Oil markets and energy security are again in the headlines. Political leaders in the oil-importing, industrialized countries warn of the detrimental effects that high oil prices have on the world economy. Oil-importing developing countries add their plight in devastating oil import bills. OPEC has responded to calls to increase official production quotas to help bring prices down. Experts refer to surging demand in Asia, economic recovery in the US, refinery bottlenecks especially in the US as well as terrorist attacks and political uncertainties in the Middle East as driving factors behind the higher level of oil prices we have had.
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.
The International Energy Forum is happy to co-operate with the OME on this joint workshop on the producer-consumer dialogue. The IEF is a forum for global energy dialogue at the level of Ministers. The 9th IEF took place in Amsterdam 22-24 May and gathered ministers from all key energy countries. For the first time, an International Energy Business Forum took place preceding the ministerial. It gave ministers and CEOs of leading companies the opportunity to interact. The IEF attaches importance to being in dialogue also with industry itself to better understand and meet the energy challenges of today and tomorrow
I am happy for this opportunity to give an IEF perspective on the producer-consumer dialogue, to highlight the ministerial, to present the international secretariat that has recently established in Saudi Arabia and indicate some activity planned for the coming year.
Energy resources and investments
In Amsterdam, energy ministers and senior officials from 70 countries and leading international organisations gave their perspectives on the main theme - "Investing in Energy". An important backdrop for their deliberations was 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 in the developing countries, especially in Asia, as they industrialise and their economies and populations grow.
The consensus view 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 is the assessment that total investments of USD 16 trillion are 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, also here, 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 political 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. 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 necessary dialogue on energy
A global dialogue on energy is necessary because energy is a global issue. 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.
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.
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, even if this also 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. 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, Japan and now the Netherlands. It is attracting an ever-increasing number of ministers in what has developed from a ministerial workshop 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.
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 impact the global energy scenario. In the IEF, these and other countries participate on an equal footing with their peers in the IEA and OPEC. No other place can Energy Ministers meet so many of their colleagues in such a time-efficient manner as in the IEF. In addition to the plenary discussions, the IEF offers a unique opportunity for bilaterals that add to the attractiveness and importance of IEF Ministerials.
The IEF is unique also in approach. Ministers come to the IEF to discuss common concerns, to exchange information and policy views. And to look for consensus-oriented approaches to the energy challenges ahead with a growing awareness of long-term common interests. These exchanges have contributed to greater mutual understanding, enabling more enlightened national decision-making and closer co-operation within and between energy organisations.
The IEF is not a decision-making organisation. Nor is it an organisation for negotiating legally binding settlements and collective action. The idea of multilateral fixing of prices and production levels remains out of bounds. Decisions are made in capitals and in international organisations that are mandated for decision-making.
The IEF does not adopt conclusions or consensus statements. As I mentioned, it is an informal dialogue and decisions are not made there. However, following earlier practice, host country the Netherlands and co-hosts Iran and Norway issued on their own responsibility a summary and conclusions from the plenary discussions at the Amsterdam Ministerial. Let me mention some of the points made.
Concern was expressed about the prevailing high oil prices that were seen as the result of unanticipated strong demand, of tight capacities up and down stream as well as of geopolitical uncertainties. Economic recovery worldwide, especially in developing countries, would benefit from stable oil prices at a reasonable level.
Security of oil and gas supply was not seen to be in danger. Environmental issues were mentioned. Both producer and consumer countries had to take action to reach sustainable price levels. The foreseen increase in production was welcomed.
The importance of investments for long-term developments was underscored. To secure sufficient supply of oil and gas investments of USD 6 trillion were required to maintain existing capacity and for necessary new capacity up to 2030.
The point was made that stable and transparent economic, fiscal and legal frameworks need to be in place to attract sufficient foreign direct investment and other financial resources. Bilateral and multilateral investment agreements can facilitate mobilization of investments.
Transparency in the legal and political context as well as with respect to oil production and stocks is important for the willingness of private financiers to invest.
In addition to their plenary discussions on investments, ministers addressed 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, was, as expected, a topic of great interest. Ministers interacted with leading CEOs in a special International Energy Business Forum immediately preceding their own deliberations.
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. An Executive Board was established for the new Secretariat and has put a legal framework in place. Chaired by Qatar, the host of the next IEF Ministerial, the Executive Board has the following additional members: China, India, Iran, Italy, Japan, Mexico, the Netherlands, Norway, Qatar, Russia, Saudi Arabia, South Africa and Venezuela as well as the IEA and OPEC secretariats. The Secretariat started its work in December last year. We are still in the establishment phase and expect to be fully operational by the end of the year.
The biannual meetings at the level of Ministers will remain the main event of the IEF and focus of the Secretariat. Thus support to the next host country Qatar and their co-hosts China and Italy of the next IEF in 2006 will be our cardinal task.
The Secretariat 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. Energy security and stability along with the interrelationship between energy, technology, the environment and economic growth will be the prominent perspective. These supporting activities 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.
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 also commission from external experts studies of common interest to producers and consumers.
The idea of setting up an Advisory Committee of industry representatives for the Secretariat is being considered in the Executive Board.
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. I would expect that the producer-consumer dialogue on energy in the IEF will also have to relate to political processes elsewhere driven by other ministers than energy ministers, but which have bearing on energy policies. The IEF and its Secretariat should be alert to such processes of international co-operation and help bring energy dimensions to bear. The Amsterdam ministerial also placed perspectives of developing countries and the issue of access to energy for the world's poor firmly on the table. I expect this dimension of the producer-consumer dialogue to receive increasing international attention as the UN Commission for Environment and Development prepares for its focus on energy in 2006-7 following up the Johannesburg Summit two years ago.
Regional and inter-regional approaches
Regional and inter-regional approaches can be instrumental in further developing a purposeful global energy dialogue. The Secretariat would like to facilitate meetings on regional or inter-regional basis as an important part of the IEF's global energy vision. And such meetings, between the biannual meetings, at political or senior official level, would explore in greater depth issues addressed in past plenary discussions and prepare the ground for future plenary discussions. And also in these endeavours, we would like to look into appropriate ways of involving industry
The Secretariat organised on 5-6 April in Riyadh the first EUROGULF workshop on energy stability and sustainability. EUROGULF is a research project on EU-GCC energy relations. After a follow-on workshop later this year, the Secretariat will host their final high level, inter-regional conference in Riyadh in Spring 2005.
Several themes for possible meetings of smaller groups of ministers or senior officials emerged from discussions in Amsterdam:
The Secretariat will discuss with Russian authorities co-hosting a joint roundtable for ministers and industry to promote a Eurasian energy co-operation in connection with the Moscow Oil and Gas Week in October.
In light of the desire to strengthen dialogue between Asian countries and Middle East producers, an inter-regional meeting within the IEF framework is being considered. I would see that inter-regional dialogue as an element of increasing importance also for the global dialogue in the IEF, considering the dramatic surge in Asian energy demand in the years ahead that will affect global markets.
A new inter-regional conference of African, Latin American and Caribbean energy ministers was launched in Algiers in February this year. A suggestion was for the Secretariat to assist in preparations for the next AFROLAC meeting in 2006 by providing a link to the global umbrella of the IEF. We might organise jointly a preparatory roundtable that could include discussion of issues raised in Amsterdam. And the Secretariat could help bring some of the perspectives and results of AFROLAC into the next IEF ministerial for wider global discussion.
There was a call for special attention to be given in the producer-consumer dialogue to the expected development of regional markets for natural gas to a global market place. The Secretariat would like to take up that call and host, co-host or facilitate other ways a roundtable discussion of interested countries.
The Secretariat was challenged to look at the issue of transit. The issue would likewise lend itself to a roundtable discussion of interested countries. Usefully, I would think, in co-operation with the Energy Charter Secretariat to draw on their expertise and to avoid duplication of effort.
The Secretariat was invited to interact with the newly established UN-Energy task force. The theme of "Energy for development" following up the Johannesburg Summit in 2002 and preparing for UNCSD focus on energy in 2006 and 2007 will be high on the international energy agenda.
Other themes for supportive meetings this year and next may include:
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.