Strategic Perspectives of the Gulf by the Major Asian Powers

Contribution

By

H.E Abdulla Bin Hamad Al Attiyah

Second Deputy Premier

Minister of Energy & Industry

Managing Director_ Qatar Petroleum

State of Qatar

 FIRST PANEL

9:30 a.m – 11:00 a.m

29^th January, 2006

Excellencies, Ladies & Gentlemen

Good Morning

During the thirty years after the first oil shock in 1973 world energy consumption increased by more than 73%.

During that period the share in energy consumption of the industrialized countries including the Soviet Union decreased from 78.4% to 61% of the world consumption.

That was not only because of increased energy use efficiency but mainly due to world economic growth and increasing energy consumption in developing countries and especially those with big populations such as India and China.

As a consequence there was a shift of the center of gravity of demand and increased consumption towards the East and South.

At the same time there were changes in the shares of different sources of energy in the world energy consumption mix.

While the share of crude oil dropped from 45% to 34% the share of natural gas increased by more that 7%. Coal maintained its share in the energy mix and all other sources of energy such as nuclear, wind, water, solar and biomass registered increases.

It is not possible to discuss the changes in the Energy dynamics in Asia and the Middle East in isolation of the world Energy scene. It is, therefore, necessary to look at the global picture first, then examine its interaction with regional factors and its influence on their development.

It is also necessary to go back and review what we had witnessed and the changes we lived through during the second half of the last century and the first half of the present decade.

Up to the early seventies of the last century, the International major oil companies, the seven Sisters, were in control of most of the world energy trade and managed efficiently every link of the global energy chain from the sources to the consumers.

Following the birth of the organization of Petroleum Exporting countries, OPEC, nationalizations and the establishment of national oil companies in both exporting and importing countries; changes became evident.

The International oil companies gradually lost control of the source which is most important link in the energy chain. They also lost control of some downstream links in developing countries. These were the start of structural changes in the industry.

As a result the Majors and industrial countries directed their investment to alternative sources of energy including oil and natural gas outside the OPEC area.

On the downstream side, the investments were selective and mainly in the more profitable links of the energy chain. This caused the development of bottlenecks in several sectors of the industry such as refining and transportation.

On the other end of the chain and because of what OPEC countries endured from the mid-eighties and until the end of the last century, nursing idle production capacities, relatively low prices and lack of funds, no major investment were made by OPEC countries in additional production facilities.

Long periods of low refining margins and the high cost of building new refineries, because of tighter products specification and environmental considerations, rendered available refining capacities inadequate for meeting the ever increasing world demand for petroleum products.

Recent confusion and worry linked to energy were caused by the substantial increased in demand in Asia and other parts of the world as a result of economic growth and the improvements in the standard of living in populous countries.

It is easy to blame forecasters, but it is only fair to also blame the players on the energy scene who are responsible for the lack of transparency which is essential for efficient forecasting.

After a period of strained relations, if not confrontation, between producers and consumers starting in the early 1970’s OPEC suggested, not long after the price collapse in the 1980’s moving towards dialogue and joint planning. Because of abundant supplies and low prices at the time, the response of the consumers was not positive.

After a shaky star of the consumer producer dialogue in 1991, it developed to become the International Energy Forum with a permanent secretariat.

The Tenth Forum will be held in Doha next April with the participation more that seventy countries and international organizations. The theme of the tenth forum will be “ Energy Security, a shared responsibility”

Preceding the Ministerial Forum there will be an International Energy Business Forum to which more than forty CEO’s of International and National energy companies have been invited to discuss and debate with ministers responsible for energy and discuss their concerns.

The objective of all that is, coordination and cooperation, which could lead to joint planning and increased transparency. That will stabilize energy markets reducing the chances of price shocks. Also ensuring uninterrupted flow of supplies and supporting world economic growth for the benefit of all peoples.

I mentioned earlier the shift of the center of gravity of world demand East and south because of increased energy needs in fast developing countries at rates not seen in the past, if we don’t say unexpected.

What we witness today in the Middle East and Asia in Energy dynamics and changes are only the natural response to developments in the world energy demand in general and Asian demand in particular, coupled with the fact that most of the worlds known hydrocarbon reserves are in the Middle East.

Because of the importance of energy for economic growth, regionally and globally, made energy a strategic issue of high priority.

In spite of the many international and regional alliances and groupings dealing with energy issues such as OPEC, the IEA and others, energy exporting and importing countries now seek bilateral relations. They also encourage reciprocal investment as a means of securing supplies for the importing country and markets for the exporter.

Moves by China and India for example to invest in exploration and production in Africa, the Middle East and other locations and opening their countries to investors in the energy sector are excellent examples. This is in addition to investment in supply pipelines which, in spite of their possible drawbacks, help in diversifying energy supplies and channels of delivery.

The involvement of a consumer country in developing the reserves of an exporter means better security of supply, while the involvement of an exporter country in refining and distribution in a consumer country means for the exporter a secure market. So it is securing supplies for one and markets for the other.

Since 1990 energy consumption in mature economies increased by 40 percent only while it doubled in emerging economies with Asia registering the highest increase. The annual average growth rate in Asian consumption was 4.6 percent compared to only 1.3 percent in mature economies.

While it might be difficult to make a forecast in numbers it is not so in seeing the trend of changes to come.

Given that developing countries will be responsible for most energy demand growth in the future, and given oil’s high energy concentration and mobility, developing countries are the natural future partners of the big reserves holders on the producing side and especially those in the Middle East who are developing countries themselves.

It is to be noted the increased and growing number of studies, conferences and ministerial regional round tables covering the energy scene and its dynamics in Asian and the Middle East.

Recent high level political visits and contacts between Asia and Middle East energy exporting countries is another indicator of concerns relating to energy security of both supply for the Asian consumers and demand for the producers.

It is an accepted fact that energy sources other than hydrocarbons and coal will play in the future an important role in environmental, economic and strategic aspect of energy. This makes transparency of consumer country plans so important and essential for forecasting the need for and developing conventional energy sources.

In conclusion. Energy market stability remains hostage to joint planning, transparency and reciprocal trust.

Our joint target is securing energy supplies that ensures the continuity of globalize economic growth at the same time safeguarding the interests of depletable energy source owners.

After all, energy security is a joint responsibility.