Urgent need

Developing new oil resources is urgent for Asian countries. The decrease in oil production in the region and the high costs of developing oil resources mean that Asian countries have to joint efforts in developing new oil resources in remote and deepwater areas. The state-owned energy companies should play a crucial role in such exploitations. Recently, officials of Indonesia and Malaysia said that their governments support state-owned oil companies of the two countries to set up a joint venture company to develop new oil resources and carry out related technical research.

Building up an oil reserve mechanism as soon as possible is another important task. In this field, Japan and South Korea lead others in Asia. An oil reserve mechanism could enable Asian countries to prevent the possible shock of a sudden oil supply cut to their domestic economies and help to maintain the stability of international oil prices.

Energy-importing countries need to expand their sources of energy and try to change the current disadvantageous situation in which they are overly dependent on oil from the Middle East. To this end, Russia and West African countries are good choices.

The market mechanism should be perfected in Asia to attract more foreign investment. David J. O'Reilly, Chairman of ChevronTexaco, the second largest oil company in the United States, calls on Asian countries to further open their markets, increase transparency, eliminate trade barriers and strengthen infrastructure construction in order to attract foreign capital in oil and gas resource development.

A basic framework of long-term energy cooperation is needed. Asian countries should push forward the establishment of a cooperation platform and mechanism. Recently, experts from China and India initiated creating a bilateral energy cooperation mechanism and a multilateral one with China and India as the main participants to drive forward the energy cooperation between the two countries and even in a wider sphere in the region.

For example, an Asian Energy Agency similar to the International Energy Agency could be set up. Many experts suggest making the energy forum of the Bo'ao Forum of Asia a regular meeting, which will provide a long-term and stable opportunity for Asian countries to discuss energy problems.

Asian countries could also join hands in cracking down on piracy and terrorist activities, securing regional stability, improving energy facilities and the transportation network, and maintaining the security of important ports and energy transportation strongholds.

Although the oil consumption of East Asia equals that of the European and U.S. markets, there is only one trading center in Asia, which is Singapore. Therefore, Asian countries need to create an international oil market with China, Japan and South Korea at its center, which will increase Asia's role in setting international oil prices and eliminate the current problem of being overcharged.

To Asian countries, exploring and developing energy resources in some controversial areas will undoubtedly lead to regional political tensions. Setting up multilateral energy cooperation companies will be an ideal mode, which will avoid some bilateral conflicts and strengthen the technical and capital complementarity among different countries.

The energy cooperation among China, Japan, South Korea and Mongolia is a good example. The countries signed a memorandum of understanding on developing natural gas resources in Russia's East Siberian area in December 1997. Energy companies from these countries are planning to jointly develop a natural gas field in Russia that will involve the outlay of $10 billion.

(The author is a research fellow at the China Institute of International Studies)