by Kumar Amitav Chaliha

NEW DELHI (KWR) At face value, nothing concrete emerged from the first roundtable of Asian and Middle East ministers on regional oil and gas cooperation in New Delhi on January 6, except the usual proclamations on the importance of stability and security in oil supplies.

However, the confab marked the political launch of a possible new regional grouping, which is being dubbed the Asian Energy Forum or Asian Energy Agency. "We have made a start and this is going to continue," Mani Shankar Aiyar, India's petroleum minister and host of the conference, said. Aiyar said that getting all the oil ministers under one roof to discuss Asian energy cooperation was an achievement in itself.

Saudi Arabia has offered to hold the next Asian roundtable, with Japan acting as the co-host. Tokyo has also agreed to hold the third conference, with Qatar as co-host, while Kuwait would host the fourth meeting, with Korea as co-host. Aiyar could not confirm if the ministers of producing and consuming countries would meet once or twice a year. The date for the second meeting has not been set, but it would likely be next year, Saudi Oil Minister Ali Naimi told reporters.

"An Asian dialogue is indispensable and is aimed at evolving an Asian consensus," Aiyar said in his concluding remarks.

Aiyar, a career diplomat, argued that Asia is emerging as an important production and consumption center. The Middle East accounts for nearly 70% of Asian crude imports, but Asia still behaves as if it were a residual consumer of Asian oil production, said Aiyar.

The Indian minister stressed the need for the emergence of an Asian crude benchmark and development of a regional spot market.

He also said that Asian countries should invest in the Middle East region, which need an estimated $1.6 trillion in investments in upstream, midstream and downstream, and stressed to create strategic storage facilities to avoid oil shocks.

Saudi Minister Naimi said that Asia should continue to depend on the Middle East instead of diversifying supplies in the name of security.

" I'd like to assure our customers in Asia that Saudi Arabia is both capable of, and committed to, meeting the petroleum needs of its Asian partners," Naimi told the conference. "We closely monitor growth of petroleum demand in Asia to anticipate future needs so we can meet them without delay."

Saudi Arabia ships more than 4.5 million barrels per day to Asia, representing nearly 60% of its crude exports and 20% of Asia's current consumption.

Naimi also said the kingdom is dedicated to maintaining spare production capacity of 1.5 million-2 million barrels per day (bpd) should the need arise. He invited India to submit bids for gas exploration and investments in downstream.

For its part, Saudi Arabia is actively pursuing investments in refining capacity in Asia, Naimi said, pointing to investments in South Korea, Japan, Philippines and China.

" Restructuring of the industry in some Asian countries has brought more opportunities for joint investment in downstream activities," Naimi said. "We'll continue looking for partners across the continent for refining and marketing investments. We've the capacity to supply crude to our joint ventures throughout Asia."
Kuwaiti officials also stressed the importance of Asia as a key consumer of Middle East crude.

UAE Oil Minister Mohamed al-Hamili said that the Middle East is expected to increase its production capacity to 40 million bpd by 2020 from around 25 million bpd today. He reinforced Saudi Arabia's view that Asia will continue as a key market for Middle East crude.

Iran's Bijan Zangeneh floated the idea of creating an Asian Bank for Energy Development to invest in oil infrastructure in Asia. Zangeneh said the oil majors are not the commercial agents for countries such as China, India, Japan and Korea, and said these large consumers should invest in developing petroleum resources in the main producing countries.

The oil consuming countries led by Japan, South Korea and China stressed the need for stability and security of supplies through mutual investments, stockpiling and the forging of an Asian energy policy. Japan suggested that a combination of stockpiling crude -- it has 73 days of storage -- energy conservation measures, spare upstream capacity, and increased upstream investment is needed to ensure supply security. Tokyo stressed the need for transparency in crude prices to avoid paying a premium.

Zhang Xiaoqiang, vice chairman of China's National Development and Reform Commission, noted that his country imported more than 2.6 million bpd, with domestic production estimated at 3.5 million bpd. He said that China was not responsible for a spurt in global crude prices last year, because it imports less than 40% of its total consumption.

Korean officials mooted the idea of creating a joint oil stockpile for Asia, storing supplies in countries where facilities are available. They also stressed the need for an Asian energy policy forum at the ministerial level, saying that organizations such as the International Energy Agency do not take care of Asian interests.