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The International Energy Forum

12 December 2006

Riyadh, Saudi Arabia

Thank you for visiting our Headquarters here in Riyadh. I am happy for this opportunity to introduce the Secretariat and the global political level dialogue between energy producing and consuming countries in the International Energy Forum, which it has been set up to support. From the vantage point of that global dialogue, I will suggest some of the energy challenges that we see head. And why deepened dialogue is important if we are to successfully meet those challenges. At a time of heightened energy consciousness and energy security concern around the world. 

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 Russia, China, India, Brazil, South Africa and others, that will have increasing impact on the global scenario.

The past has shown, not least in this region of the world, 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. 

From Confrontation to Dialogue

Energy security is the focus of the informal, political level dialogue in the IEF. The producer-consumer dialogue has played its part in ushering international energy affairs out of an era of mistrust and confrontation into one of greater understanding and better awareness of long-term common interests. Results can be seen in concrete measures taken by both consumer and producer countries individually and by their organisations. 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. 

The 10th IEF Ministerial that took place in Doha last April discussed energy security as 'shared responsibility'. Issues discussed there were later given forceful emphasis also by the G8 Heads of Government at their annual Summit this summer 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 energy dialogue. They invited the International Energy Forum 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. 

Unique dialogue

The idea of political level dialogue, as it has developed in the IEF, stems from the World Commission on Environment and Development, which acknowledged in its report 'Our Common Future' in 1987 the importance of energy for sustainable economic and social development. It recommended that new mechanisms for encouraging dialogue between consumers and producers be explored.

On that note the Chairperson of the Commission and Prime Minister of Norway, Dr. Brundtland called for an informal 'Workshop of Ministers' of energy producing and consuming countries to 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. There were lawyer colleagues of yours who suggested that it might even be illegal in relation to anti-trust regulations. In a word, 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 the 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 this year. Italy will host the 11th IEF Ministerial in Rome in 2008 with India and Mexico as co-hosts. 

At the Riyadh Ministerial in 2000, then Crown Prince Abdullah proposed the establishment of a permanent Secretariat to strengthen the informal dialogue process. He offered to host it here in Riyadh as well. His proposal was endorsed by Ministers at the following IEF Ministerial in Japan in 2002. The Secretariat was set up in December 2003. In November 2005, now Custodian of the Two Holy Mosques, King Abdullah inaugurated our Headquarters, generously provided by the Kingdom of Saudi Arabia. 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.

Three Pillars

The Secretariat's mission focuses on the three pillars of activity. 

i) to support host country and co-hosting countries in preparing for and implementing the biennial Ministerials and to follow up the Ministerial deliberations,

ii) to provide platforms for exchange of views on relevant energy issues and to contribute to the continuity and deepening of the Ministerial level dialogue,

iii) and to facilitate and enhance the exchange of energy data and information, especially by co-ordinating the Joint Oil Data Initiative.

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. This time of heightened energy consciousness is also a time of uncertainties and increasing interdependencies among nations. This has prompted some to re-think fundamental policies. 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. 

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 among energy resources. 

- Resource nationalism. Nations wanting to make the most of their endowment.

- 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.

- Increasing awareness of long-term communality of interests among producers and consumers in a globalizing world.

An Energy Scenario

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 IEA's latest 'business-as-usual' scenario, presented a few weeks ago, sees energy demand increasing by more than half over today's level by 2030. 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 as they industrialize and their economies grow. 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. 

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.

Shared responsibility

Our Doha Ministerial in April gathered Energy Ministers and officials of 59 countries and heads of international energy organizations. Ministers receive 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, 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.

JODI - A unique transparency initiative

Ministers underlined the importance of transparency and exchange of data for market predictability and for the investments required to enhance energy security. They reaffirmed their 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 of the better data that JODI can present for energy security was subsequently echoed by the G8 Heads of Government in their St. Petersburg Plan of Action on Global Energy Security. They welcomed 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 last month at the APEC Summit and the meeting of G20 Finance Ministers. 

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 had the honour to host the 6th International JODI Conference in Riyadh two and a half weeks ago against the backdrop of high political-level expectation. It was inaugurated by H.E. Ali I. Al-Naimi, the Minister of Petroleum and Mineral Resources of Saudi Arabia. The Conference gathered 120 participants, representing thirty governments, nine international energy organisations, nine international and national energy companies and research institutes and consultants. 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 World Database was released to the public in November last year by the Custodian of the Two Holy Mosques, King Abdullah on occasion of the inauguration of our Secretariat headquarters.

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 90% of global supply and demand, are now submitting data production, demand and stocks through their organisations. 

JODI is international ambition translated into action. For its success, we rely on the submission of timely and accurate data by participating countries. 

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. 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. 

Some are 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. 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. 

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 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 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 resource and suppliers capacity are along with emergency responses key options for security of supply. 

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 UN Commission on Sustainable Development this year and next. Because of the importance of energy in meeting the Millennium Development Goals. 

As global focus now is being put on issues of energy security, regional and inter-regional energy co-operation is also being strengthened around the world. 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 regional and inter-regional energy ambition and co-operative designs. 

Let me in this context mention 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.

That 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. Both of these regional Asian dialogues will be followed-up next year, the former Roundtable in Saudi Arabia with Japan as co-host. The latter in Turkey with Azerbaijan as co-hosting country. Regional Asian developments will increasingly impact global developments and be of increasing interest also to Arab 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.