Visiting China one can only be humble. Developments in your country are truly breathtaking. And they are not only of domestic Chinese interest and importance. The way in which China chooses to meet challenges in economic development, energy security and safeguarding the environment will quite substantially influence the global scenario as well.
China's impressive economic growth is reflected in her rapidly increasing and record level imports of oil. Now the second largest importer of crude oil in the world, China's oil imports are set to increase substantially in the years ahead, strongly affecting global markets. It should be no surprise that the world is watching and listening to China. And that it wants and needs China as an active and responsible partner in international co-operation. At a time of heightened energy consciousness and energy security concern around the world.
I am happy to be back in China and for this opportunity to underscore the importance of global energy dialogue for global energy security. In my remarks this morning, I will first recall the political background for the informal dialogue between Ministers of energy-producing and energy-consuming countries in the International Energy Forum, adding some of the energy challenges one can see ahead. Why deepened dialogue is important if we are to meet those challenges successfully. I will sketch some shared perspectives that have emerged from our Ministerial discussions and mention some aspects of energy security and energy interdependence in our multi-polar energy world. I will underline the importance of regional co-operation in support of global co-operation. Highlighting the process of regional roundtables of Asian Ministers that the Secretariat is facilitating. China, a global player, is centre stage also in this New Asian Energy Identity that is emerging and that holds great co-operative promise. Both regionally and within the wider global context that is my perspective.
From Confrontation to Dialogue
The past has shown how energy, especially the strategic commodity oil, and market volatility could impact domestic economic development. And also how it could create conflict or exacerbate political tensions between countries and groups of countries. An image of confrontation had developed between producers and consumers of petroleum. OPEC and the IEA emerged as the bi-polar and multilateral expression of conflicting producer-consumer interests.
The idea of political level dialogue, as it has developed in the IEF, stems from the UN Commission on Environment and Development, which acknowledged in its report 'Our Common Future' twenty years ago the importance of energy for sustainable economic and social development. It recommended that new mechanisms for encouraging dialogue between energy consumers and producers be explored.
On that note, the Chairperson of the Commission and Prime Minister of Norway, Dr. Brundtland called for an informal political level 'Workshop' where Ministers of energy producing and consuming countries could discuss the resource situation and market outlook as well as the links between energy and environment. Many were ready to try, but important countries regarded the very idea of a dialogue on these matters at political level as a non-starter, even as outright dangerous. The differences and conflicts between producers and consumers were in many quarters regarded as permanent facts of life. A divide that no political level dialogue could bridge, or should even attempt to bridge. One just had to live with sharply fluctuating oil prices, instability and mutual insecurity, and their adverse wider economic and political impact.
The Gulf War in 1990-91 highlighted again the geo-political and economic importance of oil. It proved a turning point for the idea of dialogue at political level. A more co-operative atmosphere between producers and consumers ensued in its wake. At the initiative of Presidents Mitterand of France and Perez of Venezuela, a 'Ministerial Seminar' of Producers and Consumers was held in Paris in 1991. In the years that followed, a confidence-building process could develop with Ministerial meetings taking place in Norway, Spain, Venezuela, India, South Africa, Saudi Arabia, Japan, the Netherlands and in Qatar. Italy will host the 11th IEF Ministerial in Rome next year with India and Mexico as co-hosts.
The global dialogue on energy in the IEF is unique in that it transcends traditional political, economic and energy policy dividing lines. It gathers under one global umbrella Ministers not only of the petroleum exporting countries of OPEC as well as Ministers of the industrialized, energy importing countries in the IEA. It also gathers Ministers of countries outside these organisations, such as China, Russia, India, Brazil, South Africa and others, that will have increasing impact on the global scenario. China was a co-hosting country of our Ministerial in Qatar last year. Attended by the Vice Chairman of your National Development and Reform Commission H.E. Zhang Guobao. China is also a member of the Executive Board of the IEF Secretariat along with twelve other countries and the secretariats of the IEA and OPEC.
The IEF is not an international organisation in the traditional sense. It is a process of informal, global dialogue on energy at the level of ministers involving, at present, some 60 key energy countries. Energy security, and the links between energy, environment and economic development, is the core focus of this dialogue, which is unique also in approach. It is not a negotiating or decision-making body. It is a forum for discussion, exchange of information and policy views. The informal and frank exchanges among Ministers in the IEF have contributed to greater mutual understanding, enabling more enlightened national decision-making and closer co-operation within and between energy organisations.
It was at the Riyadh Ministerial in 2000 that King Abdullah of Saudi Arabia, then Crown Prince, proposed the establishment of a permanent Secretariat to strengthen the informal dialogue process. He offered to host it in Riyadh as well. This Royal proposal was endorsed by IEF Ministers at their following meeting in Japan in 2002. The Secretariat was set up in December 2003. In November 2005, King Abdullah inaugurated our Headquarters. Minister of Petroleum H.E. Ali Al-Naimi convened on that occasion a meeting of Ministers of key producing and consuming countries and CEOs of leading national and international oil companies. Vice Chairman Zhang Guobao represented China also at that important gathering of IEF Ministers.
The Secretariat's mission focuses on the three pillars of activity.
to support host country and co-hosting countries in preparing for and implementing the biennial Ministerials and to follow up the Ministerial deliberations,
to facilitate and enhance the exchange of energy data and information, especially by co-ordinating the Joint Oil Data Initiative and
iii. to provide platforms for exchange of views on relevant energy issues and to contribute to the continuity and deepening of the Ministerial level dialogue,
Heightened Energy Consciousness
Energy security continues to top the political agenda for energy importing as well as exporting countries, for industrialized as well as developing economies. Our time of heightened energy consciousness is also a time of uncertainties and increasing interdependencies among nations. This has prompted re-think of fundamental policies in many countries. And the policy tuning of one country to meet new challenges and to reduce its particular energy uncertainties can in itself exacerbate uncertainties or create new ones for others. Not least considering the interrelationship between energy, environment and economic development. As well as the links between energy and geopolitics. Global producer-consumer dialogue acquires increasing importance as nations revisit and modify established policies, and shape new ones, in their quest for energy security.
Amid these uncertainties, there is a fundamental certainty. And that is that 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. The political challenge lies in operationalizing this energy imperative in a fair and sustainable way. Through national policies as well as in bilateral, regional and wider global co-operation. Through dialogue and co-operation not only among Governments, but also between governments and industry.
In the coming years, producer-consumer dialogue and relations will evolve against a complex backdrop, some catchwords of which are that:
- Fossil fuels remain paramount for quite some time with increasing attention to development of alternatives.
- Increasing energy demand, efficiency and trade.
- Increasing competition for energy resources and increasing competition among energy resources.
- Resource nationalism. Nations wanting to make the most of their endowment for the benefit of their people.
- Energy interdependence or energy independence for energy security?
- Environmental concern. Catastrophe or environmentally benign technological breakthroughs?
- Vulnerability of energy production and supply to politically motivated attack, technical mishap and forces of nature.
- Call for good governance and transparency.
- Energy a 'Public Good'. People expect their Governments to provide sufficient, reliable and affordable energy.
- Energy poverty. Demands for equitable access to energy for the quarter of the world's population who do not have it, but who want it and need it for a better life tomorrow.
- The shift to Asia of global economic gravity with geopolitical and energy implications.
- And I hope, increasing awareness of long-term communality of interests among producers and consumers in a globalizing world.
An Energy Scenario
Let me highlight some figures and trends that I believe should receive thought in our assessment of energy security.
The increase in global energy demand foreseen in the years ahead is substantial. The resources are there, but timely investments of some USD 20 trillion, half of this in developing countries, are needed to meet projected demand over the next 25 years. The economic challenge will be to mobilise these 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 IEA's latest 'business-as-usual' scenario sees energy demand increasing by more than half over today's level by 2030, 70% of the increase in developing countries as they industrialize and their economies grow. Fossil fuels will remain the primary sources of energy and account for four-fifths of total demand. Oil would account for 32%, natural gas for 23% and coal for 26% of the energy mix. These fossil fuels would dwarf the 5% share of nuclear, the 4% share of hydro and other renewables as well as the 10% share of biomass and waste.
We expect fossil fuels to meet more than 80% also of the total increase in global energy demand by 2030, most of which will come in the developing countries. Global energy related CO2 emissions would grow correspondingly, increasing by more than half from today's level. Over three quarters of this increase would come from developing countries. China is expected to account for 80% of the increase in global emissions the next twenty years, overtaking the United States as the world's biggest emitter by 2010.
Today, a quarter of the world's population, 1.6 billion people lack access to electricity and two-fifths rely mainly on traditional biomass for their basic energy needs. Probably 1.4 billion people (of 8.1 billion) will still lack access to electricity in 2030.
At the 10th IEF Ministerial in Doha in April last year, energy Ministers discussed energy security as 'shared responsibility'. They received direct input from CEOs of leading national and international energy companies in the 2nd International Energy Business Forum preceding their internal discussions.
Ministers 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 attributed higher oil prices to a number of factors, including increasing demand, not least here in China, 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 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 along with 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.
The need for dialogue and co-operation on issues of energy security was a few months later given additional forceful emphasis also by the G8 Heads of Government at their annual Summit under the Presidency of the Russian Federation. At the very top of their St. Petersburg Plan of Action on Global Energy Security, the Heads of Government underscored the importance of the global energy dialogue at the level of Ministers in the IEF. They invited the IEF to study ways of broadening the dialogue between energy producing and energy consuming countries on increasing transparency, predictability and stability of global energy markets. Including information exchange on medium- and long-term policy plans and programmes.
Energy Security and Interdependence
We are all 'addicted to energy'. Not as an end in itself. But as a means to promote economic and social development. Energy goes to the very core of national interests. It is a sovereignty issue. But it is also a global issue in an increasingly interdependent world. An energy world that is becoming increasingly multi-polar.
Some would argue 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 would argue 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. Energy interdependence can be good. But energy interdependence can also be bad. For it be good and sustainable, it has to be mutually beneficial - 'win-win'.
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 on the other. Energy importing countries want security of supply from energy exporting countries. Energy exporting countries in turn want security of energy demand in energy importing countries. They may in addition want and need investments from abroad to develop infrastructure necessary to produce and export their energy resources.
In our IEF dialogue, Ministers of some energy-importing countries are requesting a 'road map' from energy-exporting countries on future supply. And Ministers of some energy- exporting countries are likewise requesting a 'road map' on future demand from the energy- importing countries. As we know from other issues of international political concern, road maps are not always easy to make, and even when made can sometimes prove difficult to follow. But the realistic road maps that are possible to chart for energy security, could give useful guidance for the investment decisions needed to secure adequate energy supplies.
There is a geographical mismatch between the centres of oil and gas reserves and centres of consumption. Energy trade is poised to expand rapidly, increasing mutual dependence between countries. This poses new challenges. Vulnerability to disruptions of energy supply due to politically motivated disruption, terrorist onslaught or technical mishap can increase. Maintaining the security of international sea-lanes and pipelines assumes increasing importance for energy security.
Energy security is a broad-based issue. Energy efficiency, strategic petroleum reserves and stock-holding, spare capacity, fuel-switching, diversification of resources and suppliers are along with emergency responses key options for those countries seeking enhanced security of supply. The perspective is not just one of short-term crisis. The perspective must also be long-term as production and consumption patterns as well as requirements for investments in infrastructure evolve.
Energy security is more than an issue of technical arrangements and infrastructure. It has also to do with economics, geopolitics and the environment. It has domestic and foreign policy implications. The further development of a substantive and co-operative producer-consumer dialogue is a prerequisite for our common efforts for energy security. And in this effort, the industry itself has a crucial role to play in addition to governments. They are the people doing the actual work to find, produce and bring energy to the consumer.
The quest for sustainable global energy security is now being highlighted not only by Energy Ministers. I have already mentioned the G8 Heads of Government. Ministers of Foreign Affairs, Finance, Economics, Trade, Environment and Development are adding their voices as well. As are NGOs and other stakeholders. More and more people are joining the energy dialogue and often for very different reasons.
A Multi-polar Energy World
Energy security in its more holistic, global and long-term perspective is the focus theme of the 15th Session of the United Nations Commission on Sustainable Development in May this year. Because of the importance of energy in meeting the Millennium Development Goals.
As global focus now is being put on issues of energy security, many countries are diversifying their energy markets or sources of energy supply in a series of bilateral solutions. But also multilateral regional and inter-regional energy co-operation is being strengthened around the world. We see it in Asia, in Africa, in Europe and in North as well as South America. We see it strengthening also between regions. Regional and inter-regional co-operation can provide stepping-stones to global approaches and co-operation. The IEF acquires added importance as a global meeting point for the mosaic of bilateral, regional and inter-regional energy ambition and co-operative designs.
New Asian Energy Identity
Let me highlight the process of Roundtables of Asian Ministers on 'Regional Co-operation in the Oil and Gas Economy' initiated by India in January 2005 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. H.E. Zhang Xiaoqiang, Vice Chairman of the National Development and Reform Commission represented China.
With the West Asian countries sending two out of their every three barrels of exported oil eastwards in Asia, and four out of every five barrels of East Asian imports coming from the Gulf - a communality of interests is apparent. Today and increasingly so tomorrow.
That Roundtable was supplemented by an additional Roundtable of Ministers of the principal Asian consumers and North and Central Asian producers in November 2005, 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.
These political level roundtable processes are spearheading what I would call a 'New Asian Energy Identity' that will further evolve in the coming years as the importance of Asia to global political and economic developments will increase. The IEF Secretariat is proud to be facilitating this Asian dialogue in light of this vast region's importance to the global scenario.
The Minister of Petroleum and Mineral Resources of Saudi Arabia, H.E. Ali Al-Naimi and the Minister of Economy, Trade and Industry of Japan, H.E. Akira Amari have invited Asian Ministers to Riyadh in May this year to carry forward discussions in the process of the Roundtable of Ministers of the East and South Asian consumers and West Asian producers. The IEF Secretariat is facilitating also this coming Roundtable that we are proud to host at our Headquarters. We are looking forward to China again making her voice heard in this important regional dialogue.
JODI - A unique transparency initiative
A word about the need for better data and more transparency. So important for market predictability and for the investments required to enhance energy security. IEF Ministers reaffirmed at the Doha IEF support of the Joint Oil Data Initiative - JODI for short. They envisaged the initiative, in due course, being expanded to include also other sources of energy that are important in the world energy mix.
The importance for energy security of the better data that JODI can present was subsequently echoed by the G8 Heads of Government in their St. Petersburg Plan of Action on Global Energy Security. Welcoming the implementation of JODI, they pledged to take further action to improve and enhance the collection and reporting of market data on oil and other energy sources by all countries. Including through development of a global standard for reporting reserves. The G8 Heads of Government invited the IEF to work on the expansion of JODI membership and to continue to improve the quality and timeliness of data. High level political support to JODI was again highlighted at the APEC Summit and the meeting of G20 Finance Ministers. And here in Beijing, in December last year, also the Five-Country Energy Minister's Meeting hosted by China agreed to strengthen co-operation in improving transparency of data through better sharing of information to enhance oil market stability.
JODI is a concrete outcome of the producer-consumer dialogue. Co-ordination of this unique inter-organisational transparency initiative, with the full support of the IEA and OPEC, APEC, Eurostat, OLADE and the UN, is a flagship Secretariat activity. The IEF Secretariat hosted last November the 6th International JODI Conference in Riyadh against the backdrop of rising political-level expectation. Inaugurated by the Minister of Petroleum and Mineral Resources of Saudi Arabia, the Conference gathered 120 participants, representing thirty governments, including China, international energy organisations as well as international and national energy companies. It marked the first anniversary of the release to the public of the JODI World Database, which the IEF Secretariat is managing with input and support of our partner organisations.
The JODI Conference offered a timely opportunity to assess at high expert level progress one year down the road, to identify areas and aspects that can be improved and to exchange views on the way forward. More than 90 countries, representing more than 90% of global supply and demand, are now submitting data production, demand and stocks through their organisations. China through APEC.
Following up the political call for better data and expanding JODI membership, the IEF Secretariat has initiated a programme of regional JODI training sessions. With our JODI partners and the support of host countries, we have so far held two. The first one in Caracas, Venezuela in August last summer for Latin-American countries. The second one in Johannesburg, South Africa a few weeks ago for sub-Saharan African countries inaugurated by the Minister of Mineral Resources and Energy of South Africa. Later this year, we envisage additional regional training workshops. One for Middle East and North African countries. And one for Caspian countries and Central Asian countries.
JODI is a case of international ambition translated into action. For its success, we rely on the submission of timely and accurate data by participating countries.
Seven Political 'C's
To sum up, let me share the seven political 'C's of Energy that I see on the horizon for dialogue between producers and consumers. Although, we are all in the same boat of global interdependence, I am not referring to the 'Seven Seas' of our planet Earth, but 'C's as represented by the third letter of the Latin alphabet. These seven 'C's are: Concern, Competition, Conflict, Co-operation, Consensus, Conservation and Confluence.
The first 'C' is energy concern. We simply cannot do without energy, in our homes and in the world. We need it for survival. It fuels economic and social development. Political leaders and individuals are, and should be, concerned about their energy security and the energy challenges ahead.
As energy demand grows, so will competition, the second 'C'. Competition for energy resources and between energy resources. Competition is good when it makes everyone try a little harder. But it should be transparent, fair and on a level playing field. Competition is bad when it leads to the third 'C' - conflict.
We have seen how conflict in energy can have negative economic and political consequences. The objective of dialogue is to reduce the scope for conflict and to foster the fourth 'C' - win-win co-operation. Co-operation between some stakeholders should, however, not be lethal to others.
We are aiming for the fifth 'C' - a global consensus on energy based on the awareness of long-term common interests. An element of this consensus is the sixth 'C' - Conservation. We will need more energy and must improve energy efficiency, for many reasons.
You cannot isolate energy from everything else. That brings us to the important seventh 'C' - confluence. Confluence of the streams of energy, environment and economic development into a sustainable and equitable Common Future.
A Global Energy Policy Interrelationship
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 impacts the global environment. Energy influences, and is influenced by, international politics.
IEF Ministerial meetings have contributed to a convergence of views. The utility of global energy dialogue is no longer questioned. Greater stability and predictability in energy developments is a shared goal and a vehicle 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. Energy security and stability are core objectives. The IEF is driven by governments at ministerial level and recognises the need for interaction also with other stakeholders, not least private industry.
The global producer-consumer dialogue is not confined to activity and events that are solely global in participation and scope. It can be seen as a global energy policy interrelationship and network of on-going contacts at political and experts' level, at a bilateral, regional, inter-regional and global level and where international organisations, financial institutions and research institutes, as well as industry itself, have a role to play.
Let me commend the organizers and sponsors of 'China Oil and Gas Summit 2007' on convening this important and timely conference on China's energy future. I hope to see China, with her impressive human and natural resources as well as with her promising future, play an increasingly active role in the IEF in the years ahead, making her valuable contribution to a secure and sustainable global energy future.