Dialogue Vehicles and Their Roles for Northeast Asia Energy Cooperation

1. Dialogue Vehicles and Their Roles for Northeast Asia Energy Cooperation October 18, 2002 Sang Yul Shim Korea Energy Economics Institute

2. Major Points for Presentation • Potential trans-boundary energy projects and their major features • Khabarovsk Communique • Senior Officials Meeting and its roles • Working Groups (Expert Groups) and their roles

3. Potential Trans-boundary Energy Projects • Trans-NEA pipeline construction and joint development of natural gas fields • Interstate electricity ties • Joint programs to cope with oil supply disruption

4. Major Features of Interstate Energy Projects • Plurilateral or multilateral processes among NEA counties in terms of dialogues, negotiations and formal agreements • Multi-dimensional phenomenon including project economics, transnational fiscal and legal systems, secured supply of energy, and trans-boundary environmental consideration • Complementary position, i.e., open relationship, with other regional cooperative organizations, e.g., APEC, OPEC, etc. • All these features cannot be dealt with efficiently at the national or private firm levels, and thus require a binding agreement, general or project-specific.

5. KhabarovskCommunique in October 2001* First Step towards Multilateral Dialogues North-East Asia Expert Group Meeting The inter-governmental meeting attended by 57 participants, senior and high-level officials as well as resource persons, from the six countries of the region, namely, China, DPRK, Japan, Mongolia, ROK, and Russian Federation * Excerpted from http://www.unescap.org/enrd/energy

6. KhabarovskCommunique Driving Forces and Objectives • Driving forces • Considerable potential for trans-boundary energy cooperation • Need for an inter-governmental forum • Objectives • Increase the supply of energy from the NEA region • Optimize the efficiency of supply and use of energy • Minimize the environmental impact of energy projects through improved energy mix

7. KhabarovskCommunique Basic Principles • Sovereign rights over energy resources • Free and fair trade of energy products • Free and non-discriminatory transit of energy products • Consideration of a special support to DPRK and Mongolia in recognition of disparities in economic development • Investment promotion and protection • Environmental protection

8. KhabarovskCommunique Further Consultations for Future Institutional Arrangement • A Senior Officials Meeting between six countries of the NEA region • A Secretariat • UN ESCAP as Interim Secretariat • Working Groups on: • Energy Planning, Programming and Restructuring • Emerging Energy Technology and Scientific Cooperation and their Financial, Social and Environmental Impact • Electric Power Interconnection • Interstate Transit of Fossil Fuels • Development of a North-East Asian Energy Charter

9. Senior Officials Meeting Expanded Participants and Anticipated Roles • Participants enlarged to include representatives from other regional cooperative organizations and international financial institutions • Anticipated roles • Refining major elements of energy cooperation • Organizing joint studies and making a NEA Vision Report • Stipulating terms of reference for activities of Working Groups (Expert Groups) • Supporting sub-regional or regional forums to develop cooperative schemes, and to propagate shared interests and business potential • Preparing a legal and institutional framework

10. Senior Officials Meeting: Anticipated Roles Refining Major Elements of Energy Cooperation • Issues of short- and long-term vision (objectives) • Identification of short- and long-term vision, and trade-off • Project-specific vision versus overall vision • Issues of basic principles • General principles such as free trade and transit, etc. • Exceptional or transitional approaches to facilitate dialogue process reflecting special attention to disparate natures of economic development and market structure • Issues of a legal and institutional framework • Project-specific agreement or general agreement on cooperation

11. Senior Officials Meeting: Anticipated Roles Organizing Joint Studies and Making a NEA Vision Report • Need for joint studies and a Vision Report • Recognizing shared interests and mutual benefits by consensus • Promoting participation of relevant countries • Obtaining political will and support from top level officials of governments of NEA countries • Joint studies to be conducted by Working Groups (Expert Groups) based on terms of reference including selected subjects which will be specified by the SOM • Based upon joint study reports of Working Groups, a NEA Vision Report to be made by an ad hoc NEA Vision Group established by the SOM

12. Working Groups (Expert Groups) Expanded Participants and Anticipated Roles • Prospective participants enlarged to include resource persons from other regional cooperative organizations and international financial institutions • Anticipated roles • Economic, technical and financial analyses of trans-boundary energy projects: identification of project economics, mutual benefits, barriers and counter-measures • Analysis of the sufficient size for energy cooperation in terms of the number of countries, i.e., plurilateral or multilateral involvement • Analysis of the cooperative framework, joining or adapting one of existing frameworks or taking a new approach • Organizing and holding relevant forums

13. Concluding Remarks • Groundwork for dialogue channels to initiate NEA energy cooperation has been laid. • Next step is to formalize institutional arrangements, and to develop a cooperative framework for the facilitation of the realization of interstate potential energy projects.