Lord Powell
Thank you very much, Deputy Prime Minister. You have underlined the acute dilemmas for small, emerging countries in securing affordable energy at times of high economic crisis. We will follow the normal procedure; I will take a group of questions and then ask our panel to answer.
Dr Abdullah Elkuwaiz, Former Ambassador of Saudi Arabia to Bahrain
I have two questions for His Excellency, Minister Al Attiyah. Sir, you have correctly pointed out that the present level of energy consumption cannot be sustained. In the meantime, if we look at the numbers, we will find the fastest growth of energy consumption is among oil‑producing countries for a number of factors: fast income growth, fast population growth and also industrialisation. What is your Excellency’s recommendation for oil producers to maintain that level of growth and energy consumption?
Qatar is a world leader in the production and export of gas. The country is also a pioneer in liquefied natural gas (LNG) and gas‑to‑liquid (GTL) projects. With this major change in the gas market, what is your perception of this market?
Mahmoud Gebril Elwarfally, Director General, Libyan Economic Development Board
My question is to the panel in general but specifically to His Excellency, Mr Al Attiyah. It is a matter of curiosity for oil‑producing countries, particularly in the Middle East, whether it is advisable to pump oil while not developing strategies to break dependency on oil as rentier economies. Is it more advisable to produce oil according to developed needs, when there is a clear strategy to diversify the economy? Is the main criterion to pump oil according to the needs of the global economy or development?
Abdulla Abdullatif Abdulla, Undersecretary, Ministry of Foreign Affairs, Bahrain
I would also like to thank the panellists for their excellent statements. We have talked about energies here, but what about nuclear energy? Although I am not in favour of developing that, we know that many countries are. We heard a very good example of renewable energy today from Mr Tanti. Could you share some of your thoughts about this?
Dr Tim Huxley, Executive Director, IISS-Asia; Senior Fellow for Asia-Pacific Security; Editor, Adelphis; Corresponding Director for Military Information and Analysis, IISS, UK
My question is for Deputy Prime Minister Thongloun Sisoulith, and it relates to the hydroelectric potential of his country. How does he see that potential perhaps being affected in the future by two important developments: the first is the upstream damning of the Mekong by China; and the second is the impact of climate change?
Abdullah Bin Hamad Al Attiyah
As a member of OPEC, we are always trying to be careful in the way we create a sustainable energy supply. We have all admitted that oil and gas are not renewable. A lot of change has happened to technology in the last 10‑15 years. The depletion ratio was much faster in the old days but, because of technology, oil recovery is horizontal. All this new technology extends the life of even very old oil. Also, the recoverable factor is increasing dramatically. Now, we can produce more oil from an old field, even very old fields that some thought were already depleted. Their lives are coming back, like creating new genetics to give new youth. We are looking at how scientists will also develop genetics in the future to take back or age 50 years, so we can live in good shape. This is what we are doing with technology in oil fields today. The life of the oil field is changing from year to year. We have to admit that oil will be sustainable for a longer period, but it is not renewable. This is our challenge.
We believe that oil will be a very important energy. It will continue. I do not believe that the oil era will be over. Renewables – wind, solar and nuclear – will not take the place of oil. Oil will continue as a very important concern for at least the coming 50 years. We are not against renewables at all, but I am sometimes against the word ‘alternative’. ‘Alternative’ means ‘move and let me sit in your chair’. When we see mixed energy, yes, I will support it, because then all these energies will be complementary to each other. I would really like this to be more considered.
With my experience over many years in this business, and also from chairing OPEC many times, sometimes they talk to us with double standards. By this I particularly mean the main consumers. When we are sitting in rooms away from the press, they will put on a lot of pressure: ‘Please invest more money to increase production. Build a new capacity to cover future consumption.’ We try to talk about implementation and how they will use this new capacity and they give you their assurance that they need it but, when they are in public, we hear a new tone: ‘This is foreign oil. We cannot trust it. We are developing ways to replace oil.’ We are so concerned and confused then. Should we believe them when they are talking to us personally or publicly? Many times we have talked about how we can create trust in each other.
Yes, Qatar is becoming one of the biggest LNG and GTL producers. Today our LNG is distributed to three continents at the same time, to North America, Europe and Asia. Now some cargoes even reach Argentine, Chile, Mexico and Canada. Today we are operating the biggest energy‑shipping company in the world with 54 ships. Bigger ships have never been built before. Today we are very proud that we can challenge, even in technologies. We have built the biggest train ever built in the world; each train is 7.8 million tonnes. Also, we built the biggest ships in the world. We are very proud to be operating two kinds of ships. One we call Q‑Flex. Its size is 220,000 cubic metres. The other one is Q‑Max. Its size is 266,000 cubic metres. These have never been built before. Today, we have the most flexible supply of energy in the world, so we can reach our customers wherever they want us to reach them.
We believe that there are a lot of questions today about the price of gas - shale gas - which reflects the US market changing the whole concept. A few years ago, the American was concerned about the depletion of conventional gas, preparing to buy more LNG or gas from others. Today, it has changed, because technology has also played a very important role in reducing the cost of shale gas. If you remember, a few years ago, if the price was below $8‑9, the shale gas would close. Now they can live with $4.
We have to live with this challenge. Now we will start to divert some cargoes from the US market to Asia or Europe, where we believe they are more sustainable and affordable. In the US, you would sit in the Henry Hub or liquid markets; in Asia and some parts of Europe, you can go long term but with the parity of oil. It creates a sustainable system in the gas market. We are seeing a lot of change, but we have to live with it. We have to think. Asia is a big market and it is growing very fast. Gas is growing very fast. The world needs gas; they need more gas.
We are very proud that now Japan, Korea, China, Taiwan and India are our main markets. We are seeing the Indian and Chinese markets growing very fast. Last year, we signed to supply Japan with 5 million tonnes, and now we are discussing another 7 million plus another 3 million. Also, we signed a big contract with India seven years ago for 7.5 million tonnes, and now we are discussing another 4 million tonnes. We are seeing that the gas market has corrected itself. As I said, because we are becoming the biggest producer, we are also operating the biggest shipping company with 54 ships, so we can meet our customer the next day.
Lord Powell
Are you also going to address Mr Elwarfally’s question about whether it is a mistake to run down reserves to quickly?
Abdullah Bin Hamad Al Attiyah
To produce oil for developing or world demand is a very difficult question to answer, because we believe we are also producing to curb world demand. The challenge is how we can play that role. OPEC was created to deal with the segregation of the world oil market, how we can balance between demand and supply and how we can avoid over‑production or shortage of supply. I think we have to be very careful today, because we need the world, but the world needs us. This is why we are very concerned about our own tactics with our customers, our supply, demand and stability. We do not want to show that we are threatening our customers. However, we also do not want our customer to threaten us. We have to try to live together. We need each other.
I was very surprised that two senators in the US want to apply new legislations fighting foreign oil. Then I asked myself, ‘What does it mean, ‘foreign oil’?’ We believe in free trade. Our market is open to all American commodities and products. Could we call American cars ‘foreign cars’? This could be very difficult when we believe in free trade. I have energy. You have something. I sell energy to you and buy something from you the next day. Every time they threaten me calling it ‘foreign oil’. Sometimes they call it different names. Sometimes you create uncertainty with me or with other producers, by saying what ‘foreign’ means. Is ‘foreign’ an accusation? Then ‘foreign’ becomes criminal. I am a foreigner when I go to Europe, too. This is the definition of ‘foreign’. I hope that the definition of ‘foreign’ has not become a crime.
Lord Powell
I turn next to Mr Tanti to take the question about renewables and, in particular, how he sees the future relationship between nuclear power and renewables like wind power and solar.
Tulsi Tanti
Thank you, Chairman. I also believe what the Excellency has said. Some of those points are very important to our global economy and the sustainability of long‑term energy security requirements. Let us understand how different types of energy can save our economy. I strongly believe, first of all, that we need all energies. I do not see that any one energy can replace another. That is not possible. We are consuming so much energy today that, in the next 25 years, we need to double that energy. If you calculate the statistics, we do not have sufficient resources. It will become increasingly expensive then, one day, it will disappear. At the same time, if we continue to consume like this, we will destroy our planet, too. I do not see that any energy source can replace it. We need oil, gas, nuclear, wind and solar. We need all of them.
How they are mixed in the product portfolio is very important. That must be balanced to bring sustainability and manage country‑level energy security while, at the same time, global security is maintained and everyone gets energy. Another important part is affordable energy. We are not against nuclear or oil either, but we need low‑cost energy and we need a low‑carbon economy. Both are equally important and simultaneous. That balance is important. Nuclear does not create carbon but it creates the base load. At the same time, wind and solar cannot have a base load; they both have variable loads. Both need a complementary strength. Wind and solar need nuclear, oil and gas. This combination can give a unique portfolio to any country’s energy requirement. What should be addressed, importantly, is that to consume the oil we hope to consume, we have to address low‑carbon technology and how to consume oil more efficiently, so that we can use resources more efficiently while, at the same time, not damaging the environment. That is the challenge we hope to address, and that is the opportunity and the investment I see. This country can invest in this, because they are gaining enormous revenue from selling energy from oil and gas. Why not invest in that technology and make more efficient technology that is low‑carbon and more efficient, so that it is available for the long term.
At the same time, we hope to invest in a certain percentage of the other product mix, renewables and nuclear also, because without them we are unable to achieve the total global economy requirement. To bring that sustainability, I strongly believe we need all sorts and we hope to use all the resources. I do not see that any source can replace another. The challenge is a low‑carbon economy and affordable energy for everybody. I see those as the opportunities and challenges simultaneously.
Lord Powell
Thank you very much. That was a very pointed answer. Minister Sisoulith, would you like to deal with the point about hydroelectricity?
Thongloun Sisoulith
[Answer in Lao]
Lord Powell
Thank you very much, Deputy Prime Minister. You illustrate how one party’s solutions to its energy problems can damage another party’s prospects, and the need for cooperative solutions.
Alexander Nicoll, Director of Editorial, IISS
I follow Mr Tanti’s point that there is a role for all kinds of energy in the future, but I would just like to press him a little more closely on the precise role for wind energy. Obviously your story is most extraordinary and impressive, but how big a market do you really see for it in the future? In the West there is a lot of doubt about how big a role it can really play; people say it is not really economic to do it; and that it can really only provide a small amount of the load and one also hears that about solar energy. Would it be your argument that there is a lot of technological development still to go and that it can then take a greater and more economic role in the future?
Makoto Ohashi, Vice President, Mitsui & Co, Middle East Ltd
My first question is about the security of transport, piracy. The issue of piracy is no longer confined to Somalia; it is already deep into the Indian Ocean. Could some of the analysts comment on its impact on the energy market and is there anything more we should do about it? My second question may be diplomatically incorrect, but I would like to hear more about the future prospects for the nuclear energy market here. It has to be compatible with non‑proliferation agreements and so I would like to hear more about how to deal with the current Iranian issue.
Participant
I totally agree with His Excellency, Abdullah Bin Hamad Al Attiyahthat where there is a will, there is a way to deal with the challenges we face in this part of the world. What matters is that we need to be committed to our goals and strategies. I really believe there is no sustainable development without protection for the environment, because it will affect the future of our children and the generations that follow. I also totally agree that technology is the name of the game. Unless we invest in and use technology in an appropriate way, we will not be able to survive and improve the economic development of our countries, so we need to strike a balance between economic development and protecting our environment. I know a lot of economists would agree with me that is the path to sustainability.
Siddharth Vardarajan, Bureau Chief, The Hindu
When we are considering the evolution of other forms of energy, there is clearly a relationship between the price of hydrocarbons and the attractiveness of other forms of energy. If the price of oil and gas were to cross a certain threshold, would this make the progress of other forms of energy such as wind and solar more inevitable?
Secondly, when Vladimir Putin visited Qatar a few years ago, there was talk of an OPEC for gas. I was just wondering where that discussion has gone?
Dato Syed Sultan bin Mohammed Idris, Malaysian Ambassador to Bahrain
In the Middle East and also in the tropical countries we have abundant sunlight and yet the use of solar energy is still in its infancy. What are the prospects for and the cost effectiveness of solar energy in this region?
Lord Powell
Some of you will have been here a few months ago when Defence Secretary Gates was asked about piracy in the defence dialogue here. He said he had two bits of advice for ships’ captains. One was to speed up and not slow down and the other was to raise the gangplank and not lower it. I am not sure you can answer the question better than that.
Abdullah Bin Hamad Al Attiyah
Transportation security is very important and we have seen piracy spread as far as the Oman Sea, the Arabian Sea and the Indian Ocean. I think the whole world should implement security measures. This is matter for the Security Council of the United Nations. The assistance of all the world’s navies is required.
On the price of hydrocarbons and the relationship between the price of oil and gas I understand what you mean, but I do not think solar energy is a competitor yet. It is still facing a lot of difficulties over mass production; the cost of production makes it uncompetitive with gas. Gas does not compete with solar energy; it competes with coal or with oil‑based products. Gas is more environmentally friendly than coal and is the first choice to reduce emissions.
I have travelled to India many times; we were the first country to supply India with a huge quantity of gas and we are expanding that supply to new areas of India. New Delhi and other Indian cities today are better than they were a few years ago with less pollution and this is thanks to gas. I believe gas will remain the leader, even with competition from alternative energy. You cannot compare apples and oranges.
If you want to build nuclear plants you need 13-14 years and coal fired plants take 4-5 years, but gas turbines take only 18 months. Gas is clean and modern gas‑turbine technology can reduce pollution even further. It is the first choice.
There is an equivalent to OPEC for gas producers already. It has been officially established and its headquarters are in Doha. We have already elected our first general secretary, who is from Russia and he arrived in Qatar a month ago to establish the headquarters. We have already had three meetings.
Tulsi Tanti
The wind industry is becoming increasingly mature with nearly 30% growth over the last five years. Last year there was a new 38 gigawatt installation. The great thing is this resource is freely available in all countries. There are no issues about sites or resources. The technology is also quite mature and becoming cost competitive. The technology is also now capable of generating quite large quantities of energy. It is not just 10 or 20 megawatts. It is 200‑2,000 megawatts. The next phase of development in offshore wind is seeing ever larger projects.
I believe that 25% of energy needs can be met from wind power in any country without any technical issues. Denmark has already done this and they are already exporting power to other European countries.
We believe there are enormous growth opportunities in this market. Currently the financial crisis is having an effect, but the demand is there. The industry is creating an enormous number of green jobs in developed countries and the development time for generating facilities is six months. It is easy and fast to install.
In the US 28 states have already set targets which say that by 2020 25% of energy has to come from renewables and within renewables 80% is wind. The EU has also set clear targets for 20% of energy to come from renewables by 2020. This EU target is mandatory in utility companies, so the growth momentum is there. In Asia, Particularly India and China there is no need for a target, because these countries need ever more energy and they actually have energy deficits. Wind energy costs will reduce by 15% over the next 10 years, which is very competitive. We believe strongly has great growth opportunities.
I believe that solar will remain the second biggest renewable energy source in the world. The opportunity is there. Huge investments in technology and innovation are required in the solar sector, because it is four times as expensive as wind. There is no competition between wind and solar; we need both sources, but solar needs greater investment to become more competitive. The other disadvantage with solar generation is that it needs a large area of land, although this may change in the future. It is possible to harness wind and sun to create a more sustainable economy.
