Asian leaders move to secure oil supplies

Leading Asian economies wound up a week of intense Gulf energy diplomacy on Monday, taking centre stage at a summit where Abu Dhabi unveiled plans to seek international bids for vast oilfields historically run by western oil companies.

As Wen Jiabao, China’s premier, stressed the “political and international dimensions” of a global energy business in which Asian demand was of growing importance, analysts said the Abu Dhabi decision could open the way for the arrival in the Gulf of more multinationals from the east.

“My instinct would be that this would enable the arrival of new entrants, particularly from Asian countries,” said Bill Farren-Price, founder and chief executive of Petroleum Policy Intelligence, a British-based energy consultancy. “That would also allow the political partnerships between Middle Eastern oil producers and Asian consuming countries to be strengthened.”

The Abu Dhabi summit capped a week that has seen leaders from China, India, Japan and South Korea – representing almost a quarter of world gross domestic product and more than a third of the world’s population – weigh in politically on the security of their energy supplies, the bulk of which come from the Middle East.

The diplomacy is particularly striking because it closely follows Iran’s threat to block the Strait of Hormuz, the export gateway for large gas shipments and a fifth of the world’s traded oil, in response to a planned western embargo on its oil.

In an interview with Cable News Network, due to be broadcast on Monday, Ali Naimi, Saudi Arabia’s oil minister, sought to play down international fears of a prolonged shutdown of the strait, but admitted the situation was “disturbing”.

Leaders from four the big Asian economies have played a delicate game over the past week, seeking to appease US and European demands to support a push against Iran’s nuclear programme, while simultaneously looking to shore up their energy supplies and calm tensions in the strategically important region.

Interactive Map:
The Strait of Hormuz

Iranian naval assets in the region along with international maritime boundaries, shipping lanes, terminals, pipelines and major oil and gas fields

A Hormuz shutdown would be particularly difficult for Asian economies, which are far more reliant on Gulf oil and liquefied natural gas than are counterparts in Europe and North America.

Japan has sought pledges from Saudi Arabia and the United Arab Emirates to raise production to make up for any Iranian shortfall, while India’s refiners are diversifying their oil supplies away from Iran towards partners in the Gulf and Latin America.

Mr Wen told the Abu Dhabi conference that politics were crucial in securing international energy supplies, while Kim Hwang-sik, South Korea’s prime minister, stressed the need for industrialised and emerging economies to co-operate more to expand renewable energy resources.

Mr Wen, on a Middle East tour, said: “We must all join together and work harder to develop future energy, build a stable, economical and safe energy supply system and mitigate the constraint and inequality caused by energy and resources.”

Analysts say it is no coincidence that the Asian leaders visiting the Gulf have made sure to stop not only in Saudi Arabia but also in the UAE, a 2.7m barrel-a-day producer where big concessions will be up for renewal in 2014.

Abdulla Nasser Al Suwaidi, Abu Dhabi National Oil Company’s director-general, told reporters the licences would be “put to bidding”, highlighting the tough battle facing western oil companies to maintain their position in a country whose stability may now command even more of a premium amid the turmoil in some other Middle Eastern oil states.