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Perspectives on Addressing Energy Security in Cambodia: Issues, Challenges, and Responses
Cambodia's Solar Power (Photo: B2B)
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ដោយ: ថ្មីៗ
Sustained population and economic growth in Cambodia are the key drivers in significantly increasing energy demand to almost 2.5 times for both primary and final energy demand from 2013-2040. In absolute term, Cambodia energy supply is projected to increase from 6.82 Mtoe to 17.88 Mtoe during the period 2013-2040; while the final energy demand is also expected to rise from 6.00 Mtoe to 14.29 Mtoe during the same period (Kimura and Han, 2016).
The strongest growth in final energy consumption is likely to occur in the transportation and industry sectors, with an average growth rate of 4.3 percent and 4.0 percent respectively. Cambodia’s electricity demand is projected to have strong growth with an average annual growth rate of 12.8 percent between 2013 and 2040. The fastest growth in electricity generation will be in coal (17.0 percent per year), followed by hydro (13.8 percent per year), and ‘others’ (8.3 percent per year).
Generation from oil-fired power plants will decrease considerably due to high fuel cost. In the past until 2001, almost 100 percent of electricity generation came from oil-fired power plants. In 2002, a hydro power plant started operation in Cambodia and by 2013 its share in the power generation mix increased to 57.4 percent. Coal power generation was also introduced to Cambodia rather late in 2009. By 2013, the share of coal in the power generation mix had risen to 9.5 percent, and subsequently its share of coal in power generation had risen to 30 percent in 2016.
Cambodia has very high import dependency as country relies heavily on imports of coal, oil (petroleum products), and electricity. To fuel economic growth, Cambodia continues to increase import of these fossil fuels, and thus it puts pressure on the energy security. The statistics (MME, 2016) showed that Cambodia import dependency has increased from 50 percent to almost 60 percent from 2013-2016. The increase of energy demand in Cambodia will also see the increase of CO2 emissions from combustion of fossil fuels. It is projected that CO2 emission will increase by 5.6 percent per year from 1.96 Mt-C in 2013 to 8.62 Mt-C in 2040 under Business as Usual Scenario. Oil and coal are the largest source of carbon emissions.
The increasing energy demand in Cambodia posts threats on supply security. Yet, oil stockpiling and other security measures are yet to be developed to cope with unexpected supply disruption as it may arrive from external factors such as conflict in the middle east, natural disasters, accidents, and terror attacks on oil supply cargo. Almost 80 percent of oil export from the Middle East is bound for Asia. So far, the piracy and armed robbery has played a role in disrupting the free movement of vessels, causing delays, financial losses, and even loss of life. Data from the International Maritime Bureau (IMB, 2016) of the International Chamber of Commerce (ICC) reveals that globally, acts of piracy and robbery at sea have declined over the past 5 years. However, the piracy incidents in Southeast Asia and South Asia are either rising or continuing unabated which could post threat anytime on supply security to the region including Cambodia.
Besides oil supply security risks, Cambodia is affected by tropical weather, with plentiful rainfall which resulting in floods for almost every year. Flood is the major natural disaster in Cambodia, especially in the lower Tonlé Sap basin and the lower Mekong River provinces. The significant probability of flood combined with relatively underdeveloped state of the road system in the country result in the risk of oil supply disruption, especially the supply transported by lorry. This was evident when typhoon Ketsana hit the country in 2009. In any extreme weather as Cambodia become more increasingly vulnerable to climate change, typhoon and flood could possibly damage not only roads but (in any extreme case/scenario) could possibly damage the Sihanoukville port and railways, which could prevent oil transportation to major part of Cambodia.
In such extreme case but plausible, it may take at least 1 month before oil transportation can be resumed normally as Cambodian does not have any strategic oil stock piling to address the supply shortage during oil supply disruption. Oil supply in Cambodia has been undertaken by private companies such Chevron, Total, and PTT, as well as Cambodian suppliers like SOKIMEX and Tela. Based on the government regulation, these companies are supposed to hold inventory (operational) oil stock at the terminals for about 30 days. However, these oil importing companies, in reality, may hold operational oil stock of only about 15-20 days as the country may not have mechanism in place to monitor petroleum product stock holdings of these companies. The government’s imposing on companies to hold inventory oil stock of about 30 days will require these companies to invest more for oil facilities in which oil importing companies may not comply with, if without government’s inspection and monitoring system in place.
Notably, the government is aware of these energy security especially the oil supply security. The government has been working on improving road conditions and developing other transport modes like railways and barges to diversify the modes of oil transportation. The government efforts on improvement of disaster forecasting system as well as emergency scheme for distributing fuel by various transport modes are seen as a right direction to reinforce the oil supply resilience in the country. The current development of oil refinery in Sihanouk Ville, by Cambodian Petrochemical Company (CPC) outsourcing the construction contract to state-owned Chinese National Petroleum Company to be completed by 2019, and the expected domestic oil production developed by KrisEnergy Ltd, the operator of Cambodian’s offshore Block A in the Gulf of Thailand, will likely increase Cambodian energy security in the near future.
Although the government are putting efforts to develop the energy infrastructures such as expected oil refinery and tapping domestic oil production by 2020, but Cambodian may still face many challenges which could threaten energy security as a results of good governance issues around these resources, as well as inadequate energy policy in both downstream petroleum products regulation and upstream of resource extraction. While Cambodia is expecting the indigenous oil production by 2020, and oil refinery by 2019, the current energy security of Cambodia remain weak as country is heavily see the rising of oil import to meet the growing energy demand in the country.
The energy security situation is worsen from the view point of lack of fuel diversifications in the energy mix. For the power generation, Cambodia is mainly rely on hydropower and coal-fired power generation for cities and provinces that have connected to national grid. However, electrification rate remain a critical issue for Cambodia as about 40 percent of the population does not access to electricity. Biomass remains a dominant source of energy for cooking in most rural part of Cambodia. Thus all these daunting issues of inaccessible to commercial energy uses are already an energy insecurity. In addition, Cambodian institution has Law on Disaster Management for Flood and Drought, but not for energy emergency response during the disruption of energy supply. Given all the background of energy landscape of Cambodia, below are suggested policy recommendations to the government and stakeholders for considerations:
1- As Cambodian is expected to have stable economic growth in the medium to long term, in which industry sector will play major role to contribute significantly to Gross Domestic Product (GDP), Cambodia will need a stable, reliable and affordable energy price to ensure that Cambodian is competitive to global market. In this regard, Cambodian may need to establish an institution such as National Emergency Strategy Organization (NESO) to deal with energy supply disruption in the future.
2- Cambodian government may consider to establish hard infrastructure such as oil stock piling by the government, on top of what oil importing companies holding inventory oil stock at 30 days of net import. Having oil stock is very significant to ensure that important industries and sectors such as hospital, food industries, electronics, are well protected during emergency response to energy supply disruption. Having own stock of oil and gas is a good signal to investors, and it could attract more important investment to Cambodia such as electronics and others as these sectors will require stable energy supply without black out, and energy input is key to overall production cost to ensure Cambodian’s industries remain competitive to products produced outside of Cambodia.
3- Policy makers may need to develop energy policies to shelve the country from potential risks by bringing energy resiliency through appropriate energy policy and energy infrastructure investment such as oil receiving terminals, ports, pipelines, and strong electricity grids. Besides these hard infrastructure, energy efficiency and conservations (EECs) policies are low-hanging fruit, but they require policy makers be committed to policy formulation, effective implementation and monitoring on all EEC’s policies. These EECs’ policies are expected to save a lots of energy at the final consumption sectors (industry, transportation, commercial and residential sectors).
4- In addition, Cambodian could see all huge energy saving in the transformation sector if policies be formulated to ensure that new fleets of power generation be deployed for high efficiency and low emission power generations. Currently coal-fired power plants are deployed in Sihanouk Ville based on sub-critical technology as these plants are installed with small capacity (50-100 MW) in which high efficacy technology such as Ultra Super Technology (USC) could not be used unless the installed capacity is at least 400-500 MW. In addition, the low technology such as sub-critical technology is relatively cheaper in terms of capital cost, and thus Cambodian may opt for low technology. However, this low technology is associated with low efficiency, high CO2 emission and other pollutants such as sulfa dioxides (SOx), nitrogen dioxides (NOx) and particulate matters (PPM) which could threaten health condition of people whose residents live nearby the plants, and acid rain could be a serious problem in the future.
5- Collective measures and actions to rapidly develop and deploy energy efficiency and saving in all sectors and double the share of renewable energy such as solar, wind, and biomass power generations to the overall energy mix for inclusive and sustainable development are high recommended as a holistic approach.
6- Finally electrifying Cambodian for every corner is a must and urgent as many households still cannot access to commercial energy. Thus appropriate energy policies to promote distributed energy system either using fossil fuel power generations or renewable energy are highly recommended to ensure that remote and mountainous areas are able to access to electricity as these energy are important for their day to day need. Lack of these energy will affect their health, capital formulation of children, and other businesses-related opportunities.
By Han Phoumin, Energy Economist, Economic Research Institute for ASEAN and East Asia (ERIA)
The strongest growth in final energy consumption is likely to occur in the transportation and industry sectors, with an average growth rate of 4.3 percent and 4.0 percent respectively. Cambodia’s electricity demand is projected to have strong growth with an average annual growth rate of 12.8 percent between 2013 and 2040. The fastest growth in electricity generation will be in coal (17.0 percent per year), followed by hydro (13.8 percent per year), and ‘others’ (8.3 percent per year).
Generation from oil-fired power plants will decrease considerably due to high fuel cost. In the past until 2001, almost 100 percent of electricity generation came from oil-fired power plants. In 2002, a hydro power plant started operation in Cambodia and by 2013 its share in the power generation mix increased to 57.4 percent. Coal power generation was also introduced to Cambodia rather late in 2009. By 2013, the share of coal in the power generation mix had risen to 9.5 percent, and subsequently its share of coal in power generation had risen to 30 percent in 2016.
Cambodia has very high import dependency as country relies heavily on imports of coal, oil (petroleum products), and electricity. To fuel economic growth, Cambodia continues to increase import of these fossil fuels, and thus it puts pressure on the energy security. The statistics (MME, 2016) showed that Cambodia import dependency has increased from 50 percent to almost 60 percent from 2013-2016. The increase of energy demand in Cambodia will also see the increase of CO2 emissions from combustion of fossil fuels. It is projected that CO2 emission will increase by 5.6 percent per year from 1.96 Mt-C in 2013 to 8.62 Mt-C in 2040 under Business as Usual Scenario. Oil and coal are the largest source of carbon emissions.
The increasing energy demand in Cambodia posts threats on supply security. Yet, oil stockpiling and other security measures are yet to be developed to cope with unexpected supply disruption as it may arrive from external factors such as conflict in the middle east, natural disasters, accidents, and terror attacks on oil supply cargo. Almost 80 percent of oil export from the Middle East is bound for Asia. So far, the piracy and armed robbery has played a role in disrupting the free movement of vessels, causing delays, financial losses, and even loss of life. Data from the International Maritime Bureau (IMB, 2016) of the International Chamber of Commerce (ICC) reveals that globally, acts of piracy and robbery at sea have declined over the past 5 years. However, the piracy incidents in Southeast Asia and South Asia are either rising or continuing unabated which could post threat anytime on supply security to the region including Cambodia.
Besides oil supply security risks, Cambodia is affected by tropical weather, with plentiful rainfall which resulting in floods for almost every year. Flood is the major natural disaster in Cambodia, especially in the lower Tonlé Sap basin and the lower Mekong River provinces. The significant probability of flood combined with relatively underdeveloped state of the road system in the country result in the risk of oil supply disruption, especially the supply transported by lorry. This was evident when typhoon Ketsana hit the country in 2009. In any extreme weather as Cambodia become more increasingly vulnerable to climate change, typhoon and flood could possibly damage not only roads but (in any extreme case/scenario) could possibly damage the Sihanoukville port and railways, which could prevent oil transportation to major part of Cambodia.
In such extreme case but plausible, it may take at least 1 month before oil transportation can be resumed normally as Cambodian does not have any strategic oil stock piling to address the supply shortage during oil supply disruption. Oil supply in Cambodia has been undertaken by private companies such Chevron, Total, and PTT, as well as Cambodian suppliers like SOKIMEX and Tela. Based on the government regulation, these companies are supposed to hold inventory (operational) oil stock at the terminals for about 30 days. However, these oil importing companies, in reality, may hold operational oil stock of only about 15-20 days as the country may not have mechanism in place to monitor petroleum product stock holdings of these companies. The government’s imposing on companies to hold inventory oil stock of about 30 days will require these companies to invest more for oil facilities in which oil importing companies may not comply with, if without government’s inspection and monitoring system in place.
Notably, the government is aware of these energy security especially the oil supply security. The government has been working on improving road conditions and developing other transport modes like railways and barges to diversify the modes of oil transportation. The government efforts on improvement of disaster forecasting system as well as emergency scheme for distributing fuel by various transport modes are seen as a right direction to reinforce the oil supply resilience in the country. The current development of oil refinery in Sihanouk Ville, by Cambodian Petrochemical Company (CPC) outsourcing the construction contract to state-owned Chinese National Petroleum Company to be completed by 2019, and the expected domestic oil production developed by KrisEnergy Ltd, the operator of Cambodian’s offshore Block A in the Gulf of Thailand, will likely increase Cambodian energy security in the near future.
Although the government are putting efforts to develop the energy infrastructures such as expected oil refinery and tapping domestic oil production by 2020, but Cambodian may still face many challenges which could threaten energy security as a results of good governance issues around these resources, as well as inadequate energy policy in both downstream petroleum products regulation and upstream of resource extraction. While Cambodia is expecting the indigenous oil production by 2020, and oil refinery by 2019, the current energy security of Cambodia remain weak as country is heavily see the rising of oil import to meet the growing energy demand in the country.
The energy security situation is worsen from the view point of lack of fuel diversifications in the energy mix. For the power generation, Cambodia is mainly rely on hydropower and coal-fired power generation for cities and provinces that have connected to national grid. However, electrification rate remain a critical issue for Cambodia as about 40 percent of the population does not access to electricity. Biomass remains a dominant source of energy for cooking in most rural part of Cambodia. Thus all these daunting issues of inaccessible to commercial energy uses are already an energy insecurity. In addition, Cambodian institution has Law on Disaster Management for Flood and Drought, but not for energy emergency response during the disruption of energy supply. Given all the background of energy landscape of Cambodia, below are suggested policy recommendations to the government and stakeholders for considerations:
1- As Cambodian is expected to have stable economic growth in the medium to long term, in which industry sector will play major role to contribute significantly to Gross Domestic Product (GDP), Cambodia will need a stable, reliable and affordable energy price to ensure that Cambodian is competitive to global market. In this regard, Cambodian may need to establish an institution such as National Emergency Strategy Organization (NESO) to deal with energy supply disruption in the future.
2- Cambodian government may consider to establish hard infrastructure such as oil stock piling by the government, on top of what oil importing companies holding inventory oil stock at 30 days of net import. Having oil stock is very significant to ensure that important industries and sectors such as hospital, food industries, electronics, are well protected during emergency response to energy supply disruption. Having own stock of oil and gas is a good signal to investors, and it could attract more important investment to Cambodia such as electronics and others as these sectors will require stable energy supply without black out, and energy input is key to overall production cost to ensure Cambodian’s industries remain competitive to products produced outside of Cambodia.
3- Policy makers may need to develop energy policies to shelve the country from potential risks by bringing energy resiliency through appropriate energy policy and energy infrastructure investment such as oil receiving terminals, ports, pipelines, and strong electricity grids. Besides these hard infrastructure, energy efficiency and conservations (EECs) policies are low-hanging fruit, but they require policy makers be committed to policy formulation, effective implementation and monitoring on all EEC’s policies. These EECs’ policies are expected to save a lots of energy at the final consumption sectors (industry, transportation, commercial and residential sectors).
4- In addition, Cambodian could see all huge energy saving in the transformation sector if policies be formulated to ensure that new fleets of power generation be deployed for high efficiency and low emission power generations. Currently coal-fired power plants are deployed in Sihanouk Ville based on sub-critical technology as these plants are installed with small capacity (50-100 MW) in which high efficacy technology such as Ultra Super Technology (USC) could not be used unless the installed capacity is at least 400-500 MW. In addition, the low technology such as sub-critical technology is relatively cheaper in terms of capital cost, and thus Cambodian may opt for low technology. However, this low technology is associated with low efficiency, high CO2 emission and other pollutants such as sulfa dioxides (SOx), nitrogen dioxides (NOx) and particulate matters (PPM) which could threaten health condition of people whose residents live nearby the plants, and acid rain could be a serious problem in the future.
5- Collective measures and actions to rapidly develop and deploy energy efficiency and saving in all sectors and double the share of renewable energy such as solar, wind, and biomass power generations to the overall energy mix for inclusive and sustainable development are high recommended as a holistic approach.
6- Finally electrifying Cambodian for every corner is a must and urgent as many households still cannot access to commercial energy. Thus appropriate energy policies to promote distributed energy system either using fossil fuel power generations or renewable energy are highly recommended to ensure that remote and mountainous areas are able to access to electricity as these energy are important for their day to day need. Lack of these energy will affect their health, capital formulation of children, and other businesses-related opportunities.
By Han Phoumin, Energy Economist, Economic Research Institute for ASEAN and East Asia (ERIA)
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