forms of Regional Economic Competition
18
Internationalization of the RMB
The road to the RMB Internationalization is far from complete
Size of the home economy relative to others
Economic stability in the form of low inflation, small bud-
get deficits and stable growth
Strong official and institutional support
Deep, open and well-regulated capital markets (in a de-
liberately slow progress)opening up of China’s onshore capital marketgreater access for foreign investors to local capital marketsdeeper global RMB liquidity and wider cross-border flow
channels
Other Forms of Regional Economic Competition
RMB Internationalisation:Developments
19
RMB Internationalization: ProspectsMicro level: Increase Liquidity Supply and
Streamline Reflow process
Cut red tapes on approval process for cross-border use of RMB;Expand RMB payment in tourism, shopping and study in foreign countries; Explore measures to enable overseas public listed company to pay interests and dividend in RMB; Encourage policy banks and other financial institutions to expand RMB external financing and facilitate overseas development aid in RMB;
20
RMB Internationalization: ProspectsMicro level: Increase Liquidity Supply and
Streamline Reflow
Promote RMB bond issue in domestic and international market; Encourage use of RMB as a denominated currency in global outsourcing and commodity transactions; Encourage use of swap lines and expand financing channels for clearing banks and RMB participating banks in domestic market;
21
RMB Internationalization: ProspectsMacro level: Reform, Growth, Infrastructure and
Soft Power
Expand economic and financial opening up and reform : capital account, interest rate and exchange rate;
Sustain strong and stable economic growth;
Upgrade market infrastructure for cross border use of RMB: China International Payment System (CIPS), bond market development, regulation clean-up;
22
23
RMB Internationalization: ProspectsMacro level: Reform, Growth, Infrastructure
and Soft Power
Improve institutions and international coordination.
“One Belt and One Road” strategy .
IMF SDR review later this year
History may provide a guidance
24
RMB Internationalization: ProspectsMacro level: “One Belt and One Road”
strategy
A NEW SILK ROADREGIONAL COOPERATION VIA NEW OVERLAND AND
MARITIME LINKAGES
China opens new USD 2.5 bil oil & gas pipeline through Myanmar, Feb 15
Obama opens new chapter in relations btw US & Myanmar, Nov 13
China-Myanmar border conflict – Kokang shells fall. China sent troops to border,
May 15
China’s consortium study on new USD 28 bil Thailand Kra Canal, May 15
China consortium study on new USD 28 bil Thailand Kra Canal, May 15
Kra Canal ??– Singapore’s maritime trade dominance along Straits of
Malacca challenged ?
Iranian Ports – The Post Sanction Era, Mehdi Rastegary, Sina Ports Iran, Sep
15 • 6 Ports to watch -
Chabahar, Shahid Rajaee Port, Bushehr Port, Assaluyeh Port, Imam Khomeini Port, and Khoramshahr.
• Chabahar is the port that India is eyeing to develop to compete with Gawdar, Pakistan.
• Oil tanker fleet capacity of 15 mil ton/yr
• Strait of Hormuz -bunkering, economic supply of oil products, and availability of infrastructure and equipment,
Iran welcomes India USD 85 mil private investment for Chabahar port project, Aug 15
India-Iran Strategic Chabahar Port to be Operational by December 2016, Will Give Access to Afghanistan, Central Asia
CHINA PAKISTAN ECONOMIC CORRIDOR – USD 46 bil, Apr
15
CHINA PAKISTAN ECONOMIC CORRIDOR
China Sri Lanka Port Project – Xi visit – Sep 2014
Sri Lanka Colombo South Harbour (Hambantota) expansion/China
submarine visit
Bangladesh “aborted” China backed USD 8 billion port in
Sonadia island
Japan JICA (ADB?) funds Bangladesh Matarbari port
LNG tankers lie unused around Singapore as gas downturn turns to crisis, Feb 15
S.Korea to build LNG bunkering terminals, wants to dominate duel-fuel tanker building, Jul
15
Chinese independents ENN, Guanghui Energy get foothold in LNG trade as restrictions lifted, May 15
Pertamina to partner with Kalla Group for 4-mtpa LNG receiving terminal, Apr 15
Philippines' First Gen seeks partner for $1 bln LNG import terminal, Mar 15
China Deepsea Oil rigs in South China Seas
China builds 6 artificial islands in South China Seas and builds 3rd airstrip
China builds 6 artificial islands in South China Seas and builds 3rd airstrip
Saudi Arabian Crude Oil Production & Brent Price
China Oil production & consumption
China Peak Oil ? - Oil Production Trajectories of Daqing and Prudhoe Bay, ‘000 bpd
China Peak Oil ? - Slowing Changqing Output Suggests Tight Oil Insufficient to Offset Core Fields’
Decline
China Peak Oil ? - Offshore Oil Production Will Not Turn the Tide of Oil Production Declines
Key implications• The game, players and rules have changed.• Oil & Gas security from Lisbon to Shanghai
requires new approaches or serious adaptation of the old ones
• A potential security and economic crisis in the making – esp the downturn started from China & the South China seas dispute
• Volatility not only in prices but also in social security
• Develop win-win propositions for all in order to reduce geopolitical tensions
• Tank storage investors still have many other new attractive destinations
Thank you
Cosco China runs 3 mil TEU/yr Greek Piraeus Port
Cosco Pac & CMHI acquires 65% of Turkey Kumport for USD920 mil, Sep
15
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