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The Evolving Roles of International Organisations and the Private Sector in Energy Security and Stability

23 January 2004

Windsor, United Kingdom

I am happy to be back at Windsor Castle for another retreat in good company to discuss energy issues of mutual concern and to benefit from the knowledge, experience and wisdom represented in this room. And I am honoured to lead off our roundtable discussion on the "Evolving Roles of International Organisations and the Private Sector in Energy Security and Stability". My intention is to do so from the perspective of my new job. This gives me a welcomed, early opportunity to briefly present the International Energy Forum and say a few words on the producer-consumer dialogue. 

Last month, I moved from Vienna with leave of absence from the Ministry of Foreign Affairs of Norway, to Riyadh to do something a little out of the ordinary. To set up a new international entity - the Secretariat of the International Energy Forum. The IEF is an informal forum for global dialogue on energy at the level of ministers. It involves, at present, some 60 countries and the relevant international organisations. 

"Energy Security and Stability", the theme for this year's retreat, is the core focus of the dialogue at ministers' level in the IEF. 

Before introducing the IEF and its Secretariat, a new kid on the global energy block, let me, as a backdrop for our discussions, give you some figures and trends published by an old kid on the block, the International Energy Agency in Paris. These are trends and figures that I believe should receive thought in our assessment of energy security. 

Rising energy demand

The good news in the IEA's "World Energy Outlook", published in late 2002, is, importantly enough, that the Earth's energy resources are adequate to meet rising demand for at least the next three decades. 

Yet, there are many reasons for concern. Concern about security of energy supplies, concern about investment in infrastructure, concern about the threat of environmental damage caused by energy production and use, and also concern about the unequal access of the world's population to modern energy.

· By the year 2030 world energy demand will have increased by two-thirds with an average annual growth of 1.7%. Fossil fuels will remain the primary sources of energy and meet more than 90% of the increase in demand.

· Oil demand will rise by 1.6% a year from 75mb/d to 120 mbd in 2030. ¾ of the increase will come from the transport sector. Most of this projected 60% increase in demand will be met by OPEC, particularly producers in the Middle East.

· Demand for natural gas will grow more strongly than for other fossil fuels and double up to 2030. Consumption of coal will also grow, though more slowly than that of oil and gas. China and India will together account for 2/3 of the increase.

· Role of nuclear power will peak at the end of this decade and then decline gradually to 5% by 2030. It will decline in Europe and North America, but rise in some Asian countries. Some governments find the nuclear option interesting as a means to reduce CO2 emissions and to improve security of energy supply.

· Renewables will play an increasing role. Hydropower will hold its share in global primary energy, but see its share in electricity generation fall. The group of non-hydro renewables will grow faster than any other primary energy source. Wind power and biomass will grow most rapidly. But non-hydro renewables will still only make a small dent in global energy demand.

· More than 60% of the increase in world primary energy demand will come from the developing countries, especially in Asia, as they industrialise with growing economies and population.

· A quarter of the World's population (1.6b of 6.1b) has no access to electricity and two fifths rely mainly on traditional biomass for their basic energy needs. In 2030, a projected 1.4 (of 8.3) billion people will still be without electricity.

· Global energy related emissions of carbon dioxide will grow slightly more quickly than primary energy demand. 1.8% year from 2000-2030. 70% more than today. 2/3 of the increase will come in developing countries.

· The geographical source of new emissions will shift substantially from the industrialised countries to the developing world. China alone will account for a quarter of the increase in CO2 emissions, but remain well below those of USA. Most OECD countries face a real challenge in meeting their Kyoto-commitments. OECD countries that have signed the protocol will be 29% above target in 2010.

· Energy trade, almost entirely in fossil fuels, will expand rapidly and increase mutual dependence among countries. But this can also impose new challenges. Our vulnerability to disruptions of energy supply due to terrorist onslaught or technical mishap can increase. Maintaining the security of international sea-lanes and pipelines will assume increasing importance for energy security.

World Energy Demand

 


Coal
Oil
Gas
Nuclear
Hydro
Other renewables

2000
26%
38%
23%
7%
3%
2%

2030
24%
37%
28%
5%
2%
4%

 

Investments needed

More good news is that total world financial resources should be sufficient to finance the investments needed. Yet, there are challenges, economic and political. 

According to the IEA's recently published World Energy Investment Outlook, total investments in the range of USD 16 trillion are required for the energy supply infrastructure needed to satisfy expected demand in 2030.

The electricity sector is here the dominant one. Power generation, transmission and distribution will absorb about 10 of the USD 16 trillion (60%). The oil and gas sectors will each exceed USD 3 trillion (19%) and coal will require a mere USD 400 billion (2%). 

Developing countries will need almost half of the projected USD 16 trillion. That is also where production and demand increase most rapidly. USD 2.3 trillion in China alone, 14% of the world total. 

Russia and other transition economies will account for 10% of global investment. Investments needs will country-wise remain largest in the USA and Canada - USD 3.2 trillion. 

Half (51%) of the projected global investments will be needed simply to replace or maintain existing and future capacity. And half (49%) will be in capacity to meet rising demand. 

The economic challenge will be to mobilise these new investments. How will necessary investments 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 will be 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 goal of sustainable global economic, social and environmental development. This is no less than a mega-challenge. The issues are of such character and importance that they must be addressed in dialogue not only between nations at political level, but also in dialogue between governments and industry. 

The International Energy Forum

A few words then about the International Energy Forum and its new international secretariat. I will highlight how the informal dialogue between ministers from energy producing and consuming countries has evolved in addressing the vital issue of security and stability in energy. 

The staring point is, of course, that energy is crucial for economic and social development in their 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. 

The past has shown how energy, especially the strategic commodity oil, and excessive market volatility, can create conflict or exacerbate existing political tensions between countries or groups of countries. Today, we see how international dialogue and co-operation in oil and energy is to mutual benefit and generates positive impulses to wider economic and political co-operation. Deepened global dialogue and co-operation should continue as an energy mantra for the future. 

Yet, 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 insecurity that had even wider adverse economic and political impact. 

The Gulf War in 1990-91 once again highlighted the importance of oil. A more co-operative atmosphere between producers and consumers ensued in its wake. The process of political dialogue across earlier diving lines could start. The first Ministerial was held in Paris in 1991. It was followed on a more or less biannual basis by meetings in Norway, Spain, Venezuela, India, South Africa, Saudi Arabia and Japan, attracting an ever-increasing number of ministers in what came to be called the International Energy Forum. Discussions have focused on security of energy supply and demand as well as on the links between energy, environment and economic development. 

At their meeting in Japan a little more than a year ago, Ministers endorsed the proposal of HRH Crown Prince Abdullah of Saudi Arabia to set up an international secretariat, headquartered in Riyadh, to further strengthen the process of global dialogue on energy at the political level. 

The series of IEF ministerial meetings has contributed to a convergence of views. The utility of global energy dialogue is no longer questioned. Today, in our globalising world, 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. 

Energy Ministers from some sixty countries and heads of international energy organisations have been invited to meet at the 9th International Energy Forum hosted by the Netherlands in Amsterdam in May. Their main theme will be "Investing in Energy. Choices for the Future". In addition to plenary discussions, Ministers will also address a host of other energy related issues in informal bilateral exchanges. They will interact with leading CEOs in a special International Energy Business Forum immediately preceding, and giving important input to, their own deliberations. 

The producer-consumer dialogue at political level in the IEF is unique in its global participation and perspective. It is a meeting place not only for ministers of IEA and OPEC countries, but also for ministers of important countries outside these two main producer and consumer organisations; Russia, China, India, Brazil and South Africa to name a few, that already have, and will increasingly have, substantial impact on the global energy scenario. In the IEF, these countries can participate on an equal footing with their peers in OPEC and the IEA.

The IEF 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, as well as informal contact at political level. These exchanges have contributed to greater mutual understanding, enabling more enlightened national decision-making and closer co-operation within and between energy organisations. 

Main tasks of the new IEF Secretariat will be to assist countries hosting the biannual ministerial meetings and organise supporting seminars and roundtable meetings at political as well as experts' level. It will contribute to enhanced data collection and transparency. It will interact with governments, industry and organisations with a view to channelling and generating workable ideas for strengthening the global energy dialogue in an evolving global environment. Greater stability and security in energy is a shared objective of both producers and consumers. 

Energy Security Tools

Energy security is something that national and international leaders do and should worry about, not only in crisis situations, but also in a long-term perspective as production and consumption patterns, and requirements for investments in infrastructure, evolve. 

Energy security is a broad-based issue and no longer focussed purely on oil. Energy efficiency, stock-holding, fuel-switching, substitution options, diversification of resources and spare capacity are along with emergency responses key concepts in traditional security of supply thinking. Energy security policy has often been inward looking, wary of dependence on external sources, especially on areas with political uncertainties. 

There are two sides of the energy security coin. Security of supply and security of demand. 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. 

For both consumers and producers this implies dependency. 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 the more positive vision that such dependency can serve as an impulse to improve relations between countries and the overall geopolitical climate. 

Energy security should not be regarded as an issue of technical arrangements and infrastructure alone. It has also to do with economics, politics and the environment in both short and long-term perspective. It has domestic and foreign policy implications. And the quest for sustainable energy on the global scene that was highlighted at the Johannesburg Summit, is a matter of energy security in its wider global and long-term perspective. 

Opening perspective

Let me conclude my opening remarks by describing the International Energy Forum as an evolving international endeavour to promote an inclusive, global dialogue on energy at the political level. 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 players concerned, not least private industry.