Oil prices are back in the headlines. At an all-time high in nominal terms. Energy security is again high on the political agenda. Government leaders are concerned. Oil importing, industrialized countries warn of the detrimental effects that high oil prices have on the world economy. Oil-importing developing countries suffer even more than before from increasing oil import bills. Oil-exporting countries are producing what they can to help bring prices down. And making good money doing do. Surging demand in Asia, economic recovery, refinery bottlenecks as well as terrorist attacks and political uncertainties are driving factors behind the high oil prices that we have today.
If this shorter-term perspective is challenging, the longer-term scenario is even more daunting. The increase in global energy demand foreseen in the years ahead is substantial. An add-on of almost two-thirds of today's level by the year 2030. 85% of the increase will be met by fossil fuels. Most of this increase will come in the developing countries as they industrialise and their economies grow. It is estimated that total investments of USD 16 trillion are required for the energy supply infrastructure needed to satisfy global demand in 2030. In this longer term perspective, production and consumption patterns, the energy mix as well as investment requirements, will evolve in a changing geopolitical environment. And these energy developments will influence that changing geopolitical climate.
Clearly, this is a time for global energy dialogue. Because energy is crucial for economic and social development in individual countries. Energy is important for commercial and political relations between countries. It fuels the world economy. Production and consumption of energy impact the global environment. Energy influences, and is influenced by, international politics. It is difficult to imagine an area, where nations are more interdependent than in the confluence of energy, environment and economic development.
International Energy Forum
Let me thank you for this opportunity to share some perspectives on co-operation between energy producing and consuming countries and on the need for global dialogue. I will do so from the vantage point of the International Energy Forum and its new international secretariat headquartered in Saudi Arabia. The mission of the Secretariat is to facilitate on a continuous basis the informal dialogue at the level Ministers in the IEF. A dialogue, focused on security of energy supply and demand, as well as on the links between energy, environment and economic development. The 9th IEF Ministerial took place in Amsterdam 22-24 May. Ministers exchanged views on energy challenges ahead, especially those related to investments. 63 countries and eleven international organisations participated. Never before had so many energy ministers gathered in any one place at any one time.
Energy is a matter of vital national interest. In their national interest, the USA and other industrialised, oil-importing countries have joined together in the IEA. In their national interest, some oil-exporting countries have joined together in OPEC. The IEF is the institutional endeavour of not only IEA and OPEC countries, but also of the large number of energy producing and consuming countries outside these organisations, to join together in a global energy dialogue at the level of ministers and across traditional dividing lines. A dialogue of the interdependent to promote energy security and long-term common interests.
Dialogue of the Interdependent
The past has shown how energy, especially the strategic commodity oil, and market volatility, can create conflict or exacerbate political tensions between countries or groups of countries. For many years, it was politically not on for energy ministers from consuming and producing countries to meet in a multilateral context. It now is.
In that more confrontational past, voices for energy dialogue could be heard. But persistent voices against dialogue were louder. When Norway's former Prime Minister Dr. Brundtland, in the late 1980s, called for an informal meeting between ministers of energy producing and consuming countries, there were those who regarded the very idea of a dialogue at political level as a non-starter. Some even thought it outright dangerous. The differences and conflicts between the two groups of countries were seen as given. One just had to live with sharply fluctuating oil prices, instability and mutual insecurity, and with the adverse wider economic and political impact this would have.
International developments and the Gulf War in 1990-91 highlighted the importance of oil and proved a turning point for the idea of dialogue at political level. A more co-operative atmosphere between producers and consumers ensued. At the initiative of Presidents Mitterand of France and Perez of Venezuela, the first Ministerial was held in Paris in 1991. It broke the ice and was followed on a more or less biannual basis by meetings in Norway, Spain, Venezuela, India, South Africa, Saudi Arabia, Japan and last May in the Netherlands. An ever-increasing number of ministers have come to take part in what developed from a Ministerial Workshop to become the International Energy Forum.
Unique in scope and approach
The producer-consumer dialogue at political level in the IEF is unique in its global participation and perspective. I have mentioned that it involves not only ministers of IEA and OPEC countries, but also ministers of important countries outside these two main producer and consumer organisations; China, Russia, India, Brazil and South Africa, to name a few, that are increasingly impacting the global energy scenario. In the IEF, these and other countries make their voices heard on an equal footing with their peers in the IEA and OPEC.
The IEF is unique also in approach. Ministers discuss common concerns. They present their policy views and listen to those of others. Together, they look for consensus-oriented approaches to the energy challenges ahead. The IEF is not a decision-making organisation. Nor do ministers negotiate legally binding settlements and collective action there. The IEF is not a body for multilateral fixing of prices and production levels. Decisions are made on a national basis in capitals or in other international organisations that are mandated to do so.
The series of IEF ministerial meetings has contributed to a convergence of views. There is growing awareness of the simple fact that we are all in the same boat. Greater stability and predictability in energy developments are increasingly seen as a shared goal that can facilitate long-term economic planning and have a positive influence on political developments as well. The mutual sense of interdependency, vulnerability and win-win opportunity has improved the atmosphere for long-term co-operation. And difficult short-term issues are being addressed in a more co-operative way than before when the atmosphere was confrontational.
Let me highlight some shared perspectives from the Amsterdam Ministerial.
Ministers expressed concern about the high oil prices. Economic recovery worldwide, especially in developing countries, would benefit from stable oil prices at a reasonable level. Both producer and consumer countries should take action to ensure sustainable price levels.
Ministers considered present oil and gas reserves sufficient to meet the world's increasing energy needs, provided that necessary investments are made in time.
Unhindered access to capital, energy technology and markets would promote the development of production, transit and transport capacity. The sovereign rights of states over their natural resources were reaffirmed. The commercial objectives of oil and gas companies were recognised.
Ministers echoed the strong message from CEOs of leading energy companies in the preceding International Energy Business Forum that stable and transparent economic, fiscal and legal frameworks need to be in place to attract sufficient foreign direct investment and other resources. Bilateral and multilateral investment agreements could help clarify conditions and thus facilitate the mobilization of investments. Transparency also with respect to oil production and stocks was seen as important to that end.
Ministers underscored the importance of investments in cleaner fossil fuels and of reducing the detrimental effects of growing energy use. The importance of developing alternative energy sources was stressed. Their vision was a smooth transition to a new energy era for the longer term, facilitated by the presence of still ample oil and gas reserves.
The importance of energy for sustainable development and follow-up of the Johannesburg Summit was also emphasized, especially bearing in mind the energy needs of a growing world population, a quarter of which still does not have access to electricity.
Energy security is a complex and broad-based issue. It is more than oil. And it is more than technical arrangements and infrastructure. It also has to do with economics, politics and the environment. Energy security has domestic and foreign policy implications. Security of supply and security of demand translate into producer-consumer interdependence.
The Amsterdam Ministerial highlighted the importance of investments for energy security. The economic challenge is to mobilise needed new investments. The question is how necessary investments will find their way to the energy sector considering competition for funds also from other important sectors of the economy. Who will invest how much, in what, and where, in order to manage supply and demand for both present and future generations?
The political challenge is to ensure a common energy future where energy supply and demand can be balanced in such a way as to promote, and not jeopardise, the political goals of sustainable global economic, social and environmental development. The world will need more and cleaner energy used in a more efficient way. It should be accessible and affordable to a larger share of the world's population.
Projections to the year 2030, from the IEA, indicate that fossil fuels will remain the primary sources of energy with oil amounting to 35%, natural gas to 25% and coal to 22% of the energy mix. They will meet 85% of the total increase in global energy demand. With 82% of total global demand, fossil fuels will dwarf nuclear's 5%, hydro and other renewables almost 4% and biomass and waste's almost 10%.
Energy trade, almost entirely in fossil fuels, is set to expand rapidly. The mismatch between where these sources of energy are produced and where they are used will increase, as will producer-consumer interdependence. This poses new challenges. Vulnerability to disruptions of energy supply, due to politically motivated sabotage or technical mishap, can increase. Maintaining the security of international sea-lanes and pipelines on- and offshore assumes increasing importance for energy security.
There is no quick and lasting fix to the challenge of global energy security. The issues are of such character and importance that they must be addressed in on-going dialogue not only between nations at political level, but also in dialogue and partnerships between governments and industry. Fostering an investment climate in which national development and corporate interests converge would be an important contribution.
New Kid on the Global Energy Block
At the IEF Ministerial in Riyadh in 2000, Crown Prince Abdullah of Saudi Arabia suggested the need for a Secretariat to support the producer-consumer dialogue, what until then had been an informal process without any fixed institution. He offered Saudi Arabia as host country for this new body. The idea was endorsed at the following Ministerial in Japan in 2002. And the Secretariat started its work in December last year. It is funded on the basis of annual voluntary contributions from participating countries.
A cardinal task for the new International Energy Forum Secretariat in Riyadh is to support host country Qatar, and co-hosts China and Italy, in preparing the next Ministerial that will take place in Doha in 2006. The Secretariat will help to ensure the continuity of the ministerial level energy dialogue also between the biannual meetings by organising supportive meetings and roundtables. It can play a catalyst role by facilitating regional and inter-regional activities and linking these to the global dialogue endeavour in preparation for the following full Ministerial.
Last month, at the request of the Energy Minister of Russia, we took part in the 4th Russian Oil and Gas Week and had a joint roundtable on Eurasian energy co-operation. In January, the Petroleum Minister of India will host, in association with the IEFS, a meeting of ministers of the principal Asian oil-importing countries and the principal Middle East oil-exporting countries. The Energy Ministers of ASEAN+3 (China, Japan and Korea) have requested us to facilitate a corresponding meeting with a larger group of Middle-East exporters later in the year. Energy interdependence between these two regions will assume increasing importance for the global dialogue as Asian energy demand surges in the years ahead, affecting the global market scenario as well.
We are discussing facilitation of regional meetings hosted by South Africa and Mexico as well. The UN has invited us to contribute to the focus that they will put on energy and development in 2006-2007, following up the Johannesburg Summit.
The Secretariat will also contribute to enhanced oil data collection and transparency. We are now discussing with six organisations - APEC, Eurostat, IEA, OLADE, OPEC and the UN - our role in co-ordinating the Joint Oil Data Initiative (JODI) that they have developed. More than 90 countries, representing 95% of global supply and demand, are now submitting data and oil companies are also participating. Ministers have endorsed the Secretariat assuming a co-ordinating role in this international and inter-organisational endeavour. JODI coordination is set to become a flagship of our activity and would contribute to market stability and energy security.
Let me conclude, Ladies and Gentlemen, by emphasizing that the International Energy Forum is an evolving international endeavour driven by governments at ministerial level. It provides a venue for ministers of energy exporting and importing countries, of developing and industrialised countries, to put their concerns and policy views on the table and to listen to, and better understand, those of others. An informal dialogue of the interdependent, where Ministers can identify effective and sustainable ways of promoting global energy security across traditional political and economic dividing lines.