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Energy: White Paper

My Lords, this White Paper is to be welcomed, as is the manner in which it was presented to us by the Minister. He is well equipped, from his experience and abilities, to deal with a very complex problem. He will remember Harold Macmillan giving advice to colleagues, when dealing with something very complex that takes a long time: he said that the balance between delivering a cliché or making a terrible mistake is a state of delicate equipoise. We are confident that he will avoid both. I want to concentrate on chapter 1 of the White Paper, which deals with energy security, and in particular security of supply. The word ““security”” in this context is used in its traditional rather than its intelligence sense. So where in this context we speak of ““national security””, we mean it in a most compendious way—it includes government, business, industry, finance, the people and the way we live economically in this country. Security of supply of energy requirements that will sustain our national security is absolutely vital. All the other parts of this White Paper are equally important. But in the shorter term—the next 10 to 20 years—we cannot afford to neglect our critical dependence on traditional energy supplies. Their security is therefore something we must work for. We should work for it in our national interest, in the expectation that that would usually coincide with the international interest. What are the essential factors that affect our national interest at the moment? Most of our energy requirements will have to be met by imported supplies for the foreseeable future. We remain a trading nation, right down to energy. Secondly, the chief executive of Shell said recently that by 2050 the world’s use of energy will double from its present volume. Thirdly, the International Energy Agency this week predicted a period of five years plus of what it called a supply crunch—an extremely tight market. Higher oil and gas prices will remain. Of course the economist and the financier will tell us that most of the time that can be accommodated. But it cannot readily be accommodated at the personal level. Higher oil and gas prices, persisting over time, mean more expensive petrol, more expensive utilities and more expensive food, so that every citizen is affected economically. My fourth point involves resource nationalism. It is here to stay in some countries, and, because they have such massive resources, the rest of us will accommodate the nationalisation of their products. But this resource nationalism means that, in a period of higher prices, there will be a restricted supply and little inclination to spend lots of money on discovery and exploration—a circular system that maintains a high price level, if that is possible. The last point about these external factors concerns resources. Anyone who has been to an energy conference will remember the bar charts for gas and oil that show us, each time, which entities supply the most and have the greatest reserves. For gas, it is Gazprom; for oil, it is Saudi Aramco. Those bars on the chart literally go off the page compared with any other similar entity. In effect, two entities are in seriously important positions of control of world energy supplies. What do those five factors mean? They mean that we as a country need energy at an expensive price, which is likely to continue, from limited sources, some of which may be unstable, with little prospect in the foreseeable future of big new reserves being found. That state of affairs requires of our Government and our country some really serious thinking about security of supply. I propose some suggestions under three headings. The first is that we adopt a more aggressive search for energy supplies. One of the least publicised but most important achievements of the last Government towards their end was the agreement with Norway for long-term supplies of energy—an ally, a neighbour and geopolitically secure. What about Qatar? I imagine that our ambassador there is treated as one of the more important people to speak to on the phone occasionally. What about Libya? It is opening up into the market. Algeria presently wants to feed gas into Spain, France and probably beyond. What of our gas infrastructure, which is designed to meet these new sources? That means going out into the market and getting it. How do we do that? First, I suggest an advisory group; not a talking shop, but one which consists of energy experts, financiers and geopolitical planners, who meet the Government from time to time to talk it through, as would any big business if it had the capacity to deal with such a problem. No civil servant reading the White Paper could enjoy the hubris of thinking that any Government could achieve it all through their own resources. Next, why do not we appoint ““energy ambassadors””? I refer not to diplomats but to people who cross the energy, political, business and government divides, and who spend their time, within reason, looking for our markets, preserving those we have and seeking to make our supplies secure, being on top of the issue. This is geopolitics of a serious kind. May Kaldor’s recent book, Oil Wars, makes plain to us that which we should have known historically: that the present panorama in many ways repeats that which existed towards the beginning of the 20th century—the oil wars of that time where Baku was the Riyadh of its epoch. So I suggest a more aggressive policy built on skill, experience and determination. Next, we must look for a more reliable market. The governance of the countries upon whom we are dependent in this regard is unreliable. It is amazing that we should be conducting the world economy without anyone really knowing how much oil reserves there are or what the future gas capacity will be. For 15 consecutive years, Saudi Arabia has declared that its reserves are 280 billion barrels, even though in the same number of years it has consumed 100 billion barrels. The absurdity of that state of affairs should worry us if, as I pointed out, Saudi Aramco is the key supplier. Where is it all going? So I suggest better governance and more transparency. At 1.29 of chapter 1, the Government say that the UN should work for that transparency in the interests of us all. Next, under the heading of the more reliable market, we have an energy charter. It exists to preserve a system for energy usage around the world, based in Brussels. As my noble friend Lord Haskel indicated, why do we not have a European energy security charter to which we sign up as allies and supporters of a single market, not to divide the supply of energy into Europe but to unite it in the most productive way? If one looks at a map showing gas and oil supplies into Europe, it is all from the east—not the Middle East. One can see the lines for gas and oil criss-crossing pretty well every European country. Has anyone planned it, negotiated it, or thought it through? Of course not. It has happened coincidentally with one national interest meeting another. So the Russo-German gas pipeline under the Baltic could create the supply alliance between two very powerful countries. What about the remainder of Europe? Again the word ““Russian”” is not coincidental here. Its proposal for an oil pipeline—Bulgaria, Greece and Italy—completes the circle of supply and potential market control. That requires European action. Lastly, I refer to a market with security of supply that remembers the developing world. I start with national interest, not charitable sentiment. If by next year, or the year after, we as a nation will be the first in the G8 to reach 0.7 per cent in our commitment to development aid, do we want it wasted because it will go to countries which do not have proper energy supplies or systems which will be necessary to make our development aid more beneficial to them? At 1.50 of chapter 1, the Government have some really serious proposals: an energy research programme for Africa; an infrastructure consortium; and the involvement of the development banks. I have spent a considerable time on security of supply because it can be forgotten. I am talking about today and the tomorrows of the near future. They are vital to us. This is an extraordinarily complex problem. It will benefit from the following: informed debate; evidence-based decisions; financial prudence; and all of us in Parliament and Government being geopolitically astute, as I am sure our new Minister will be.