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Rt. Hon. Helen Liddell - Former Minister for Energy and Competitiveness in Europe (Jul 1999 - Jun 2001)Offshore Northern Seas 2000 Conference |
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Minister, Ladies and Gentlemen: let me say first of all how pleased I am to be here at ONS 2000,one of the world's leading oil and gas conferences and exhibitions that alternates with the UK's own Offshore Europe in Aberdeen. Vision for future European Energy Market I should like to set out for you my vision for the future energy market in Europe. And by that I mean the market across the European Economic Area as a whole. I want to see a future in which Europe has access to diverse, secure, sustainable supplies of energy at competitive prices. Supplies which are available to business and consumers through competitive and well;regulated markets. I am the first Minister at my department to be responsible both for energy and for competitiveness in Europe. It is a long title but there is an essential link between the two elements. The UK electricity and gas markets are already among the most open in the world. But I am not satisfied with that. Regulation, liberalisation and competition are not domestic issues. Markets are no longer local. The Single Market across the EEA should, in theory, mean that companies can develop markets as easily across the Continent as they can within their own national boundaries. The reality is that although some of our colleagues in other EU member states are swift to break into the UK market, the political will to see competition flourish throughout the EEA is stronger in some countries than in others. That's part of the reason why the cost of energy in Europe is still much higher than in the US and elsewhere. And if Europe is to be a full player in the global marketplace, we must address all the barriers to our competitiveness including energy prices. The Electricity and Gas Directives have put the framework for market opening in place throughout the Single European Market. But there's more to do. Liberalisation in Norway Governments in Europe which are now taking the first steps on the road to liberalisation would do well to look to Norway's electricity market as an example. The UK may have been the first to start the liberalisation process but Norway was the first country to open the electricity market fully to competition and offer all consumers a free choice of supplier. Norway also realised the importance of having a truly independent grid operator. And set up the first power exchange, Nordpool;another model which others have since followed. Indeed, we in the UK drew heavily on your experience in developing our own new electricity trading arrangements. And you have seen competition work, with consumers exercising choice and shopping around for the best deal. Liberalisation in the UK Now all electricity and gas consumers in the UK have free choice of supplier. And already liberalisation has brought significant benefits. We have seen lower prices for all types of consumer. UK industrial gas prices fell by over 45 per cent in real terms between 1990 and 1999. Industrial electricity prices have fallen by 22 per cent since competition was extended in 1994. Domestic prices have also fallen, with new electricity suppliers offering savings of up to 15 per cent on an average annual bill. At the same time, levels of customer service have improved. The alarmist forecasts of a deterioration in service have failed to materialise Responsible regulation has helped to enforce statutory standards of service and control prices to small consumers. Where consumers can change supplier easily, standards of service must remain high for companies to retain market share. There have been some innovative responses to consumer demands. Even lower prices for those who buy both gas and electricity from the same supplier, the availability of "green" and charity-linked supplies, new payment methods to help low-volume consumers, greater use of e commerce. Benefits of liberalisation for business and consumers Pushing for more open markets across Europe is a top priority for the UK. Not just because we want to see UK-based energy companies succeed in Europe. But because by rigging their energy markets against competition, some European countries are preventing other industries from competing effectively in the global market. There is no doubt that at present high energy prices are holding our countries back. Our businesses need the benefits of modern, dynamic, competitive energy markets if they are to compete globally. No business, large or small, can thrive if it is a hostage to monolithic, monopolistic and unregulated utilities that charge higher prices and provide a poorer and more limited service than competitive providers in rival economies. And Europe knows it. That is why at the Lisbon Summit earlier this year, European leaders made a commitment to accelerate liberalisation in the gas and electricity sectors. Until the reform process is complete the lack of a fully liberalised competitive framework will continue to disadvantage European consumers in comparison to the USA, where electricity prices are a good third below the EU average. And the price mark-up in Europe will drag down European competitiveness in the global market. A true single market in energy - nothing less than 100% liberalisation to create more supply competition right down to the level of the domestic consumer - would be a classic example of the European Union working for its people. The reforms put in place so far have already seen electricity prices fall dramatically in Europe, by up to 20% in some cases. In turn those lower prices will boost the small firms which provide two out of three jobs, helping them to expand, take on more people and create new opportunities. Obstacles to liberalisation However, the road ahead is not without its pitfalls. There remain powerful vested interests in Europe which do not want competition. Large vertically integrated companies with dominant positions hanging on to their monopolies in home markets while using their market power and considerable financial resources to move into markets in other countries which are more open to competition. In some cases, these giants are merging to form even larger companies. I do wonder whether such moves help or hinder competition. I sincerely hope that national and Community competition authorities will take a careful look at present and future corporate structures and consider whether they are consistent with a truly competitive single market in energy. And if not, I hope they will act to make sure new entrants can break into the market. Liberalisation of the gas market I have spoken primarily about electricity, but in my view liberalisation of the gas market is even more important. Because gas is taking an increasing share in electricity generation, the terms on which it is supplied are crucial. Opening gas markets is more important, but also more difficult. Large-scale structural changes will be needed. The scene is at present dominated by powerful monopoly buyers and monopoly sellers, in many cases heavily influenced by governments. Some very radical changes are going to have to take place before we can achieve real gas-to-gas competition in Europe and break the historic link with oil prices. If suppliers are to have access to competitive supplies:
Norway and gas liberalisation I hope that Norway, with its strong liberalisation credentials in electricity, will help us deliver the same benefits for gas consumers in Europe, especially as Europe is Norway's main export market. Gas cannot be separated from the dramatic changes which will take place in European energy markets over the next decade. The gas sector will benefit from competition, just as much as the electricity sector. It is not different. If the gas sector is sheltered from market forces, producers, traders and consumers will miss out on huge opportunities. Norway stands to reap huge benefits as the European gas market opens up. I look forward to seeing how you will adapt your current arrangements to meet the new challenges and opportunities. A little more flexibility, for instance in the arrangements for gas sales, would have a positive and not a negative impact on your gas sector. I look forward to the day when we can work together on that. The task ahead is huge. But the prize is well worth it. Offshore industry I should like to take this opportunity to look specifically at our offshore industry;Offshore Northern Seas. Production of oil and gas continues to run at record levels, but since the fall in oil prices in 1998 and the disappointing levels of investment, exploration and appraisal spending and drilling activity that followed, the challenge has been for the UK to maintain the UKCS as an active and profitable field for operations. One response of my Government was to set up the Oil and Gas Industry Task Force (now PILOT) to bring together Government and industry and to get under the skin of the issues facing the industry now and in the next ten years. Improved international competitiveness and a secure future for offshore operations is our aim. Closer attention to global best practice, exploitation of new technology, greater use of electronic commerce and streamlining of the Government's own regulation are our tools. Already we can see results. Confidence is returning to the UKCS as a good place to do business. More development projects are being brought forward. There is renewed interest in previously undeveloped fields and the commercial co-operation needed to access them. And surrounding these projects are impressive levels of technological innovation which demonstrate the industry's ability to meet the challenges of operating in the North Sea. Shell's Shearwater platform, for example, the heaviest integrated deck so far built for UKCS operations and which will supply gas, via the SEAL pipeline and the Interconnector, will both help secure our own gas supply and facilitate trade with Europe. Further investment in new gas fields and re-activating marginal fields, as well as investment in the infrastructure to both receive and transport gas at competitive prices are all key to ensuring sustainable gas supplies. But this must be complemented by competitive engineering, equipment and service contracts if the oil and gas industries are to develop solutions that maximise the return to the investor and benefit the consumer through low cost energy. Our oil and gas industry must engage its available productive capacity by winning large upstream and downstream international energy projects. Winning market share abroad will deliver price dividends in home markets. At home we are encouraging UK oil and gas companies to trade and invest overseas. To engage in joint venture partnerships to develop and maintain new sources of energy in a competitive, and environmentally friendly way. To back them up, we have strengthened our export promotion activities to deliver a more pro-active and a co-ordinated approach through the creation of Trade Partners UK. To help them to seize the opportunities which will undoubtedly emerge as the countries of Central and Eastern Europe liberalise their markets. Undoubtedly, the UKCS is changing, moving into its Third age. But that can bring with it new opportunities: opportunities that can be seized to create new forms as old ones go, maintaining prosperity in communities transformed by the oil and gas industry Conclusion As prosperity spreads across Europe, bringing into the greater family of our continent those countries emerging as modern economies and democracies, the energy industry will be the engine of growth and prosperity. All of our peoples can benefit from energy market liberalisation across an enlarged Europe. Competitive markets can and will deliver our shared energy objectives of security of supply, protection of the environment and social equity. To harvest those rewards action will be needed at the European and the domestic level. Those who act now will see early rewards for their people, their businesses and their economic prosperity. And the challenge of the global marketplace can be seized to generate even greater opportunities. Can any of us afford to delay? |
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Other speeches by Rt. Hon. Helen Liddell - Former Minister for Energy and Competitiveness in Europe (Jul 1999 - Jun 2001)
(the following are available from the archive) |
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