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Below is the text of the speech made by Michael Fallon, the Energy Minister, on 2nd June 2014.

Introduction

It is a pleasure to be speaking at an event that is focusing on a key challenge facing Europe.

This is a crucial time for EU energy policy. Recent events have brought into focus the importance for all our citizens of energy security. In gatherings such as this there is often very fashionable talk of the so-called trilemma that posits security, affordability, and decarbonisation at opposite points of the triangle. This is false geometry. Without secure, affordable energy we will not be able to move to a more sustainable, lower carbon energy future.

A Common approach

The Rome G7 Energy communique set out with welcome clarity what we need to do as a Union and as countries to strengthen energy security – more home-grown energy, reducing energy demand, diversifying supplies and supply routes, and building the missing internal energy infrastructure and integrated markets so energy in all forms can flow smoothly and freely.

It is vital that we use this momentum to inform decisions that are needed on our objectives for 2030. By acting now we can give investors the certainty they need to commit the enormous sums of money required to modernise and reinforce the EU’s energy infrastructure over the next decade.

This evening I want to focus on the priorities the UK sees for the EU –

First, taking full advantage of the benefits that a single EU market in energy has to offer.

Second, we need to maximise home grown energy sources and diversify supplies.

Third, the 2030 package needs to be a driver of competitiveness that benefits consumers and industry and allows member states to determine their own energy mix and to decarbonise at the pace best suited to their economic situation.

Single market

A well-functioning and integrated internal energy market in electricity and gas will be a critical part of ensuring security of our energy supplies and in keeping energy costs down.

By opening up and integrating markets across national boundaries, we can increase competition, access the cheapest energy and reduce the level of back-up generation needed.

The benefits of a single market are clear and undisputed. So, we must ask what we need to do to achieve them.

The European Council has already agreed that the internal energy market should be completed by 2014. This is something the UK strongly supports.

This means full and effective implementation of the Third Package in every Member State. It also means agreeing on key technical rules aimed at removing the remaining barriers to cross-border trade.

On top of that, Europe need much more investment in interconnection to better link markets.

If we can seize the opportunity we can deliver a more resilient and competitive energy market.

Home grown sources

To deliver these benefits we need diverse sources of energy. We have an abundance of energy resources that it can, and must take advantage of.

That means that exploiting the full use of all energy technologies, from shale gas to renewables, from nuclear to shale. We should not any longer be ideological about energy.

Renewables play, and will continue to play, an important role both in the European energy system and here in the UK. Through the Levy Control Framework this government has set out support through to 2020; with many countries making retroactive changes and reducing their subsidies, our move is unparalleled.

In addition to renewables, new nuclear is critical for the future. The UK has already attracted significant levels of investment into the new nuclear build programme. We reached agreement with EDF on the key terms of a proposed investment contract for the Hinkley Point C nuclear power station. We are now working closely with the European Commission on the Hinkley state aid investigation.

Given the continuing need for gas, we cannot afford to ignore the potential for domestic less sources. The development of shale gas in Europe could reduce our reliance on imports, could place downward pressure on energy prices and it could support the move away from high carbon fuels.

So we are very pleased that the Commission responded to calls from the UK and other Member States to adopt a proportionate approach on the regulation of shale. We are conducting a study with Poland on the impact of shale for our countries and the whole EU which I hope will inform the new Commission and the new Parliament on the need to incentivise exploration, rather than bureaucratise.

Diversify sources

We will, of course, continue to need to import energy into Europe for the foreseeable future. Diversification of routes and sources of gas supply to the EU is an important element of the EU’s energy security policy. In that context I was delighted to hear – earlier this year – of the Final Investment Decision for the development of the Shah Deniz II gas field in Azerbaijan. This means that the Southern Corridor bringing Caspian Gas via the Trans-Adriatic pipeline to Europe is a significant step closer.

The Southern Corridor itself will help to improve Europe’s competitiveness, by providing consumers and industry with a new gas import route and supply source, increasing the continent’s energy security, bringing more competition our market.

2030 Framework

What we saw in the European Elections was voters reacting against a European Union that they consider to be heading in the wrong direction. We need an approach that recognises far more sharply that Europe should concentrate on what matters, on growth and jobs.

And it is that message which must be reflected in the framework for 2030 – 2030 must be a driver for competitiveness and resilience that secures investment in a diverse and low carbon technology base.

Signing up to yet more targets, irrespective of the impact on consumers and business, would be, in our view, deeply irresponsible. That is why we support greenhouse gas emissions reduction target without a binding renewables target.

As I said, Member States must be free to choose the least cost pathway that they determine as appropriate.

And in cutting emissions Members states too must retain the flexibility to take action at their own pace – to go no slower and no faster than other European countries if they so wish.

Conclusion

In conclusion, I would like to share three thoughts.

The importance of energy to our way of life means that keeping it secure is not an option- It’s an imperative.

Secondly, energy is not limited to national borders. Our energy security challenges are best addressed together.

Thirdly, we can only speculate on and not predict the future. Costs of technologies change, as do national circumstances. We need to be ambitious in our objectives, but we must be flexible in how we meet these.

So I think this Convention comes at a crucial time. The next few weeks and months will be important in setting the future direction of the EU energy and climate policy; we, the UK, will play a full role to ensure ambitious climate targets, enhanced energy security and above all strenghten EU competitiveness.

Thank you.

Below is the text of the speech made by Michael Fallon, the Energy Minister, at Chatham House in London on 27th January 2014.

Good morning. It’s a pleasure to be here with you all today. I’d like to thank Chatham House for providing this forum. The focus of today’s discussions – the future of oil and gas supplies from the Middle East and North Africa – is certainly of critical importance to us all.

Future role of oil and gas in meeting global energy demand

The world will continue to rely on oil and gas for the foreseeable future, making the security of competitively priced oil and gas supplies of vital importance to the world’s economy.

Oil and gas consumption is expected to rise significantly for some time, even as we move towards a low carbon economy. In particular demand for transport fuel is projected to continue to grow outside the OECD, while gas is increasingly replacing coal as a fuel for power generation around the world.

The latest predictions from the IEA are that that under its central scenario the world will be consuming over 100 million barrels of oil a day in 2035, up from 89 million barrels a day in 2012.

However over the same time the IEA expects that conventional crude oil output from existing fields is set to fall by around 40 million barrels per day by 2035. This means that new sources of oil will need to be developed to make up the difference.

The development of unconventional oil will clearly have an important role in the coming years. And the same is true for gas – with unconventional gas expected to account for almost 50% of the increase in global gas production to 2035. Further work is required on how to safely and sustainably exploit these resources.

But this is not the whole answer. Indeed, the IEA emphasises the Middle East as being at the centre of the longer term oil outlook. Even with projections that domestic consumption in the region will increase significantly, exports from the region will continue to be integral to global supply.

This requires huge investment in production – an estimated $660bn per year will need to be invested in existing and new oil and gas fields to meet global demand. British companies are well placed to make this investment and are already active in many places around the world, including the Gulf. BP and Shell, for example, are already present in Iraq, while Shell is a partner in the Qatargas 4 LNG and Pearl GTL projects in Qatar.

The IEA highlights Iraq – with its huge oil reserves – as the country that could be the single largest contributor to global production growth. That requires investment now, in infrastructure, sustainable water management, and the strong legal and financial frameworks that investors need.

The IEA also projects increasing gas production from the Middle East and North Africa from both conventional and unconventional sources. When I visited Qatar in November, I was struck at how important Qatar is and will continue to be as a gas supplier to the wider MENA region and beyond. Qatar is of course a significant supplier of LNG to the UK. I also met the Algerian energy Minister last year, and was interested to learn more about the potential scale of Algeria’s unconventional gas resources. Of course there remain uncertainties as to the extent to which these resources will prove to be economically recoverable. In global gas markets, MENA gas producers are likely to be faced with growing competition from new sources of LNG from suppliers in the US, Canada, Australia and East Africa.

International Cooperation

I mentioned the significant investment required. Key to supporting this is helping to ensure that we have well-functioning oil and gas markets. This is a shared challenge, which transcends national boundaries, and we value international collaboration on this agenda.

We saw in 2008 how damaging severe price fluctuations can be, when a mid-year spike of $145/barrel was followed by a fall to $30/barrel by year end.

These swings severely damaged the confidence of consumers and producers alike: the price rise led to consumers sharply reducing demand for oil and goods and services in the wider economy; and the price drop created major challenges and uncertainties for many producing countries, both in terms of meeting the wider needs of their populations and in deciding the investment needed for future production.

When the world met in Jeddah and London that year to discuss how to avoid such sharp fluctuations happening in the future, the central conclusion that emerged was the need to improve the functioning of the global oil market. Participants agreed that delivering such reform required significant improvement in the dialogue between consuming and producing countries facilitated by the International Energy Forum.

This led to the re-launch of the IEF in 2011. Since then the Forum has done important work with the IEA, OPEC and others to improve market transparency through the development of Joint Organisation Data Initiative, it has investigated the links between physical and financial oil markets and has worked to improve energy outlook data.

Maintaining this dialogue and work is essential if we are to ensure the world economy has the secure and competitively priced energy supplies it needs. In a period of relative price stability such as we have recently had, it would be all too easy for complacency to set in and for the world to downgrade the importance of such discussions. We should not, and I look forward to the IEF Ministerial meeting this May.

The UK also supports international efforts aimed at removing inefficient fossil fuel subsidies. The IEA estimates that $544bn was spent globally on consumption subsidies in 2012. The G20 and APEC have committed to action on this issue, and I would encourage all those with such subsidies to consider their long term impact.

A well-functioning and integrated European energy market in electricity and gas will be a critical part of ensuring security of our energy supplies and keeping energy costs down.

The European Council has already agreed that the internal energy market should be completed by 2014. This is something the UK strongly supports. This means full and effective implementation of the Third Package of energy legislation in every Member State.

We will need to effectively implement rules to allow energy to flow properly across markets. And Europe will need significant investment in interconnection to better link markets together.

And international efforts are – of course – crucial to facilitating the shift to low carbon energy. I welcome the role being taken by many countries in the Middle East and North Africa to support this transition, for example the World Future Energy Summit hosted by the UAE last week.

The draft 2030 package the European Commission adopted last week will set the long term perspective on this low carbon shift for the EU, and I welcome both the ambitious approach to a greenhouse gas emissions target of 40% for the EU but hopefully going higher in the case of a global deal, but also the acceptance by the Commission on the need for Member States to decarbonise in the most flexible and cost-effective way for each of them, moving away from binding national technology specific targets.

UK energy policy

I’d like to turn now to reflect on UK energy policy. We are seeking to achieve three key aims – energy security, emissions reduction to meet our ambitious climate changes targets, and maintaining affordability for consumers.

The North Sea continues to be hugely important for the UK. We are determined to maximise production of these oil and gas reserves and are currently conducting a review – the Wood Review – to ensure our regulatory regime is as business friendly as possible.

Unconventional oil and gas is an exciting prospect for us, and we have recently announced changes to our tax regime which will make the UK the most attractive location for investment in shale gas.

And we are working hard to put the policies in place to enable the shift to a low carbon energy system. We are committed to reducing our greenhouse gas emissions by 80% by 2050. Our energy policies include a number of flagship programmes to achieve this, including our far-reaching Electricity Market Reforms, the ambitious energy efficiency programme through the Green Deal.

Nevertheless, UK import dependency for oil and gas is set to rise over coming years.

We became a net importer of oil in 2005. In 2012 our oil import dependence increased to 36%, and is expected to rise to 47% by 2020.

For gas, we became a net importer in 2004; and in 2012 our gas import dependency stood at 50% – with Qatar one of our key suppliers. By 2020 imports are likely to rise to 58% and it is clear that gas will remain an important element of our energy mix for decades to come.

And as we increasingly look to international markets for our energy supplies, we also welcome the interest from international investors in the UK energy sector.

It is estimated that replacing and upgrading our electricity infrastructure alone will require up to £110 billion of capital investment between now and 2020. I recognise that policy certainty is key to this – and the Energy Act and our electricity market reforms deliver this.

I have been delighted to see investments in the UK energy sector ramping up. For example I welcome Masdar’s investment of £500m in the London Array, the world’s largest offshore wind farm. And the decision of the Abu Dhabi National Energy Company to lead in the development of the Morrone field in the North Sea.

Conclusion

Perhaps I can end by noting that common challenges face us all. We need to ensure that energy markets can provide the supplies consumers need at affordable prices while providing the necessary long term incentives for producers and investors. Achieving this is no mean feat, but dialogue and cooperation has a central role to play.

Thank you.

Below is the text of the speech made by Michael Fallon in the House of Commons on 13th March 2008.

What a disappointing Budget. I thought that the new Chancellor would emerge from the shadows as his own man through the Budget, but we ended up with a Chancellor who dithered over Northern Rock and capital gains tax and cannot even decide whether the plastic bags levy should be voluntary or compulsory.

Let me begin with the public finances and our problems. Five years ago, in the Budget of March 2003, we were promised that we would be in surplus by March 2006. Each subsequent Budget and pre-Budget report postponed that. Yesterday, we were told that we would not be in surplus until 2010-11, exactly five years later than originally planned.

Let me put it another way. In the financial year that we are completing, we were supposed to have a surplus of £9 billion. Instead, we have a deficit of £7.9 billion. That is a turnaround of £17 billion—half the defence budget—because the Government failed to keep to their original plans.

Alternatively, let us look at net borrowing. Five years ago, we were told that net borrowing in the year that we are about to start would be £24 billion; yesterday, it was admitted that it would be £43 billion, almost twice as much. Worse still, for the first time that I can see in 11 consecutive Budgets and pre-Budget reports, the borrowing figures will be higher in the next two years than they were in the last two. The figures will increase to £43 billion and £38 billion, both of which are higher than the figure for borrowing in the year just ended. Not until 2012-13 will we get back to the borrowing level of £23 billion that we last saw as an outturn in 2002-03—a decade of binge borrowing.

Finally, there is overall public sector net debt. That will rise, according to the Red Book figures, to £731 billion in 2012-13, which is almost double what it was 10 years earlier. This comes at a time when we are already paying almost as much in debt interest, at £31 billion, as we are on the entire defence budget, at £33 billion, as we can see in chart 1.1 of the Red Book. Indeed, debt interest is now our fourth biggest spending programme. We on the Conservative Benches do not need to take any more lessons about unfunded tax promises, because that scale of collapse in the public finances is simply unfunded Government spending.

To put it another way, the Treasury got the growth that it expected from the economy last year, so why does public sector borrowing need to jump from £36 billion to £43 billion? Why do we need to force the motorist, the drinker and the small business to pay more taxes? Growth was around 3 per cent., as forecast and above its historic trend, but we are spending 45 per cent. of our national income while tax receipts account for only 41 per cent. Why? Because the then Chancellor failed to prepare during the stronger years. The Government failed to control spending or pay down debt. That is not just sloppy forecasting; rather it shows clearly and conclusively that the Government, and especially the former Chancellor, cannot plan their public finances properly. Therefore, we cannot trust the current Chancellor when he tells us that everything else will be okay. That is the failure in our public finances.

Secondly, I want to address the question of who really pays for that failure. It is not the public sector, which now faces relatively smaller increases in its growth. There will of course be fewer additional police community support officers and fewer additional NHS physiotherapists. However, we know that public sector pensions are still protected and that some pay restraint in the public sector is already being breached by the more and more widespread use of bonuses. For instance, one third of HM Revenue and Customs staff received bonuses last year.

It is not the public sector that will pay. The real losers from the collapse in our public finances are the people at the bottom. The first group are the lowest- paid of all. An unmarried person without children who earns only £11,500 year, on the minimum wage or just above it, pays tax and national insurance at 16 per cent. of their earnings. Someone in Ireland in exactly the same position would have to earn almost twice that amount—more than £22,000 a year—before they paid tax at 15 per cent. Why should single people starting their working lives be hit the hardest? Why should they be discriminated against by the myriad rules against part-time working, which make it less worth while to work between four and 16 hours a week, for example, because of the interaction of income support, working tax credit and child tax credit? The tax credit system is fine in itself, as we on the Conservative Benches have accepted. However, because it goes so far up the income scale, it simply does not give enough help to those who need it at the very bottom.

The second category having to pay for all the mistakes is our pensioners, particularly those on fixed incomes and those facing year-on-year real increases in council tax of around 4 or 5 per cent. Let me give an example from Sevenoaks district council, which is one of the southern district councils that has been worst treated by this Government. My constituent, Ms Earnshaw-Whittles, keeps a careful record, going all the way back, of the exact amount that she pays. In 1998-99, the first year for which the Government made the allocation, she paid £90 a month in a band G house. Had that amount been increased with inflation, she would now be paying £115.63. In fact, she has to pay £171, which is 48 per cent. higher. We are talking about people on fixed incomes paying half as much again in council tax they would as if the figures had been indexed. They are the people paying for the Government’s mistakes.

We know, too, that every council has had to plug the gap in its pension funds caused by the then Chancellor’s disastrous raid on pensions in 1997. Every local authority has had to cope with all the extra legislation passed through the House and the multitude of directives issued by Whitehall, but on a reduced grant.

Finally, small businesses are paying the price for the failure to control our public finances. Not only are they over-regulated, as Conservative Members have pointed out time and again, but they are constantly forced to act as the Government’s agents, by operating the tax credit system, checking on immigrant status and sorting out graduate loan repayments. As thanks for that, this year of all years, corporation tax will be increased by 2 per cent. We have been asking why since the last Budget, but we have not received an explanation. Rather than putting the burden of their mistakes on to those who simply cannot pay, the Government should look much harder at putting their own house in order.

I want to conclude with some remarks about the waste and inefficiency in central Government. There was not much in the Chancellor’s speech yesterday about the efficiency savings programme. We have had the Gershon savings and it is claimed that the £30 billion is on course to be realised. However, we know from the work of the National Audit Office and the Public Accounts Committee what a small proportion of those savings have been fully realised, fully audited and cashable. I understand that the NAO has endorsed only about a quarter of the current savings as real, in terms that the private sector would understand.

Secondly, there is the period after the Gershon review, post 2010-11. We were told yesterday that we would have to wait until the 2009 Budget before we saw the details of those savings, although yesterday we were promised something called the “public value programme”. It is not immediately clear to me how the public value programme differs from the current value-for-money delivery agreements. We have learned from bitter experience that changing the labels does not mean that we will get real cost-cutting in the administration of government, better ways of working, a reduced rate of absenteeism and an improvement in the efficiency of the back office systems. Those are all things that the private sector has had to cope with and implement over the past 10 years, but which still seem so difficult in the public sector.

Then there is pay, of course. I welcome the suggestion in the Red Book that Whitehall wants an increasing number of multi-year agreements, but I have warned before, including earlier in my speech, about the ever-widening use of bonuses to circumvent pay ceilings instead of adopting the performance-related pay measures that are now common in the private sector.

There are also asset sales. The Government have another £12 billion to go before they realise their 2010-11 target, and only two years left to get on with it. It seems to be taking them an awful lot of time even to sell the things that they have said for years that they wished to sell, such as the Tote. They have been playing around with that for years. A couple of weeks ago, the Department for Culture, Media and Sport announced that it intended to appoint financial advisers. If the Government are to realise their intended gains from asset sales, they must get on with it.

As I said on Monday, this country is in a financial crisis. We see that in the lack of confidence in commercial banking, the deep-rooted problems in the bond markets and the serious downturn in the United States. I suspect that we are nowhere near the end of that crisis. Just because this business cycle has run twice as long as previous cycles, that does not excuse the Government for not having prepared properly for its end. That is what Governments are for. Instead, just as our constituents face rising food and fuel prices, we find the Government being caught out. They have unfunded spending commitments, which are being met each year only through higher taxes and increased borrowing. They failed to prepare and have now been found out. Next year, they must prepare to fail.