Below are some extracts from a speech given by Michael Fallon, Energy Minister at Chatham House.
Future role of oil and gas in meeting global energy demand
‘The world will continue to rely on oil and gas for the foreseeable future, making the security of competitively priced oil and gas supplies of vital importance to the world’s economy.
‘Oil and gas consumption is expected to rise significantly for some time, even as we move towards a low carbon economy. In particular demand for transport fuel is projected to continue to grow outside the OECD, while gas is increasingly replacing coal as a fuel for power generation around the world.’
‘The development of unconventional oil will clearly have an important role in the coming years. And the same is true for gas, with unconventional gas expected to account for almost 50% of the increase in global gas production to 2035. Further work is required on how to safely and sustainably exploit these resources.
‘But this is not the whole answer. Indeed, the IEA emphasises the Middle East as being at the centre of the longer term oil outlook. Even with projections that domestic consumption in the region will increase significantly, exports from the region will continue to be integral to global supply.’
‘The IEA highlights Iraq, with its huge oil reserves, as the country that could be the single largest contributor to global production growth. That requires investment now, in infrastructure, sustainable water management, and the strong legal and financial frameworks that investors need.
‘The IEA also projects increasing gas production from the Middle East and North Africa from both conventional and unconventional sources.’
‘Significant investment is required. Key to supporting this is helping to ensure that we have well functioning oil and gas markets. This is a shared challenge, which transcends national boundaries, and we value international collaboration on this agenda.’
‘The UK also supports international efforts aimed at removing inefficient fossil fuel subsidies. The IEA estimates that US$ 544 billion was spent globally on consumption subsidies in 2012. The G20 and APEC have committed to action on this issue, and I would encourage all those with such subsidies to consider their long term impact.
‘A well functioning and integrated European energy market in electricity and gas will be a critical part of ensuring security of our energy supplies and keeping energy costs down.’
UK energy policy
‘We are seeking to achieve three key aims, energy security, emissions reduction to meet our ambitions climate changes targets, and maintaining affordability for consumers.
‘The North Sea continues to be hugely important for the UK. We are determined to maximise production of these oil and gas reserves and are currently conducting a review to ensure our regulatory regime is as business friendly as possible.
‘Unconventional oil and gas is an exciting prospect for us, and we have recently announced changes to our tax regime which will make the UK the most attractive location for investment in shale gas.
‘And we are working hard to put the policies in place to enable the shift to a low carbon energy system.’
‘UK import dependency for oil and gas is set to rise over coming years.
‘We became a net importer of oil in 2005. In 2012 our oil import dependence increased to 36%, and is expected to rise to 47% by 2020.
‘For gas, we became a net importer in 2004; and in 2012 our gas import dependency stood at 50%, with Qatar one of our key suppliers. By 2020 imports are likely to rise to 58% and it is clear that gas will remain an important element of our energy mix for decades to come.
‘And as we increasingly look to international markets for our energy supplies, we also welcome the interest from international investors in the UK energy sector.’
‘Perhaps I can end by noting that common challenges face us all. We need to ensure that energy markets can provide the supplies consumers need at affordable prices while providing the necessary long term incentives for producers and investors. Achieving this is no mean feat, but dialogue and cooperation has a central role to play.'
Adapted from a speech by Claira Lloyd.
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