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Malcolm Wicks MP, Minister of State for Energy
Chatham House, 05 February 2008
I’m grateful for the opportunity to speak at this important conference.
I remember speaking at the Middle East Oil Investment Conference here at the end of 2006. Since then, it has been a busy time for energy policy in the UK. We published an Energy White Paper in May; more recently we announced a major expansion of offshore wind, published a Nuclear White Paper and introduced an Energy Bill; and of course we have committed ourselves to the EU-wide target of 20% renewables by 2020, with our own target being set around 15% - a huge challenge for the decade ahead.
But the fundamental challenges behind the policy detail remain: the need for secure and affordable supplies of energy; and the imperative of tackling climate change by reducing carbon dioxide emissions.
These two challenges are at the heart of UK energy policy, but the truth is that no country or region is insulated from them. Climate change is global in nature, and energy security is a challenge we all share.
The importance of the Middle East, meanwhile, has - if anything - been thrown into even starker relief, as global energy prices have risen.
So today, I’d like to talk in particular about the need for investment in the Middle East, what UK expertise can contribute to this, and the challenge of moving that investment in a low-carbon direction.
The IEA’s World Energy Outlook predicted that global energy demand will be 50% higher, and demand for oil in particular 37% higher, in 2030. IEA projections are that oil projects currently under development are not sufficient to meet that increase, especially given the likely decline in production from many existing facilities.
All countries are aware that we are now in an age of relatively high energy prices, and there is of course a drive to find alternatives to fossil fuels, including wind and solar, biomass, hydrogen fuel cells, and nuclear. But it is a simple matter of fact that the world does still need fossil fuels, and will do, to some extent, for decades to come. Indeed, their use in rapidly developing nations such as China and India will be increasing, not decreasing.
The consequence of this is that a re-evaluation is needed in the Middle East. As one of the global market’s most significant producers of hydrocarbons, sound investment and focused innovation are potentially more valuable in the Middle East than anywhere else.
There are, globally, huge opportunities for business in the energy sector, with the IEA predicting the need for $22 trillion of investment in energy infrastructure. National and international oil and gas companies need to work in partnership, where appropriate, to deliver this. I firmly believe there is a role for both.
The most obvious need is in upstream infrastructure, to allow for the optimum development of reserves. This will benefit producers and consumers alike, and clearly it must continue and increase over the coming years. I was greatly interested therefore in what my colleague, the Algerian Energy Minister, said yesterday morning about increasing investment.
But it is also vital that the downstream sector, and refining in particular, attracts its fair share of investment capital and technological development.
UK business has a role to play in all this. In December, we launched a publication called “UK Energy Excellence”, which examines UK expertise in meeting future global energy demand and identifies challenges and opportunities over the next 20 years. This is a business-led initiative, creating a working partnership between UK energy companies and Government to help promote real practical solutions to what are global challenges.
British business has a wealth of expertise, technical, financial and market-based, in these areas. We are already one of the leading international partners for nations and companies working to develop infrastructure and technologies in the vital field of energy. My colleagues in UK Trade and Investment and I will continue to help wherever we can to strengthen that position still further.
Now let me turn to the problem of climate change.
If we do nothing under current policies and trends, according to the IEA, global CO2 emissions will rise by nearly 60% by 2030. Even the policies under consideration, in addition to those already agreed, are not sufficient for emissions to peak by 2015. This should be a cause of great concern to all of us - because it will affect all of us. No country, no company and no individual is exempt: climate change is both global and personal.
Energy investments made over the coming years will either lock in high-emission technologies for decades to come, or bring low-carbon technologies online. The urgency of the situation, and the overwhelming scientific consensus on the evidence, dictate the latter course. Meanwhile, the drivers behind the greatest reductions in CO2 are likely to be carbon capture and storage, and energy efficiency at the end-user point, both for fuel and electricity.
Carbon capture and storage (CCS) will be crucial in cutting global carbon emissions, especially given that increase in fossil fuel use in China and India. That is why in the UK we launched last year a competition to support one of the first commercial-scale CCS demonstration projects in the world, for post-combustion coal, to be operational by 2014.
And our investment in a new Energy Technologies Institute, a joint venture with the private sector running into hundreds of millions of pounds, shows how serious we are about bringing forward a full range of low-carbon technologies.
But there is progress in the Middle East too. I was encouraged by the announcement at the OPEC summit in November that Saudi, Kuwait, Qatar and the United Arab Emirates would pledge a total of US$750 million to a new fund for tackling climate change. The stated aims of this fund are to support cleaner and more efficient petroleum technologies and to promote the development of technologies such as CCS. That’s a very positive move; I welcome it and I hope it is successful.
This drive for low-carbon energy production is an enormous wealth and job creation opportunity. I have full confidence that, through partnerships between governments and companies, the innovation that characterised the oil industry throughout the last century will rise to this new challenge.
Huge investment in clean technologies is required. But if the Middle East takes the lead in developing such expertise today then it will be well positioned in the future. Not only will the region be able to supply a market where consumers demand low-carbon fuels; it will also be able to export these technologies and skills around the globe.
I am clear that industry worldwide, and UK industry in particular as a leader in this field, must and will play a vital part in reducing emissions worldwide. The UK Government is committed to supporting the development and use of new energy technologies worldwide and in the UK.
We can’t stop using oil, nor other fossil fuels. But we do need to be smarter about how we use them, and better at reducing, and ultimately capturing, the emissions.
Investment in Middle East energy is one of the greatest opportunities in the world today. Governments and oil and gas companies, both national and international, need to work together to ensure that the necessary investment is made, and to ensure that we continue to move forward on the path towards a low-carbon future.
