28 March 2011

Julian Mansfield, Policy Lead for Energy Security in

European and Multilateral Fora

Energy security and British

diplomacy

Content

• Energy security context

– What is energy security?

– What are the energy risks?

• British energy diplomacy

– International energy strategy:

• Price stability

• Investment in production

• Reliable supply

• Low carbon

• The importance of Norway

– Energy supplier

– Low carbon partner

Energy security

What is energy security?

Economic security

• Affordable

• Not volatile

Physical security

• Reliable

• Accessible

Energy Security

But there are risks to energy security

> Price rises and volatility

> Supply interruptions

Emerging economy demand

Developed economy demand

Investment challenges linked

to supply constraints

Geopolitical risks affecting supply

Demand-side risks:

Emerging / developed economy demand

0

1 000

2 000

3 000

4 000

5 000

1980 1990 2000 2010 2020 2030

Worl

d p

rim

ary

energ

y (

Mto

e)

Oil

CoalGas

Biomass

Nuclear

Other renewablesHydro

Global primary energy

demand grows by 36%

between 2008 & 2035,

with natural gas rising

the most

9

1115

9

12

411

7

820

36

3.5

1.5

8

Net Imports now & in 2030 (Million barrels per day)‏

Net Exports now & in 2030 (Million barrels per day)‏ IEA WEO

As OECD & Asia import

more, MENA, Russia and

West Africa must supply

more

IEA WEO: New Policies Scenario

Supply-side risks:

production constraints

• Production capacity is limited:

– increasingly complex geology

and technology (e.g. Arctic)

– ultimately finite resources

– political conditions (e.g. MENA)

• Underinvestment after 2020

– Private capital

• Regulatory and tax uncertainties (e.g. Russia)

• Technology uncertainties

– Resource nationalism (e.g. Kazakhstan)

Supply-side risks:

geopolitical risks to export and production

Supply-side risks:

gas supply and security

But what are we doing

about it?

International Energy Strategy

• FCO/DECC/Cabinet Office jointly

developed an International Energy

Strategy to address these risks.

• It is based around 4 pillars:

British energy

diplomacy

Encouraging production investment

Enhancing supply

reliability

Enhancing price stability

Reducing demand

through low carbon

Enhancing price stability

Promote transparency in oil and gas markets (JODI)

Enhance producer-consumer dialogue (IEF)

Shared analysis (IEF, IEA, OPEC)

Emergency arrangements (IEA, OPEC)

Encouraging investment in production

Investment friendly regulation in key producer states

Demand transparency

Multilateral legal protection

Enhancing reliability of supply

More efficient EU and global gas

markets

Diversity and reliability of gas

supplies

Facilitating a North Sea offshore grid

Improving the physical security of key infrastructure

Limiting climate threats

Encouraging low carbon growth

Encourage low carbon technology Building confidence in

collective action

Gathering and sharing analysis

Shaping and framing the

global debate

Influencing key

constituencies

Our objectives

Eliminate fossil fuel subsidies

Promote energy efficiency

Global legal framework / EU 30%

Our diplomacy

The importance of Norway

Norway‏and‏Britain’s‏energy‏security

• Norway supplies nearly 30% of UK energy,

including 58% of our gas imports and

74% of our oil imports.

• Gas has a vital role to play in the UK

energy mix during the transition to

low carbon and beyond.

• January’s‏Joint Prime

Ministerial Statement

of Cooperation reflects

the importance we place

on Norway

Norway: our key partner

• PMs joint Statement of Cooperation (January 2011):

– Energy supply: Safe oil and gas exploration, extraction and supply,

offshore wind, CCS, development of a North Sea power grid, and a

Norway-UK electricity interconnector.

– Low carbon: Promote climate policies and technologies and work towards

a successful COP17 in Durban

• Officials dialogue will take forward this political vision

• “One North Sea Joint Ministerial Statement”‏(August2010‏) agreed

on cooperation priorities on energy and climate change

Conclusion