Greetings from Washington. I am delighted to again participate in ADIPEC, albeit virtually. COVID has thrown the world upside down, but it is critically important that we move forward. To that end, I would like to recognize and congratulate the United Arab Emirates for doing just that.
COVID-induced economic pain has exposed several vulnerabilities, but it is in times of weakness that we recognize our greatest strengths and find new opportunities. The UAE elevated this concept in signing the historic Abraham Accords. We look forward to building on this achievement.
Many of ADIPEC’s themes this year speak to the historic inflection point in which we find ourselves, but if I can sum them up into one word, it would be “transformation.” From my position at the Department of State, I watched the transformation of the global energy map, how new supply and demand patterns affect statecraft, and meeting calls for cleaner energy present both opportunities and challenges.
Shifting Energy Map
Energy quite literally powers economies – it is the means for development and progress or stagnation and decline. As such, energy represents an important factor in foreign policy. The relatively recent growth of U.S. oil and gas production has materially transformed energy geopolitics in multiple ways and with such speed that friends and foes alike are still adjusting.
Consider that from 2007 to 2019 – 12 years – U.S. oil production increased over two hundred and forty percent (240%), producing upwards of 13 million barrels in January this year.
This unprecedented and scaled production afforded the United States greater foreign policy room to maneuver and oppose states that used their energy for malign objectives. In partnership with other producing nations, including the UAE, we curtailed Iran’s oil exports so the regime could no longer use oil revenues to fund terrorism and instability in the Middle East. Together, we removed more than two million barrels of Iranian oil off the market without harming the global market or importing countries.
U.S. energy abundance opened an entirely new avenue to increase peace in the region, in partnership with likeminded nations. I believe that energy partnerships can have a halo-like effect on other political or diplomatic areas.
We have seen a similar effect with respect to U.S. natural gas production. In 2016, when the U.S. started exporting LNG in earnest, we were the 15th biggest exporter in the world.
Three years later, in 2019, the U.S. was the third largest LNG exporter, and we have shipped gas to almost 40 countries.
As in the case of oil, U.S. natural gas offers countries new options and indeed the foundation of a market. Countries increasingly have energy choices rather than being dependent on a dominant supplier. And countries are increasingly choosing to have greater diversity of supplies and in doing so, they assert their own agency.
For decades, the U.S. has joined Europe’s ambition to have greater energy diversity. Today, U.S. LNG exports are helping nations to achieve that ambition.
For example, over the last two years, the State Department has assisted Croatia’s plans to build an LNG terminal at Krk Island. Last month, the FSRU LNG Croatia arrived on site and is expected to start commercial operation in January 2021.
In Greece, we have supported the expansion of an existing LNG terminal and the construction of a new one at Alexandroupoli.
The U.S. is committed to energy diversity and energy partnerships because we recognize that these partnerships can lead to more than just commercial gains. We believe they foster peace, stability, and shared progress. We believe because we are bearing witness to it.
Consider Israel’s gas sales to Egypt and Jordan, and Jordan may possibly sell power to Iraq. UAE has commenced energy technology discussions with Israel. And although early, Israel and Lebanon are in discussions over their disputed maritime boundaries.
Eastern Mediterranean gas may soon flow through Greece and into the wider Balkan region. I recently joined Secretary Pompeo on a trip to Thessaloniki where we discussed the development of a regional market. I went on to Bulgaria and North Macedonia to advance a series of energy infrastructure projects. Balkan countries have a complicated history including war and deep mistrust, yet we see optimism in developing regional energy markets.
Yet, this drive toward regional energy markets is not particular to the Middle East and Southern Europe – it is a global phenomenon.
The Indo-Pacific region will drive most of the world’s energy demand growth through 2040, requiring trillions of dollars of investment.
We are helping countries in the region build free, fair, and transparent energy markets, as well as develop their indigenous energy resources. through the State Department-led, whole-of-government initiative called Asia EDGE – or Enhancing Development and Growth through Energy.
Since Secretary Pompeo launched Asia EDGE just over two years ago, we have dedicated more than 140 million dollars in technical assistance to support energy security, diversification, access, and trade across the Indo-Pacific.
We are working with Thailand and Vietnam – where a major gas deal was just announced — to strengthen gas sector governance. The U.S. is committed to the principles of sovereignty and that includes countries’ sovereign right to develop their own offshore energy resources.
These new energy markets are positive developments that can improve geopolitical stability and promote a more prosperous world. However, we recognize that they are still nascent, and require continued support from like-minded nations.
The calls for cleaner forms of energy and ESG activism and investment are affecting the geopolitical landscape as well, COVID notwithstanding. In fact, investment in conventional energy has dropped more than 20 percent this year, while renewable investment increased 6 percent.
Yet, rarely do people consider that clean energy technologies require significantly more minerals than conventional sources. According to the World Bank, demand for minerals such as lithium, cobalt, and graphite–all central to battery storage technologies–are projected to grow an extraordinary 500 percent over the next 30 years.
The International Energy Agency found that the production and processing of many key clean energy minerals are more geographically concentrated than oil and natural gas reserves. And according to IRENA, many critical energy minerals, “are found in weak states with poor governance records.”
This market concentration means that clean energy companies and their global consumers are vulnerable to supply disruptions, labor unrest, sudden royalty increases, and geopolitically motivated actions.
Just as with the geopolitical transformations brought by the development of regional energy markets, these developments also require nurturing to ensure countries can reap the full benefits for their people.
To address the supply chain issue, my bureau launched the Energy Resource Governance Initiative, or ERGI, in 2019 to help support the creation of resilient mineral supply chains. To expand access and understanding of these principles, we have launched the ERGI Toolkit, which is available at https://www.ergi.tools/.
ERGI is a multilateral, multi-country partnership between governments with developed mining sectors—to share best practices in governance, regulation, and investment climate in the energy minerals sector. And I am pleased that ERGI is gaining ground. I recently convened 20 countries to advance ERGI principles as well as a CEO roundtable from private sector representatives across the clean energy value chain.
We find ourselves at an inflection point in the evolution of the global energy system which has profound geopolitical implications. We have achieved a bit of momentum towards building a more cooperative, partnership-based system for all.
Yet, we must remain committed and guard against actors who benefit from a more unstable, divided order.
The United States will continue to support countries to develop free, fair and transparent energy markets and resilient supply chains.