IMPACT OF VOLATILE OIL MARKETS, EQUITABLE ENERGY ACCESS AMONG ISSUES

AT THEMATIC SESSION OF BRUSSELS CONFERENCE

(Received from a UN Information Officer.)

BRUSSELS, 17 May -- Recent volatility and uncertainty in oil markets had affected importers more than exporters, and for some the debt relief provided by the Heavily Indebted Poor Countries (HIPC) Initiative was being offset by the rising prices of oil products, Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), told the Third United Conference on Least Developed Countries this afternoon.  

As the Conference held an interactive thematic session on “Energy”,

Mr. Ricupero stressed that it was important to come up with economic safeguards against the vagaries of markets.  The UNCTAD had started a programme on the implications of petroleum prices on developing countries’ economies.  The Organization of Petroleum Exporting Countries (OPEC) was very sensitive to that question, however, and he was going to meet with its leaders soon to discuss the relevant questions.

The session’s three segments focused on:  access to energy, particularly in rural areas; enhancing energy efficiency; and efficient oil and gas pricing and procurement in LDCs.  Among the wide variety of concerns addressed were:  ensuring energy access to the one third of the world’s population currently without such access; clean and renewable sources of energy; public/private partnerships; monitoring of energy integration plans; and energy management and its relationship to the environment.  Also, several members of OPEC emphasized the need to stabilize oil prices at a figure that was reasonable, while several speakers stressed the importance of the Kyoto Protocol to the Framework Convention on Climate Change.

Carlos Magariños, Director General, United Nations Industrial Development Organization (UNIDO) and moderator of the session, said a key point was that a large percentage of future energy needs would be from developing countries.  Today, 2 billion people had no access to energy.  The business-as-usual approach had to change and be replaced with one with political will.  The definition of access to energy was the provision of reliable and affordable energy.  By 2015, UNIDO proposed to reduce the number of people with no access to energy by half.

Bacari Kone, Minister of Economy and Finance of Mali and co-Chair of the session, said that when night fell, many areas in Africa found themselves in total darkness.  Without electric power, the continent could not achieve sustainable development.  A follow-up structure needed to be established after the conclusion of the Conference in order to implement its decisions, many of which would be based on the views expressed in the debate today. 

Wilhelm Molterer, Federal Minister for Agriculture, Forestry, Environment and Water Management, Austria, also co-chaired the session this afternoon.

Panellists included:  Andre Nalke-Dorogo, Minister of Mines Energy and Water, Central African Republic; Musa H. Sillah, Secretary of State for Trade, Industry and Employment, Gambia; P. De Sampaio Nuñes, Director of Transport and Energy, European Commission; Sonam Tshering, Director of the Department of Power, Bhutan; Thomas Johansson, Director of Energy and Atmosphere Programme, United Nations Development Fund (UNDP); Chris Mottershead, Vice-President Technology, British Petroleum; Godfrey S. Simasiku, Deputy Minister of Finance and Economic Development, Zambia; S. Maya, Zimbabwe; Andreas Ranet, Verbundplan, Austria; Bernard Jamet, France; Yvette Steven, Department of Economic and Social Affairs; Joe Klemesu, West African Gas Pipeline; Fatih Birol, Head of Economic Analysis Division, OECD/IEA; and Georges Gero, New York Mercantile Exchange.

The Conference will meet again at 9:30 a.m. Friday, 18 May, when it is scheduled to hold an interactive session on enhancing productive capacities, the role of investment and enterprise development.

Thematic Session

Opening Statements

Carlos Magariños, Director General, United Nations Industrial Development Organization (UNIDO), said energy was a priority programme of his agency.  It attached particular importance to the problems of least developed countries (LDCs), particularly those in Africa.  The UNIDO sought to promote the effective production and use of energy and the transition of advanced technologies to the next generation of users.  As such, it was avidly promoting technological development and capacity-building.

At a high-level meeting convened by UNIDO in Vienna in March, providing energy to LCDs was one of the key issues.  Also, at the last meeting of the Commission for Sustainable Development, access, renewable energy, rural energy and energy and transport were key issues that were considered.  It had also been recognized that international cooperation would play a critical role in achieving sustainable development.  A key point was that a large percentage of energy needs in the future would be from developing countries.  Two billion people had no access to energy.  The business-as-usual approach had to change to one with political will.

He said the definition of access to energy was the provision of reliable and affordable energy.  Nearly one third of the world’s population had no access to modern commercial energy.  Rural electrification was a necessary condition of sustainable development.  The rational use of energy meant reducing energy consumed for a given purpose, avoiding unnecessary use, and implementing effective energy recovery.  Another proposal was the provision of efficient oil and gas prices in LDCs.  A crucial factor for LDCs was the financing of energy projects. The UNIDO proposed to reduce the number of people with no access to energy by half by 2015.

The session’s co-Chair, WILHELM MOLTERER, Federal Minister for Agriculture, Forestry, Environment and Water Management of Austria, said that a high-level meeting, which had been held in preparation for the current event, had been held in Vienna in March and had provided a basis for the discussion during the Conference.  The ninth session of the Commission on Sustainable Development had addressed the question of energy and sustainable development last month.  The participants of both meetings had noted that the current patterns of energy production and use were not sustainable and that action at all levels was needed to address that problem.

Access to energy had been identified as one of the main issues, he continued, with almost one third of the Earth’s population living without connection to modern energy grids.  Electrification, particularly in rural areas, remained one of the main challenges.  The situation in LDCs was worse than anywhere else.  Having access to modern forms of energy at affordable prices was a basic precondition for economic development.  The lack of energy in LDCs hampered their economic chances.

Energy generation, distribution and availability needed to be addressed in order to provide local economies with much-needed energy, he said.  He believed that sustainable development was better served through small- and medium-sized projects.  Small-scale projects created local employment, reducing the level of poverty and assisting in sustainable development.  Important challenges for the next 10 years lay in capacity- and institution-building, development of energy partnerships, and the provision of environmentally sound and socially acceptable energy.  Another meeting in connection with energy issues -- on financing energy  -- was scheduled for November in Vienna.

Bacari KonE, Minister for Economy and Finance of Mali and co-Chair, said energy was a key concern for his country, which was landlocked.  The economies of the LDCs were fragile, because there was little room for diversification, and they were particularly affected by oil and gas fluctuations.  Poor supplies of commodities and the increase in oil prices had given rise to serious indebtedness. Oil increases had also jeopardized the positives expected from debt reduction under the HIPC Initiative.  There was also poor electricity coverage, particularly in the rural areas, which contributed to poverty and obstructed the start-up of commercial enterprises.

He said LDCs had decided upon and implemented a programme, that included better conditions for obtaining oil and gas supplies, which would greatly benefit a landlocked country like Mali.  He stressed the importance his country attached to the multi-functional platform -- a source of energy that was well suited to the rural areas.  The failure of the programme of action over the last 10 years was due to a lack of follow-up.  Without energy, socio-economic development was not possible.

RUBENS RICUPERO, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), reminded the participants that the debate should be really interactive, leading to tangible results –-the practical “deliverables”. Turning to the situation in the LDCs, he said that energy was a crucial problem both for the exporters and importers of energy.  Petroleum products accounted for up to 25 per cent of all energy sources used in the world.  While some of the countries developing their potential were among the exporters of petroleum products, energy imports were high on the agenda of others.  Energy constituted  12 per cent of total LDC imports, and in some countries it accounted for as much as 50 per cent of imported goods.

Recent volatility and uncertainty in oil markets had affected the importers more than exporters, he said, and for some the debt relief provided by the Heavily Indebted Poor Countries (HIPC) Initiative was being offset by the rising prices of oil products.  It was important to come up with economic safeguards against the vagaries of markets.  The UNCTAD had started a programme on the implications of petroleum prices on developing countries’ economies.  However, the Organization of Petroleum Exporting Countries (OPEC) was very sensitive to that question, and he was going to meet with its leaders soon to discuss the relevant questions.  The UNCTAD had made several important initiatives on risk management for petroleum products.  That was a practical way of helping countries. 

Turning to the questions to be considered today, he said that one of them was how to help the LDCs to overcome the structural hurdles in the energy field.  Should the criteria include only efficiency, or sustainable development, as well?  Many choices depended on the approach to those issues.  Another question that should be addressed in the discussion was the effectiveness of energy production and creating an enabling environment to improve the work of energy companies.  Public/private partnerships could be useful in that respect.  Another question concerned the high cost of financing and how it affected the oil-importing countries.  Resolving the energy issues of today could lead to future prosperity.

Theme 1:  Access to Energy

ANDRE NALKE-DORONGO, Minister of Mines, Energy and Water of the Central African Republic, said only 3 per cent of his country’s population had access to electricity.  The country was rich in hydroelectric power, with the potential to put down plants capable of pumping anything from 100 to 1,000 kilowatts.  Least developed countries needed help developing energy resources in rural areas.  They also needed support connecting their electricity grids.  Both those actions had to be carried out if the battle against poverty was to be solved.

MUSAH SILLAH, Secretary of State for Trade, Industry and Employment of the Gambia, said he believed that the basis for sustainable trade was energy.  One   of the disadvantages of having no electricity was the accompanying massive desertification.  There were also schools in rural areas.  Without electricity, their laboratories would find it difficult to function.  The lack of power made it difficult for a country to move forward.  The high cost of petroleum products had, thus, compelled his country and others to look at other sources of energy.  He called on all development partners to assist in the provision of affordable energy to LDCs.

P. DE SAMPAIO NUÑES, Director, Transport and Energy, European Commission, informed the participants about the Commission’s efforts to promote the new types of energy for the LDCs.  The Commission had devoted some 450 million euros to the projects on centralized power and energy efficiency.  Those projects were “not always a complete success”, and that was frustrating.  The Commission also spent about 250 million euros a year on research and development of technology programmes to advance cleaner and more efficient use of energy.

In LDCs, the Commission recognized the problems of the lack of institutions and financing for energy, he continued.  An international framework was needed to address energy questions in the LDCs.  As climate change was a severe threat, if no value was given to reductions in greenhouse gas emissions, it would be very difficult to keep going.  In that respect, it was very important to ratify the Kyoto Protocol.  Price and stability were a subject of discussion in the European Commission, including the range of sustainable prices.  The recent rise in oil pries had had a devastating effect on the LDCs.  The Commission was open to collaboration to solve those problems.

SONAM TSHERING, Director, Department of Power, of Bhutan, said he hoped the end of the Conference would provide solutions to help halve the number of people without energy by 2015.  Most LDCs derived their energy from biomass, in fuel form.  Bhutan had electricity in the cities, while kerosene was used for lighting in the rural areas.  Nevertheless the country was endowed with hydropower.  He warned countries with similar resources against becoming complacent.  Those nations had to ensure that hydropower remained a sustainable source.

He said that in Bhutan the revenue earned from the export of hydropower was plowed back into socio-economic development.  The national project “Vision 2020” hoped to provide electricity to all by the year 2020.  But there were serious constraints.  The first was Bhutan’s geographic terrain, which was very mountainous.  Such topography did not facilitate the linking of nationwide power lines.  Thus, the costs were high and the population scattered.  Bhutan would need $20 million per annum if it were to achieve the goal of electricity for all by 2020.  On a global level, a trust fund was needed, so that energy could be distributed to all.

THOMAS JOHANSSON, Director of the Energy and Atmosphere Programme, United Nations Development Programme (UNDP), said access to modern energy was a prerequisite for sustainable development.  Fortunately, affordable energy technologies existed, which could help to resolve that and many other energy problems.  The UNDP was happy to be able to provide assistance in the expansion of several regional energy projects, in cooperation with its partners. 

Continuing, he said that there should be an operational target on energy, in addition to the goal of reducing the number of people living in abject poverty. Functioning markets were very important in that respect, but they were not the only aspect of the problem.  Many LDCs were very small, and the question of connecting them to power grids presented a problem.  Liberalization and price regulation were of great importance.  Grid access to independent producers needed to be addressed.  Energy had to be an important element of development programmes, and international cooperation needed to intensify at all levels.  Energy for sustainable development should be mainstreamed.  Energy options needed to be further explored, and he invited the participants to see UNDP’s recent publication on that matter.

CHRIS MOTTERSHEHAD, Technology Vice-President, LCG, British Petroleum (BP), said there were critical roles for both the developed world and LDCs.  While it was important for multinationals to bring technology to developing countries and LDCs, there was an equally critical role to be played by small- and medium-sized companies that understood the critical dynamism of the various markets.  He said BP traditionally assisted those LDCs who primarily sat on top of large quantities of hydrocarbon reserves.  But, it could not do all of that alone.  It firmly believed that local entrepreneurs could run with ideas and investments and customize them to local conditions.

Mr. GURKOK, UNIDO, presented some “deliverables”, which had been identified at the High-Level Expert Group Meeting in March.  The experiences of the technical missions to Bhutan and Zambia were presented in separate documents, available to the delegates.

As the first deliverable, he mentioned a multifunctional platform -- essentially a small, diesel-powered engine that provides energy for milling, dehulling, charging batteries and pumping water -– which was an example of good cooperation between several United Nations agencies, including UNIDO and UNDP. The project, developed in Mali, was now being expanded to include several other African countries.  Another deliverable involved joint development of rural access to clean water and energy in the LDCs, carried out by the Department of Economic and Social Affairs and UNIDO.  Also, he noted the local assembly of renewable energy manufacturing equipment in the LDCs; for example, in the Gambia, a project under which solar energy equipment was produced.  Finally, a rural energy pilot programme in Bhutan encouraged the use of environmentally-friendly energy sources.

During the subsequent discussion, a number of speakers who were members of OPEC all highlighted that oil was a non-renewable commodity and a strategic one. It was, therefore, essential for that commodity to have its price stabilized.  It was underscored, however, that the stabilized price should be reasonable, so that it would not be out of the reach of both developing countries and LDCs.

Other speakers drew attention to the fact that energy had slipped away from governments and had been left to private sector.  That was no guarantee that it would reach the poor, especially in the rural areas.  There was also a call to ensure that energy occupied a central place in the World Conference on Sustainable Development to be held in Johannesburg in 2002.

Concerning access to energy, a speaker said that several hydroelectric dams existed in his country, but as there was no electric grid, there was no way of moving that energy to the rural areas.  Without the much-needed infrastructure and regional cooperation, the high energy potential could not be used to its full extent.  One of the solutions would be creating a connection between individual electric networks and sharing energy at the regional level. 

Energy use must be safe, a country representative said.  Regional interconnections would be possible only in the absence of conflict.  Multinational regional and subregional companies could be set up to run regional energy networks.

Enhancing Energy Efficiency

GODFREY S. SIMASIKU, Deputy Minister of Finance and Economic Development of Zambia, said that his country intended to implement several energy conservation and efficiency programmes in collaboration with the United Nations.  His country was still dependent on mostly traditional sources of energy, and it was important to improve the social and economic conditions of the population through more efficient use of energy.  New and improved technologies should be used.  Information dissemination and increasing awareness and demand management were among the projected actions. 

A special ministry for energy and water development had been created by his Government, he continued.  Without proper control, demand for energy could cause serious environmental problems, including deforestation.  Short–term benefits in exploiting resources should never be at the expense of long-term safety and benefits.

S. MAYA, Zimbabwe, said energy should be used as rationally as possible.  The little that was accessed was often traditional energy, which was not featured in discussions on energy efficiency.  Efficiency centres were being set up to assist LDCs on how to use energy rationally.  The aim was, basically, to ensure that there was a strong and effective fallback for governments that had legislation on energy use.  In most cases, the energy supplied was expensive.  It would be unfair, however, to supply such energy, then charge people the same expensive rate when they were only using a fraction of it.  The centres were the equivalent of the mechanic, who looked at cars that were gas-guzzlers and tried to make them efficient.

ANDREAS RANET, of Verbundplan, Austria, said that his company wanted to present two best-practice projects based in Cuba and Ethiopia.  The first one had investigated substituting traditional energy resources with advanced ones, and several photovoltaic systems were installed.  Financed by UNIDO, the project in Cuba had been completed this year.  Related to hydropower in LDCs, the project in Ethiopia had been financed by the Government of Austria.  His company’s experience showed that special emphasis should be placed on the human resources aspect, skilled professionals, and productivity improvement.

BERNARD JAMET, of France, said that energy savings represented a fundamental issue, even for countries where access to energy was limited.  For those countries, conservation of energy and efficient energy savings could even be of particular importance.  The solutions to the basic problems needed to be found first.  Those included financing and investment.  The transfer of technology was also not possible without finding reliable financing.  Lasting sustainable mechanisms that went beyond subsidies were needed for energy development and efficiency. 

One speaker said that an inventory of countries with the potential to generate such energy as hydroelectricity should be drawn up.  Once the fuel producers had been identified, they should then be helped to construct whatever they needed to fulfil their energy-generating potential.

Efficient Oil and Gas Pricing and Procurement

YVETTE STEVENS, United Nations Department of Economic and Social Affairs, said consumption of energy in LDCs was very low.  Some of those countries, however, could benefit from cross-border supplies from neighbours, who had the potential to produce electricity from local sources.  While renewable energy technology did exist, much was needed in the way of research and development to bring that source to a level that was affordable.

She said in LDCs the problems associated with petroleum usually stemmed from price fluctuations and the transportation and storage of the fuel.  Trucks transported fuel and the conditions of the roads were bad in many LDCs, especially in the landlocked countries.  That needed to be remedied if petroleum was to become accessible to LDCs.  She added that some African countries had natural gas, but at the moment that gas was being flared into the open air without being used. That should be looked at as a possible source of energy for LDCs.

JOE KLEMESU, Chairman of the Project Implementation Committee of the West African Gas Pipeline, said that the project he represented used natural gas -- which was being otherwise flared in Nigeria -- for  use in Nigeria, Togo, Benin and Ghana.  The four governments involved were providing an enabling environment to several companies, including Chevron, which were implementing the project.  Local natural gas was an attractive option for the countries of the region, promising huge revenues.  In connection with the project, the legal and fiscal backgrounds of the countries involved must be harmonized to create a united legal regime and produce a single concession agreement.  Electricity tariffs of the four countries also needed to be adjusted.

FATIH BIROL, Head of the Economic Analysis Division of the Organization of Economic Cooperation and Development (OECD)/IEA, said that the share of traditional energy-producing countries was projected to fall, due to the increasing role of the developing countries in the energy field.  A sustainable energy future was not projected, however.  The high demand for electricity was going to grow, and policy interventions were needed to arrest that trend.  Energy intensity figures needed to be analysed in order to understand the current patterns. 

Prices of energy for both oil-importing and -exporting countries played a very important role, he said.  The external debt of developing countries, for example, grew in the years when oil prices jumped.  Efficient energy pricing within countries was also important.  In many countries, energy prices were heavily subsidized, and the implications of such policies often involved inefficient energy consumption.  Eighty per cent of the energy consumption of the LDCs involved non-commercial energy use, which needed to be taken into account.  He suggested reforming the energy prices and subsidies in LDCs.  The reform should be practical, transparent and implemented at reasonable administrative cost. 

GEIRGES GERO, Member of the Board, New York Mercantile Exchange, said that the price of energy today was not just a matter of the supply and demand of a simple commodity -- it also involved currency, weather, shipment risks and other factors.  Currently, it seemed to become a surrogate for the people who used to buy gold in times of volatility.

He said the exchange did not set prices -- it was a level-playing field for all buyers and sellers to make transactions less costly around the world.  Every entity was exposed to risks, some of which could be managed.  Crude oil and oil products were critical for the developing countries.  In the past year, the prices of natural gas had gone from single to triple digits, compared to oil.  Oil had also fluctuated.  Those risks could be managed, and the financing could become a useful mechanism for the developing countries.

A representative of UNCTAD said the energy deliverables were basically related to the need for capacity-building.  What was required was a new initiative

to cover the export of natural gas exports and the development of that form of energy.  Better storage, pricing policies, enhanced energy efficiency, strategies to protect countries against price fluctuations were all related deliverables that had come out of this afternoon’s meeting.  In addition, there was also a directive for management and finance programmes in hydrocarbon-producing States. In the discussion, a speaker said there had been much debate on rising oil prices.  Yet, no one had mentioned the speculators in London and other western capitals who earned enormous profits by driving up the price of oil.

A speaker also stressed the importance of reviving the Kyoto Protocol to the Framework Convention on Climate Change, which could set guidelines for the industrialized and developing countries for the production of greenhouse gases.

Speaking about the joint efforts in the field of energy, a delegate said that networking in the sphere of hydroelectric power and gas pipelines could help to resolve the problems of LDCs.  Africa had enough capacity to produce energy, but it was unevenly distributed.  The West African pipeline was an important project, which deserved support from development partners.

Closer monitoring of energy integration patterns was needed, a speaker said.  The international community should draw a plan of energy use to make sure that the energy most suited to a particular region was used there.  Each form of energy and its safety needed to be examined.  A panellist said that what was lacking was an energy policy in many LDCs; that was where cooperation could be useful.  The lack of statistics on energy was also a problem.

In his concluding remarks, Mr. MOLTERER said that the issues of energy use, supply and demand had received much attention in the debate.  The use of clean and sustainable sources of energy was a precondition for development, and access to sound and equitable energy was key to solving many countries’ problems.  The interventions showed great interest in knowledge and capacity-building, he continued.  New energy solutions had been mentioned, including the multi-functional platforms.  The public/private partnership was also stressed.  He  supported the remarks on the importance of the Kyoto Protocol for sustainable development. 

Mr. MAGARIÑOS said everybody would profit from the comments made.  He emphasized the need to articulate energy development goals, which should include reducing by half the proportion of people without access to energy by the year 2015.  Access to clean and renewable energy was key to the development of many countries, and more concerted efforts would be needed to address the unfavourable situation in many parts of the world.  The UNIDO was ready to coordinate international efforts in that respect.

Mr. KONE said that there was a consensus on the need to ensure access to affordable and clean energy for LDCs.  Basic infrastructure would make the supplies more secure.  Also covered were the interconnections between various sources of energy, as well as between countries.  The need for price-setting policies to address the imbalances in the markets was mentioned.  Together, all the main ideas expressed in the debate would help the international community move forward.  When night fell, many areas in Africa found themselves in total darkness.  Without electric power, the continent could not achieve sustainable development.