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Co-Operation between Producers - The Role of the International Energy Forum

14 May 2006

Jordan

At the Seventh Arab Energy Conference in Cairo four years ago, the Minister of Petroleum and Mineral Resources of Saudi Arabia, H.E. Ali Al-Naimi underscored the Kingdom's long-standing interest in promoting dialogue between oil producing and oil consuming countries. He made reference to the proposal by then Crown Prince of Saudi Arabia, now Custodian of the Two Holy Mosques, King Abdullah ibn Abdulaziz Al Saud, to set up in Riyadh a permanent Secretariat for the International Energy Forum.

That Royal vision has since been translated into reality. The establishment of the IEF Secretariat in December 2003 is a manifestation of international co-operative commitment. Our new headquarters were inaugurated by King Abdullah six months ago in the presence of Ministers of key energy producing and consuming countries and heads of international energy organizations and oil companies. 

As the first Secretary General of the IEF, I am honoured to speak on producer-consumer dialogue and co-operation at this important gathering of Arab countries. And doing so, let me also recognize the very supportive role that Arab ministers have played in developing the global dialogue in the IEF, and that regardless of whether oil prices have been high or low. Arab countries have hosted or co-hosted six of the ten IEF Ministerial meetings that have taken place since 1991. 

A few weeks ago, in another Arab capital, Doha, Energy Ministers and officials of 59 countries, heads of international organizations and CEOs of leading national and international oil companies met to discuss energy security at the 10th IEF Ministerial. They met, as we meet today, at a time of heightened global energy consciousness. 

The IEF is a unique forum for global dialogue on energy across traditional political, economic and energy policy dividing lines in an ever-more interdependent world. It gathers under one global umbrella Ministers not only of the petroleum exporting countries of OPEC and OAPEC as well as Ministers of the industrialized, energy importing countries in the IEA, but also very importantly, as we look ahead, Ministers of countries outside these organizations, countries such as Russia, China, India among others, that will have increasing impact on the global scenario. 

Impact

What impact has this process of producer and consumer dialogue had on oil market stability? 

I will not attempt the impossible - to try to quantify that impact in figures. In my paper, I have instead wanted to recall the confrontational producer-consumer past, present the dialogue at political level in the IEF and highlight some of the shared perspectives that emerged from the Ministerial in Doha a few weeks ago. I submit my conviction that producer-consumer dialogue and co-operation has had, and will continue to have, favourable impact on oil market stability and energy security. I would hate to think of the consequences of the absence of dialogue. 

The past has shown how energy, especially the strategic commodity oil, and market volatility could create conflict or exacerbate political tensions between countries and groups of countries. An image of confrontation developed between producers and consumers of petroleum. OPEC and the IEA emerged as the bi-polar and multilateral expression of conflicting producer-consumer interests. 

This is easy to forget, when we today see IEA Executive Director Claude Mandil and OPEC Secretary General Mohammed Barkindo sitting happily and constructively on the same panel at this conference and elsewhere. Indeed, there was a time when there was no institutional contact between these major producer and consumer organizations. The day after tomorrow, OPEC and the IEA will hold a joint workshop on demand in Oslo, where I am honoured to bring some IEF global perspectives to their deliberations. In addition to their direct bilateral co-operation, the IEA and OPEC co-operate in the broader global dialogue in the IEF with countries that are not members of their organizations. They are indeed very supportive to the IEF endeavour. 

The informal political level dialogue in the IEF has played its part in ushering international energy affairs out of an era of mistrust and confrontation into one of greater understanding, better awareness of long-term common interests. This translates into more enlightened national policy decision-making and more purposeful co-ordination of national policies in other patterns of international energy co-operation. The results can be seen in concrete measures taken by both consumer and producer countries individually, and by their organizations. The results of dialogue are also evident in statements of policy intent that in times of geopolitical and other uncertainty send calming signals to nervous energy markets.

Doha Energy Road Map
It goes without saying that oil was key when Ministers discussed energy security in Doha last month. They noted that world economic growth had remained strong despite increasing oil prices and market volatility. They expressed concern over effects of sustained high price levels on the world economy, and especially on developing countries. Ministers confirmed their shared interest in reduced market volatility and prices at reasonable levels for both consumers and producers. They noted increasing producer and consumer interdependencies.

They attributed current higher oil prices to a number of factors, including increasing demand, tight up- and down-stream capacities, intervention of non-industrial actors and geo-political developments, which contribute to increased anxiety in the market. 

Ministers underlined the importance of strengthening dialogue and co-operation not only between governments, but also between governments and industry with a view ensuring reliability, security and affordability of energy. They called for a stepping up of investments across the energy chain to meet the substantial increase in demand required for global economic growth and social development in the years ahead.

The consensus is that the world will continue to rely strongly on fossil fuels, oil, natural gas and coal, supplies of which are ample. Ministers thus underlined the need to accelerate the development of cleaner fossil fuel technologies and alternative sources of energy and to increase energy efficiency. 

Ministers underscored that improved access to markets, resources, technology and financial services, bolstered by fair and transparent economic fiscal and legal regulatory frameworks, and by good governance, is crucial for the long-term energy security of both consumers and producers. They also acknowledged the need to do something about the shortage of skilled human resources throughout the industry.

Data and transparency

Ministers underlined the importance of transparency and exchange of data for market predictability and thus for the investments required to enhance energy security. They reaffirmed their support of the Joint Oil Data Initiative - JODI for short - which the Secretariat is coordinating with the support of the IEA and OPEC, APEC, Eurostat, OLADE and the UN. And they envisaged the initiative, in due course, being expanded to include also other sources of energy that are important in the world energy mix.

Co-ordination of this unique inter-organisational transparency initiative is a Secretariat flagship activity. A concrete outcome of the producer-consumer dialogue. More than 90 countries, representing 90% of global supply and demand, are now submitting data production, demand and stocks. I am happy to see that Algeria, Egypt, Kuwait, Libya, Oman, Qatar, Saudi Arabia, United Arab Emirates and Yemen are all participating in JODI. The JODI World database is now available to the public.

We rely on the submission of timely and accurate data by participating countries to their respective organizations. Our 2006 Action Plan for JODI includes hosting the 6th JODI Conference as well as facilitating JODI training sessions in Africa and Latin America later this year in co-operation with host countries and regional organizations. We presented JODI at the 14th UN Commission on Sustainable Development in New York last week.

A defining issue

Italy will host the next Ministerial in Rome in 2008 with India and Mexico as co-hosts. On that Road to Rome, the Secretariat will facilitate supportive meetings at Ministerial and officials' level and also interact with industry, providing continuity to the producer-consumer dialogue in the IEF. In that context, I appreciate the opportunity to attend this Arab Energy Conference to learn more of Your regional energy security concerns. And I am happy to note the desire expressed by H.E. Samih Fahmy the Minister of Petroleum of Egypt to involve the IEF Secretariat in the roundtable on oil and gas that he will host in November. 

The global dialogue in the IEF focuses on energy security and the links between energy, environment and economic development. The world will need more and cleaner energy used in a more efficient way, accessible and affordable to a larger share of the world's population. 

Energy security is the priority theme also of the Russian Federation's presidency of the G8 Group of nations. The Secretariat was honoured to address the meeting of G8 Energy Ministers in Moscow two months ago. Global concern is reflected in the fact that energy, which is crucial for reaching the Millennium Development Goals, is also the focal issue for the United Nations Commission of Sustainable Development this year and next. Attending the Commission's Session in New York last week, I was happy to see our host for the 10th IEF Ministerial, H.E. Abdullah bin Hamad Al-Attiyah, the Second Deputy Prime Minister, Minister of Energy and Industry of Qatar, elected Chairman of this important Commission that now will enter its energy policy making phase. The Secretariat is looking forward to providing its support to the new Chairman in bringing shared perspectives of IEF energy ministers to bear on the UNCSD process, a process where also Ministers of Environment and Development Co-operation.

Multi-polar energy world

At a time of heightened energy security concern around the world, we are witnessing a strengthening of regional and inter-regional energy co-operation. I think this will be increasingly reflected in institutional developments. Parallel processes of global and regional co-operation are important to energy security in a multi-polar energy world. The IEF provides a meeting point for the mosaic of regional and inter-regional energy ambition and co-operative designs. 

The series of Arab Energy Conferences is well established. This 8th Conference leaves no doubt of a forceful Arab energy ambition. His Majesty King Abdullah of Jordan is calling for the establishment of an Arab institutional framework for oil and energy issues in order to develop a pan-Arab perspective. 

Arab petroleum exporting countries are involved in the dialogue between the OPEC and the EU that was started last year. They are also involved in the process of Roundtables of Asian Ministers on 'Regional Co-operation in the Oil and Gas Economy' initiated by India in January last year in association with the IEF Secretariat and with Kuwait as co-host. Ministers of the principal Asian importers and West Asian (Gulf) producers, representing half of the World's population, the bulk of the World's remaining proven oil and gas reserves and, very importantly, the greater part of the surging global energy demand expected in the decades ahead, discussed on that occasion for the first time on a regional Asian basis issues of energy security, stability and sustainability. This Roundtable was supplemented by an additional Roundtable of Ministers of the principal Asian consumers and North and Central Asian producers last November, again convened by India and this time co-hosted by Russia. Ministers recognized very importantly at both Roundtables that the Asian oil economy is integral to, and inseparable from, the global oil economy. Regional Asian developments will increasingly impact global developments and be of increasing interest also to Arab countries.

The Secretariat is interacting with regional and inter-regional energy ambition also elsewhere. We hosted in Riyadh the first workshop of the EU-GCC EuroGulf Project, we participate in the Conference of African, Latin-American and Caribbean Energy Ministers (AFROLAC), the African Petroleum Congress processes as well Eurasian dialogues promoted by Russia and the UNECE. We are looking to further interaction also with regional Arab energy co-operation.

Interdependence

The higher level of oil prices has brought energy security again to the top of the political agenda for geo-political and economic reasons in addition to the energy imperative. The political level dialogue in the IEF highlights both sides of the energy security coin. Security of supply and security of demand. For both consumers and producers this implies dependency. 

Some are now arguing that dependency on others in so important and strategic an area as energy constitutes a political and economic risk that should be reduced to a minimum, if it cannot be avoided altogether. Others are arguing that energy dependency is not only practical and inevitable in a globalizing world, but that it ties countries closer together also economically and can serve as an impulse to improve relations between countries and the overall geopolitical climate. For energy interdependence to be sustainable, it has to be mutually beneficial - win-win. Because energy goes to the very core of national political, economic and environmental interests as well as those of the global community. 

It is ultimately the ambition and national policy decisions of governments that will determine the achievements and success of producer-consumer co-operation and the impact this co-operation can have on oil market stability. The Secretariat is dedicated to support, as best it can, the global, political level dialogue in the International Energy Forum. This on-going dialogue endeavour has, in my view, an increasingly important role to play in lubricating international energy affairs.