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The International Energy Forum and the Producer-Consumer Dialogue

29 April 2004

Paris, France

Oil has again been in the headlines the last few days. Not only because of the suicide boat attack on the Basra terminal. We have also read the warning over rises in oil prices from the Chairman of the US Federal Reserve, Mr Greenspan. The Deputy Energy Secretary of the US added his voice advising OPEC to increase production. The President of OPEC said that the organisation is considering to increase the USD 22-28 price band established four years ago, while the Energy Minister of Saudi Arabia, the world's largest oil exporter, confirmed his country's commitment to the current band. We also read the Executive Director of the IEA, the energy "watch-dog" of the industrialised countries, making the point that it would be detrimental to the world economy if OPEC raises its price band. 

Clearly, this is a time for producer-consumer dialogue. And happily, the mechanisms are now in place for a purposeful dialogue based on greater mutual understanding and awareness of long-term common interests. Such mechanisms have not always been in place. 

Let me commend the International Oil Summit for being an important forum for producer-consumer dialogue. And let me thank the organisers for convening this 5th Summit with such distinguished participation. 

The direct contact between the IEA and OPEC secretariats is another mechanism for dialogue. Their direct contact is to mutual producer-consumer benefit. Desirable as it is, it was politically unthinkable for important players only a few years ago to have the two secretariats meet. And we have the mechanism that I represent - the International Energy Forum - the informal global producer-consumer dialogue at the level of ministers that started here in Paris thirteen years ago. 

I am happy for this opportunity to give an IEF perspective on the producer-consumer dialogue, to highlight its forthcoming Ministerial meeting next month and present the international secretariat that has recently established in Saudi Arabia - a new kid on the global energy block. 

Energy resources and investments 

The 9th IEF Ministerial meeting will take place in Amsterdam 22-24 May. Energy Ministers from 70 countries and leading international organisations have been invited to give their perspectives on the main theme - "Investing in Energy". 

An important backdrop for their deliberations will be the substantial increase in global energy demand foreseen in the years ahead. 25 years from now, world energy demand will have increased by two-thirds of today's level. More than 60% of this increase will come from the developing countries, especially in Asia, as they industrialise and their economies and populations grow. 

The good news is that the Earth's energy resources are adequate to meet this substantial increase in demand. Yet, there are 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.

Another backdrop for ministers are the total investments of USD 16 trillion required for the energy supply infrastructure needed to satisfy expected demand in 2030. Developing countries, where production and demand increase most rapidly, will need almost half of these projected investments. 

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

Economic and political challenges 

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. And more specifically, 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 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. 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 and partnerships between governments and industry. 

A forward-looking dialogue on these issues will, indeed, take place when energy ministers meet at the IEF Ministerial in Amsterdam next month. 

A necessary dialogue on energy 

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. A global dialogue on energy is necessary because energy is a global issue. 

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 are to mutual benefit and encourage wider economic and political co-operation. Deepened global dialogue and co-operation is the IEF's energy mantra for the future. 

Even in the 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 that even had adverse wider economic and political impact. 

The International Energy Forum 

International developments and the Gulf War in 1990-91 once again highlighted the importance of oil. A more co-operative atmosphere between producers and consumers ensued in the wake of that war. The process of dialogue at political level across earlier diving lines could start. At the initiative of Presidents Mitterand of France and Perez of Venezuela, 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 developed from a ministerial workshop and seminar to become 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. 

The series of IEF ministerial meetings has contributed to a convergence of views. The utility of global energy dialogue is no longer questioned. 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. 

Next stop Amsterdam 

In addition to their plenary discussions on investments at the Amsterdam IEF, Ministers will also address a host of other energy related issues in informal bilateral exchanges. The situation in the oil market, the reasons for and effects of the oil price of the day, is always a topic of mutual interest. Ministers will interact with leading CEOs in a special International Energy Business Forum immediately preceding their own deliberations. 

The purpose of this year's plenary discussions will be to: 

  • establish a well-founded and shared perception of the development of energy markets in the coming decades, 
  • assess investment needs and constraints in the mobilization of capital, 
  • discuss possible policies to overcome constraints and meet the challenges, 
  • produce an agenda on investments and related issues for further elaboration within the framework of the IEF, its Secretariat and other appropriate bodies.

Unique dialogue 

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; China, Russia, India, Brazil and South Africa to name a few, that will increasingly have substantial impact on the global energy scenario. In the IEF, these and other 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. Ministers go back to their capitals and make decisions there. The IEF 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. 

New International Secretariat 

At their meeting in Japan in 2002, Ministers endorsed the proposal of HRH Crown Prince Abdullah of Saudi Arabia to establish an international secretariat, headquartered in Riyadh, to further strengthen the process of global dialogue on energy at the political level. 

The new IEF Secretariat started its work in December last year and will assist countries hosting the biannual ministerial meetings. It will help to ensure the continuity of the energy dialogue also between the biannual meetings by organising supporting seminars and roundtables at political as well as experts' level. The focus will be broad and include both global, regional and inter-regional energy issues. The interrelationship between energy, technology, the environment and economic growth will be a prominent perspective. This can include meetings of smaller groups of ministers to discuss issues in a regional or inter-regional context, or global issues among countries most immediately concerned and influential. 

With regard to inter-regional activity under our global dialogue umbrella, let me mention that the Secretariat hosted, as one of its initial activities, the first EUROGULF energy workshop in Riyadh earlier this month. This a policy research project rooted in complementary interests of oil- importing European Union countries and oil-exporting Gulf Co-operation Council countries. A future activity might likewise be to host or co-organise with a participating country an inter-regional meeting e.g. between major Asian importing countries and Gulf exporting countries. 

The Secretariat will also contribute to enhanced data collection and transparency. Transparent, timely and reliable oil statistics will give a better understanding of the world oil supply and demand situation to the benefit of both producers and consumers. To that end, six organisations - APEC, Eurostat, IEA, OLADE, OPEC and the UN - have developed a Joint Oil Data Initiative (JODI). The IEF Secretariat is now discussing with these JODI partners the role it might play in coordinating, sustaining and expanding this initiative. 

The Secretariat 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. 

Energy Security 

Energy security is again at the top of the political agenda for geo-political and economic reasons in addition to the energy imperative. Energy security is something that national and international leaders should and do worry about. Not only in a short-term crisis perspective, but also in a long-term perspective as production and consumption patterns as well as requirements for investments in infrastructure evolve. 

Energy security is a broad-based issue and no longer focussed purely on oil. Energy efficiency, strategic petroleum reserves and stock-holding, fuel-switching, substitution options, diversification of resources and spare capacity are along with emergency responses key options for security of supply. 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, as I would, the more positive vision that such dependency ties countries closer together and can serve as an impulse to improve relations between countries and the overall geopolitical climate. 

Energy trade, almost entirely in fossil fuels, will expand rapidly and increase mutual dependence among 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 more than an issue of technical arrangements and infrastructure. It has also to do with economics, politics and the environment. 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. Long-term energy security is not security for one party at the expense of others. It must translate into energy security for all. In this perspective, the further development of a substantive and co-operative producer-consumer dialogue is a prerequisite for our common efforts for energy security. 

In conclusion 

Ladies and Gentlemen, the International Energy Forum is 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 stakeholders, not least private industry. 

Dialogue is good and important. But not an end in itself. A purposeful global dialogue on energy assumes wider significance as a means to promote equitable and sustainable economic and social development and to improve relations between countries and the overall geopolitical climate.