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Jeddah Oil Summit: UK Prime Minister's Energy Plan

Prime Minister Sets Out Energy Plan

The Prime Minister has set out his "roadmap for the future" on oil and energy at the international summit in Jeddah.

Speaking to delegates at today's high-level meeting, the PM highlighted the opportunities that oil producing countries have to invest in renewable energy technology in countries such as the UK. He hailed the summit as the first step towards "greater stability and certainty for all".

Mr Brown said that it was necessary not only to increase supply of oil and gas to meet rising demand but also to increase energy efficiency among consumers. By working together, producers and consumers could escape the "zero-sum game" of the past and build "a greater commonality of interest".

The PM said:

"The foundation of a global new deal is a credible commitment to a better functioning of the oil market through clear signalling of current and future supply and demand from both oil producers and oil consumers.

"We cannot make all these changes overnight. But building on the spirit of co-operation embodied in this new 'Jeddah process', we can - and must - put in place a roadmap for the future ---- the key to creating greater certainty and stability for all."

Mr Brown called for greater transparency in the provision on data on supply and demand and in return pledged that the UK would do more to exploit the estimated 25 billion barrels of oil reserves still available in North Sea fields.

Increasing focus on renewable energy - the EU has committed to securing 20 percent of its energy from renewable sources by 2020 - will lead to investment opportunities in technologies such as carbon capture and storage and in particular in nuclear power generation, he said. The UK will require up to £100 billion to meet its own targets, he said.

During today's meeting Saudi Arabia announced an increase in its production to 9.7 million barrels per day. The PM offered to host a follow-up conference in London later this year.

***

FULL SPEECH

Transcript of the Prime Minister's speech to the international oil summit in Jeddah, Saudi Arabia.

PM's speech to international oil summit in Jeddah

[transcript]

I want to begin by paying tribute to King Abdullah and our Saudi hosts for calling us together at this important moment of challenge - and I believe moment of opportunity - for the world to come together to address the third great oil shock in as many decades and the severe impact on standards of living everywhere.

And building not just upon our common interest in a stable oil market but also our shared understanding that oil demand is rising faster than supply today and into the future - and that there is today too much uncertainty and volatility - I want to propose a new way forward.

The foundation of a global new deal is a credible commitment to a better functioning of the oil market through clear signalling of current and future supply and demand from both oil producers and oil consumers. Transparency means a reinvigoration of our commitment to ensure that:

* wherever there are shortages and gaps they are addressed;

* wherever there are investment bottlenecks they are dealt with;

* wherever there is protectionism it is tackled.

So that instead of uncertainty and unpredictability for years ahead, both producers and consumers would have greater certainty; and instead of instability we have greater stability - and as a result of this clarity a commitment to increased supply and investment by producers that is matched by a commitment to energy efficiency by consumers.

Second, all of us need credible future commitments on increased oil and gas supply because even with further action we propose to tackle climate change, demand for oil will continue to be strong over the medium term.

Third, all of us need credible commitments on future demand: showing how the rising demand for energy as a result the growth of both population and prosperity can in part be reduced by more efficient use of energy and by the use of alternative sources of energy including nuclear and renewables.

Fourth, we need to do all this in a way that is not the old zero sum game where we hurt producers if we benefit consumers and vice versa, but a new win-win for both oil producers and consumers. So I propose that Britain and other oil consumers should open our markets to new investment from oil producers, including sovereign wealth funds, in all forms of energy including renewables and nuclear --- providing oil producers with a long term future in non oil energy. and in return oil producers should be open to increasing funding and expertise in oil exploration and development through cooperation with external investors, providing increased oil supply in the medium term while growing economies adjust to a less oil-intense long-term future.

In this way we move from the old conflict of interest between producers and consumers to building what the world needs and can allow us to move forward: a greater commonality of interest between producers and consumers.

Let me start with transparency - where we need the best available information:

* a revitalization of the scope of the Joint Oil Data Initiative (JODI) with wider and more comprehensive information on production, refining, demands and stocks;

* and the International Energy Forum (IEF), OPEC and the International Energy Agency (IEA) asked by us to produce a shared assessment of future global energy supply and demand trends.

But even with global action to tackle climate change, projections suggest that demand for oil and gas will remain high and growing for the foreseeable future. So the second pillar must be more supply -- and more investment to achieve it.

For Britain I pledge that, by examining incentives for greater recovery and for smaller fields, we will do more to exploit the 25 billion barrels of reserves still in the North Sea. And we will support Nigeria, Iraq and others seeking to overcome security constraints on increased production.

I urge all oil producers to intensify and reinvigorate work with the IEF to rigorously break down old barriers standing in the way of new strategic investments. And in line with the Kuwait initiative to promote joint ventures and using the expertise of oil companies worldwide, we should all work to remove restrictions preventing the deployment of outside technology and capital where it is needed to increase supply and refining. I call on all countries to support the joint work being undertaken by Britain and Qatar to tackle skill shortages in the oil industry.

And to prolong the use of oil in a carbon constrained world I urge more investment and R&D in carbon capture and storage.

Britain - and we have cooperation arrangements with Norway underway - will have one of the world's first commercial-scale CCS plants;

The EU aim to make 12 operational by 2015;

And Britain and Saudi Arabia have today agreed to work together on CCS, including on the regulatory structures required to ensure environmentally safe storage of carbon dioxide.

The third pillar is moderating future demand growth by improving, in an open and transparent way, current energy efficiency and exploring alternatives to oil. To meet both energy need and climate change, the world - says the IEA - could need, by 2050, 1,000 nuclear power stations; 700,000 new large wind turbines; and a 600 per cent increase in solar, biomass and hydro-power.

Our commitment to the biggest expansion of nuclear power in Europe is now clear and definitive. 15 of 27 European countries are now engaged in nuclear power.

And Europe's commitment to secure 20 per cent of energy supply from renewables by 2020 was reaffirmed at the European Council this weekend. Britain will publish details of how we will meet our share next week: showing that to meet our UK renewables target requires investment of up to £100 billion.

While we must radically improve the energy efficiency of our buildings, our industry and our homes - with all countries committing to implementing the IEA's 25 recommendations on energy efficiency - one of the biggest prizes of all to reducing oil demand is transport, two thirds of future oil demand. This requires what the UK has been arguing for:

* a new 2020 EU-wide car emissions target of 100 grams of CO2 per kilometre - a 40 per cent reduction - and such targets should be adopted worldwide;

* the development and commercialisation of the electric car;

* and a global effort to increase R and D in alternative energy.

The fourth pillar is founded on ensuring a shared interest in a more diversified range of non oil energy sources ------ with significantly more opportunities to recycle increased oil revenues - whether through Sovereign Wealth Funds or directly - into alternative energy investments in developed market economies. This gives oil producers the chance to hedge their future production by investing in the alternative energy sources that will be the bedrock of future low carbon economies. And oil consuming countries should follow the lead that we in the United Kingdom have set by offering genuine openness and partnership in our investment markets to those operating under transparent commercial principles.

Looking ahead, I can announce that Britain is taking forward discussions with the Abu Dhabi Investment Authority about new investment opportunities in Britain.

I can state that the British and Qatari Governments have agreed on the importance of Qatari investment in British energy industries and we are exploring the possibility of a new joint energy fund.

We have agreed to work with the United Arab Emirates on opportunities in nuclear energy.

And we are about to take a decision on the Scira wind farm project off the British coast which, if approved, would involve a £800 million investment by Norwegian energy major StatoilHydro, as we move forward - following my discussions with the Norwegian Prime Minister Jens Stoltenberg last week - more intensive cooperation between Norway and Britain.

All of this we will do. But it will only create the stability we need in the oil markets - and in energy generally - if other oil consuming countries also open up their markets -- and if oil producers are willing to recycle their revenues not just into Britain but into other oil consuming countries.

And as we take on these medium term challenges, we also need to deal appropriately with any short term market distortions.

While the price of oil is driven primarily by fundamental demand and supply issues, there has been a substantial growth in financial investor participation in the markets that may be exacerbating the underlying mismatch of supply and demand. Liquid markets in oil futures are of course hugely beneficial in increasing the efficiency of the global market and allowing companies to hedge unwanted exposures to changes in short and medium term oil prices. But it is right, as agreed by G8 Finance Ministers in June, that the IMF and the IEA carry out further analysis of factors behind the recent surge in oil and commodity prices, their volatility, and the effects on the global economy. In Britain we will remain vigilant as to whether we have the right approach to ensure that financial investment in oil markets takes place with the appropriate transparency. And in Europe we are currently reviewing the regulatory approach to commodity and derivative markets.

It is also right that the World Bank helps poor oil-importing countries manage the short-term impact of rising energy costs. And we must consider international support to help countries reduce their subsidies to energy consumption - now worth globally around $200 billion each year - which are preventing the efficient functioning of the market and in the longer term hurt the poor. I welcome the announcement last week by China that they will raise energy prices to bring them closer into line with their true value and I hope other countries will follow their lead.

We cannot make all these changes overnight. But building on the spirit of co-operation embodied in this new 'Jeddah process', we can - and must - put in place a roadmap for the future ---- the key to creating greater certainty and stability for all.

We will take discussions of these issues to our international partners at the G8 meeting next month in Japan. And to maintain momentum I am offering that the United Kingdom convene a follow-up conference in London later this year.

And with political leaders in all continents working together, I believe that we can make progress in the months ahead.

ENDS

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