 Good morning. Thanks so much for making it to CSIS, despite the hot weather. My name is Jane Nakano. I'm the fellow with CSIS Energy and National Security Program. And then it is my honor to welcome back Anne-Sophie Corbeau to CSIS, and especially to the new building. I think this is your first visit to the 21st century looking new building. And as many of you know, she is one of the best international natural gas market experts. She's with the International Energy Agency based in Paris. She joined IEA in March 2009 as senior gas expert at their gas coal and power division. And there she's responsible for managing the research on global gas markets and is the main author of the publication, the midterm gas market report. Prior to her assignment at IEA, Anne-Sophie worked at the Cambridge Energy Research Associates as associate director in the European gas team. And today it is our pleasure to host her. And she is here to share with you the highlights from their latest midterm gas market report. So here she is. Thank you. Very good morning, ladies and gentlemen. And it's really a pleasure to be back in Washington. It has been two years for me because last year I had actually two babies, a real one, who is now 13 months old, and a book. So now I am back with the midterm gas market report 2014. And I'm going to give you the main conclusions and basically to drive you around the world to look at how gas demand and supply are evolving in the world. So in terms of the key conclusions, we can say that gas demand in 2012 was not extraordinarily growing. It was growing only by 1.2%, which is actually much lower that what we saw over the last decade, which was closer to 2.9%. However, we are slightly more optimistic for the development over the next few years, over the period 2013-2019, with gas demand increasing at 2.2%. The main drivers behind this growth in terms of regions are, without any surprise, China, then the Middle East. But in contrast, we do not anticipate any growth in Europe and the former Soviet Union. Of course, in order to meet this demand, which is going to be about 500 billion cubic meters of additional gas demand, you need supply. And here we see a change. Two OECD regions, OECD Americas, which is essentially the United States, as well as OECD Asia, Oceania, essentially Australia, are going to be responsible for 40% of the incremental supply. Also, the Middle East is bringing a lot of additional natural gas. But in contrast, the former Soviet Union doesn't bring that much additional gas, and I will come back to that. The other interesting point about these two OECD regions contributing so much in terms of additional supply is that they are going to bring new LNG to the market. Global gas trade is going to expand by 1 third, but global LNG trade is going to increase by 40%, reaching 450 BCM by 2019. Let's now have a look back at what happened in 2013. As I said, not a good year for the gas industry in general. For once, natural gas grew less than oil, which was 1.4%. We anticipate coal to be at 3% to 4%, and renewable energy is definitely above 4%. So this is really underperforming for natural gas. And you can see a striking difference between the different regions. And in particular, I want to highlight China, which is still growing at a healthy 13%. When China is the fastest growing region in the world, by far, also in terms of volumes, despite the fact that this is only the third largest gas user in the world. But in contrast, you have also declined of natural gas demand in other regions, in particular in Europe, which was extremely surprising, considering that we had a very long winter, which actually lasted until the beginning of June. So in Europe, the perspectives are definitely not good. Gas demand is declining in industry, in power generation in particular, and the outlook, as I will explain later, are not particularly promising. You may also be surprised by the decline in non-OECD Asia. Actually, here, this is an illustration of the fact that even if you have a relatively high potential demand, you do not always have the supply available in order to meet this demand. In contrast, some countries have the means to afford for relatively expensive supplies, and this is the case for Latin America. Because of droughts last year, Latin America needed to use more gas power generation, and therefore, companies like Petrobras from Brazil were hunting for LNG cargoes, and they were paying extremely high gas prices, 19 to 20 dollars per MBTU. So real money there. As I mentioned, when we look forward, we anticipate a higher growth of natural gas demand, 2.2%, it's important, however, to see that this represents a slight downward revision in terms of our forecast compared to the previous year. In the medium-term gas market report 2013, we had 2.4%, and here now, this is 2.2%. Again, here in this picture, this is China, which is by far driving the demand picture. China will contribute to roughly one third of the additional gas demand followed by the Middle East, and really at the overhand of this picture, former Soviet Union and Europe, which are beautifully growing by slightly less than one BCM. So you can actually say there is no growth. And of course, this picture is only looking at the difference between 2013 and 2019, but during this forecast period, natural gas demand in both regions, we spend most of the time actually going back because it's going to be relatively low in 2014, going back to 2013 level by 2019. The relatively modest growth, to some extent, in Latin America, Africa, and Asia, reflects the fact that for these countries where relatively low domestic gas prices prevail, there is definitely a problem in terms of increasing domestic gas production or affording for more expensive imports by pipeline or by LNG. China is the elephant in the room. Of course, everybody knows that the Chinese economy is slowing down. Yes, but at the same time, we do not anticipate this to have a tremendous impact on natural gas demand because now the most important thing is local air pollution. I'm sure you have all seen pictures of winter in Beijing. There is a lot of local air pollution because of heating and planes are stranded. So this is now becoming priority number one, and this is driving higher demand in absolutely every single sector, residential, industry, power generation, of course, but also, as you can see in the orange line, transport. China is actually the number one in terms of the gas consumption in the transport sector with over 1.5 million natural gas vehicles, and they are now adding something like 500,000 NGVs per year. So this is a market which has a lot of potential as you can see in this picture. China, however, is not going to meet these demand entirely by domestic gas production. We have a lot of potential, but we are relatively conservative in terms of the medium-term development. So additional imports are going to be critical and these additional imports are going to be both gas coming from Central Asia or Myanmar as well as LNG. My own region, Europe, we can really say that there is no miracle to expect there. Demand in the residential sector on a slightly declining path because of energy efficiency, industry between high gas prices and relatively low economic growth, it's difficult to be hopeful. At best, we expect a stabilization of industrial gas demand. For power generation, this is a little bit more complicated because actually power generation is slightly coming back, not because the performances of gas power plants are becoming better, but simply because in some regions, like the United Kingdom, coal power plants are retired because of environmental constraints. So actually natural gas is winning there by default, but compared to the levels that we had in 2007, 2008, you can see that natural gas demand in the power generation sector is awfully low. So during most of this period, 2014, 2019, we are going to spend our time coming back to the level of 2013 with a very low point in 2014 because gas demand has already collapsed by something like 20% over the first quarter, not because of fear of Russia or energy efficiency measures, no, no, because of the very mild weather. I stopped heating actually my home in February and I think this can apply more or less to most people in Europe. So the results for the gas companies in Europe are not going to be great and there is a potential that this number may be actually the 470 BCM, so 34 BCM drop compared to last year may be actually relatively optimistic. It could even be lower than that. And as a result, while gas prices are low in Europe and some gas for plants are coming back in the morning, that's at least a good news for Europe. Well, let's now talk about the United States. People tend to focus on what happened in 2012. I think it's a mistake, 2012 is a pass. Of course in 2012, we had a very important and rapid increase of the use of gas in power generation sector, but it was because gas prices were very low. There was a very mild winter followed by a hot summer. 2013 actually is a situation with respect to normal. And actually if you were just deleting the year 2012, you could see that there is a growth, a kind of continuous growth of natural gas demand in the power generation sector and a continuous decline of coal power generation. We anticipate this kind of trend to continue over the forecast period, however, at a more moderate pace. We see that at $4 or $4.50 gas for plants have more difficulties actually to push away coal for our plants unless there are stricter environmental regulations. Another region which is really very important because it illustrates the difficulties that developing countries have to access to natural gas. There are a lot of gas resources in Asia, in non-OECD Asia, but look at India for example. Gas production there is declining. Same thing happening in Malaysia. A lot of countries are becoming LNG importers, even if at the same time they're also exporting LNG and this is a trend which is expected to continue. So the consequence is that for non-OECD Asia, this region is going to go progressively from being a net exporter to be just at the limit of being a net importer by 2019. And it will import increasing volumes of LNG because this is the only thing that they can actually get in this region due to the geography. Let's now look at what is going on in terms of sectors. Of course, as usual, the power generation sector is the main contributor to additional natural gas demand, increasing by over 250 billion cubic meters. That sounds great, but actually, in terms of the share of gas in the power generation mix, this is only increasing by 0.5% so that natural gas will represent 22% of the power generation mix. Actually, in every single region, you have competition between natural gas and something else. Well, here in the US, for example, this is not only coal. This is also definitely coal, but also renewable in Europe. This is coal as well in Asia, in China, while in the Middle East, the main competitor in the relative absence of nuclear and renewable there is oil. I mean, nuclear and renewable, they're starting to come, but they do not represent a high share, as you can see on this graphic, the fourth bar starting from the right. So to summarize, those who think that because natural gas is the least polluting of all the combustible fuels and should have an easy life in getting additional market shares in every single region, while unfortunately, they are wrong. And the best example of that is Europe, where natural gas demand may be a clean burning fuel, but nevertheless, the gas demand is growing down very, very fast. Let's talk about new potential now. And one of these examples is transport. And by transport, this is everything from road transport, trucks, train, and also potentially shipping. For those who were here last year, you may remember that we looked in detail at the road transport, something that we have done again. We are still relatively bullish on the development of natural gas in road transport, seeing more than a doubling of natural gas demand in this sector from 45 to over 90 billion cubic meters, but we also looked at another part of the transport sector, which is a shipping industry. We agree this is actually more for post-2020, but we see a potential there for the development of natural gas use, not only for international seas, but also for domestic navigation. Again, because of new regulation being put in terms of sulfur and also because of countries being aware that while there is simply too much pollution. So seeing, for example, natural gas-based shipping on the rivers in China, this is definitely not impossible and could happen relatively soon. I think this is actually happening right now because some companies have pledged to invest in this particular sector. So we do see some use of gas in the transport sector, in the maritime transport sector in China supply. Okay, so where is gas going to come from? As I mentioned, two OECD regions, as well as the Middle East, are the main contributor to additional natural gas production over the period 2013, 2019, as you can see. And at the bottom of the spectrum, while there is Europe where there is absolutely no miracle, natural gas production there is not going to increase despite all the potential of shell gas, which is discussed whereas this potential is unlikely to concretize insignificant volumes by 2019. The other quite interesting point in this graphic is that former Soviet Union gas production is not increasing that much. It's not a problem of potential for once. It's a problem of the natural gas demand in this region doesn't increase. Second problem, there is competition to supply Europe and here we anticipate relatively stable or slightly declining Russian exports to Europe. And third, we have been very conservative in terms of the new export infrastructure from Russia to global gas market. In particular, the Yamal LNG project, which is announced for 2018, we have pushed it back to early 2020, as well as a widely discussed China-Russia gas pipeline. This one is definitely going to arrive, but we anticipate more a 2020 starting date. Should these two projects come online a little bit earlier, then the numbers for FSU region would be of course slightly better. Another point that I want to make about this graphic is actually what is the contribution of these different countries towards their demand or towards additional incremental international trade? Well, we have actually very wide difference. China, Latin America, Asia, are going to actually contribute only to meet their natural gas demand growth, which means that whatever exports these countries have, it's going to decline. The Middle East also falls in this category. But look at countries like OECD Americas, Asia Oceania, former Soviet Union, and Africa. These countries are also going to bring additional gas volumes to global gas market, either in the form of pipeline exports or LNG. So there is really a big difference on how these countries are actually using their incremental gas production, if they have, which is not the case for Europe. Talking about the Middle East. Well, I want really to kill an idea which is that the Middle East has plenty of gas and can produce as much as it wants. Well, yes, in theory, there is a lot of gas, quite actually concentrated in a couple of countries. But a lot of the Middle Eastern countries are actually importing natural gas. This is a case for the Emirates, for Kuwait, for Oman, for Iran as well. It was a case for Lebanon and Syria before the war. It's also the case for Jordan. So it doesn't leave us with a lot of countries which are actually fine. I mean, the only country which is so far fine in terms of meeting both its additional gas demand and export commitments, this is Qatar. Saudi Arabia is self-sufficient but would definitely love to have more gas being developed because it still has to burn a lot of oil and an increasing amount of oil in the power generation sector. We looked at that a little bit in detail this time. And also Iraq, well, the situation in Iraq, of course, was after what we, when we published this report, what we can say is that actually Iraq is a self-sufficient country in terms of natural gas. So if there is a problem in terms of gas production, this is only going to affect Iraq and in particular, quite likely, the power generation sector. So that would mean lower power generation for the people living there, which is quite unfortunate. Another region which has also quite a bullish forecast in terms of gas production. As you can see, it was not the case over the history. We had a relatively flat outlook or flat historical line with problems in Algeria, problems in Egypt and problem in Algeria, which are really the three main gas producers in Africa. Now we anticipate that in Algeria, they are going to have a lot of discoveries finally after a lot of delays coming online over the period 2014 to 2019. Egypt, a small recovery, but we do not anticipate miracles there because companies are a little bit fed up of, well, getting relatively low gas prices. This is actually under discussion right now. They are also afraid of the political instability and they are also mostly not getting paid. And when you are BG and you are seeing that you cannot even export your gas as LNG, that you have to sell it on the domestic market for the beautiful $2.65 per MBTU, you are not happy. That's for sure. And your shareholders are not happy either. But a lot of the growth of African gas production is also coming from other countries, in particular, Angola. Whenever Angola's new liquefaction plant is going to restart and operate normally, Angola will also bring new gas to global gas market. Russia, I don't think I'm ever going to present this market outlook in Russia because the Russians will not like what I have to say, which is that their gas production is not going to increase that much. I mean, don't get me wrong. There is a lot of potential. I mean, all the companies, the gas firms, the Rosnevs and Novatec, they have a lot of potential to increase gas production. But if your domestic market doesn't grow, then you need to export it. On one side, we have Europe and there is a little bit of a problem with Europe these days on top of the fact that, I mean, the gas demand is not there. You know, you can dream about Europe, but if gas demand doesn't increase, gas demand doesn't increase. So the other outlet is, of course, as Mr. Putin perfectly understood, this is Asia. This is actually the reason why we have had this final investment decision taken on Yamal, so Yamal's movie is moving forward. Why are we a little bit conservative? Because, I mean, this is very far in the North and this is also going to be built on permafrost. So we think that it's going to take a few years in order to be built. And same thing for the Russia-China gas pipeline. But these are very good news and, I mean, a significant change in the position of Russia on global gas market. Now, there are also a lot of other projects, other LNG projects, which could move forward. And if I were a Russian investor, then I would definitely bet on the extension of Saralin 2 because from an economic point of view and also from the proximity with Japan, Korea, China, this is a project which is making the most sense. But the investment decisions in Russia are not always driven by economical considerations as we all know. So unless somebody has a little mouse in Mr. Putin's office, we don't know which project is going to move forward. What we cannot is that now, it's not only gas pump who is on the driving seat. There are people behind, looking at the door, and you can be sure about one thing. If the China-Russia gas deal had not been signed, then Rosneff was ready to come build the pipeline and export natural gas pipeline to China. That's almost a certainty. So for gas pump, there is really a danger, internal danger, and this is the reason why signing this deal was becoming a pressing issue. On commercial gas, we have been talking about on commercial gas for quite a few years now. I mean, for sure, shell gas is a reality in North America. This is also starting to be a reality in China, not even one BCM of gas produced and also in Argentina. But looking forward, we do not anticipate a lot of expansion of shell gas production outside North America. We do recognize, however, that there are some wildcards in particular Argentina or Mexico. I mean, China, there is definitely shell gas development. But it's not only about shell gas. There is also coal-based methane in Australia, a little bit in China, tight gas in different parts of the world, and also surprisingly, even though this is not exactly on commercial gas, coal gasification in China, coal gasification, this is a new way of removing the pollution away from the cities. So actually, you are polluting in Inner Mongolia and you are sending natural gas towards the coast so that the cities have cleaner hair. In terms of CO2 emissions, this is really not very good, but in terms of local pollution, definitely improving. So in a nutshell, we do not anticipate to have a very big expansion of the shell gas revolution outside North America. This is still starting. Countries are still pondering whether or not to move forward. There is still a lot of local opposition, in particular in Europe where this is far from being an easy task. LNG is what is linking all these parts together. And here, we have a quite dramatic expansion of LNG liquefaction. Most of this expansion is actually coming from one country. This is Australia. Seven projects under construction, very expensive projects as well. There is, despite all the talks, only one single project in the US which is actually under construction and Aztec NF idea. And we are waiting impatiently to see the overs finally while getting all the first approval and also finally taking final investment decision. But so far, there is only one project. Also, some of the things to look at is the development of a new technology which is floating LNG. Floating LNG, this is happening in Australia. This is also happening in Malaysia and surprisingly in Colombia. So this is a kind of new technology which could enable the development of 20 assets moving forward. Something definitely to watch in terms of cost, in terms of feasibility, in terms of source resistance to weather events. And this LNG, this LNG is definitely to go somewhere, right? Well, a lot of that is going to go not so much to Japan and Korea where we do not anticipate a rapid growth of natural gas demand, but to China, India, and South East Asia. These are the new players. There will be also some growth in the small markets, Latin America and the Middle East. But the most interesting thing is what I call the residual market. This is Europe. 2014-2015, there is not so much gas, LNG, coming to the market. So actually, the LNG imports in Europe which were already extremely low in 2013 are going to be even lower. Before, we get more LNG on the global gas markets and then finally they start to recover. So, I mean, this recovery doesn't look much. This is only something like plus 20 BCM between 2019 and 2013. But that would be sufficient in order to cover the incremental import needs in Europe. And why is everybody interested in exporting to Asia? Well, the picture is relatively self-explanatory, right? This is the average Asian LNG price that you are seeing at the top of the graphic and it has been quite high. And of course, well, it may make some would-be LNG exporter quite happy, but it's definitely not making happy the Asian countries. And we have seen that all of them are doing whatever they can in order to reduce this import bill. So they have been, for example, contracting some US LNG. But they are also looking at their existing suppliers, looking whether it's possible or not to renegotiate the contracts, which is not an easy task. They are also investing not only in the US, but also in East Africa and Russia in order to get also potentially lower gas price. It's not only contracted, it's also investing upstream. For example, in East Africa, you can see a lot of investments of Asian companies in particular in Mozambique. Finally, you may remember that last year we published a small report about the potential of developing a trading hub in Asia. We still see a lot of interest towards this potential. However, this is not going to happen tomorrow. The experience shows that at least a decade is necessary in order to develop a functioning and transparent natural gas trading hub in a new region. So in that case, that will be Asia. And to conclude my presentation, a look at Europe. As I mentioned, actually Europe and gas demand is not going to grow. So the additional import needs are only driven by one thing, the decline, the drop in domestic gas production. And this is roughly 20 BCM over the period 2013-2019. Now we have many potential sources. And actually, LNG, even though this is not reaching the peak that we had in 2010-11, is still coming back. Some of them is coming back. And here's a key variable is actually China's appetite for this LNG. If China doesn't swallow all the LNG, then some can actually come back to Europe, allowing Europe to kind of stabilize its pipeline imports. And in particular, that means for Russia that these pipeline imports are going to be limited in terms of growth. Actually, they're slightly declining. You may see towards the end of the graphic, towards the right for the last year, that actually the light blue area seems to expand. Yes, but this is not Russian gas. This is the Azeri gas, which is finally arriving to Turkey. So in a nutshell, despite all the talks and articles in the newspaper, et cetera, even with this very pessimistic demand picture, quite normal production picture, it seems very difficult for Europe to decrease substantially its dependency on Russian gas imports. It could maybe do some things in the longer term, but in the medium term, it sounds extremely difficult. In this scenario, in this report, and in the scenario in general, we have not anticipated a scenario of a description between Russia, Ukraine, and Europe. So the gas continues to flow as it is today towards Europe, and we have very low gas prices. Thank you very much for your attention. I will now open the floor to questions. Thank you very much, Anne-Sophie. This was very comprehensive and a lot of timely issues you shared with us and highlighted. Maybe I will start off asking you a couple of questions before I open the floor. The first one is you did talk about how there are quite a few projects in Australia, and for quite some time, we've been hearing how Australia may surpass Qatar. Is that still your outlook? I mean, there is about 80 BCM of additional LNG capacity, which is under construction in Australia. So unless there is a hurricane which is destroying a few projects, Australia will become the next Qatar by 2020. We have remained relatively conservative in terms of the arrival of this new LNG and the completion of the LNG plans, which are under construction, but adding all the capacity together, Australia will be higher than Qatar, so Australia will become the first LNG, the largest LNG exporter, unless Qatar suddenly decides to debottleneck a little bit its LNG facilities, then it will be a tie, I think. They will be at about the same level. Speaking of Qatar, though, how do I guess Qatar shares the huge field with Iran? So it has also a lot to do with the scope of Iran coming back to the international market if everything goes well with the nuclear negotiations. So how would you also assess that factor? Is it also, so that's sort of my first part of my question and if, you know, it's hard to predict when Iran may come back, but how in what sort of a slope do you think that may affect the Qatari export potential? Well, I mean Qatar has decided to put the moratorium on further exports and as far as I'm aware of, this has not been lifted. So any other additional project has been frozen so far and we have not heard that there will be any development besides the industrial developments, I mean the Zbazan project which is actually targeting the domestic gas market. So we have not put in any additional projects or exports even though, I mean, there are talks about, for example, expanding the dolphin gas pipeline which is currently serving Oman and the Emirates because Qatar does export about 20 BCM of natural gas by pipeline to Oman and the Emirates but I understand that Qatar is no longer ready to sell very cheap gas to this country so this gas is going to be at a much higher price and the negotiations are tough. Regarding Iran, I mean we actually had a relatively large focus on this country because I mean we see that the relationships are getting slightly better and I think you had this comment about the fact that they are sharing the same field, yes but unlike Qatar, Iran has a lot of overfields. I mean, South Pass is of course a very important asset but they are also over relatively giant fields so this is not only about South Pass. South Pass is going to continue to be developed. We have been, I have to admit relatively conservative because I mean it's very difficult to make accurate predictions about Iran and we also do not have extraordinary data as everybody else and it's difficult to go to spy there but should companies come back progressively to Iran then we could anticipate a more rapid development of the different phases of South Pass and it's not that it's going to bring back or to bring Iran to the global LNG market because I mean this is still relatively far away but Iran has a lot of projects to export to neighboring countries which require only relatively limited pipeline development. They just need to agree on the price. I understand for example that they have revived this potential agreement between Oman and Iran but they still need to agree on the price. There could be however if this deal was moving forward some kind of virtual LNG exports coming from Iran because then the gas from Iran will actually potentially serve to fill in the LNG export facilities in Iran in Oman which are not completely full. What is also important to keep in mind regarding Iran is that you have a lot of potential savings in the domestic market. We are using roughly one third, one third, one third for residential industry and power generation sector but it's not efficient at all. I mean I remember being told that typical household in Iran was using something like 2000 cubic meters which is very high compared to European standards. Also looking at the efficiency of power generation sector this is not typical for Iran actually it's typical for the whole Middle East the efficiency of the gas power plants are also quite low. I mean also consequence of the sanctions but not only that. And same thing also in the industrial sector so there is a lot of potential to actually save a little bit of gas there so that these gas could be freed for potential exports. And Iran definitely has ambitions and we have also ambitions to attract the companies back to Iran by proposing new terms in terms of upstream development. Thanks so much. So now I'd like to invite folks from the audience and just a few ground rules please tell us who you are and who you're with and then ask the question in the form of question. Hi my name is Dr. Donna Wells I'm an expert in the Russian language internet. I'm specifically interested in Sino-Russian relations right now so my question is if not for Russian natural gas would China be able to find the gas to meet its demand and is the same true for oil? Okay I'm going to answer the gas question because I am a gas expert you will have the oil expert next week so you can ask him the question. Actually there are a lot of potential sources for China. I mean it's LNG, it's Myanmar, it's Central Asia. So I would say that for this deal to be signed it was really about time. Also for the Chinese and also for CNPC because the NDRC was already allowing the construction of some regasification terminals in another part of China. Basically I mean in the region where the pipeline was going to arrive. Signaling to CNPC if you don't sign the deal now I'm going to give to Sinox the potential to build regasification terminals and this is going to be LNG. And also do remember that Chinese companies are very active in different parts of the world in East Africa, in Australia, in Russia, also in Canada in order to get some LNG back to China. So there are potential of the sources and also there is a big question mark around shell gas. I mean shell gas we are slightly more optimistic for the medium term with the cooling area from SinoPak which is going to contribute to help them meeting their 6.5 BCM target by 2015. For the long term we remain relatively conservative but we do recognize that shell gas could grow much rapidly than anybody anticipates. However as everybody agrees on Chinese shell gas I mean this is really a question of faith. Are they going to achieve the same miracle than the US? We should see we still need a lot of data right now costs are very high we need to tackle a lot of issues on pricing and regulation and infrastructure and water management but there is a potential. Just add on to that question. So you did mention that the longer target, the 2020 target, so it comes in a huge range actually that it's the 60, 200, the million, yeah. So is it, but can they achieve? I mean do you think the Chinese will hit somewhere in that range or not even 60 in your view? To be honest we are, I mean first of all we are looking only at 2019 so there is still one year to go. We are slightly below that but as I mentioned I mean we do recognize the potential of achieving better results than anticipated. It's going to be easier to say when we have more results of what is going on for SinoPak for CNPC and see how the companies are handling and how they are decreasing the drilling cost because the drilling cost remains relatively high in this region. One else? Yes. David Livingston, Carnegie Endowment. I have two small questions. The first one is if you could elaborate a bit more on how you see the evolution of capacity markets impacting ultimate gas demand over the medium term in Europe in particular but also how it might affect that 0.5% increase in overall gases role in the overall power mix to 2018, 2020. And then second of all if you could just discuss a little bit about gas to liquids, whether you see any geographies where that has significant and sustainable potential. Yeah regarding capacity markets actually we looked at that last year in last year's report a little bit and our conclusion which still holds is that capacity market this is good to make sure that the companies are investing in capacity so that this capacity is going to be available when needed but when I'm looking now at the gas use in the power generation sector this is still determined by the pricing relationship and in the absence of a higher price for coal or a higher CO2 price. Well I mean this is no brainer gas is not competitive. At seven dollars per minute you it starts to be competitive for the most efficient natural gas power plants because coal prices came down also and we have relatively low CO2 prices in Europe in general apart from the UK. Regarding GTL well I think there were a lot of plants about GTL but none of them is actually moving forward. I mean some companies have just scrapped their GTL plans. The last I heard about was in Mozambique we shall see because I mean Mozambique is really at a very early stage of its developments. It could be that GTL is one of the options taken by the government to monetize their gas resources internally but we are really at a two early stage to be able to say that this is going to move forward. Anyone else? Fiona. Hi, Arbor Johnson with Ito Chu. Could you elaborate a little more on your thoughts about gas and transport? I assume China is mostly trucking but what about other parts of the world and vehicles? I think you're a bit more bullish than some other folks. Thank you. Okay I mean the gas use in transport this is it really depends on the region we are looking at. So China we do anticipate rapid growth because I mean this is just part of the strategy to reduce the local air pollution so they are doing everything including NGVs but also EVs, hybrids, et cetera. So this really part of that. Actually use of gas in transport is also quite popular in Latin America, in Brazil, in Argentina but here's the issue especially in Argentina is that they do not have enough gas supply so they have a tendency to now cut down a little bit of supplies to this particular sector because I mean it's actually sometimes also quite important to have gas for power generation sector. And we see the same issue happening in Pakistan for example where I mean there are also a lot of NGVs more than two million. We see that happening in Bangladesh. So in many developing countries despite the interest to develop natural gas vehicles it sometimes felt victim because of the lack of supply. One of the countries which doesn't have any problem in terms of supply this is of course the United States which is going to be the second fastest growing market after China. And another region where there is a potential for growth there is definitely a lot of interest coming from the market players this is Europe because Europe has plenty of underutilized LNG regasification capacity which could be used for tracking, et cetera. However, some investors are relatively prudent because they don't know to what extent they would count on fiscal stability. Governments when they see something working well they say wow, new money, yeah, wonderful. Let me tax that a little bit. So this is really the feedback that I'm getting from some investors. But we see that in the Nordic countries in the Netherlands, in Sweden, in Norway I mean there is more and more interest to developing these micro liquefaction plants and also using the broader regasification terminal in order to serve smaller scale LNG facilities. So this is happening but probably not as rapidly as China. Hi, Alex Benedetta with SNL Energy. US legislators have been pushing legislation to expedite US LNG exports, several of them stating that specifically to look at aiding central and eastern European countries. And I know that there were diplomats from some of those countries here a few months ago that said simply pushing exports would send a market signal and that some market signals have already been sent so that contracts are a bit more negotiable. Can you comment at all on the impact of pushing US LNG exports or what impact exports could have on central and eastern European countries in terms of their ability to negotiate contracts and work with Russian gas suppliers? We have of course noticed this push of US legislators towards US LNG. As I said, I mean there is only one single project which has taken final investment decisions. So if you want to help these countries or the world in general because I mean after all you cannot have any control on where the gas is going to go, then you need to have these companies taking final investment decision now because there will be probably some three more years to go before these LNG plans are operational. So I mean US LNG for 2014-15 is not going to help anybody. The only actually central European country which has a functioning LNG terminal, this is Poland. So of course we can reorganize the flows, et cetera, but if you want to target one specific country, Ukraine, Slovakia, et cetera, for good reasons, they do not have any LNG terminal. Finally, I would be very interested to see what the US legislators have in mind when they say that they want to send natural gas to these countries because in order for the gas to arrive to these countries, then you need to have an agreement with the companies there. I am not aware that SPP, Polish oil and gas or whoever else in Central Europe assign a long-term agreement to import US LNG so far. So far raising the question, how is the gas is going to arrive to these countries if it has not been contracted? Hello, you touched on the challenges of water conservation at Thomas Lamero from Georgetown University. You touched on water challenges and developing shale gas. I wonder where in the world that would be the biggest challenge and what they're doing to either alleviate or how that will impact development in the medium term. Not sure I got untied is a good question, I'm sorry. So the challenge is to develop shale gas or water, okay, sorry. Yes, water remain a very important issue. Well, this is the case definitely in the US. I mean, we are still waiting on actually, maybe I missed it, the results of the EPS study on that, that has been, I think, talked about for 2000, since 2010. Ah, okay, I have not seen it. But I mean, I think that water is among the main issues to address it, it's really on the country by country. This is among the reasons why there is so much local opposition, the companies know that in order for the shale gas to be a success in many regions, water has to be solved. I mean, in China, for example, when you are looking at China, the gas resources, also the coal mining operation or coal gasification which are all water intensive, we are all kind of targeting the same water reservoirs. So there is really an issue there in order for all these companies and these energy sources to sustain the development of Chinese economy to solve the water issue by doing more in terms of recycling. Same thing applies, actually I was reading an article this morning about Saudi Aramco and the house of the Arabia wants to develop the shale gas that they have. Well, I mean, also a lot of recycling, you need to become much more efficient in terms of recycling. If I can just quickly add to that discussion, the lot of service companies that are based in the West, you know, including the United States are looking, I mean, that's one of the key areas where they're focusing R&D to see how much they can recycle and it's unique to each shale is unique. So it's a little hard to say, you know, okay. Well, for example, I guess in one shale within the US, the recovery rate is as high as like 90% from what I understand, but, you know, but in other parts of the United States, and it's much lower and, but there is expertise, there is technology that's being looked at. So to what extent then some of these countries say, you know, China could be India, that do have both the quantity and also qualitative water issues can really successfully, you know, adopt them in the US of Western technology and expertise, and then to their, you know, specific needs and then go forward. It's not a part of, I think, the discussion. So, questions? Yes. Hi, Michael Radner with Congressional Research Service. Thank you for your presentation today. Could you disaggregate Europe a bit and talk about any countries that you see increasing demand for gas or is it just flat across the board? Yeah, that's actually a very good point because, well, OECD Europe includes Turkey and Turkey is one of the generally growing market. Central Eastern Europe, frankly they, I mean, I have done some energy reviews of their policy and I mean, they do not like gas. I mean, anyway, I mean, there is no mystery. You look at the map, Central Europe, Russia, they do not like gas. For them, it's synonymous of dependency to Russia. Another country where we have some growth, as I mentioned in my speech, is the United Kingdom because there, actually, you are decommissioning some old coal power plants. So that needs to be replaced to produce new power demand and this is going to be replaced by natural gas. But, otherwise, we do not have a country where there is a very happy story about natural gas. I mean, the only one that you can say is relatively optimistic is Turkey and that's it. Speaking of that, the region, actually, more from the supply side, is does Israel count as OECD Asia? Was it by the IEA definition? Can you speak about their supply outlook as well? Yes, I mean, sorry about that, but actually, somehow, Israel has landed in Asia Oceania, which, of course, makes absolute sense to put them with Australia, Japan, and Korea. That side is, well, definitely a lot of gas. I mean, so far, Tama, which has been operating since April 2013, is operating very well. I think they're on target, if not beyond target. They are producing something on an annual basis like 7.5 billion cubic meters and they are on the way to actually double that by 2016, which is very good news for the country, but also for some surrounding countries because they have now signed an agreement with the Palestinian Authority to export a little bit of the gas towards this region. Also, depending on whether the Palestinian Authority can actually build the gas fire plant in time, and they are going to supply some Jordanian industrials, I think Jordan Potash and another one that I don't remember. So actually, when we are looking at Israel's exports, there are two things. Third, there is a 40% limit, so how much gas can actually be exported and how to export it. And right now, we see that, I mean, there is more push toward exporting by pipeline rather by LNG, Woodside pulled out. But it may be that actually some of these gas is going to be exported as LNG if, and but this is a big if. If they manage to have an agreement with Egypt, whereby we are building some pipeline of short pipelines, but there is no potential terrorist attack, which are going to feed the two absolutely underutilized or actually non-utilized LNG liquefaction plants in Egypt, that will make Union, Phenoza and BG, which have just signed deals with Israel on that. Very happy, I am pretty sure. But this is a political deal now. I mean, you need this to be approved by Israeli government and Egyptian government. Piece of cake. Who else? Mallory Lee Wong with Johns Hopkins University. You mentioned that in China, coal to gasification is to grow significantly. And I was just wondering if you could elaborate a little bit more on the drivers behind this trend, if you could break down the domestic market picture a little bit more and then if you are as, if you see the outlook being positive past the medium term as well, even though that might be hard to predict, thank you. Yeah, over the past two years, we have started looking at that a little bit more carefully because we were seeing that the government was suddenly approving a lot of projects and last year, this number of projects amounted to the amazing 200 billion cubic meters. So with our 40 BCM of actually gas production coming from this process, we are relatively conservative. Why are we nevertheless seeing this happening? Because, I mean, from an economic point of view, it doesn't make sense. Water, however, could be an issue in specific areas. So this is going to be a case by case study. Also, I mean, as I mentioned, the biggest problem in my view is the fact that even though this is removing the pollution away from the cities, which is really, I mean, as I mentioned, this is the number one priority right now. It's still not good at all from an environmental perspective because you are still producing a lot of CO2 when you are actually gasifying the coal. So unless there is CO2 sequestration associated with this project upstream, the environmental benefits of the whole process are not completely obvious. So I think for China, this is the thing to tackle. But otherwise, I mean, it's also solving a big bottleneck which is transporting all the coal towards the eastern part of the country. I mean, right now there is really a congestion. So you are no longer transporting coal, you are transporting natural gas by pipeline. Or gas pipeline. Anyone else? Then Joy, oh, yes, Mike, yeah, sounds good. On North American exports, what is your criteria? You said you included only one project, the Cheneer project, because it's under construction or reached FID. What's your criteria for inputting a project into your forecast? Because there's a lot more projects if you include Canada as well that are potentially coming online by the end of the decade. And so I'm just curious how you incorporate that. Is it FID? Is it ground breaking or what? Yeah, I mean, we definitely look at final investment decision, but in the case of the US, actually the US is exporting more gas than the Cheneer project alone will actually be based on. Because we have anticipated that more FIDs will be taken right now, I mean in the next 18 months, which are going to enable some projects to move forward and to contribute to additional LNG. This can take place because US LNG is going to take less time to be built than a traditional liquefaction plant. However, for Canada, we still have not seen any final investment decision. I don't know whether they are closed or not, but I don't think so. I mean, there is still a lot of negotiation with the First Nations in particular. Most of the big projects which are currently under discussion are relatively expensive as well. So we do not anticipate any big Canadian project to be online by 2019. That said, there are some very small projects which maybe if they are based on floating LNG, which seems to be built in less time, could potentially come online by 2019. But this is a big if and this is not the base case in our assumptions. But as mentioned, I mean, floating LNG, there are a lot of people, especially in Malaysia, which are apparently building these things relatively fast. It's worth really looking at that in more detail. Divya Reddy from Eurasia Group. I just have a question about your assumptions on Chinese demand, particularly in the power and industrial sectors. Are there specific policies that you assume will be implemented in the next few years that will actually make those, allow them to meet those estimates? I mean, in terms of the modeling and in terms of power demand in particular, so we do the modeling for power demand. Then, I mean, we look at the development of nuclear generation, which is basically based on the existing projects. I mean, the World Nuclear Association has a very complete database, so you can basically make your estimates based on that. Our renewable team, which is going to actually publish its medium-term renewable report at the end of August 2014, has given me all the input in terms of additional renewable generation. So the reminder is essentially coal and gas. And then, I mean, there is a question also here of what are the targets of the government in terms of new gas far plants, and we assume that they are going to be used at a certain rate. We do agree that if you are only looking at the economic feasibility of coal versus gas, this is not always working in favor of gas, but there is also a push coming from the government, especially in the northern region, so that, I mean, the companies are actually signing for gas in order to supply the gas far plants. So this is part of this environmental push to diminish the local air pollution. For industry, I mean, this is really part of the general growth, so I mean, this is more linked to GDP in general. We do, however, think that there is a small potential to be realized, but more in the longer term, of a switch between, I mean, the coal which is used in the industry, which is actually quite a large part of the overall coal used in China towards natural gas, but progressively. One thing is sure for industries in China, they need to be sure that they can rely on natural gas, but they are not going to be cut in the middle of the winter, and so far the market is still in a stage of development, so they need to have more certainty, but as soon as they have certainty that, I mean, they can get the gas and that the gas is not too expensive, then probably they will switch to gas. Anyone else? Hi, I'm Charles Jean from Bank of America. You mentioned a couple times the potential for natural gas to be used in maritime shipping, and I was wondering if you could speak a little bit more about what some of the existing projects are, or what the challenges are for, or the potential outlook. Yeah, as you mentioned, as you know, probably, I mean, starting in 2015, there will be new regulations in terms of the sulfur emission, basically, in some regions which are called the ECA, Emission Control Areas, two of them are around North America and in the northern part of Europe, and you cannot use, I mean, the high sulfur fuel oil, this is no longer possible. So you have basically three options, so you can ever use marine diesel oil, which means that, I mean, there is no investment required, but this is awfully expensive. You can use crewboats, which are kind of installations that you can put on your boat, which allows you to actually remove the sulfur. It's not always easy to install on every single boat. I mean, some of these things are only four meters high. You can see, I mean, the size, et cetera, on the websites of the providers. Some of them are much bigger, like 16 meters. So, I mean, this requires, of course, investment. And the third option is LNG. Two options here. Either you convert your existing boat into LNG, but knowing that this is going to affect the room of viable if you are transporting goods, because, I mean, first of all, LNG is bigger in terms of volume than conventional oil, but also you need to have a whole, you know, the kind of envelope which is protecting your reservoir, which is going to be thicker, because when natural gas, LNG is going to be transported at minus 160 degrees. Does that make sense? Well, it really depends on the difference of the gas prices on one side and the marine diesel oil prices on the other side. So this is really the biggest uncertainty for anybody investing in this kind of new area. This is actually also the main uncertainty for anybody right now looking at investing in road transport. I mean, to what extent is differential between gas prices and oil prices going to be sustained for the next five or 10 years? I mean, you know, in road transport, you have a lot of change of the material, of the trucks, but you are not changing a boat every two years. So I mean, there is more danger here. And also, I think a lot of people are waiting to see whether the international maritime organization is going to enlarge the limit in terms of self-remission to the international seas sooner or later. Is it going to be 2020? Then maybe LNG starts to become interesting or is it going to be 2025? Anyone else? Do I get to ask you one more question? I hope. So obviously, you know, we're looking at the midterm. That's sort of the time horizon for the presentation. But some of the stuff that you anticipate may be game changers. I mean, I think Iran came up a couple of times, but say, you know, between 2020 and 2030, you know, on the supplier side, you know, who may also be sort of a big sort of a shake or mover. And then also, technology-wise, you did touch upon floating LNG, but could that be a significant game changer? Or when you think about it, you know, as an analyst, not necessarily, you know, sort of going through some of the highlights, what are some of the stuff that you, you know, look out for projecting? I think in terms of game changers, I've already said that several times, but for me, Chinese shell gas is probably one of the biggest one in terms of the size. Some of you may remember, we had published two years ago the Golden Rules for Golden Age of Gas, in which we were looking at different gas scenarios for unconventional gas in different regions, in particular in China. And the difference in terms of unconventional gas production in China can be relatively large, whether you are very bullish or whether you are not bullish at all. I mean, it can be up to 280 BCM by 2035. So with that, of course, you have consequences both on demand but also on supply in terms of the import needs. So this is relatively large. Yuan, of course, is the elephant in the room. As I said, in terms of regional pipeline exports, yes, it could come to the international scene. In terms of LNG, unless this is filling in the underutilized LNG liquefaction plants in surrounding countries, I don't think we are going to see any Iranian LNG before 2025. East Africa is your new much awaited supplier, which has plenty of gas, could be surprising or not. I mean, it's really a question of how fast the companies which are there are going to take their final investment decisions so far they are, I mean, they are targeted to 2018, which is way too ambitious because, I mean, they have not even taken final investment decision. So it's not crystal clear how fast they are going to proceed. Knowing that, I mean, the governments are relatively new in terms of the gas scene. They don't want to be screwed by companies which have thousands of lawyers, which is understandable. They also want to keep some of the gas for themselves. In particular, Tanzania, it made clear that they want to keep some of the gas for the domestic market, which may actually lead to a fear that there could be some kind of Egyptian syndrome. You know, you are agreeing with the government, I'm going to use this gas for my domestic market, you are going to take this gas for exports. And a few years later, where the government is knocking at your door and saying, well, actually I need the gas because my people are rioting, so sorry, for your LNG and all your investment, but I'm going to take the gas. Doesn't Myanmar also have something similar, if I'm not mistaken? Like there was some reason, or maybe about a year ago, domestic, I'm not up to date, but domestic legislation or movement to have a cap on how much they want to export. I cannot remember, it may be true actually, but Myanmar is such a small market and they have also a lot of hydro potential. So I mean, their gas use cannot be really big. I mean, it wasn't big in Tanzania and it could potentially be a bit bigger. And then floating islands, or the technology side? Floating LNG, yes, definitely, but I mean, otherwise, I mean, for me the biggest thing is definitely energy efficiency, not always in terms of improving, you know, the end user demand, but also at the intermediate level, looking at the efficiency of power plants. I mean, this is very low in many countries and there is definitely a lot to do to improve the efficiency of the existing gas power plants or old power plants or coal power plants. I mean, people need to invest more because I mean, in terms of investment, this is lower cost and it can improve the economics of a lot of projects and a lot of help also, a lot of countries which have difficulties to afford for the fuels. Well, thank you so much Anne-Sophie for coming and presenting and please join me in thanking her with the run of blocks. Thank you.