Dialogue For Global Energy Security: The Role Of The IEF
Source: IEA China’s scramble for energy
security: an analysis of recent activities (2005)
By Arne Walther
Energy
and the environment are center-beam in the international political
spotlight of our day. Energy security continues to top
the political agenda for energy importing as well as exporting
countries, and for industrialized as well as developing economies.
We are all “addicted” to energy because every country
needs energy to reach its economic and social objectives. Energy
also affects commercial and political relations between countries,
and fuels the world economy. Production and consumption of energy
impact the global environment. Energy influences, and is influenced
by, international politics. Energy is a challenge for the industry
set to harness it, and a challenge for leaderships that would govern
it. Energy goes to the core of political, economic and environmental
interests of individual countries, as well as of the global community.
It is difficult to imagine an area, where nations are more interdependent
than in the confluence of energy, environment and economic development.
Spotlight On Energy
With the international spotlight on energy, questions are being
asked. Are there sufficient energy resources? Will the investments
needed to develop them be made in time? Will energy be accessible
and affordable on an equitable global basis, or only for the privileged
few? Will there be a conflict and scramble for resources adversely
affecting sustainable global developments? What about the environment
and climate change? Will we see new patterns of energy cooperation
shaping new geopolitical realities? Or, will established geopolitical
realities be a stumbling block for wise and sustainable patterns
of energy cooperation?
Energy
and environmental uncertainties are prompting countries and groups
of countries to re-think fundamental policies. “Diversity” is
widely seen as key to policies for energy security, with a diversity
of suppliers and in energy-mix for the consumers, and of markets
for the producers. But the policy tuning of one country to meet
new challenges and reduce its particular energy uncertainties can
also exacerbate uncertainties or create new ones for others. Amid
the uncertainties, there is a fundamental certainty. 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 cooperation.
The shorter-term perspective is challenging. The longer-term one
is even more daunting. The increase in global energy demand foreseen
in the years ahead is substantial. Most of this increase will come
in the developing countries as they industrialize and their economies
grow. Patterns of energy production and consumption, the energy
mix as well as investment requirements, will evolve in a changing
geopolitical environment. And these energy developments will influence
that changing geopolitical climate.
Global Focal Point
The global producer-consumer dialogue in the IEF acquires increasing
importance as nations revisit and modify established policies,
and shape new ones, in their quest for energy security. Global
dialogue on energy in the IEF transcends traditional political,
economic and energy policy dividing lines. It gathers under one
global political umbrella ministers of the petroleum exporting
countries of OPEC and those of the industrialized, energy importing
countries of the OECD/IEA. It also gathers ministers of countries
outside these organizations, such as Russia, China, India, Brazil,
South Africa and others, that will have increasing impact on the
global scenario.
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, better awareness of long-term common
interests and convergence of views and outlooks. The knowledge
basis for national decision-making and for purposeful co-ordination
of policies within other international organizations is better
than before. Results can be seen in concrete measures taken by
both consumer and producer countries individually and by their
organizations. 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
IEF can increasingly serve as a global focal point for the wider
Global
Energy Policy Interrelationship of co-operative contacts
among governments at political and officials’ level and on
bilateral, regional, inter-regional and global basis. Not only
governments, but also oil companies, the broader energy industry,
financial institutions, international organizations and other stakeholders
have their integrated role to play in a widened co-operative interrelationship.
The Case For Dialogue
The
importance of energy dialogue and the IEF’s role a cooperative
mechanism are enjoying increasing international recognition by
ministers, individually and by regional and global energy organizations.
Not least the G8 Heads of Government, at their Summits in Gleneagles
in 2005 and St Petersburg in July 2006 encouraged IEF ambitions.
Yet, for many years, it was politically simply not “on” for
energy ministers of consuming and producing countries to meet in
a multilateral context. The strategic commodity, oil, and market
volatility could create conflict or exacerbate political tensions
between countries or groups of them. The oil crisis of 1973-74
in the wake of the Middle East war, and the use of oil as a political
weapon, had pitted petroleum producing and consuming countries
antagonistically against each other. OPEC and the IEA emerged as
the bi-polar and multilateral expression of conflicting producer-consumer
interests. While cooperative relations could develop on a bilateral
basis, multilateral approaches to build bridges and establish a
structured producer-consumer dialogue foundered in the Conference
on International Economic Cooperation (CIEC) in Paris and again
in United Nations Conference on Trade and Development (UNCTAD)
in the second half of the 1970s.
New Cooperative Mantra
It
became increasingly clear, however, that sharply fluctuating
oil prices were detrimental
to both producers and consumers and
there could be no long-term winners in troubled energy markets.
Less volatility in energy markets and stable prices at a reasonable
level for consumers and producers emerged as a shared ambition
and new cooperative mantra. The World Commission on Environment
and Development 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,
Gro Harlem Brundtland, called at the World Economic
Forum in Davos in 1989 for an informal “Workshop of Ministers” of
energy producing and consuming countries to discuss the resource
and market situation, and outlook, as well as the links between
energy and environment. Many were ready to try, but some important
industrialized countries regarded the idea of a dialogue on these
matters at a political level as a non-starter, appearing to regard
differences and conflicts between producers and consumers as a
divide that no political level dialogue could bridge, or should
even attempt to bridge.
Globetrotting Trek
The
1990-91 Gulf War highlighted again the geopolitical and economic
importance
of oil. A more cooperative atmosphere between producers
and consumers ensued in its wake. At the initiative of Presidents
Mitterrand of France and Perez of Venezuela, a “Ministerial
Seminar” of Producers and Consumers was held in Paris in
1991 breaking the political ice. It was followed by an informal “Ministerial
Workshop” in Norway in 1992 that broadened the dialogue from
the traditional bi-polar IEA-OPEC configuration to involve Russia.
The process of IEF Ministerials then moved to Spain in 1994, Venezuela
in 1995, and India in 1996, acknowledging the importance of Asia
and the growing energy needs of the emerging economies as integral
dimensions of the global energy policy interrelationship.
Ministerials followed in South Africa in 1998 and Riyadh in 2000,
where King ?Abd Allah of Saudi Arabia, then Crown Prince, proposed
the establishment of a permanent Secretariat and offered to host
it in Riyadh. The IEF Ministerial in Japan in 2002 endorsed the
Secretariat proposal. The new Secretariat presented itself at the
9th IEF in the Netherlands in 2004, where the 1st International
Energy Business Forum was convened for direct interaction between
CEOs of leading energy companies and IEF Ministers. Qatar hosted
the 10th IEF Ministerial and 2nd International Energy Business
Forum in April last year.
Shared Responsibility
In Qatar, ministers noted that world economic growth had remained
strong despite increasing oil prices and market volatility, but
expressed concern over effects of sustained high price levels on
the world economy, and especially on developing countries. They
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
contributed to increased anxiety in the market.
Ministers underlined the importance of strengthening dialogue
and cooperation 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.
Ministers urged accelerated development of cleaner fossil fuel
technologies along with alternative sources of energy and increased
energy efficiency in a world that would continue to rely strongly
on its ample supplies of fossil fuels, oil, natural gas and coal.
They 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,
are crucial for the long-term energy security of both consumers
and producers.
Flagship Activity
The Joint Oil Data Initiative (JODI) is a concrete outcome of
the producer-consumer dialogue. Coordination of this unique inter-organizational
transparency initiative is a flagship Secretariat activity, with
the active participation and full support of our partner organizations;
the Asia Pacific Economic Cooperation (APEC), European Communities,
IEA, the Latin-American Organization for Energy Cooperation (OLADE),
OPEC and the UN. Our partner organizations joined hands to set
up the Joint Oil Data Exercise in 2001 following the call by ministers
at the 7th IEF in 2000 to do something about the lack of data transparency
seen to cause excessive oil price fluctuations. They established
the JODI as a permanent mechanism in 2003. The IEF Secretariat
assumed the co-ordination of JODI in 2005 and manages the JODI
World Database with the objective of improving the quality and
transparency of international oil statistics.
More than 90 countries, representing 90% of global supply and
demand, are now submitting data to JODI through our partner organizations.
The data cover production, demand and stocks of seven product categories:
crude oil, LPG, gasoline, kerosene, diesel oil, fuel oil and total
oil. JODI is promising work in progress with great potential.
IEF ministers underline the importance of transparency and exchange
of data for market predictability and for the investments required
to enhance energy security. They envisage in due course being expanded
to include also other sources of energy that are important in the
world energy mix. The IEF Secretariat will present to the 11th
IEF a feasibility study on the potential expansion of JODI to include
natural gas.
Energy Security And Interdependence
Energy security is the core objective of the political level dialogue
in the IEF. While energy goes to the very core of national interests,
it is also a global issue in an increasingly interdependent world,
an energy world that is becoming increasingly multi-polar. Deliberations
in the IEF have shown how multi-dimensional the challenge of global
energy security is. There is no quick and lasting fix. For nations
to talk about energy security at political level, bilaterally,
regionally and globally is good. But actually doing something about
it is better and requires dialogue and partnerships also among
governments and industry. Some 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, not be avoided
altogether. Others 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 improve the overall geo-political
climate.
For
energy interdependence to be good and sustainable, it has to
be mutually
beneficial. 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. 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 importing countries.
New Asian Energy Identity
Energy
cooperation in Asia is taking a new form and deserves special
mention in
light of its potential. Recognizing the global impact
of energy developments in Asia, the Secretariat is facilitating
the process of Roundtables of Asian Energy Ministers initiated
by India in January 2005. 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 are
now interacting on broad regional Asian basis issues addressing
energy security, stability and sustainability.
The Secretariat assisted the further development of this new Asian
Energy Identity at the Second Asian Ministerial Energy Roundtable
that Saudi Arabia hosted and Japan co-hosted in May 2007. This
Asian process that will continue with a 3rd Roundtable of Asian
Energy Ministers that Japan will host in 2009 facilitated by the
IEF Secretariat and with Qatar as co-host. Kuwait will subsequently
host the 4th Asian Ministerial Roundtable, and Korea the 5th.
Rome And Beyond
The 11th IEF Ministerial in Rome in 20-22 April 2008 offers a
new global opportunity for ministers to address the energy resource
challenge. They will update their outlooks with regard to supply
and demand, as well as market conditions, with a view to finding
ways to remove bottlenecks to energy security and to enhance market
stability. They can further discuss how to promote the substantial
energy investments where and when needed. Ministers can seek to
identify policies towards a sustainable energy future addressing
issues such as environmental and climate change concern, better
access to energy for developing countries, the importance of developing
cleaner fossil fuel technologies as well as alternative sources
of energy. Ministers will interact with CEOs of leading national
and international energy companies in the 3rd International Energy
Business Forum preceding their internal discussions.
If “All roads lead to Rome”,
the road of energy dialogue does not end there. Neither energy
nor dialogue is a goal in itself,
but a means to promote sustainable economic and social development,
while strengthening relations among countries in the wider political
perspective. The dialogue under the IEF umbrella is, above all,
a global confidence-building process among ministers of energy
producing and consuming countries, industrialized and developing
countries, across traditional political, economic and energy policy
dividing lines. It is a dialogue in which ministers focus on energy
security and address the links between energy, environment and
economic development. They can also promote their national interests
in the wider context of promoting common global objectives as well.
In that perspective, there can be no final destination, there will
always be new horizons.
Given the strategic importance of energy to each and every country,
I do not see the establishment in the near future of a global energy
organization, where national decision-making would be relinquished
and replaced by binding global energy governance. But through the
myriad of established and future new partnerships between governments
and between governments and industry, I do see the producer-consumer
dialogue in the IEF as a vehicle to develop a Global Code of Energy
Conduct. A Code of Conduct that is advantageous for all to follow.
To deviate from this in pursuit of short-term advantage at the
expense of others would be tantamount to shooting oneself in the
foot, at the very least.
