I am delighted to be here today for my first public engagement since being appointed as UK Energy Minister. It has been a steep learning curve over the last couple of weeks, but my previous role as City Minister, as well as spending 25 years in finance prior to becoming an MP, will stand me in good stead. I can certainly tell you now that a key priority for UK Government, and my personal priority as Energy Minister, is energy security: keeping the lights on and the bills down for todays’ consumers, their children and their grandchildren.
In an increasingly interdependent world, energy security cannot be a wholly domestic issue. Only with strong and stable energy partners across the world can we achieve secure access to energy, a well-functioning energy market and stability to plan for the future. Recent events in Russia and Ukraine have made this clearer than ever.
Iraq is a key partner, which is why I am pleased to be addressing this prestigious event so early in my new job.
In my address I would like to set out how I think we can work together as partners to archive our shared goals of energy security and prosperity and highlight the role that British businesses can play in supporting these efforts.
So first, Iraq’s Energy Potential
The IEA estimates that global oil demand will grow by 14 million barrels a day to reach a total of 104 million barrels a day by 2040. Iraq –a country of immense resource wealth - has the potential to meet a significant proportion of that growth, in fact the highest proportion of any other country by 2040. Because of this huge potential Iraq remains strategically, economically and practically at the centre of any conversation we have about global energy security.
This makes it more vital than ever that we continue to focus on investment and the future health of Iraq’s energy sector which will help to deliver prosperity for Iraq as a whole. It is great news that Iraqi oil exports have recovered and continue to increase month on month. We will all benefit from this rise in production.
And second, what can British business do?
The UK is highly ambitious – we want to be Iraq’s “partner of choice”, we are committed to working with you to make this happen.
Our biggest energy companies have already committed billions of dollars to Iraq, both in terms of investment and in the provision of technical expertise.
For example BP is running one of the world’s largest fields in southern Iraq and have goals to increase this even further and triple production. Shell has recently signed a Heads of Agreement to build an $11bn petrochemical plant in Basra, which will be one of the largest in the world and will generate around 40,000 to 50,000 jobs and will contribute significantly to Iraq’s economic recovery, as well as supporting sustainable and inclusive growth.
Many other British companies also operate across Iraq in all parts of the energy sector, from production to engineering and the supporting supply chains. They have been at the front of technological expertise and advancements and exploring new methods of best practice, continuing to help strengthen Iraq’s energy sector. For example last year Shell and Petronas were able to start production at Majnoon. As well as increasing production to a target of 1.8million barrels of oil a day by 2017, it has begun the vital process of capturing flared gas, as has the Joint Venture at Basra between Iraq’s South Gas Company, Shell and Mitsubishi Corporation. As you will know flaring is a great waste of resource and money, and causes great damage to the environment. This technology can address this, allowing Iraq to make the most of its energy reserves, diverting the gas for local power generation and export.
The UK Government is very keen to support more British involvement in Iraq’s oil and gas industry. To do this UK Trade and Investment have a programme of strategic engagement in place with BP, Shell and the leading engineering, procurement and construction contractors to help smaller UK companies make the most of the opportunities available and provide the skills and services Iraq needs. For example we have run a “share fair” with BP to introduce more UK companies to the procurement chain associated with the Rumaila project.
We are also helping smaller companies engage with the larger players in the market. For example, with our industry partners the Energy Industries Council, we sponsored two delegations of UK Small and Medium Enterprises at the Basra Oil and Gas show. I was delighted to hear that as a consequence of our engagement with BP in Iraq, Severn Glocon of Gloucester has been working in country for 2 years from their Basra based engineering support facility. This is great news – and we want to see more of the same.
I am proud of the role that British businesses are playing and commend the contribution of all our firms involved. So to reiterate, my aim is for the UK to be Iraq’s primary partner of choice in energy.
Third, how can Iraq encourage further investment?
Well the importance of international investment into Iraq, both for Iraq as well as for our own energy security, is clear. As we all know strong leadership, vision and cooperation between all parties in the energy sector will create the right commercial environment for investment. The rule of law and strong independent institutions are a key part of this. In Iraq, lower oil prices in particular have highlighted some weaknesses in economic institutions. Tackling these, along with some of the political divisions that risk undermining Iraq’s energy potential, is of great importance. This will give international companies the confidence that their commitments will be honoured and their investments protected and will attract more international companies to invest in Iraq.
The UK is a firm believer that good governance also ensures that a country’s energy resources benefit its entire people, both today and in the future.
Good governance includes a strong partnership between the Government of Iraq and Kurdistan Regional Government. We welcomed the budget allocations and energy export deal in December which laid the foundation for increased cooperation. We underscore the importance of both parties continuing to work together, as they have been over recent months, to ensure this deal is allowed to succeed.
Fourth, diversification will be important for Iraq
Iraq’s energy potential is the foundation for a brighter future for the country. A prosperous energy sector will support economic development throughout the country. Revenues from the energy sector could be used for Iraq’s broader development – for example investment in infrastructure, improved services for the Iraqi people, education and healthcare. All parts of the country and population could benefit from the investment and prosperity. In turn, Iraq’s economic development will be vital for its political future and stability.
In spite of the opportunities that a prosperous energy sector can deliver, the recent fall in oil prices has also demonstrated the vulnerability to market fluctuations when relying too heavily on energy products. Financial discipline is key to weathering the storm of low prices, which I know, has hit Iraq hard. But, longer-term, Iraq will want to consider taking steps towards greater economic diversification. This is fundamental to achieving a prosperous and robust economy and ensuring inclusive and sustainable growth.
Finally security remains a key issue
The UK plans to continue our support as Iraq takes these transformational steps. Tackling Iraq’s challenges, from the fall in oil prices to regional events, is important to us all.
This is especially true when it comes to tackling the threat which ISIL poses. Together, we face a common enemy of violent Islamic extremists. Only through support and partnership can responses to this threat be effective and inclusive.
The UK is committed to continue to stand by the people of Iraq, the government of Iraq and the Kurdistan Regional Government in their fight against terrorism and protecting civilians from ISIL’s murderous campaign. The UK airstrikes and other military support show that the UK plays its part in standing against ISIL, but we recognise that this is a generational fight and it will take time and patience.
We continue to support the Iraqi-led government response to ISIL as part of a global coalition of more than 60 countries. As part of the Global Coalition nearly 800 UK personnel are deployed on operations in the region; helping Iraqis to strengthen and mobilise against ISIL, providing counter- IED training and airstrike, intelligence, surveillance and reconnaissance capabilities. We continue to reaffirm our commitment to unity in tackling ISIL and seek to build on the successful Paris meeting last week. I know that our Ambassador to Iraq, Frank Baker, will speak further on these issues later today.
So in conclusion
Fulfilling Iraq’s energy potential is a priority for the whole of Iraq for the UK and for British companies and more broadly for global energy security. As a friend to all of Iraq, the UK stands ready to provide support and cooperation. We are dedicated to working with all parties in tackling the ISIL threat; this is a priority and a strong unified response set on solid economic foundations will prove most effective. Iraq’s significant energy resources have the potential to drive future stability and prosperity, creating jobs and raising living standards for the Iraqi people and I am confident that Iraq will continue to be a great and responsible energy producer, with benefits for all Iraqis. Unity and cooperation is fundamental to realising these goals so let us work together to guarantee prosperity, stability and energy security for us all.
Thank you for your attention.