Foreign Office Minister for Energy addresses Iraq Petroleum Conference

But the energy challenge cannot be met through demand-side measures alone. The historic trend is clear: whilst energy intensity falls, total energy demand still rises. Whilst the US has reduced energy intensity 50% since the 1970’s, its total energy consumption has risen. Therefore, increased supply, from traditional and sustainable sources, is absolutely vital to a balanced energy transformation.

Iraq’s energy potential

Iraq has the world’s third largest proven oil reserves. Iraq is the only country, besides Saudi Arabia, with the potential to massively increase conventional oil production. It currently produces nearly 3 million barrels per day and the government has ambitious plans to increase production to 12 million barrels over the next decade. Harnessing this huge potential is crucial to Iraq’s economic development and stability, and crucial for global energy security as well. We should all look forward to a time when Iraq is a significant influencing force for stability in the world’s oil markets.

Besides oil, Iraq also has the 12th largest proven gas reserves in the world, with some estimations citing nearly 200 trillion cubic feet in Northern Iraq alone. Heritage’s discovery of 8 trillion cubic feet in Miran West-2, demonstrates the game-changing potential Iraq has in gas, with sufficient resources to satisfy both domestic needs and to take advantage of export opportunities, including export to Europe. As we continue to move to a low carbon economy, natural gas will become increasingly prominent in the world’s energy mix and we shall need more gas to back up renewable installations such as windfarms, and the importance of Iraq’s gas reserves will rise further.  Gas will remain an important fuel, particularly in electricity generation. In the UK we need to ask why when gas is plentiful, energy prices are formidably high.

Tragically, terrorism and sectarian violence once held Iraq back from developing these resources: in 2006, nearly 100 civilians died in bombing and violent attacks every day. However, in 2011, the Iraqi Health Ministry report that this figure has now fallen to less than 5. This is still tragic, but is a sharp contrast to five years ago. Thanks to the bravery and courage of the Iraqi Security Forces, the security situation in Iraq has drastically improved. From Concerned Local Citizens in Anbar, to the actions of the Maliki Government, the Iraqi people’s resolve to liberate themselves from the scourge of terror, has yielded a new Iraq. However, we must never forget Churchill’s military maxim that “there are two kinds of success – initial and enduring”. Iraq must ensure that its security success is of the enduring kind.

The success of the 2009 licensing rounds has demonstrated that a secure Iraq is an attractive place to invest. A package of hydrocarbons laws, which resolve revenue sharing between Baghdad and the regions, is the next vital step. It would enhance investor confidence and help diffuse regional tension, by legally establishing the mechanism for Regions to negotiate contracts with international firms, and what level of funding from central government they are entitled to.

Important practical steps have already been made: a technical agreement permitting the exporting of oil from the Kurdistan Region of Iraq, with the revenues being received by the central government, has been agreed between the Oil Ministry and Kurdistan Regional Government. No doubt you will be hearing a lot more about this during the conference. The development of such technical agreements into full, transparent legislation will be a great step forward in the development of good governance in Iraq and it will also encourage investment across the whole of Iraq.