Asia barters for scarce energy as Iran crisis throttles supplies

TOKYO – Indonesia’s leader visited Tokyo this week in Asia’s latest flurry of fuel-bartering efforts to offset crippling shortages caused by conflict in the Middle East, a key source of regional energy supplies.

The race for alternatives has heated up as China, the world’s second largest economy, imposed fuel export bans, while nations such as South Korea and Thailand try to exploit the lifting of American sanctions on Russian energy as a stop-gap move.

Matters are getting desperate for poorer nations as the Philippines became the first to declare a national energy emergency, Sri Lanka cut its work-week to four days and rationed fuel, and Myanmar limited car drivers to alternate days.

South-east Asia’s biggest economy and the world’s fourth most populous country, Indonesia is also expected to announce curbs in the coming days.

“To maintain rational economic relationships is of vital importance,” President Prabowo Subianto told Japanese business leaders in Tokyo after pacts signed on March 30 covering long-term oil and gas and geothermal power projects.

“The geopolitical situation in the Middle East gives strategic uncertainty for the security of our energy,” he said.

More immediately, Jakarta could strike a deal to beef up supplies of liquefied natural gas (LNG) to Tokyo in exchange for liquefied petroleum gas (LPG), an essential cooking fuel, Mr Djoko Siswanto, head of oil and gas regulator SKK Migas, said.

While Mr Prabowo and Japan’s Prime Minister Sanae Takaichi agreed to boost ties on energy security at a meeting on March 31, neither leader confirmed such a swop agreement.

Japan’s government-backed oil and gas producer Inpex is discussing a similar barter deal with India to swop LPG for naphtha and crude oil, according to an internal Japanese government document.

Vietnam has also sought Japan’s help for energy supplies, while the Philippines said on March 30 it received diesel from Tokyo.

Japan’s trade minister stressed the importance of keeping up fuel supplies to South-east Asian nations where it has supply chains, but declined to comment on specific deals.

Resource-poor Japan relies on the Middle East for about 95 per cent of its oil and 11 per cent of its imports of LNG, though its energy stockpiles are among the world’s largest.

China export ban bites

Australia’s position as a major energy producer and exporter should give it clout in talks with Asian partners for supplies of jet fuels that could soon run short, energy analysts say.

The government is engaging with major suppliers such as China, Singapore and South Korea, Foreign Minister Penny Wong has said.

However, China has banned exports of refined fuel, including jet fuel, to safeguard its economy from energy disruption.

That ban, and another by Thailand, have hit Vietnam especially hard, as the neighbours fill more than 60 per cent of its jet fuel needs.

Vietnam’s aviation regulator has urged the authorities to seek additional jet fuel supplies from Brunei, India, Japan and South Korea.

Two-way deals with alternative suppliers should help ease shortages, but a longer war will require concerted efforts, said Mr Hiroshi Hashimoto, a senior fellow at Japan’s Institute of Energy Economics.

“If the crisis continues for a prolonged period, Asian countries may need to develop multilateral frameworks to help each other and talk to alternative supply sources,” he said.

Russia an unlikely alternative

Russia could prove to be an unlikely supplier for some Asian countries after the United States issued a temporary waiver of sanctions for its attack on Ukraine.

For the first time in years, South Korea has imported Russian naphtha, a feedstock critical for making plastics used in everything from cars to electronics, and also seeks to secure crude oil, its Energy Ministry said.

India has stepped up purchases of oil from Russia, with which Bangladesh, Thailand and Sri Lanka are also in talks.

It could be challenging to finalise arrangements with Russian oil companies before the April 11 expiry of the US sanctions waiver, however, said Mr Janaka Rajakaruna, chairman of Sri Lanka’s state-run Ceylon Petroleum.

Small countries such as New Zealand are keenly aware they could be vulnerable amid a scramble for fuel set to get more frenetic in the next few months.

Prime Minister Christopher Luxon has spoken by telephone in recent weeks with the leaders of Singapore, Malaysia and South Korea, New Zealand’s three largest suppliers of refined products, as well as with the head of the European Commission.

Associate Energy Minister Shane Jones said he has also contacted big commodity traders, among others, in the effort to shore up fuel supplies.

“Unless you build options, we’re too small to get noticed in a maddening, frenzied search for fuel in another two or three months,” Mr Jones said. REUTERS