Speech at the 7th Doha Natural Gas Conference
Doha, 11 March 2009
Dr Al-Mulla, Distinguished guests,
Thank you for your kind welcome. I feel very privileged and grateful for the opportunity to address this important conference.
Today's debate highlights two of the greatest challenges facing mankind at this present time: climate change and energy security. The EU is tackling these challenges head on, and gas has a particular role in our strategy.
Challenges of today's world: climate change + energy security and security of supplies
Climate change and energy security are challenges of such a significant scale that they require us to re-define some of the assumptions of the economic model which the world has pursued for several generations.
The warnings on the impact of climate change have been very clear. The UN's Intergovernmental Panel on Climate Change has stated: "Warming of the climate system is unequivocal.... Observational evidence from all continents and most oceans shows that many natural systems are being affected by regional climate changes, particularly temperature increases".
We know there's a problem, and we have a responsibility to act. There is still time to avoid the worst impacts of climate change, if we take strong action now.
We also know, notably from the Stern report to the UK government, that the costs of business as usual are substantially greater than the costs of policy change. The costs of inaction could rise as high as between 5% and 20% of lost global GDP each and every year. These are extraordinarily high numbers, and are much greater than the GDP lost by the economic slow downs.
And there is another lesson that can be confirmed by the recent experience in financial markets: acting later costs more than acting early.
Our second problem is that we are heading for a global energy crisis. The world is moving on a totally unsustainable and ultimately unrealistic energy path, based on increasing fossil fuel consumption and increasing world population.
All mainstream scenarios suggest that global energy demand could rise by half as much again by 2030, with energy demand doubling in developing countries. In parallel, the United Nations predicts that global population will increase from 6.5 billion today by an additional 2.5 billion by 2050, with most of this growth coming from the developing world. With continually rising expectations of living standards across the globe, this means that to satisfy our demands we will have to produce a manifold increase in energy and goods in just a single generation.
Yet at the same time, we know that reserves of conventional fuels are not increasing as fast as we need. We know that many traditional production areas are in decline. And the cost of oil and gas extraction is rising. The plain fact is that we cannot assume that supplies of fossil fuels will increase in line with demand as has happened for the last twenty years.
The IEA among others has given us adequate warning, and now the world now has a responsibility to move towards a more sustainable energy future. This means, above all, low-carbon energy, clean technologies and energy efficiency.
This brings us back to climate change. Climate change and energy security are two sides of the same coin. The same remedies must be applied to both problems.
European Union's role
The EU has been at the forefront of policies to tackle energy security and climate change head-on. We have a broad and powerful market of 27 Member States with 500 million people. Many other countries are also knocking on the door to adhere to the European Union. We have a broad and diverse energy mix and high levels of energy trade with many countries across the world. We have a political consensus which says that energy security and climate change must be dealt with at the European level.
We also have a single market based on transparent and democratic rules which extends beyond our Member States to include countries such as Norway, Iceland and Switzerland, down to the Balkan states through our special links under the Energy Community.
The EU has already made its weight felt in the global climate change debate and is an important partner for energy consumers and producers across the world. All in all, the EU has a unique capacity to help the world shift towards a more sustainable and secure energy path.
EU policy response
Two years ago, in March 2007, European heads of state and government agreed that the EU energy and climate change strategies should be brought together into a comprehensive policy. They endorsed new targets to reduce greenhouse gas emissions by 20% by 2020, rising to 30% in the framework of an international climate change agreement, and to increase the share of renewable energy in energy consumption to 20% by 2020, up from around 7%. They also called for a cut in 20% in energy demand by 2020. These objectives have become known as the 20-20-20 agenda.
Within two years, the energy landscape in the EU has been transformed. Last December, the EU adopted a historic package of legislation to make the greenhouse gas emissions and renewable energy targets binding on the whole EU. Every Member State has accepted national targets which, together, will realise the overall objective. Every Member State is also committed to implementing ambitious energy efficiency action plans. This new-found solidarity in energy policy is an important change and we saw the benefits of it recently during the Russia-Ukraine gas dispute.
In March 2007, the EU also re-stated its commitment to limit the increase of global average temperature to 20C above pre-industrial levels. This presupposes that emissions of global greenhouses gases are stabilized within the next two decades, and that industrialized countries reduce their emissions by 60% to 80% by 2050. It is in this context also that the 20-20-20 targets were agreed.
In Copenhagen later this year we need to reach an agreement which is firmly built on an ambitious global vision in fighting climate change while confronting the challenge of rebuilding our energy systems, fighting poverty and enabling sustainable development.
The deal in Copenhagen needs to be fair and comprehensive. We want ambitious emission reductions as well as new commitments to cooperate on adaptation, financing and technology.
The Copenhagen deal will also be a way of strengthening energy security. Promoting energy efficiency, promoting renewable energy sources, investing in energy infrastructure, making energy markets more efficient so as to allow renewable energy to compete on more equal terms and let the carbon pricing instrument of emissions trading have its full affect - are all energy policy initiatives that strengthen climate policy.
In short, climate change is a major opportunity to transform global energy security and to move towards a more sustainable economic model.
This is by no means anti-fossil fuel. We cannot do without fossil fuels, and every realistic scenario confirms that even in a low-carbon future, there is a significant role for fossil fuels. It is a process of redefinition, not a process of rejection. But this makes it all the more important for global collaboration in developing the new energy technologies and energy efficient practices to help us use the world's resources in a manner that does not bring huge and irreparable damage to our planet.
With or without climate change, we would have to make these changes. The global energy supply situation is at a critical point. The EU is responding to these challenges by massive investments of the right kind in clean technologies, new infrastructure, energy efficiency and alternative energy supplies.
It is no coincidence that energy efficiency and energy sector investment feature prominently in the Commission's Economic Recovery Plan. The Plan is the Commission's macro-economic response to the current economic situation and aims to stimulate demand, reduce job losses and speed up the shift toward a low carbon economy. 3.5 billion euros are earmarked for energy security investments, including off shore wind technology, interconnections and carbon capture and storage.
But the EU will not resolve the climate dilemma on its own. No single country or region of the world can reverse the global trends in isolation. International cooperation is essential, particularly in the areas of energy technology cooperation and energy efficiency.
Energy cooperation with Qatar offers a potentially huge opportunity to this country to diversify its economy and develop the world's energy resources of the future.
There is a huge renewable energy potential in this region in the form of solar or photovoltaic power. I welcome the interest of your companies, including the Qatar Science and Technology Park, in these important technologies. I also note initiatives taken by international oil and gas companies to diversify their interests in this region.
I should also mention the possible establishment of an Energy Technology Centre in the framework of both the EU-GCC and EU-OPEC energy dialogues. Such a centre could help promote cooperation between academic and educational centres, research institutions and industry to develop solutions to common security and climate chance challenges.
In another strategic area, the EU's international cooperation on carbon capture and storage is progressing well. At the Poznan climate conference last December, the Commission proposed including CCS in the Clean Development Mechanism. This is important to stimulate investment in CCS projects also in OPEC countries. International co-operation in this field creates opportunities for all sides.
EU market framework
The EU is in a strong position to encourage investments, support new technology and respond to new strategic challenges because it has a clear and predictable market framework.
Public policy objectives are known and widely supported; and the investment environment is predictable. Even if the third internal market package has not been formally adopted yet, political agreements have been reached on the major issues. In addition, there is no longer uncertainty around the future carbon trade regime and the renewables RES target.
The EU internal energy market is the bedrock for energy security within the EU. It is vital to supply security and to creating the necessary price signals to trigger investment and to increase market participation and customer choice.
For gas, EU legislation lays down the right of third parties to non-discriminatory access to transmission and distribution systems and to liquefied natural gas (LNG) facilities. System operators must guarantee non-discriminatory and transparent access to the system for all users. Consumers also have the right to choose their gas supplier.
The immediate result is that new suppliers can now enter the market.
The EU market is already a highly attractive market for suppliers and consumers, combining high standards of governance with a mature regulatory environment favourable to investment. This will benefit not just domestic stakeholders, but also international companies.
As a result of market opening, we have seen the growing success of trading platforms on the electricity and gas wholesale markets: new power exchanges and new gas hubs have been created.
The new legislation which is close to adoption will not change the ground rules. It only makes them fairer and more coherent across the whole European market.
It will establish a more formal industry grouping of network operators, the European Network of Transmission System Operators (ENTSO). This will have the clear mandate and responsibility of proposing a 10-year investment plan, and preparing technical codes necessary to integrate markets and open up market access.
To ensure the free flow of electricity and gas around the single market, we will have to reach agreement on many, very technical, cross-border issues. This will be the task of a new Agency for the Cooperation of Energy Regulators (ACER).
Our next major challenge will be to ensure that the investments are forthcoming to enable the transport of both renewable and conventional energy across the whole EU in practice, within a truly integrated energy market.
This brings me to the issue of infrastructure and the Commission's second Strategic Energy Review.
One of the core arguments of the Strategic Review is that the EU needs to put its energy security dimension at the forefront of infrastructure development. This has since been fully vindicated by the Russia-Ukraine gas crisis. In practice this means that the energy infrastructure must become a priority of energy policy, including giving higher profile to the TransEuropean Networks for Energy.
Next week, the European Council will, I hope, endorse the Commission's review and signal a clear determination that energy security is a matter which the EU will resolve together.
Security of gas supplies
I would like to come now to gas supply security and its significance in EU energy policy. Gas is fundamental to Europe's energy security, Europe's economy and to our battle against climate change.
In the EU, one quarter of all the energy we use is gas. Gas is used in a wide range of applications – in homes, businesses, large industry, power generation, even transport. It is seen as a relatively clean fuel.
Almost 60% of our gas is imported – and the share is rising every year. In the year 2000, EU-25 imported 186 million tonnes of oil equivalent of gas. In 2005, the same countries imported 250 million tonnes of oil equivalent. That is a rise of one third over 5 years. By 2030, on existing policies, that figure could rise to 430 mtoe, with 84% coming from imports.
In 2020, 30% of gas supply may be in the form of LNG.
The EU gas market is expanding. A large number of new gas infrastructure projects have either been recently completed or are progressing, including new links from North Africa. The development of the southern gas corridor for supplying gas from Caspian and Middle Eastern sources is an important project for the EU. Another initiative I like to mention is the completion of the Mediterranean Energy Ring. This would bring our energy infrastructure closer to the Middle East.
The EU has no shortage of gas reserves around its borders. The Middle East, Russia, Norway and North Africa hold around 70% of the world's gas reserves.
Today, the EU relies mainly on Russia, Norway, and Algeria for its gas imports. History shows that these suppliers have generally been very reliable. But the recent gas dispute between Russia and the Ukraine demonstrated the vulnerability of the EU in gas security.
To reduce the risk of future gas disruptions, we need greater diversity in our gas supplies, both in suppliers, supply routes and supply products.
Qatar could be part of this picture. On the basis of existing contracts, it is estimated that gas supplies from Qatar could quadruple to 30 BCM, from around 7.5 BCM last year. This would make Qatar the fourth largest gas supplier to the EU.
Qatar's investment in Liquefied Natural Gas comes conveniently at a time when the EU is developing new import openings for this fuel, as well as a common action plan for LNG.
I am also aware of your plans to create a regional gas pipeline network in the region. This is something which interests us very much and which could be the base for future cooperation.
Climate change and energy security bring the EU and Qatar together. Qatar can be an important player in European energy security and find a reliable partner in the EU, the world's largest open gas market. And Europe can be an important partner for Qatar in developing sustainable markets for its gas, and in tackling the growing challenges facing its industry resulting from climate change.
The geographic proximity of Qatar and the EU make gas trade beneficial for both sides. Today, the only option is LNG, but we should not rule out the possibility of a later pipeline link.
The challenges of energy security and climate change call for a new openness in energy policy thinking. We need to think the unthinkable. What is happening in financial markets today could happen in the world's energy markets tomorrow. We must use all opportunities to build up energy diversity and energy cooperation.
The EU is already taking decisive action on both climate change and energy security. We are integrating and opening up our energy markets. We are investing in new technologies, energy efficiency and energy networks. We are seeking to make our gas supplies more diverse and we recognise the benefits of LNG. And we are building up international collaboration.
Energy security and climate change have led countries across the whole globe to come together in a common cause, to invest in new technologies and jobs, and to find ways to use the world's resources more wisely for the benefit of future generations. It is true: every cloud has a silver lining.
Thank you for your attention.