 Well, I'd like to welcome everybody. I'm David Pumphrey. I'm with the Energy and National Security Program here at CSIS, and it's my honor to do the introductions for our three speakers here today. The IEA has become the respected place for looking at what's going on in the energy world, both in the short term and the long term. And the introduction a few years ago of these medium term reports has been a real addition to the insights we can gain about the trends that are going on in energy markets. And I think to have them presented together, both the gas and the oil, is really a very important step forward. So it is really a great pleasure to welcome Executive Director Tanaka, Ian Cronchon, David Fife, here to do the presentation. They just released this yesterday in Paris and hopped on a plane and flew over here. So I think we're the first or the second audience outside of Paris that has the opportunity to hear the presentations. We've passed out some biographical information, so I won't spend a lot of time on that. And we'll start with Mr. Tanaka, who will open it, and then after their presentations there will be a little time for Q's and A's. So Mr. Tanaka, please. Thank you, David, for providing us an opportunity. And good afternoon, ladies and gentlemen. I am still in a jet lag. I really thank CSIS to provide us the opportunity to present our two very important documents, the mid-term oil market report and natural gas market review. These are the two documents which we have annually publicized that it's getting more and more important because the issue which we are now concerned is this uncertainty. So we are living in uncertain times. So how can we get our future more clear? I hope these two documents will contribute to the better understanding of the market. We think that financial landscape has changed dramatically over the past 12 months. And the global financial and economic crisis has had a hugely significant impact on the oil and gas sector as well. For oil, the prices are around half the levels seen in July last year. We noticed that it went up to US$147 per barrel, but they have begun to strengthen again recently, partly due to a perception that economic recovery may be just around the corner. In the natural gas sector, we have moved from a tight supply and demand balance with extremely high gas prices to the one that is easing with plummeting prices. The gas prices are now less than the third of their peaks of mid-2008 and seem slower to respond to signs of recovery. Recent years have seen big increases in a gas supply, notably from North American unconventional gas or gas shales, from LNG globally and from new IA suppliers such as Norway and Australia. The question remains in the medium term as to where the next big tranche of supply can be expected to be sourced, both the oil and gas markets, like all others, face enormous uncertainty with respect to the timing, pace, and extent of economic rebound. Whether we end up facing a supply crunch again by mid-dicket or with a more comfortable buffer of supply flexibility depends largely on the pace of economic recovery and the government action on energy efficiency. This second part is a very important message in this oil market report. We must be careful a return to razor-thin spare capacity in the case of crude oil and resultant price volatility is in the interest of neither producers nor consumers. For both oil and gas, the importance of continued long-term supply investment through the down cycle is clear. But the future is also partly in our hands. The government can influence the path that oil and gas markets take. For both oil and gas, a level of investment playing fields would help ensure the development of sufficient supplies when demand growth recovers. For gas, critical improvements need to be made in developing cross-border interconnections and promoting more efficient market operations, especially in Europe. But consumer governments also have a key role to play in the future of the oil and gas sectors by ensuring field diversity and promoting energy efficiency. Given the current market and the sectoral focus of future demand growth, now is a golden opportunity for consumer governments to introduce long-term energy efficiency measures for transport. Higher efficiency in transport can help to promote sustainable growth and at the same time enhance our energy security and helps mitigate climate change. These administrations move to improve US fuel economy to 35.5 MPG by 2016, which is equivalent to the 6.6 litre per 100 km and represents a 30% reduction in the fuel use compared to the new US light-duty vehicles in 2005. The IA commands the US for this initiative. And a permanent structural change in demand patterns may already be underway. With General Motors and Chrysler filing for Chapter 11 here in the United States plus sharp reduction in the OECD steelmaking, for example, it is a fair question. Not only road transport but also airline and power sector demand appears to be seeing a reduction in the intensity of oil use. The gas remains an important bridging field to allow to allow carbon future, especially in the power sector, but IA countries need to invest in a diverse range of power supply options including renewable and nuclear and coal with improved environmental performance like CCS. It is essential that we place a low carbon future and energy security at the forefront of attempts to kick-start economic recovery. As well as we all know too well, energy demand will expand significantly again to fuel renewed global economic growth particularly in known OECD countries. This is already altering the focus of IA analysis, particularly as regards energy security. And energy security now encompasses gas security as well as oil. Indeed, the IA remains concerned about the prospects for uninterrupted gas supplies to European and global markets from Russia via Ukraine. With respect to climate change, we are currently on a track for a rise in the temperature of 6 degrees centigrade by the end of the century and unsustainable path. In the short term, slower economic growth will curb emissions, but potentially weaker fossil fuel prices and financing difficulties are curbing investment in clean energy technologies which may in turn prolong our reliance on fossil fuel. Then in the mid- and longer-term, the crisis may lead to higher emissions. We must not let the current financial crisis overshadow these longer-term challenges, but oil and gas will remain central to our energy needs for decades to come. Both publications, this mid-term oil market report as well as gas market review that we are launching here today, shed light on where we are likely to be in five to ten years' time based on existing investment plans and policies. As such, we hope that they assist planners, policymakers, and the industry in better appreciating the context of the challenges we face for the future. Thank you very much, and I will let our best and brightest to explain about their individual reports, the first David Hyde and then Jan Kroncher. That looks familiar. Good afternoon, everyone. I'd just like to repeat Mr. Tanaka's big thank you to CSIS for allowing us to launch our two publications here in the U.S. today. I think I've been allocated 20 minutes to try and summarize our view of the oil market over the next five years, which is a bit of a big task. So what you're going to get is very much a condensed version of what's in the report. We'll welcome your questions today, but we'll also welcome any questions on the substance or the methodology or the approach over the next days and weeks after people have a chance to read through the report. So we look forward to people's feedback and very much welcome it. Before going into some of the detail, I think it's probably worth just summarizing some of the key issues that we think the report raises for the oil market. As Mr. Tanaka said, the key issue we face is what sort of economic path are we on for the next five years? Is it a reversion to business as usual or are we going to see a more subdued growth trend economically speaking over the next five years? That's clearly going to be critical. And that has caused us this year, exceptionally for the midterm market report, to generate a couple of scenarios. Arguably we could have generated four or five scenarios for oil demand in particular going forward. The pace of the demand rebound amid structural change. The question about have we seen demand destruction or just demand suppression in the light of economic collapse and last year's much, much higher prices. I think that's still a very live issue. We make some points about that and we sort of veer perhaps a little bit more towards the demand destruction argument in our report, but I don't think anyone can be certain about that until we pull out of the economic recession that we're currently suffering from. The impact of economic uncertainty and price volatility on investment, upstream and downstream, is going to be critical. Again, it's something that it's going to take time for us to realize. Spending levels upstream are likely to be off around 20% this year. How long are those sort of spending curves going to be in place? We think basically that oil supply growth over the next five years is going to be even slower than it has been in the past five years, which is saying quite a lot, I think, because certainly this decade has been one in which it's become more and more difficult to expand the supply base in a timely fashion. We think conventional crude oil supplies are likely to look very, very sluggish in growth terms over the next five years, but we do think there are offsets from things like biofuels, natural gas liquids and nonconventional oil, even in this time horizon on the basis of investments that are already being made. We highlight yet again the almost perennial issue of refining boom and bust, the downstream sector of the industry, which tends to face even more volatility than the upstream in terms of profitability, and we see potentially a reversion to rather depressed returns in refining becoming reinstated over the next three to four years. And I suppose it all comes down to at the end. The thing we try and get to at the end of our report is are we in for another supply crunch type situation with capacity growth struggling to keep up with demand growth, or are we going to see something which looks a bit easier, a little bit more flexibility in the supply system. We use OPEC spare capacity as the sort of benchmark of how much flexibility there is within the system, and depending on the scenario you're looking at you get very, very different answers, not surprisingly. You can get to an easier supply demand balance depending on the economic growth scenario you take, but also it can be influenced by the choices of governments and consumers in terms of the choices they make in terms of purchases, in terms of policies, even over this sort of five-year time horizon. And we end up, I suppose, raising a number of questions about the role for government in this very uncertain economic and energy market. We need to see investments stimulated somehow. We'd like to see people investing through the down cycle, if at all possible. And we also want to see more energy efficiency, and I think over here in the U.S. that's becoming more and more of an issue, clearly. We want to see more market transparency. We want to see more information about the physical side of the market to allow us to make judgments about where we may be headed in the years to come, but we also need more transparency on the financial flows into the oil market, the futures market, and the physical market go hand in hand nowadays in terms of driving prices. And we need more visibility on what the main actors are doing on both sides of the market to allow us to see what's driving prices and to allow us to make better judgments about where we may be headed in the years to come. If we start looking at the demand side of the equation, I mean, the revisions that ourselves and other analysts have had to make to our demand estimates, even in the last year, has been very, very dramatic indeed. We started out with a 2009 oil demand forecast a year ago of nearly 88 million barrels per day, and we're now down below 84 million barrels per day. So we've lost 4 million barrels per day of demand, but not surprisingly in the sort of fairly calamitous economic situation that the world has had to confront over the past 12 months or so. Oil demand is falling not only in the OECD but also in the non-OECD as well. And the bottom line is the shortened medium term outlook is hugely uncertain. Now we paint a picture for demand in this outlook with two scenarios. One is a higher GDP assumption, and that basically has trend GDP growth going back to between 4% and 5% per annum over the medium and longer term. We factor in a price assumption, and everyone gets very excited about the IA coming out with forecasts of prices. This isn't a price forecast. This was the futures curve back in end April, early May, which was showing about $70 a barrel nominal, $60 per barrel real going through to 2014. That's the peg on which we're hanging our demand forecast and to a certain extent our supply forecast. It's not a forecast of prices, it's an assumption. So that's what underpins our sort of higher view of the world or our more optimistic view of the world if you like. But buried in there as well is also a view that the efficiency of oil use is going to continue improving. Oil intensity is going to continue declining and potentially at a slightly accelerated rate compared to what we've seen over the past decade. We've got global oil intensity declining by about 2.5% per year compared to about 2%, which is what we've seen over the past decade. Now we've seen already gains in efficiency use in road and air transport. We're seeing structural change in the power sector as progressively oil is replaced by gas. And we think basically that's going to continue. It's not a very radical view. Remember this forecast is based on the policies that are in place or likely to be initiated over the next three, four, five years. So it's really a look at the world as it is today and the investment cycle and the policy cycle as it is today. Of course that efficiency picture could be improved even further with technological breakthroughs or new policy developments. But of course that is more likely to occur in the period after 2015 rather than in the immediate five year period. There is of course a time lag in these things happening. Okay, I'm skipping slides rather quickly here. A very trigger sensitive computer this. Bottom line is where do we see all the growth in demand coming from in this higher GDP case? It's coming from the non-OECD. There's no surprise there really. Those are the countries with the expectation of stronger GDP growth, higher income elasticity. And if you like a degree of stickiness in administered prices, the bottom line is that consumers in the developing countries were not paying 100 or 150 dollars per barrel for their oil. They were paying markedly less than that because of price subsidies and administered price regimes. Now we don't think there's going to be dismantled overnight. We think they're being phased down if you like. China is making moves in that regard. India is making moves in that regard. And other countries in the ASEAN and elsewhere are doing so as well. But it's going to take time for those subsidies to be removed. And therefore there's a degree of resilience in the non-OECD markets, which quite frankly isn't there in the OECD. And we've basically got demand in the OECD stagnating at approximately current levels under the influence of inter-fuel substitution and efficiency improvements. And the non-OECD basically takes on the baton of having accounting for more than 50% of global demand by around 2014. Asia Pacific, Middle East, Latin America is where we think the demand growth is going to come from. Again, I'm skipping forward rather too quickly here. That slide is telling you that basically most of the growth in oil demand is going to come from transportation fuels and to a lesser extent, petrochemicals. Transport fuels are going to generate about 80% of expected demand growth going forward. It's worth pointing out, however, that this relatively optimistic view of the world nonetheless has demand in 2013, which is about 3.5 million barrels per day lower than our forecast even at December last year. So we're in a world that is looking at fundamentally weaker levels of absolute demand even under this fairly resilient rebound in the economy going forward. But what if that's all hopelessly over-optimistic? What if we're on a track both of slower and lower economic recovery? We've generated a scenario just largely for illustration, but the point here is this is sort of trend GDP growth closer to 3% rather than 5% over the outlook period. The bottom line is this gives you a demand number in 2014 that is 4 million barrels per day less than the higher GDP scenario. Now, in a 95 million barrel or 90 million barrel per day world to the layman, that may not seem like a very big difference, but 4 million barrels makes all the difference in the world to the sort of market profile that we expect for the next five years or so. Not surprisingly, everyone's been focusing on the demand side of the equation as economic performance has been contracting worldwide, but there's a lot going on the supply side as well. Spending is being curbed. I said earlier on that it's been very difficult to grow the supply side of the equation over the past decade or so even through the upcycle with prices rising for a whole host of reasons, difficulty in accessing reserves, geopolitical issues, industry cycle related issues, bottlenecks in terms of raw materials and labor and so on. Some of those cyclical difficulties are easing, but we nonetheless see it remaining very, very difficult for the industry to expand the supply base over the next five years. A lot of these above ground impediments to supply growth remain in force and they're going to remain with us for the next five years, the next 10 years going forward. We don't think it's a question at the IEA. We don't think it's a question of a lack of resources in terms of physical oil availability. We think there's plenty of oil out there. It's a question of what level of prices do you need to add oil to the market? A lot of people out there are saying, well, what is the ideal price? What is the price we require to generate new oil supplies to meet demand growth when economic recovery returns? We actually just think it's a little bit idealistic to believe you can nail an individual price and say that's the level we somehow need to work towards or manage artificially or otherwise in the market as being the ideal price because it's a moving target. We've got structural pressures which are raising the cost of generating new oil supplies but we've got cyclical pressures which are pushing down the cost of generating new supplies and the oil sands project that maybe late 2007, early 2008 was going to cost us $18, $90, $100 per barrel to bring to market. Possibly now it can be brought to market for $60 or $70 and maybe at the end of 2009 it will cost $50 because of a cyclical decline in inflation pressures so it's a moving target. I don't think there's any doubt we're moving towards structurally more expensive oil over time. That's very clear because of opportunity constraints but I think trying to narrow in on $80 per barrel, let's say, as the ideal price is perhaps misguided. Having said that, we are taking a pretty conservative view on non-OPEC supplies going forward. We now see contraction in non-OPEC supply over the next five years of about half a million barrels per day and that compares with growth from our forecast last year of about one and a half million barrels per day. There's a huge amount of new capacity that is basically being postponed and deferred or even cancelled because of declining prices, weak demand and lower spending. A study that EIA undertook for the G8 in the spring showed about two million barrels per day of projects which were originally due to come on stream in 2009, 10, 11 and which are now slipping beyond that time horizon. They'll probably come back into the mix later on but it's just going to take longer to bring that capacity on stream. We think conventional crude supplies are likely to carry on declining but we think there are offsets from non-conventional supplies and gas liquids. Very quickly, sources of supply growth, such as they are over this five year period, there's no real surprises there. The Canadian oil sands, the active projects that we see coming online there, global biofuels. There is growth in crude oil supply coming out of Brazil the Gulf of Mexico and the Caspian but the North Sea and Mexico and other mature areas are facing fairly relentless decline going forward. The big change I think in our forecast over the past couple of years has been the changing profile for the former Soviet Union and Russia in particular which we're now a lot more conservative about prospects for Russia going forward because of a decline rate at mature fields, because of budgetary constraints, debt issues and so on. We basically have a flat FSU profile for the next five years. That's not to say we don't see more growth later on when Kashi Ghan and other headline projects come on stream but certainly we seem to be an hiatus for growth from the FSU over this five year period which is a huge change for non-OPEC. The FSU was the driver of non-OPEC supply growth over the first half of the decade. It looks like we're in a bit of a hiatus there going forward. We ran a quick sensitivity to go with our low GDP case on the supply side to say, okay, what if companies don't just curve spending in 2009 but also do so in 2010 and 2011? What potential impact could that have on prompt supply today, on mature oil fields today? And we came up with a number of around about half a million barrels per day downside sensitivity which on the supply side could accompany the lower GDP and by inference lower price case that we're postulating as our alternative scenario looking forward over the next five years. But I think there's very little consensus on exactly the impact of lower spending and what it will have on prompt supply as opposed to future projects. I think that's open to a lot of debate. When we look at OPEC and I could speak about OPEC capacity developments for a lot longer than the minute or two that I've got today but suffice to say here we've curbed our estimates quite sharply too. We've got a bulge of new OPEC capacity particularly from Saudi Arabia that is being brought on stream at the moment. But after 2010 we see a pretty sluggish rate of capacity expansion from OPEC as well. There's a bit coming online from Angola with some new capacity from the UAE and elsewhere but it's pretty small potatoes really and we think in overall terms over the five year period it's about 1.7 million barrels of net growth which is pretty low compared with recent historical levels and it's to do with project delays again is the primary issue. Reviewed investment plans, renegotiation of contracts to capture lower costs, reduced cash flow and the perennial problems of resource nationalism and geopolitical turmoil in places like Iraq and Nigeria. We can talk about those perhaps in the Q&A but in contrast to the crude oil side of things we actually see OPEC gas liquids growing quite sharply over the next five years perhaps by around 2.5 million barrels per day. You have this interesting situation of OPEC gas liquids potentially competing in the market with OPEC crude. I know they don't probably see it that way but effectively OPEC gas liquids are shutting out OPEC crude from the market to some extent over the next three, four, five years and Saudi Arabia, Qatar and to an extent Iran are developing resources as much as anything for internal use rather than export use so a lot of these projects will be insulated from the economic downturn to a certain extent and that is huge implications for the refinery feedstocks late going forward. Everyone talks about heavier, sourer barrels being available over the future. Well I think over the longer term that's most likely to be the case but we're again in a hiatus I think over the next five years where lighter, sweeter supplies of crude and condensate in particular from the FSU and Africa and the Middle East are likely to ensure a lighter, sweeter barrel that is available for refiners going forward which is bad news if you're investing in copers and cracking capacity as many people are over the next three to five years. Basically very slow capacity growth after 2010 I think is the message. We see growth in biofuels albeit there are big problems for the biofuels side of the equation in supply terms. Oil prices have fallen more sharply and further than agricultural feedstocks and that's undermined margins. Plant utilization has fallen. Access to credit for smaller operators has dried up and therefore capacity growth in biofuels this year and next year looks a bit suppressed even in places like Brazil. Having said that we still think we could see about 50% supply growth from biofuels over the next five years rising from about 1.5 million barrels per day to over 2 million barrels per day by 2014 and that meets about 15% of expected transportation fuel demand growth over this period. No surprise Brazil and the US are the main sources of growth going forward because of renewable fuel mandates and basic geographical and locational benefits that Brazil enjoys. We think biofuels can rebound because they have relatively short lead times most of these projects and therefore when economic recovery kicks in we think capacity can be expanded relatively quickly and there's a degree of consolidation in the biofuels industry that is taking place which means larger, more robust financially speaking operators are going to be in place for when the rebound occurs. If we look at the downstream huge levels of cancellations and delays to projects are occurring in the downstream too but surprisingly enough there's around 7.5 million barrels per day of new active capacity that we think will come on stream over the next five years most of that's in Asia China and India in particular most of it is actually in North America. The Middle East is actually now seeing we think rather slower refining capacity growth because a number of projects have been deferred either again to capture cost reductions then negotiating contract renegotiating contracts to capture cost reductions but nonetheless there's significant growth in refining capacity over the next five years and significant growth in upgrading capacity which ties in very poorly with the crude feedstock slate that I was painting the picture I was painting for you a minute ago this is a very static look at where we think the global products markets will head and it's much more a view of pressures that will emerge in the market rather than a forecast of surpluses or deficits because by definition you can't have global surpluses or deficits of product but we see the tightness emerging in middle distillates yet again and remember in 2007 and 2008 it was tightness in the middle distillate markets as much as anything else which was helping propel crude prices higher but we also see an unsustainable tightening in the bottom end of the barrel in residual fuel oil with all that cracking capacity being added and all that light feedstock availability something's got to give either people are going to have to run a lot more crude through simple refining capacity or they're going to have to defer some of that upgrading investment or they're going to have to be such wide light heavy sweet sour spreads that the system gradually adjusts to ensure that this picture doesn't actually emerge we think there is real pressure for rationalization in the OECD refining sector particularly in Europe and the Asia Pacific and we really think closures or deactivation of capacity are very likely over the next five years it may be deactivation because actually closing a refinery in the OECD is well my impossible because of site remediation costs and so on but rationalization is definitely on the agenda we did a whole section on price formation which I can't do justice to now because I'm rapidly running out of time the debate continues about fundamentals versus speculative factors in the market and as really we said a year ago we think both are playing a role and in the short term financial flows and speculative players are playing a role in driving prices but within the context of fundamentals both today's fundamentals but people's expectations of fundamentals two, three, four, five years hence and these factors are intertwining to drive prices and I think a polarized view of fundamentals versus speculation is misguided in that sense price drivers are manifold and they interact in a different way at different times to drive prices going forward and I think anyone looking at the run up in prices since March would have to say that speculative and financial flows have played a role in that the weakness in the dollar has played a role in that but over the longer term fundamentals of supply and demand and expectations for those for the future are going to set the parameters for prices going forward but again we need much more visibility on what is happening in terms of futures trade in terms of the OTC derivatives market and so on and I think we're going to see that clearly with some of the proposals that are before governments as we speak but I think the danger is that regulators and legislators throw the baby out with the bathwater if you'll pardon the expression because what we don't want to do is just completely shut off liquidity in the markets altogether and I think that's a real danger because that could create more volatility than it solves in terms of pricing summing it all up we've got very different views of GDP going forward we've got a view that efficiency is going to improve going forward there's a huge difference in our two cases in terms of underlying demand of about four million barrels per day we think supply growth is going to be very slow going forward what does it mean for spare capacity going forward well in the higher GDP case you get a traditional market tightening towards the end of this five year period a traditional sort of supply crunch picture which may well occur and that has obvious implications for prices and volatility if there's a very thin margin of spare capacity if we're in a lower demand trend we could be headed towards something that looks a bit more like that in terms of six to seven million barrels per day of spare capacity going forward now some would say that's a very sloppy market I think we might argue that that sort of level of spare capacity is probably necessary given all the geopolitical risks that a number of key producers face when you think of Iran and Iraq India and others and capacity there that is frankly at risk on an almost perennial basis so we can get there to that more comfortable view of spare capacity either through a lower economic growth trend but we could also get there with accelerated programs of energy efficiency and consumer and government choices over the next 12 to 18 months so really it's something that's going to be generated by the path of the global economic recovery but we can also play a hand as consumers and governments in the sort of picture we have going forward thank you very much I don't know if we the bad news is after David's dulcet tones you have an Australian following him up with all the vicissitudes of an accent if you don't understand a few other things they say most all of my work colleagues have spent the last four years trying to figure out what exactly I've been saying I think the theme of the day is definitely uncertainty and certainly when you talk about gas absolutely correct gas demand weakening everywhere certainly in the United States and in Europe very similar picture across all OECD economies industrial demand in particular down heavily of the order of 14 15% worse in Russia in Ukraine even fairly bad in Japan and Germany not quite so bad in the US but still down a lot the surprising thing about the development has been that the power sector has managed to hold up its market share in a number of areas and I'll come back to that in a minute because the power sector costs is something like a third of demand industrial is about a third residential commercial about a third as well that sector tends to be relatively inelastic so overall gas demand can hold up in some ways surprisingly well the second feature we talk about in the review is the supply side in particular liquefaction capacity LNG last year in the US we saw a big fall in LNG imports 2007 had been a good year 23 BCM thereabouts 2.3 BCF per day last year under 10 big four and the reason for that I'll come to in a moment spot prices no epic in the gas market and spot prices last year peaked a little bit earlier about the last week of June in fact Henry Hub peaked about 1370 and has really struggled to get above $4 even we had got a nice heat wave in Houston normally that's the sign for the gas market to firm up a bit 102 yesterday in Houston Washington's warm but Houston's warmer but hasn't put much starch into gas markets at all on the contrary however in oil and gas oil and gas markets we've seen prices hover around $8 they'll come down tomorrow that's the beauty about these oil and gas markets they're nice and predictable in prices come down to about $6 or $7 but of course anywhere where there's competition between spot gas and oil and gas we've seen spot gas win market share and that's particularly important if you're gas from there are the world's biggest gas exporter they've lost market share and they've lost it a lot unconventional gas has definitely changed the scene in North America there's no doubt about that but that has global implications as well both from its impact on LNG markets which are definitely linking Europe and America that's clear but also even the Pacific markets the question is of course at $4 how long can this boom continue back about a year ago everyone was sitting around Madrid this time last year almost to the day saying if prices go below 10 unconventional gas will collapse and then it became 7 and then it became 6 so I'll be interested in your views on that final point of course gas markets are becoming more interdependent regional issues remain but this interdependence is a very important part of what's changed in the gas market so looking at this unfortunately I'm talking BCM here for a European audience I can translate that into the BCF per day if you like it's one of the problems when you come over here you step on the scales and suddenly you go from being a 72 kilo person to 161 pound person it's a bit scary actually so I worked that one out this morning but I think the direction of these numbers is pretty clear we had an absolute boom in the first half of last year people have forgotten a bit about that this is OECD across the board but if I did this graph for the United States it looked very similar Japan very similar even in countries like Europe very mature markets Germany grew by 8% in those early months of the year and then obviously things started to slow down and then in the second late in the second half of the year that were weakening in demand overall for most markets we still saw positive growth albeit small the US was up about 1% for the year as a whole pretty typical Japan was a bit more than that for various reasons of course the last quarter the first quarter of this year we've seen that last bar in March is about equivalent of minus 7% for the US it was minus 8% and it's all on the back of industrial demand power sector demand held up quite well I downloaded the April numbers last night and they actually still show much the same was down about minus 5% for the year for April year on year and all of that was in industrial which is down minus 13% so when you look at that data I don't see any green sheets in that data having said that of course in the last couple of months we are seeing some encouraging signs things like Chinese power demand even in the US we've seen vehicle sales rise from the middle and dismal levels and some slow down in unemployment levels what of course that graph means is if you say to me what's O9 going to look like as the year goes on well that makes if you take that as a straight line and there's some I've got some colleagues in Russia who are taking that as a straight line you come up with minus 10 I don't think it will be minus 10 but certainly this year anywhere between minus 3 and minus 5 in most OECD countries power sector is worth talking about a fair bit here because it's been an interesting part of the sector and a surprisingly strong performer 2008 we actually saw a small decline in OECD obviously again reflecting the pattern we saw in the first graph which is interesting in itself what did happen overall though was the gas maintained its market share when you look at the 2008 figures gas maintained this pattern that you see here and again almost any IA country you look at over there a thousand terawatt hours just to put that in perspective is about total Japanese power demand so its growth in the OECD 80% of it came from gas wind and other renewables about 20% and coal and oil basically offsetting each other new I mean you can pretty much predict this pattern for the next 5 even as much as 8 years in the future this will remain in OECD countries for the simple reason what's being built at the moment nuclear there's much nothing to a close first approximation coal only in a handful of countries including the United States because a lot of old plant will be phased out in the next 5 years given the investment problems we have of course investing in a nice new nuclear or coal plants probably not high on the list of investment priorities but gas has a lot of attractions so the nicest thing about the US is when we started to see the slowdown in demand I was sort of rash enough to say well gas is the most expensive source but at first that has not occurred in fact quite the contrary we knew it would come out of fossil fuels but in the case of the United States and in a number of IEA countries that has been coal that has suffered United States first 4 months of this year power demand is down about 5% coal demand in the power sector is down 10 and that's quite a dramatic change and in fact gas has actually increased its market share nothing a bit of price competition can't do and certainly we've seen some of these compete ferociously for market share gas supply highlights well OECD production actually increased and obviously North America had a fair bit to do with that I'll come back to that all OECD regions however remain at the margin import dependent North America only very much at the margin OECD Pacific 100% and Europe in the middle and of course European Gas Security I'll come back to the presentation European Gas Security got some interesting North America up until about 2005-2006 conventional wisdom was North American gas production trending downwards at around about 20 BCM per annum to BCF per day suddenly since then we've seen this dramatic increase and now we've seen US unconventional gas rise 50 BCM now it's turnaround of about 70 BCM that's a million and a half barrels a day of oil now that had happened in the oil industry headline item in David's review because it's in gas and no one seems to be paying attention but believe me people who are shipping LNG are certainly paying attention because they've built LNG terminals in the United States but their utilization rate is not high again the way LNG is working so this has global implications because it means that LNG that was LNG plant that was designed to supply US markets is looking for homes elsewhere Norway Norway's up to nearly 100 BCM exports which makes it the biggest gas exporter just quietly getting on with the job but elsewhere the United Kingdom in particular we're seeing production declines we're seeing rapid production declines they slowed down a little bit when prices were high last year but now the prices have dropped we're seeing the 8, 9, 10% decline that we've anticipated just a little bit more on the United States given we are in Washington one of the first sectors US gas sector very sensitive to prices and we've seen these sharp reductions in rig counts which to all intents and purposes we thought would presage a very quick and clear drop in US gas production unconventional but like all good recessions it's been the poor quality plant that's gone out first the good quality plant particular horizontal drilling rigs are so important for unconventional gas seen to have stayed in the mix and producers have been pretty successful at cutting costs or driving costs down as you can see over on the far chart there's a little black line at the top which still shows that even at $4 gas producers are still increasing production and some of those producers of course hedge forward at $8, $9 or even $10 so that's well and good but having said that I think that's quite a surprising outcome February there, of course February this year had an extra day so in fact the points are pretty much concurrent with the 2008 line which as you can see is 50 BCM above the preceding years the fact that we're still seeing 3 and indeed this month April we're still seeing 3% growth it will come down at some point but it has been remarkably resilient in the face of those prices I wanted to talk a little bit about non-OECD countries because half of well global gas demand comes from non-OECD countries and there's some pretty interesting ones here I mean Russia obviously number 2 440 BCM of gas about 2 thirds of US consumption Russia's not going to have a good year this year probably down minus 8 roughly in line with their economy possibly even minus 10 gas problem in particular has had a pretty bad first half of this year export shipments down by almost half in volume terms and obviously their own domestic consumers hit hard as well Middle East, big growth area we can certainly continue to look forward to growth and gas use of around about 20% between now and 2015 the two interesting markets I want to talk about were both China and India where we have seen a big turnaround in the last year both countries weren't too interested when gas was $10 or $12 but they got lots lots more interested when gas was $4 or $5 and both countries have been very aggressive assertive in going out and sowing up new deals China in particular only started importing LNG in 2006 from Australia they got a pretty good deal at the time $3 when gas was $12 it was looking pretty sad but we kept doing it at $3 long story on that one having said that they already signed 24 BCM of import contracts and they are building the terminals and they will import around about 24 BCM 25 BCM by 2011 which is roughly the amount of LNG the US imported in 2007 secondly they are aggressively signing up deals in advance of FID for new LNG projects both in Australia both Gorgon and a Colby Mephane project Gladstone on the east coast and they have taken a very aggressive stance in Turkmenistan they are actually building a pipeline from Turkmenistan way out on the left hand each of that diagram about another 2,000 km to the east which will link up with that west east pipeline that pipeline was built in 3 years I might add that's about a 4,000 km pipeline built that in 3 years they doubled it and plans to triple it and quadruple it so certainly domestic gas production is also growing as well we actually observed in the gas market we were a bit concerned about upstream investment in Turkmenistan to support that pipeline and lo and behold 2 weeks after we went to the printer the Chinese came out and announced the $3 billion deal to address upstream gas production issues in Turkmenistan so they are at it and they are working hard another deal has a dotted line down in the corner from Myanmar into Yunnan province 12 BCM have signed that in the last few months as well so all of that means that within about 3 or 4 years we could easily see China which as you can see from the top of the slide actually increased its gas use by 14% last year easily be 140 or even 150 BCM gas consumer in the medium term by 2015 which were put at number 3 globally behind US and Russia we've seen China do this with all markets and indeed to some extent all markets are sneaking feeling they may do it as well with gas India pretty similar story a market that really wasn't interested with gas at 12 but it's getting really interested with gas at 4 and of course this is a market that's very handy to guitar a large LNG supply so there's a pretty good opportunity I said 30 BCM by in 2009 I think that's a bit optimistic but certainly by 2011 we could see 30 BCM of gas going into India and certainly the big gas discovery the Christian the Godavari discovery highlights the fact that if you start to get your domestic price signals right you will there's a lot of gas in offshore waters so there's 30 BCM coming out of Christian the Godavari in the next 2 or 3 years as well so India's going to go from being a 40 BCM country to an 80 or 90 BCM country which will make it as big as Germany or Italy so suddenly these countries are turning over the consumption pattern that we're seeing in OECD just to talk a little bit about gas prices as I said we saw a dramatic fall no epic here I'm afraid in gas or not yet anyway oil link prices changing much more slowly and we're seeing a lot more gas on gas competition it's an ill wind that blows no good because Europe is finally discovering the joys of gas on gas competition which the United States has known about for some decades what we are seeing also is that NBP the British Hub Price and Henry Hub Gas Prices starting to converge that's a pretty interesting phenomena the arbitrage works pretty well across the Atlantic and certainly in the last few months just to graphically show that if you're not that familiar the colours there haven't come out that well but the bottom line is the Henry Hub Line and as you can see the US has enjoyed the cheapest gas prices globally for some time the British market was a bit slower to come down and indeed in January you can see it sort of plateaued out there the market actually managed to import oil based prices knowing the fact that it became actually a large gas exporter something to do with the Russia-Ukraine dispute I'll come back to that a little later and we've seen the two of the major oil indices there the highest one is the Japanese price but that's got it slower it's got a quicker turnover on the oil price so it can drop quicker than the German price and of course anybody who's selling spot gas into that market is making a killing at the moment into those German markets we spent a lot of time in the book on LNG markets and there are several reasons for that LNG is the glue that's linking markets together obviously pipelines stay fixed but LNG does not and is moving and has moved a lot strong demand growth this is a market that's growing rapidly but the most interesting aspect about it is what will happen in the few years ahead we just quickly run through there and certainly for the second half of the year the key theme of the presentations there's a lot more gas coming into markets where does it go how will it be worked out that's what happened in 2000 and what's shown there at the moment is 2008 and the dramatic difference was this bottom line the 20 BCM down the bottom that went from Atlantic markets into Pacific that's the biggest movement of LNG we've seen between basins ever and the past LNG has tended to stay effectively where it's produced there are two things one an increase in Asian LNG demand and secondly the availability of that LNG which was destined for American markets as I said the American markets were not as attractive as they might be and of course this gas is not tied down by long term contracts and does move according to demand and price signals so a bit of luck what we anticipate happening is that gas which went happily from Atlantic into the Pacific Basin definitely weak in Japanese or Asian demand is much much weaker and that gas effectively coming from the Middle East will move into Atlantic markets most of it we believe to Europe but some will find a home in the United States as the market of last resort they might not make a lot of money on that particularly a price of state at $4 net back to Qatar at $4 Henry hubs probably not going to be more than about $250 this is the other supply side of LNG this was only a couple of years ago it was a 200 BCM industry globally by 2013 it will be a 400 BCM industry and that's the growth these plants are being built they will be built there may be some slippage in their completion but by and large that gas will come on driven by a couple of things certainly the fact that people who built it want a bit of cash flow having committed large licks of money all of these plants were committed before 2005 I might add they were associated with a good cash flow as well mostly guitar and gas but a whole range of projects from Australia to Algeria to Angola Indonesia, Yemen it's a global industry and this is a dramatic change in the supply outlook a lot of this does not have long term contracts associated with it and will move attending an investment obviously every producer's cash flow is struggled in the current environment even though costs have fallen everyone's making cuts as David said we produced this document a few months ago for the G8 countries surprisingly enough gas projects didn't feature very prominently in the list the reason being there weren't many of them in the first place the ones that are committed are going ahead but lots of other ones simply aren't on the FID list this was gas investment was already a problem obviously the crisis is only going to make this worse and in particular in Europe where we need investments in gas of course need to be right through the production chain the supply chain it's not just a matter of upstream you've got to build the pipes you've got to build the interconnectors you've got to build the terminals we've built the LNG terminals, we've built LNG plant but we haven't built enough pipelines and we certainly haven't built enough interconnectors this will be a very very tough environment to get FID on the big capital and intensive gas projects particularly LNG projects we've only averaged one a year for the last four years we've only seen one in the last two years and I think it will be very very hard to bring a big LNG project to FID in the current financial circumstances I'll just give you we know credit conditions are easing but one of the big LNG producers that Pluto project I referred to Woodside Petroleum had to go to markets in February to borrow money they wanted $1.3 billion they got a billion they paid 650 basis points over the end of bank rate anyone who had to borrow money for a large commercial project knows that 650 probably should have been a company killer the only reason it wasn't is because the base rates have been cut so sharply in all major OECD countries in terms of Russia world's biggest gas producer inevitably Gazprom's cash flow wasn't that long ago, Gazprom was rated nearly as a world that was until its stock value lost 80% in four months last year since made a bit of a recovery but their cash flow has been hammered as I said, export sales first half we expect them to pick up in the second half but the first half has been poor and gas prices of course have fallen as well so their cash flow is probably down by nearly half, gross cash flow and investments will have to suffer we've already seen investments delayed in Yamal in Bovenin Square more cuts will come very shortly of course the last point here Ekaming Tanaka-san's comment gas demand can and may well rebound relatively quickly especially in the power sector obviously assuming the profile of economic growth recovery if recovery is slow then that won't happen but the supply side doesn't have that uncertainty about it we know what's happening on the supply side and we know new projects take long, long lead times even a project that will be announced tomorrow and the LNG won't contribute to a 2015 supply just a couple of points about pipelines here there's a European Pipeline scan lead which is a project up in the Scandinavian countries has been cancelled outright Nord Stream still going ahead in fact pipes have been acquired and coded in the sitting up near St Petersburg I saw them last year but the Swedes still haven't given their approval for that pipeline so there's a billion and a half dollars worth of steel sitting up there getting rusty up near St Petersburg a good example of the problems these large scale pipeline projects face Nabuko ever since I've been coming to the IA I've been going to presentations by the Nabuko consortium their PowerPoint presentations get better and better they have these nice animations and so on but they still haven't got any steel in the ground it's not a criticism it's just a very tough project to get rolling the pipe down in the right hand corner Turkmen China Pipeline that's up and running Chinese don't muck around they don't talk about it and they certainly don't do flashy powerpoints they just get on and build it and that pipeline will end as service I could talk a lot about all of these the black dots interestingly enough are LNG terminals Europe imports about last year imported about 10% of its gas supply is LNG Europe will certainly have the capacity to import at least double that amount easily 120 BCM within a few years whether they will or not well that's another question little talk about the Ukraine couldn't let a review of the gas year go by without talking about this disruption just to put it in perspective it was roughly the same size as Hurricane Katrina related gas disruptions in the United States in terms of market size but of course it did a little bit bigger and of course came in the middle of January when demand was much higher and the winter was much cooler indeed Paris was about minus 18 which might not sound that cold to you and certainly doesn't sound very cold to a Russian but it was cool enough to me thanks very much heating demand was up peak demand was up so more importantly and the big difference with Katrina is that the European market was just meant to go where it's a long-term contract and indeed these market weaknesses were cruelly exposed especially in Eastern Europe where a number of countries suffered so these are big volumes of lost gas and that's a lot of money for gas problems somewhere between one and a half about one and a half billion dollars I guess which they probably won't get back in the book we've actually ran through what happened in terms of timelines interesting things that happened when the dispute started on the 7th of January transit gas was cut off as well two important things happened the Russians used their other transit routes to increase gas and I think that is a small amount of credit for that but more interestingly the United Kingdom which imports no Russian gas and therefore the United Kingdom Minister it was very amusing he went on TV I can't do his pompous British accent but you have to get the feeling he sort of said along the lines of well Her Majesty's Government is of course as Britain imports no Russian gas we anticipate absolutely no impact on the gas industry in Britain that was good because what it meant was of course the continent was short and the pipe that runs between Belgium and Britain is reversible and indeed Britain became a transit country for the duration of this dispute a very big transit country just quickly other movements did happen but these were much much smaller and much much later this is a market that is at best slowed and doesn't work these are very small movements of gas heading into the sort of south-eastern corner and indeed rather belatedly the day before the dispute finished the Greeks finally managed to get some gas in the Bulgaria interestingly enough that era at the bottom spot LNG a very important part of supply for both both Greece and Turkey Spain Spain's the biggest LNG importer in Europe Spain had a nice wet year plenty of hydro and a nice windy year as well and we didn't need its gas in fact gas is down about 20% in Spain they've had this minor thing called a recession as well that's a bit of an impact but certainly there was gas available and there were Spanish cargos that went from Egypt direct to Turkey only take about a day or two to get there if you think I was going to say if you think unemployment is bad in the US Spanish unemployment is 19% at the moment just think about that this is a summary of how this was fixed there's a couple of interesting messages here the United Kingdom storage as you can see down in that bottom right bottom left corner quite a big contribution and indeed that flowed as far as Germany we actually know that flowed into Germany which is why the German storage draw wasn't anywhere near as large as it should have been the Italian storage draw was big you can see other Russian routes LNG this is a market that didn't work but it muddled through I think it would be the best description here in particular if the dispute had lasted another week or two what would have happened or if it had happened say at the end of March because this is commercial storage end of March when that storage would have been depleted it would have been a different story so there's a good story there final slide just to conclude our deliberations about the importance of economic growth in terms of our estimates for demand we've postulated sort of three parts here actually the slow economic recovery but also one where most users begin to concentrate on energy efficiency and non CO2 emitting technologies especially renewables which limits gas growth in the power sector and as you can see that bottom curve effectively by about 2015 just gets you back to 2007-08 demand in the US that's about 650 BCM 65 BCF a day so that's a slow growth scenario and if you're an investor that's a fair risk to take you're going to have to wait six or seven years to put new supply it's a bit more dynamic than that even this business as usual our second scenario the case of the US that would only get gas demand back up to about 680 BCM compared to 657 last year by 2015 and that is a very slow growth path and we have a final scenario that's been unfortunate given Michael Jackson died last week but no investment in power generation, economic recovery is rapid and gas comes back into the power mix that's probably the scenario that we postulated last year in the World Energy Outlook but believe me this year's scenario in the World Energy Outlook will be quite different so with those hopefully optimistic words I'd just like to thank our friends here at CSIS and a lot of old friends here in the audience we welcome comments, questions, feedback on everything we've said so we have about 20 or 23 minutes any questions? the Obama administration and the energy efficiency standards and push and the fuel efficiency vehicles I'd just like to know if you think there's going to be any immediate impact on the oil gas demand immediate impact is difficult to guess but certainly when this fuel standard is really working and US gasoline demand is about 9 million barrels 9 million barrels per day and if efficiency works and 30% efficiency means 3 million barrels per day the huge impact will come of course this the whole fleet this efficiency gain may take time but this direction is definitely which we want to see happen IA is promoting the so called 50 by 50 initiative is 50% fuel efficiency increase by 2050 for the all car fleet and in fact the administration's decision is just in line with this kind of direction and we are really uploading for this in fact in our oil market report we have prepared two scenarios higher economic growth scenario and lower economic growth scenario and as David say there are 4 million barrels per day difference in terms of the spare capacity towards 2014 the third scenario is hidden in between and if that is what we call the government action on efficiency as well as structural change I mean demand destruction may happen by the change of consumer behavior and it's already clear that GM or Chrysler collapse is a clear evidence of the structural changes happening already here and if this happens suddenly we may see the higher economic growth with lower oil demand and suddenly this has an impact in the market towards 2014 any other questions? Just to follow up on the question about the impact on the power sector and gas use in particular and obviously we welcome improvements in energy efficiency and a move to renewable technologies the impact of that on the power sector obviously will be tended to be overall to reduce demand but you need to look very closely at how that impacts demand and how it will affect the input into the power sector in the market review we actually did the case study of Spain which has a quite a high level of renewable penetration both hydro and wind last year as I said this year Spain actually had a very wet and windy year and that was nice last year if you went to Madrid it was beautiful, they had really nice winters lovely clear days, heavy frost but that means no rain and no wind so when that happens you see something like a 20% increase in gas imports this year it was wet, wind blew minus 20 so obviously that reduced the use of gas in the power sector but as I said it's a very volatile mix and initially our research shows that particularly where there's a carbon price at the altitude then you tend to find gas and renewables together as a whole back out coal I think that's the trend that we're likely to see similar to the trend we're seeing already Bill Hederman from Congressional Research Service I would like to know if you talked about the Russian interruption is there any maximum share that you expect to be put in place by the EU in terms of supplies from particular supply areas in the future and does that affect medium term or is it more long term okay just to the background of others there are a number of countries who have taken the type of policy measure that we're talking about Spain comes quickly to mind Spain acted in the year 2000 because it was concerned by its over dependence which was its only supply since then it has very successfully diversified its supplies I'm not aware of any moves by Brussels by the EU to impose a similar move certainly they are very keen to encourage increased diversification both of gas sources and gas supply routes and indeed increased diversification particularly in the power sector and the renewables in the low carbon technologies particularly renewables to a lesser extent nuclear the position on nuclear is a little more nuanced we say but no I'm not aware of any particular move in that regard certainly in Europe people are concerned about gas security there's no doubt about that we have I should say we have an IEA ministerial coming up in October and one of the things we anticipate ministers will discuss is the issue of gas security we will be putting paper to ministers and that will have a number of measures in it I can outline those in rough terms if you like but obviously the final agreement will have to wait on what ministers finally come to a landing on in October but certainly everyone is interested globally in the issue of gas security as Tanaka-san said energy security is no longer just about oil it is about both gas and electricity for Ian you pointed out the importance of oil gas for the U.S. and North American what happens are you seeing that this may also occur in other markets say in Europe or China well that's part of the global significance of this of course if it was to successfully translate elsewhere then yeah it would be an absolute game breaker for the gas industry as a whole sadly there are some people starting to do some work on it but it's been if you go to geological conferences as I have over the last 30 years you always get the geologists together and they make all these wonderful comments about permeability and porosity and everyone has a really nice time and they all go home and do it again next year we're still kind of at that stage in a number of certainly in Europe Europe doesn't have the vigorous and innovative production industry that you see in the United States it does however have an extremely vigorous and innovative environmental movement drilling rigs scattered all over the place Europe's a crowded place there are certainly some potential basins in places like Hungary, the Pannonian Basin so there's certainly some geological potential but that's only part of the story you do need the culture the innovative culture, the drilling the fact that of course in America you own the royalties under your property tends to make people much more interested in having a drilling rig come along it's only there for a month or two but the royalty checks keep on coming month after month those arrangements of course do not apply or swear, not even in Canada let alone in Europe a related aspect of course is that shale gas is not the only sort of unconventional gas got a lot more interest in cold bed methane especially in China especially in Australia in the midst of the worst recession in 60 years companies were busy in Australia I'd say global companies like BG and Petronas were busy paying literally billion dollar amounts for access rights to cold bed methane around in the bomb basin in Gladstone so there's some serious money going into cold bed methane as well as shale gas as well as tight sands certainly if prices start at four dollars we're not going to see that much activity but if they move up into the five or six and you would think in the medium term most people will act on that then you'd definitely see more global activity in unconventional gas Adam Samenski from Deutsche Bank this question is for David it's been today that the Rumelia field in Iraq has been awarded out to a couple of big companies and I was wondering if you could comment on how you see the potential for Iraqi oil development to influence the supply side picture looking out over the next decade well five years since this is the medium term now yeah I mean we we took a fairly conservative view as regards Iraq not because of many misgivings about physical again physical resource base I think everyone accepts that the resources are there but we were just struggling to see in the short term a regulatory framework that was going to bring this oil substantial new volumes of oil on stream quickly and I think that's the key issue and although deals are being signed as we speak some of the rules are being changed as we speak as well and there's talk about contracts needing cabinet or parliamentary approval before they will move forward and so on we took the view that Iraq could potentially over this five year period get to maybe between three and three and a half capacity in a sort of optimistic sense I think our actual number was probably closer to 2.7 2.8 as our base case forecast there's no reason why it couldn't be higher than that physically speaking but for administrative regulatory, political reasons probably fingers crossed more so than security related reasons at the moment we think that that remains an impediment so everyone talks about 6 million barrels per day and minister Sharostani in Vienna the OPEC seminar was loudly proclaiming 6 million barrels per day and ultimately if those constraints suddenly lifted there's no reason why Iraq couldn't produce 6 million barrels per day but we don't see it happening in the next five years that's the reality I'm Merrick Rasmussen in the Energy Information Administration speaking of some country specific situations I do what's your assumption about the outlook for oil production in Nigeria if they're going to be able to resolve their increased level of violence there apparently in the oil fields I mean for the past five years basically the situation looking at Nigeria has been one of if you like divergent provinces and you've had deep water projects going ahead and augmenting capacity in fairly sort of terminal decline because of the unrest and the attacks on capacity I mean we've got a situation in Nigeria at the moment where there's the best part of a million barrels per day of capacity shut in because of those attacks some of that basically in all likelihood isn't going to come back on stream I think for our forecast we've sort of knocked out about half a million because of that delta capacity it's an assumption we can't make a well informed forecast about that sort of thing when you're dealing with political and geopolitical risks but that's the sort of assumption we make that Nigeria is going to struggle and we've got net loss of capacity for Nigeria over the forecast period partly because of that there are a couple of offsets with new deep water projects such as I think Borsi and others that help stem that rather depressing picture the trouble is we've got a forecast with the situation as it is today and over the past five years there's been huge problems maintaining the integrity of the production infrastructure we have to sort of forecast on the basis that that isn't going to clear up overnight and therefore it's a rather complicated picture for capacity overall again not for reasons of physical resource in the ground but because of the geopolitical problems and the security or related problems that the country faces if I can just add on the gas side of course we saw the second half of the year an unprecedented interruption in gas production which meant there was force majeure to clear it on a couple of LNG projects a year ago people were talking very seriously about major new LNG investments in Nigeria a combination of the financial crisis and the security issues has really dampened a lot of enthusiasm for additional Nigerian LNG plenty of plans, plenty of good power point presentations but it's going to be a very tough investment environment for new gas in Nigeria notwithstanding Prime Minister and the President of Russia visiting the last few weeks Well, I want to thank all three of you very much for coming by here and giving this presentation I think it's a great opportunity to get the insight fresh off the presses so please join me in thanking them for their