Speech SPEECH DURING THE 2ND ANNUAL EAST AFRICA OIL AND GAS SUMMIT Oil & Gas revenue has the potential to significantly change the economies of any region This was published under the

2010 to 2015 Conservative and Liberal Democrat coalition government Ladies and Gentlemen, Let me take this opportunity to most sincerely thank the organisers of this summit, Global Event

Partners, for setting up today’s prestigious conference. This year’s meeting promises to be even bigger and better than last year’s and the BHC are happy to be supporting partners for the

second year in a row. As oil men, you are probably a bit worried to have a diplomat address you. I was worried too! So I set about doing a little research into what exactly was required of

Ambassador to the oil-rich nation of ‘Tazbekistan’. Surely here I’d learn what I was supposed to do. In the first episode, Her Majesty’s representative to the Tazbek people ends up

accidentally shooting the national antelope on a Presidential hunting party (which, incidentally, he successfully blames on the French) and then gets blind drunk at a feast where he is

required to raise 9 toasts. Unfortunately, the French then snuck the helicopter contract everyone was chasing…. Upon reflection, this was not altogether helpful preparation, but it did make

me grateful that the only drink to hand is coffee and the only toast we shall enjoy this morning is that upon which we have spread our marmalade. In all seriousness, my first experience of

Kenya was over twenty years ago in Turkana as a researcher. This means that, despite my inexperience in the oil sector, I find it a huge privilege and excitement to be here in East Africa

right now. So much has already changed – mobile phones were almost unheard of 20 years ago - but the pace of change is only accelerating, and it is your sector that will drive much of the

change that is yet to come. There are three messages that I’d be keen for everyone here to take away. DEVELOPMENT OF THE HYDROCARBON SECTOR HAS TO BE DONE RIGHT – TRANSPARENCY IS KEY Oil

& Gas revenue has the potential to significantly change the economies of any region. Indeed the North Sea has played, and continues to play an important role for the UK economy. But the

wealth the sector generates is not an unmitigated blessing and needs to be managed carefully if it is not to create distortions. And this needs getting right first time – as the first time

is the only time. Everyone here will be painfully aware that security is always a concern for an industry that relies on what are necessarily geographically immobile capital intensive

investments. Everyone has to have a stake if the hydrocarbon sector is to contribute to, rather than detract from, a region’s stability. The north of Kenya remains an area with unique

challenges and so, whilst the opportunities are great, there are self-evident risks that remain. Events of the last month have only served to underline this. Expectation management will be

key to containing this risk. We all need to work together to set expectations for the oil and gas industry at the correct level. Too low – and there won’t be the push to make things happen,

and the sector may not develop. Too high – if any of us paint too rosy a picture of a Norway on the equator, with jobs for everyone – then we ultimately risk alienating the very communities

that stand to benefit most from the wealth you generate: and this may ultimately undermine the wealth creation process you lead. Transparency is absolutely central to this. That is why my

Government is so supportive of efforts like the Extractive Industries Transparency Initiative: whereby firms register what payments they have made to Government, and Government reports what

payments it has received. This is a simple principle, but one that I know to be enormously effective from my own experience of asking my eldest son to administer the division of pocket money

with his siblings. If this all sounds rather gloomy, it isn’t meant to. It is clear that the oil and gas reserves that are being proven up in the East African region have the potential to

transform the economies of the countries concerned, far beyond the extractives sector. It is only to say that realising this potential is never a foregone conclusion. In this regard, the UK

Government’s international development ministry, DFID, has funded a seminal study by the independent Adam Smith Institute which provides concrete recommendations on how to get things right

in Kenya.   ###Need to be a whole of Government approach This leads me onto my second point. Getting development of the hydrocarbon sector right necessitates a whole-of-Government approach

here in Kenya. Making the most of the potential that recent discoveries have highlighted will involve more than simply the Ministry of Energy or the Ministry of Mines – excellent though they

may be. The Government here in Kenya has rightly identified this lesson and is developing cross-Government coordination. This is hugely important, especially in the early stages of the

sector’s development. For example, we need to make sure that tax regimes encourage investment and exploration and only seek to generate revenue once the product is flowing. This is the way

to maximise government income in the longer term. Elements of the press should not stand uncorrected in their assumption that the East African hydrocarbon sector is a license to print money.

As many of you who are involved in exploration will testify, in the early stages – which can last for years – it is rather a license to spend it. It’s not been fashionable to say this in

the West for a few years now, but developing the provision of financial services in East Africa will be an enormous spur to the oil and gas sector. To the extent that financiers can develop

tools to help Governments raise funds to make the necessary investments to enable oil and gas sector developments, for example, LAPSSET, they will make a significant contribution towards

growth and, of course, future tax revenue. These investments might be in infrastructure, but they might equally be in skills and training to ensure that you can turn to local labour markets

as you ramp up employment. Political focus will be required, but I’m confident that Kenya’s government is sufficiently sophisticated to enable it to develop as the regional hub of the oil

and gas sector, even if it’s reserves aren’t the largest. As the British High Commission works with Kenya to develop this sector, we have adopted a similar cross-Government approach,

involving our political, trade and investment teams, as well as colleagues from DFID, DEFRA, DECC and others. WE CAN HELP This takes me to my third and final point. The UK is well placed to

work with partners as the oil and gas sector develops in East Africa. Now, I know that such an offer of help may sound frightening coming from a Civil Servant. I think it was Ronald Reagan

who observed that the nine most frightening words in the English language were ‘I’m from the Government and I’m here to help’. However I mean it as a representative of the ‘UK plc’ rather

than Her Majesty’s Government The Oil and Gas industry is one of our greatest industrial success stories. Several decades of impressive and profitable exploration and production of the North

Sea Oil and gas reserves have provided the UK with expertise in all aspects of exploration and production. We can also bring excellence in a whole range of specialist supporting industries

such as finance (and I think here in particular of our work with Financial Services Development, Kenya), law, education, safety and training. The latter is a particular strength in the UK,

with several truly world-beating universities in the field. In all of this, our watchword will be ‘Partnership’: only what truly benefits Kenya will benefit the UK and UK firms over the

longer term. We’re already seeing Partnership here in Nairobi. A fellow British Citizen has recently spearheaded the development of oil and gas safety training courses here in Nairobi. This

means Tanzanian oil executives operating offshore rigs will soon send staff to Kenya for training, rather than Dubai. All will benefit. Out in the field, I’ve almost lost count of the number

of UK firms drilling and exploring both on and offshore. They range from the smallest of smalls to FTSE 100 firms. All want to work with the grain of your Government, Commissioner. And

those with listings on the London Stock Exchange will be striving to meet the very highest standards of CSR demanded by our institutional investors.   CONCLUSION You must remember that when

drafting this speech I was scheduled to be sat next to the Treasury Cabinet Secretary. So please forgive me, in conclusion, when I wish you all a very successful conference and success in

your endeavours; I hope that you will contribute to those societies in which you work; that make large amounts of money; and then pay a considerable amount of tax! UPDATES TO THIS PAGE

Published 29 October 2013