 Good afternoon. I thought go ahead and get started here with the presentation. It's always a pleasure to have Lausovar come and do presentations on the work he's been doing at the IEA. The last time he was here was for the first edition of their medium-term coal market report, and I think it had a lot of insights that we've all carried forward with us. The gas market report comes, of course, at a very interesting time for the U.S. as we're looking at what's the role we're going to be playing in international markets. A lot of political decisions being made there, a lot of statements being made about how those markets will operate. So I think the information Lausovar will give us will be quite helpful to understand that better. So Lausovar, go ahead. Thank you very much, Sam. Ladies and gentlemen, I'm pleased to be here. The new IEA gas outlook was launched last Thursday by our Excellency, the Director of the St. Petersburg Forum, in a very important gas country. And this is the first public presentation of the new report just a couple of days after in another very important gas country in the United States. So I'm very pleased to be with you. Now, the big picture outline is that two years ago we introduced the concept of natural gas entering a golden age. This is a golden age of gas. And two years later, we see no reason to go back on this projection. We see natural gas growing at roughly 100 billion cubic meters per year. I have to apologize from our American friends, the majority in the audience, as a European, I think instinctively in the metric terms. So natural gas is growing at roughly 100 billion cubic meters a year. So in five years, the global natural gas system adds almost Russia. And we also see natural gas continue to grow considerably faster than overall energy consumption. So natural gas increases this share in the global energy mix and much faster than oil. And we see a very important physical substitution from oil to gas in two quite interesting places. One, the power generation sector in the Middle East. Oil is gone from power generation in the United States and Europe. But oil-fired power generation is very much part of the energy reality in the Middle East. And we see several important Middle East countries pushing heavily to replace that oil with natural gas. And the other is that natural gas is emerging as a credible major transportation fuel. So comparing our gas and oil projections, the medium-term growth of oil demand is around 106 million bar-as-per-day lower than as if this shift from oil to gas did not take place. And this is roughly half-half between power generation in the Middle East and transportation in the United States and in some other countries. Having said that, we actually revised our projections downward compared to the previous report by roughly 70 billion kilometers in a five-year time horizon because of two things. One is the persistent weakness in Europe, where the combination of the Eurozone crisis and the revable policies constrained gas demand. And on the supply side, the biggest revision is in the Middle East, where the outside Qatar, most Middle Eastern countries, have an almost infinite abundance of gas underground and the gas shortage overgrown because of the insufficient policies to get upstream investment going. So there is actually a negative revision into very important regions. But there is no negative revision for the United States. In fact, as time is going by, we are gradually becoming more and more optimistic about upstream in North America. So what we see is that the growth of shale gas production in the United States is remarkably resilient to low gas prices, mainly because of three main factors. One is that we see a very promising technological development on the fundamental technologies of non-conversual gas, 3D seismic drilling and fracturing. In the heroic days of the shale gas industry in 2006, 2007, 2008, the industry to a quite large extent relied on brute force of drilling and fracking everywhere. So in the early shale gas areas, you had a long tail of shale gas wells, which contributed very little to overall production. Whereas the industry is increasingly smart in having a much better 3D seismic, much better directional drilling, a much better targeting of the fracking zones, and also multi-bed drilling to reduce the surface impact. All of this leads to a fundamentally better cost efficiency. Very importantly and a very big contrast to the rest of the world is the supply capabilities of the oil field service companies in the United States. The United States has roughly 75 percent of the global oil field service capabilities. And in my experience, there are a lot of observers in the United States and outside the United States underestimate the big capability gap of how good the oil field service industry in the United States is. So the oil field service industry in the big North American share plays increasingly relies on mass manufacturing methods. Some of the oil field service companies are actually using the same optimization software which was originally developed for low budget airlines who fly the same aircraft as the conventional airlines, but with a fraction of cost because of the very efficient utilization of equipment. Because for shale gas, you don't simply have to drill and frack. You have to drill and frack thousand and thousand and thousand times. So a very efficient, high utilization of the drilling and fracking equipment is essential. In Poland, there was an interesting case last year when our big capacity bond and drilling league was standing in the Dalzig Harbor for several months before the companies could figure out where to go and what project to do. Now, of course, that will very much have an impact on costs. And last but not least, the upstream industry in the United States proved to be very good at redirecting drilling activity into liquid-rich and oil-rich areas. But this is not black and white from an upstream perspective, so you don't switch off gas to switch on oil. There's different shades of gray. So we have a very large-scale gas production in the United States supported financially by the liquids. In fact, last year, the group of companies whom we call US gas industry received less than half of its cash flow from natural gas. More than half was provided by oil and the other natural gas liquids. So the bottom line is that the United States is projected to provide over 20 percent of the global increase of natural gas production. And we should not forget about a very important country just north of the border, Canada. Canada has extremely large gas resources, but actually has experienced a falling gas production because they were squeezed out from the traditional export markets. So without a significant export capacity, substantial gas resources in North America, the US and Canada will stay underground forever. Now, at the same time, we also foresee that the worst days for coal or the best days for coal, if you look at it from the climate change perspective, are over. The last year, we have seen a significant coal-to-gas switch in the United States, around 200 terawatt hours, which delivered a large carbon dioxide emission reduction. But this very large coal-to-gas switch relied on really dirt-cheap gas. The reason for this is that the United States has a very large gas-fired power generation fleet. So if you take a look at the nameplate capacities, the potential for coal-to-gas switch seems limitless. But around half of the gas-fired power generation fleet in the US is open-cycle gas turbine, which has low efficiency and relies on a very, very low gas price to come into production. And also, there are significant geographical barriers. The big clusters of gas-fired power generation capacities are the states of California, Arizona, and Texas. Now, California doesn't have a single coal-fired power plant, so there's no competition between there. Texas is isolated from the rest of the United States. A big difference between gas and electricity is that for gas, the United States does have a properly integrated natural pipeline infrastructure. For electricity, the United States doesn't have a natural electricity transmission infrastructure. It has a weak transmission system, which is riddled by bottlenecks. And I have not yet met a single energy expert who would have been optimistic about the development of the US electricity transmission infrastructure. So what we see in the United States is that with the recovery of gas prices, coal is holding its position reasonably well. And natural gas captures the growth. So overall, the carbon dioxide emissions in the US power sector go back on a growing path. Now, of course, I'm aware that there might be some important initiatives in US climate policy. And of course, we developed these projections before that. And then I would again make a traditional reference to Elvis Presley, is applying the Elvis principle to US climate policy is that great song by Elvis, a little less conversation, a little more action. So there we did not assume the application of Elvis Presley to US climate policy. Now, the abundance in North America is in stark contrast with the shortages in the rest of the world. And that will put the North America as a potential exporter into a very, very interesting position. Because last year, we have seen a global decline of LNG supply, which is truly exceptional. And that was not a single disruption which can be repaired. That was a long list of systemic events. The hardcore security problems in Yemen, Libya, Algeria and Nigeria are runaway growth of domestic demand in Egypt, Indonesia, Abu Dhabi, and the depletion of commercial gas reservoirs in Oman, Indonesia, Egypt and Algeria. And I have to say that there is no reason to be optimistic about either of this. I'm not optimistic about the security situation improving Yemen. I'm not optimistic about domestic demand slowing down in Egypt and so on. So this tightness is very, very likely to continue. In fact, out there, there is a significant underutilized LNG capacity. But the Egyptian government simply prohibited the use of the dummy at the LNG facility. So $15 billion liquefaction train is standing there idle because of the domestic gas shortages. Now, the covering is riding to the rescue, and that's Australia. The good news about Australia that this is a country where contracts are kept, where the government is not going to confiscate your assets. It's a geopolitically very secure supply. The bad news about Australia is that the projects are located in very remote locations, very high technical difficulties. The most usual news that you hear about Australian LNG projects is project delay and cost overrun. So this is not an easy and this is not a cheap supply. And in fact, around 85% of the future production of these projects is already contracted by major Asia utilities. So there will be little additional supply available. Now, the combination of a more positive outlook on North America upstream, the robust position of coal in North America in the absence of future of further climate policies, and the tightness of global LNG markets, greatly increased the attractiveness and greatly enhanced the competitive position of North America as a potential LNG exporter. So if I take the projects that are in advanced stage of development and by advanced stage, I defined the projects that either already have the approval from the Department of Energy or already signed multi-billion dollar commercial contracts with major buyers, those advanced projects would transform the United States into the number three LNG exporter behind Qatar and Australia and would represent a supply capability equivalent to a group of several conventional LNG exporters. And I should also emphasize that the United States is not an island. A lot of the debate about gas exports in Washington is taking place as if the United States was an island, but it is not. The Canada has a completely integrated gas market with the United States. And in Canada, there is a hundred years tradition of an export-oriented mining industry, so there is no meaningful debate that commodity exports are good. So if you let the market economy do its job, most of the export projects would be located in the Gulf Coast of the United States, but you can locate LNG export projects in Canada as well. And in fact, several major companies are working on exactly this. Now, one country which is contributing to the tightness of LNG and the global gas demand growth in general is China. China, up until recently, has an energy system which was completely dominated by coal. In fact, the structure of Chinese energy use is comparable to the Western countries until the 1950s, and air quality was absolutely awful in those countries as well. So the city of London had smogs where several thousand people died from air pollution. The city of Pittsburgh had to run the street lighting in the middle of the day because of the smog. Without natural gas, it would have been impossible to clean the air quality of the major cities of the West. And without natural gas, it would be impossible to clean the major cities of China as well. Now, we believe that the Chinese government is absolutely 100 percent serious in their determination of improving the air quality of China. I mean, you cannot have a rising superpower when you have to use chemical warfare equipment to take a walk in the capital. That's something unsustainable. So China is roughly 30 percent of the global gas demand growth. But given that the key policy driver is air quality, the structure is slightly different than in the rest of the world. So in the electricity sector, investment in new coal-fired power generation in China still exceeds investment in combined cycle gas turbines by a factor of six. The reason for being is that for a new coal-fired power plant, you can build it with ultra-supercritical technology. You can apply all the modern environmental control technologies, electrostatic filters, flue gas disauthorization. So you can do a long, long way towards cleaning up a coal-fired power plant. And the new generation Chinese coal-fired power plants are pretty good in this respect. If you want to heat buildings with coal or if you want to use coal in industrial process heat, there is no way to avoid the environmental disaster. So China will use gas in building heating very, very significantly. Interesting enough, if you take the major emerging market countries who drive energy demand growth globally, China is the only one of them which has cold winters and needs winter heating. Indonesia, India, Brazil does not have winter heating. China does. So we estimate a new gas heating in around 3.5 million homes every year. Also roughly 7 million tons of coal replaced by natural gas in industrial processes every year. So this is a very big gas demand drive. China actually has a growth of gas upstream production which would be impressive by any other standard than the size and scale of the Chinese energy system. So China is around 15% of the growth of global gas production. They have a nicely growing gas production, but this is nowhere near enough to supply their domestic production gross. And another interesting thing is that China probably has a lot of shill gas underground, but above ground they have very serious difficulties to get it out. In general, anything that the Chinese really want and does not contradict the laws of physics moves very rapidly, but shill gas is not moving very rapidly. Even the Chinese government official targets, which the Chinese industry is publicly skeptical about it, but even the official targets would call for a ramp up of shill gas production, which is roughly one-third of the speed of the ramp up of the shill gas industry in the United States. So in general, we got used to the idea of China building everything much more rapidly than what we would be able to in the U.S. But in the shill gas, the most optimistic case is one-third of the U.S. speed. They have three hot areas for shill gas in China, but if you take a look at these three, Sichuan has an incredibly high population density, several times higher than the population density of the U.S. major shill place. And the other hot areas, the Ordos basin in the north and the Tarim basin in the northwest are deserts, where water availability is a very, very big issue. So one important sign is that China is investing very seriously in coal gasification. Now coal gasification is a capital intensive, energy intensive, water hungry, and dirty technology. So in every developed market economy, coal gasification was phased out when natural gas arrived. When China is investing in it heavily today, that tells you a lot about how optimistic they are deep in their heart about shill gas in China. So with the very bullish demand growth and the moderate growth of domestic upstream driven by other sources by shill gas, China actually adds the current gas imports of Germany to its import needs, which is primary two sources, pipeline from Central Asia and LNG. China absorbs practically 100% of the production growth from Central Asia. And you know that in the city of Brussels, you can have a comfortable, well-paid job organizing conferences about how to bring Central Asia and gas to Europe. That's a complete waste of time. Europe completely missed the boat on Central Asia and gas. You should imagine a giant vacuum cleaner on the Chinese border sucking in all the gas from Central Asia. That's my mental image of that. And on LNG, they will absorb roughly one-third of the global increase of LNG supply, which is more than their contracts, so China will be also an important buyer in the spot LNG market. Now, I have not mentioned Russian gas into China. That is going to happen, but not this decade, because Russia is talking a lot about redirecting gas exports from Europe to China. But that's easier said than done. That's the first observation. And second is that we should not imagine Russian gas being produced in one definite point in space. The Russian gas resources are scattered in a territory which is bigger than the United States, some of which is predestined to go to Europe, some of which is predestined to go into China from a geographical point of view. So we should not imagine a big control room in Moscow where they can switch off Europe and switch on China back and forth. There are some people in Moscow who would like such a control room, but that's not going to happen. So the realistic basis of the Russian exports to China are the east Siberian resources, the Chalanggan and Kovitskaya fields, the allocated east of the Baikal Lake. Currently, the Russian pipeline system ends at the city of Tomsk in central Siberia, which is still 3,400 kilometers from the Pacific Ocean. So they need to develop two super giant fields and they need to build several thousand kilometers of pipelines in very, very harsh terrain with very underdeveloped infrastructure. So even if they agree, which they have not yet, they it will take them roughly a decade to develop all this all these projects. Very interesting development took place in St. Petersburg exactly the time when we were there is that a Chinese super major company bought into the Yamal LNG project in North Siberia. This is incredibly interesting from two points of view. One is that Yamal LNG is developed by Novotek, it's not developed by Gazprom. Now I must say that for a Chinese company making a major investment in Russia, it's difficult to imagine that the choice of partner would go against the wishes of the Russian government. So this first major strategic Chinese investment in the Russian gas sector is taking place with a partner other than Gazprom. If you read about it in the Russian press, the explanation is that this does not compete with Gazprom because this is LNG, but of course if China buys more LNG, it's difficult to imagine how it would not have an effect of their appetite for Russian pipeline gas. And another interesting characteristic of this project is that this is going to be an Arctic LNG project. Now Stonvid, the Norwegian LNG project, is called as an Arctic project, but Yamal is much, much more Arctic than Norway. So the geographical and climate conditions are way, way beyond anything the energy industry ever done in the Arctic. So it will be very interesting to watch how the technical and project development challenges are tackled. Now what we see in Japan is that the past two or three years, Japan was one of the global drivers of gas demand due to Fukushima and the loss of nuclear power. The new Japanese government is very determined to restore nuclear power in Japan, but we don't foresee nuclear power coming back to the pre-disaster level in the foreseeable future. But even with a moderate restoration of nuclear power, that will be sufficient to stabilize Japanese gas demand because Japan is currently burning large quantities of oil for power generation. So the first nuclear restoration will kick out oil from the power generation sector and stabilize gas as it is. And in Europe, there are some good news and bad news for the gas industry. The good news is that there is a light at the end of the tunnel. In the past three years, the European gas industry faced the perfect storm of a very weak energy demand overall because of the eurozone crisis. A very low carbon price, which was an indirect consequence of the eurozone crisis. The eurozone crisis pushed down European carbon emissions, so there was less demand for carbon quotas. Expensive gas, cheap coal, and rapidly growing renewables. So every single factor conspired against gas consumption in Europe, and it completely crashed. It completely crashed the European gas demand, and it also made the business model of gas-fired power generation in Europe borderline impossible. I can tell you just a personal example. I came to the IAEA from the European oil and gas industry, and my former company made a strategic decision that they cancelled their gas-fired power generation projects in Hungary and Slovakia, but they continued the exploration drilling in the Tau Block, which is located in the northwest from the province of Pakistan. Because they came to the conclusion, and I fully agree with them, that drilling in Taliban territory is a better risk return combination than gas-fired power generation in the European Union. Now we see some recovery of this, because the large combustion plant directive kicks in. In general, if you want to deal with coal, and you want to reduce emissions in the power sector, you can have two approaches. One, you put up a high explicit carbon price, and you have gas-defeating coal on a market basis. Now if you cannot do that, then the plan B is that you take every single sink that a coal-fired power plant emits, apart from carbon dioxide, and you regulate it to death. You regulate it until it dies, and then you will have coal-fired power plants closing down and disappearing from the energy mix, and this is what is happening in Europe. The European Parliament rejected the tightening of the emission trading system, which would have led to a higher carbon price, but the large combustion plant directive is kicking in, which will punish coal-fired power generation quite seriously, and lead to a significant decommissioning of coal-fired power generation. And as Europe loses the physical ability to burn the coal, that will lead to declining coal-fired power generation, and enable gas to recover. But gas will not recover to the pre-financial crisis level, and the increase in the utilization of gas plants in Europe will only be three percent, so the business model will remain very, very challenging. And of course, the gas industry always claims that it would be much, much better and much more cost efficient for Europe to have a gas-based strategy based on the carbon price. Now, here I compared the actual structure of power generation in Europe, nuclear is stable in the two scenarios. The current one, low gas-fired power generation, a lot of coal and a lot of renewables. And if we run the existing CCGD capacity in Europe with an optimal utilization, we would have a much higher gas-fired power generation. I added just enough coal to have the same carbon dioxide emissions, so we are the same from a climate change point of view, and we would need much less renewables. Now, in the second case, we would save some $27 billion on renewable subsidies every year. We would save another $7 billion on coal imports, but we would have a roughly 25 percent higher gas import into the European economy. And very importantly, Europe is not facing a perfectly competitive gas market where Europe is a price taker. Europe is facing an oligopolistic gas market, where currently the very, very weak demand is the most important reason of a structural transformation of gas markets. Now, the major exporters are renegotiating their contracts with the European buyers one by one, providing multi-billion dollar concessions because of the very weak demand. And if you calculate it, if the 25 percent higher gas import would lead to a price increase of just $0.8 per MBTU, then we would actually have a higher total system cost. So the renewable policies in Europe are remarkably resilient politically, and one reason for that is that a large proportion of the cost of renewables is actually not paid by the European economy. A large proportion of the cost is paid by gas from Qatar and the Algerians. It is the gas exporters who pay for the renewables in Europe in the form of a forced transformation of gas markets. Now, on the other hand, the good news from the point of view of gas exporters is that share gas in Europe is proving to be a disappointment. There is a very systematic political resistance against share gas in Europe. A couple of weeks ago, the German Brewery Association came forward with public concerns that hydro fracturing might cause a deterioration in the quality of German beer. Now, believe me, believe me, in Germany, you don't want to be in a political position when the beer industry is against you. That's not a good idea. That's not a good idea in Germany. In Poland, Prime Minister Tusk had to make a very clear public statement to his environmental ministry publicly stating that share gas development needs an entrepreneurial mindset. And if the environmental minister is not able to understand this, that he will have to find someone else who will take care of that. That was a public statement from the Prime Minister, a highly unusual one, if I might say. But even with this very high level dedicated political support from the Prime Minister himself, the Polish industry is facing the problem of ramping up the supply chain for share production. If you take the drilling activity in Poland last year and this year combined, that's roughly comparable to the drilling activity in Eagle Ford on an average week. So Poland is roughly the size of Texas. So if you wanted to have Poland playing roughly the same role as a major share play in North America, you would have to ramp up the industry's project management capability by a factor of 100. And that's a very, very significant obstacle. Now, another important phenomenon that we looked at is the emerging role of natural gas as a transportation fuel. Now, this is not a new technology. If you can go to some very interesting places like Pakistan, Bangladesh, Argentina, and you will find natural gas vehicles which are basically 1970s cars converted in some neighborhood garage. But this country has never played a major role in determining global oil demand, whereas this time we have very interesting developments in two countries which do play a major role in global oil demand, the United States and China. Of course, if you want to use natural gas in the transportation sector, plan A is to go for a brute force and build a gas to liquid plants, where the advantage is that you provide very high quality liquid fuels which can be used in the existing transport infrastructure without any modification. The bad news is that it's a very capital intensive project. The Pearl GTA project in Qatar started as a $5 billion project and it was completed as a $22 billion project with a $17 billion cost overrun. Chances are that you will experience some project management issues. You lose over one-third of the gas because it's a very energy intensive process. So, gas to liquids is a technology for places where you have very large amounts of capital and very large amounts of gas at the same time. Now, Qatar is such a place, but there are not all that many such places around there. So, we are more optimistic about the direct use of natural gas in the transportation sector than about gas to liquids. And there, you have two technology pathways. One is compressed natural gas, which is reasonably easy to compress the gas and the infrastructure is not a big deal. But compressed natural gas is suitable for personal vehicles where you would need a very, very wide coverage or for local transportation. The Holy Grail is using LNG in heavy duty transportation, either heavy trucking or in railroads, where the potential is the sky. The heavy duty transportation in diesel fuel demand is actually bigger than the gasoline demand of personal transportation. So, there you have, you could have a very large impact on oil consumption, but liquefying the gas is far more difficult than compressing it. So, the fuel distribution infrastructure is more difficult. And there we took a look at these two key countries, the United States and China is the other one. In the United States, what we see is that this decade will be primarily about rolling out the infrastructure, which is still missing. The United States currently has over 100,000 gasoline stations and roughly a thousand of them sells CNG. And as a result, despite of the Shagas revolution in full swing last year, only 15,000 CNG cars were sold in the United States in a car market of 15 million. Because people are concerned that they will not be able to fill up their cars. But there is an increasing market share for CNG in public transportation and in public deliveries where you have the multiply advantages of the easiness of the CNG infrastructure and well predictable routes and high utilization rates. On heavy duty transportation, now all the major truck manufacturers offer LNG models and some of them offer also UL models, which can run on diesel fuel and bypass the infrastructure barriers. Several companies are working on really large investments into the refilling infrastructure and we also see interesting technological R&D on refilling and storage and small scale compression, small liquefaction. And we are watching the U.S. railroads very carefully. Because there you could have individual corporate decisions leading to a very sizable impact. So the bottom line is that in the next five years, we project 120,000 bars per day oil replaced by natural gas in the United States, which means that by the end of the five-year period, natural gas will eat a bit more than one percent of U.S. gas production. So still there is plenty of gas for that. But more importantly, the next five years, we'll see a rollout of the infrastructure on the basis of this, the long-term potential could be much, much bigger than that. Now in China, despite the increasing import dependency of China and the difficulties of ramping up share gas production, actually the growth of natural gas as a transportation fuel in China is much, much bigger than in the United States. And the most important reason for this, that with a natural gas engine, you achieve a roughly 10 percent reduction of carbon dioxide emissions. So from a climate change point of view, it's nice to have, but it doesn't save the world. But you achieve a almost complete elimination of particulate emissions and an almost complete elimination of the sulfur dioxide emissions of diesel engines. And you do that in an urban environment. So if urban air quality is the key concern, and the first option is that urban air pollution is out of control, then natural gas vehicles is a very good tool, and China is prepared to go for it, even with import dependency. Another important thing is that public transportation is a low-hanging fruit for natural gas as a transportation fuel. Now, unfortunately, public transportation does not play a very major role in the United States. But it plays a very, very big role in China because China did not develop the suburban car-commuting lifestyle that the United States has. So the market for most transit buses in China is four times bigger than in the United States. And consequently, you can have very large individual consumers. So last year, the United States sold 1,600 CNG buses. And a couple of weeks ago, the Beijing City Authority ordered 3,500 in one contract more than twice as much as the US market. So there's a scope for a big bank approach. And last but not least, China is developing its gas infrastructure right now. So they are building around 5,000 kilometers of gas pipelines every year. And the Chinese are rolling out the pipeline infrastructure and the vehicle refilling infrastructure simultaneously. And this is a very effective project development. So all in all, if I add together the United States, China, and some other interesting countries, the growth of natural gas as the transportation fuel does more to reduce oil demand growth than biofuels and electric cars combined. And then another important difference is that biofuel policies globally is $1,000 billion subsidy commitment. And for electric cars as well, you have to provide very large subsidies for consumers to buy them. For natural gas, this is primarily driven by the cost efficiency and cost advantages of natural gas. So this is the story of our gas outlook. And I'm happy to take your questions and comments. Thank you. Thank you, Lars. So a very comprehensive presentation. You come at a very auspicious moment today as the president is rolling out his new climate strategy. And one of the questions I had in the work that you've been doing is a question that has come up repeatedly in things we've looked at in terms of unconventional gas development in the U.S. is methane releases. And I was wondering to what extent you've had a chance to look at that question and the work that you've been doing so far on the gas outlook and do you foresee other countries starting to move on the issue of controlling methane releases as a part of their gas development process? Yes. Indeed, this was investigated in great detail in the golden rules for natural gas report last year where we estimated that given the brutal greenhouse gas impact of methane, if you lose more than 1.52 percent of gas in leakage, that completely kills the climate policy advantages of natural gas. Now, and in this respect, shale gas is worse than the well-managed conventional projects. You can have significant metal leakage from badly managed conventional projects. But the shale gas technology is inherently more susceptible for metal leakage because of the fracking techniques. Having said that, our conclusion was that with good upstream operations, it is possible to keep metal leakage under the critical threshold. And we are not talking about science fiction technologies. We are talking about good old-fashioned upstream management. So this is something that the industry knows how to do it. But in certain cases, you need regulations and you need economic incentives for them to do it. Now, of course, you might also be aware that last week, the World Energy Outlook published a major report on climate change where we recommended four major steps to keep alive the hope for decarbonization, one of which is a significant reduction of gas flaring. For two reasons. Gas flaring is a big carbon dioxide source in itself. And second, with gas flaring, you never burn all the gas. You have some metal leaking with the burning process. And there, the biggest gas flaring is taking place in Nigeria, Iraq and Russia. There, the Russian government has some very tough policies of reducing gas flaring. But of course, you have to enforce those policies. In Russia, our view is that the key is the third part access to the Russian pipeline system. Because if you can take your gas to the European part of Russia to the major cities, that actually has a value. And then you provide the incentive to eliminate flaring. In Iraq, the key is to utilize the gas. Now, the good news is that Iraq has a terrible electricity shortage. So they actually have a very strong incentive to reduce gas flaring and burn it for power generation. For Nigeria, I would be hard pressed to tell a quick good news. True. Thanks. And before I turn it over to the audience for questions, the other question, the other issue that comes up here with great frequency is how long can the differential regional pricing structure continue to exist? Many say that the U.S. gas into being introduced globally is going to make it go away very fast, while others say the system of contracts, long-term contracts and differentiated prices has got much deeper roots and has lasted much longer. So any thoughts on that question? Yes, in a baseline case, we don't foresee an emergence of a single global price for gas. The natural gas is far more infrastructure dependent than oil. So for oil, after every dollar invested in oil upstream, on average, you have to spend $3 in oil infrastructure and pipelines or oil tankers, ports, that sort of things. In natural gas, this is 42 cents. So after every dollar of upstream investment, you need 42 cents invested in gas pipelines, LNG facilities and so on. So there is still a very, very large upstream investment need, but the proportional importance of infrastructure is more than 10 times bigger. And this infrastructure dependency and this capital-intensive nature of the infrastructure will always hinder the development of a genuinely global gas market. Having said that, we believe that North American exports will play a very important role in linking the various gas markets and providing a more flexible, more market-based, surprising structure. Okay, well, let me open it up for questions from the floor. We just have a couple of rules. One, please identify yourself when you're asking your question. And then secondly, if your question can be, it can be a comment, but if you can end with a question in terms of the comment that you're making, that would be quite helpful. So please see some hands. Let's start right here. Hossein of the USF International Petroleum Enterprises, thank you so much for the very informative presentation. I have two quick comments and then question on the slide where you have the LNG providers and so on. On the, you mentioned the problems in Poland and Germany as far as shale gas is concerned, but also in France, the nuclear lobby is very strong and against the shale gas development. So that's a major factor for development of shale gas in that part of the world. On the CNG, on the transportation side, there is a medium ground that you did not mention. You're absolutely right. The excuse is the high cost of the infrastructure development, but the middle ground is the fleet where there is a tremendous amount of usage where you don't need so many thousands of gas stations or CNG stations there. But the questions on the slides that you have, you talked about the problems in Yemen and Egypt and Algeria and so on, you were absolutely right. But you started with Russia on the top and Oman on the bottom. Russia BP has recently downgraded the reserves of natural gas in Russia and I was wondering if that would change your projections, forecasts and views on Russia. And Oman has been having major problems with the reserves. Shale was forced to downgrade or downsize the reserves several years ago and they really don't have the reserves base to support any kind of development or major development for the LNG. So with all those in mind, how do you see the position and one final thing that was linked to that is the position of Japan. You talked about China's problem securing gas from Russia, but there is a competition between Japan and China for the export of Russian gas. Could you please kind of put it in context? You covered lots of ground and I decided to limit my questions in common on that one slide in the LNG. Thank you. Sure. Well, if I can just put the CNG, you are absolutely right on the fleet, on the fleet vehicles and we did incorporate that into our projections. So there are the things like delivery trucks, public transport and so on. And I say that this 120,000 boroughs per day oil demand reduction, that's quite sizable in five years because those vehicles are not the largest part of oil consumption. The largest part of oil consumption is personal vehicles for gasoline and heavy duty trucking for gas. But even with the 100,000 boroughs per day, I must say that we are constantly more bullish than the Energy Information Administration for the United States in gas and transportation. And as your question on LNG, the concept of a prover reserve is something which can be produced economically with the given technology. So it has an economic and the technology part. Now, of course, we should ask BP of what is truly behind this downgrade. But in the case of Russia, in our view, is that any downgrade is very, very clearly because of the evolving economics rather than geology. So for example, the Stockman Field, which is alone over 3,000 billion cubic meters reserve. So it's like more than one big share play in North America. Stockman is put on hold indefinitely because that the original business model would have been to export the gas to the United States. And that's not going to happen. So there is very little doubt that Russia has the ability to increase its gas production very significantly from the current level if the markets are there. Currently, they are constrained by weak demand in Europe and also weak demand in Russia itself, where energy efficiency is so bad that it has only one direction to go. So without the development of large-scale Russian gas exports to the Asia Pacific, an awful lot of Russian gas will stay underground forever. Saltain with Energy Intelligence Group. What's your view of US LNG export policy? Do you know what the policy is because I don't? How many projects will be approved? Will it be two years or will it be 20 years? What's your view? Well, I read with a great interest the study of the Department of Energy and NERA on the economics and welfare impact of US LNG exports. I'm an economist by training and my recollection is that ever since David Ricardo analyzed the trade of wine and textiles between England and Portugal 200 years ago, there has been a 200 years old professional consensus in economics that removing artificial trade barriers is improving social welfare. So I was very relieved. I was very relieved that the Department of Energy did not overturn 200 years of economic consensus because I would have to throw away my degree. So the conclusion was that approving such projects is improving welfare. Now, I must say two things which I find very, very illuminating in the debate about US LNG exports. One is that a lot of this debate in Washington is taking place as if the United States was an island completely neglecting Canada. So if the objective is that you want to redirect investment into the Pacific coast of Canada instead of the Gulf coast of Mexico, that you can achieve by prohibiting project development in the Gulf coast of Mexico. Another interesting thing is that you can have exports without any limitation to countries which have a free trade agreement with the United States. That actually includes Singapore, which is working very hard to develop an LNG trading hub and has very interesting initiatives. So I can tell you that if the policy will be that you can legally export gas from the United States to Singapore but you cannot export it to Japan, then after my eye, I will move to Singapore, set up an LNG trading business and make some real money. So there is a very, very rich history of such policy restrictions meeting the ingenuity of energy traders and completely failing. So the bottom line is that up until the economics is there and we believe that the economics is there, you either force that gas staying underground or that gas will get out because the non-conversional gas resources of the United States and Canada combined is considerably bigger than any meaningful demand in these two countries. Raisa Ibihina, I CSS, thank you very much for an interesting presentation. I have two questions, one about Russia and one about China. As for Russia, you mentioned prospects of Russia redirecting its exports from Europe to Asia. I'm more interested in domestic consumption and what your estimates are on this Russia government's new policy on developing gas utilization and transportation. And the question about China, you mentioned several ways to utilize to switch from coal to gas in China and I'm just interesting in which sector in industry or in transportation or in power generation, the switch from coal to gas may have the biggest impact on reduction of CO2 emissions and particle emissions. Thank you. Gas in transport in Russia makes just perfect sense because on the gas side, their key concern is that some of their gas might stay underground forever because of the lack of markets and it's not easy and not cheap to get it to Asia. On the oil side, actually the Russian oil industry will find it very, very challenging to maintain the current export levels because their brownfield production is now depleting and their new oil prospects are very, very difficult. So heating the domestic oil demand in Russia by using the excess natural gas and releasing more oil for exports, it makes just perfect sense. On the other hand, we still don't see very detailed policies and very detailed projects ongoing on this field. So this is something that we understand that the Russian government has a preference for it. I agree with it, but the implementation is something that we still see. Now in China, I think the most important contribution of gas is in the buildings sector and in the industrial sector. If you take coal utilization in the United States, 97% of the coal in the US economy is used in power generation and steelmaking. These are the modern 21st century uses of coal. In China, these two industries represent only 75% of the Chinese coal used. 25% of Chinese coal and this is 25% of a very, very large number is used in 19th century type applications. The city of Beijing burns 15 million tons of coal every winter and no wonder their quality is so awful. So on the electricity side, the Chinese have a track record of building large hydropower plants and nuclear power plants on budget on time. They heavily invest in other renewables as well, so they have a set of technological options in electricity. But for building heating and industrial applications, there is no technological alternative to gas. So that will be the first driver. Now if natural gas makes it big in the Chinese electricity sector, the sky would be the limit. But we actually project that renewables and nuclear power combined will play an almost three times bigger role in reducing Chinese coal power generation growth than natural gas. Following up a little bit on the point about freeing up the fuel oil in Russia for export, you made a comment right at the beginning that I think is very important to talk about the Middle East about the abundance underground and the shortage above ground. And I was wondering if you'd like to spend a couple of minutes talking about what the impediments are to being able to develop a rational regional approach. I mean history is probably one of the most important. I think in a discussion we had earlier, you mentioned one example that I think really highlights the problems of a LNG cargo shipping from Qatar to Louisiana and turning around and going back to Kuwait as a way for Qatar gas to get to Kuwait, which if you're familiar with your geography is not a very long distance between the two countries. So I was wondering if you'd maybe spend a minute on that. And then the other issue that receives a lot of attention here is East African gas discoveries. A lot of interest in these huge deposits of Mozambique, Tanzania. But I notice in your presentation, at least in something with five-year time frame, you don't mention them much. And that may be the conclusion if you talk a little bit. I would say with a bit of a bit of a simplification in our typical Middle Eastern country, the natural gas situation is the following that you have you have plenty of gas upstream opportunities at let's say a four or five dollars per MBTU cost level. You have a national oil and gas monopoly. You might or might not have foreign investment in the gas upstream, but if you have foreign investment in the gas upstream, then you will have to sell your gas to the natural oil and gas monopoly at a regulated price, which is let's say typically two dollars per MBTU. So you have plenty of upstream opportunities which the investors would not touch because the regulated upstate uptake price is too low. Then that national oil monopoly, which is more often than not state owned, will sell the gas at a two dollars price to the natural again usually state owned electricity monopoly, which given that it gets dirt cheap gas, will burn the gas and will not care much about power generation efficiency either. And the national oil monopoly suffers a big loss. Either it's a direct financial loss or it's an opportunity cost, but everything is cost financed and paid by the oil exports. And up until you have a hundred dollars per barrel oil price paying for everything, no one will care. So this is the stylized model of the gas policy of a typical Middle Eastern country and the same country usually have an export value of gas, so if you could export it at ten dollars per MBTU. So at the export value, the upstream would flourish because you have plenty of upstream opportunities that would make sense at the export value. And also on the electricity side as well, if you combine the recent improvements of the cost efficiency of solar power with the sunshine of the Middle East, at the export value of gas in most Middle Eastern countries, solar power is actually in the money without a single cent of subsidies today. So you would have, so with a market-based policy, you would have a much bigger investment in gas upstream, and you will have an uptake of solar power without any subsidies. But I'm not very optimistic about the institutional requirements because the current situation is rather comfortable with most stakeholders and the hundred dollars per barrel oil price pays for it anyway. Now on East Africa, I tried to keep the presentation short, so that's why I didn't have a dedicated slide to it, but you're absolutely right that this is a very, very big discovery. We are talking about our reserve base, which is roughly equivalent to 80 to 100 years worth of U.S. share gas production. So very, very sizable. Now, also there's a very, very strong interest of the major Asian utilities. Interestingly enough, the Japanese were ahead of the Chinese, so Mitsui was there significantly before the Chinese showed up. When the Chinese decided to show up, they showed up with a big sack of money, making a very significant acquisition. The developing, now developing that gas will take an investment wave comparable to what Qatar did in the past decade. But that's where the challenge lies, because Qatar played their cards very, very well. So they have a very professional, very well functioning national oil company, Qatar Petroleum, who was a joint venture partner in the LNG projects. And they opened up the investment environment, so all the usual suspects, ExoMobil, Shell, Total are there in Qatar big time. And this is how you can develop East Africa as well. But these are countries where the institutional development is in a very, very early stage. So you see that as something significant in the post-2020 period. Yes, question there. Thank you. David Lewis with Manchester Trade. Can you mention anything about the U.S. neighbour to the south on oil and gas in terms of that partnership, since you mentioned Canada in the north. Thank you. Yes, in Mexico, Mexico has some of the best shale resources in the world from a geological point of view. Eagle Ford is just at the Mexico-Texas border. No one believes that the geology stops at the border. Unfortunately, also in Mexico, it's written into the constitution that oil and gas production is a state monopoly. And the anniversary of that constitutional change is on a national high day. So the policy barriers for large-scale foreign investment in the Mexican oil and gas sector are quite formidable. And we don't assume a big change there. Now, Mexico has a state oil and gas company Pemex, which up until today has not moved into shale place significantly. So I must say that our baseline projection is that Mexico imports significant quantities of gas from the United States from pipeline and shale gas in Mexico stays underground. And you would need a very significant change in government policies in Mexico for us to change that projection. Matt Willis, EDF trading. What explains the differentiation between oil field services in North America and the rest of the world? Are these issues of human capital or technological issues related to the drilling rigs or something else? No, I think the most important factor of this is 100 years of history. The first 50 years of the industry, the United States was more than half of global oil production. And in the second 50 years of the industry, it still had a very, very large onshore industry. I mean, Europe has a sizable oil and gas production, but almost all of that is offshore. In offshore, you have a small number of large and complicated projects. So Europe never had the equivalent of the small size independence by cutting all around North America. That's North American specialty. So today the only country which has, for historical reasons, a very strong oil field service industry onshore is Russia. And the Russian gas upstream is actually becoming to be similar to the North America in a sense that a group of independent companies like Novotek are moving into very interesting opportunities, taking advantage of the financial advantage of liquids, looking at tight oil and so on. Potentially, China has the capability to develop an oil field service industry like this. And I believe they will. But even for the Chinese, it will take a decade. But in Europe, I'm not optimistic at all. I mean, I have, again, in my previous job, we did a serious effort on developing non-conversual gas in Eastern Europe. And we had to charter a cargo plane to fly in heavy equipment from Houston, one by one for every test drill, because there was not a single piece of the equipment in Europe. So I think I'm not optimistic about the upswing in Europe. So just to follow on a second, does that in your mind mean that the gas gets left in the ground or takes longer to develop? Now, some of the gas might stay underground. So for example, the French government has banned on shale development full stop. Now, up until that policy stays in place, the gas stays underground. Now, but actually, a number of European countries did not ban shale gas, but they have policies in place which are functionally equivalent of banning it. So for example, when you, my country, Hungary, when you need a several months long of environmental licensing for every single flag job, this policy is just impossible to do the intensive mass production, which you need to develop a major share play. So this is practically equivalent of the government banning it. But even if you had all the European governments coming down for a strong political support, so you just based everything on the fundamental geology, which is more difficult than the United States, shale gas in Europe would always be much, much more expensive than in the United States. Chances are that shale gas, chances are that US shale gas liquefied and shipped to Europe would be cheaper than shale gas produced in Europe. But shale gas in Europe would still have a fighting chance against the conventional import contracts, which are very expensive. Sorry. Well, thank you very much for very comprehensive. This is usually expected from all year throughout the years that I have been in contact with. Well, this is most of Shirazi senior gas specialist, of course, retired. In your presentation, under one of the slides, you mentioned that with US market saturated, right? So historically, we know that the share of gas in the energy makes in the US has reached 30%. And in some countries, even higher, like let's say in the Netherlands to 57%. And so on that basis, I believe the share of gas presently in the US is well below the 30%. And worldwide, is it something like 22% now? Yeah. So what is your forecast for the worldwide trend in the US, worldwide trend US, or is any country in the world who has surpassed, let's say, the Netherlands or being very successful in that trend? There you have to make very careful comparisons on two structural factors. One is the share of the different sectors of the economy in energy consumption. And there, for example, the United States is very different from the Netherlands, which is a small, densely populated country with a brilliant public transport and railroad system. So the role of the transportation sector in the energy demand is unusually high in the United States because of the car-based transportation system. So in the United States, up until oil remains dominant in the transportation sector, oil will always have a very high share. Or up until the Americans start to use public transportation, which doesn't seem to be very likely. So this is why we are looking at gas in the US transportation sector very, very carefully. Now the other thing which can make a big difference is the structure of the electricity system, where the share of gas can go from almost zero in Poland to almost 100 percent in certain states in the former Soviet Union, depending on policies, history, and national decisions. And there, what we see in the United States, the existing US nuclear fleet still has a good 15 to 20 years to go. We don't see much investment in new nuclear in the United States. So the long-term future of nuclear is uncertain. But in the next 15, 10 years, the existing fleet is in a good shape. Coal in the United States is remarkably resilient unless you do something to kick it out. So in the absence of some dedicated policy which can either be a carbon price or can be some other environmental regulation to constrain the operations of coal-fired power plants, in the absence of that, the United States has some of the cheapest core resources in the powder river basin, which would be very, very difficult to beat. So these two factors, the very high role of transportation sector and the very strong market competitiveness of coal, will mean that a high share of gas in the US energy mix means a different number than it would mean for the Netherlands, for example. And I think we're going to hear today that the efforts towards that second half of your comments on the coal, not the price, but the regulatory approach. I think we had another question here. Jeff Price with Blue Wave Resources. We were talking about European supply a few minutes ago. The one country that does seem to be moving ahead with shale gas is the UK. They already have some producing shale gas wells. The British Geological Survey estimates that they have substantial reserves. That's one area of potential increase. Another area of potential supply for Europe would be the Levant Basin, which gets you into Israel, Lebanon, Cyprus, and all the geopolitics that that entails. What do you think is going to happen in those two areas? Well, the UK gas industry is very, very active in producing consultant reports and financial types editorials, much less active in actual drilling activity. So it's a grand total of two shale gas drilling leagues are operating in the United Kingdom. For them, it will take a couple of hundred years to get to the production level of a major US shale play. Now, I don't want to be unfair because the UK is the only country where the government policy is moving towards the right direction in terms of letting development go ahead. So in the UK now, it's up to the industry to make it happen. But still, the gap between the project development should not be underestimated. Then the Eastern Mediterranean, I can tell you that in this report, there was several hours of consultation with various lawyers on every line on the Eastern Mediterranean. Because when you combine the Cyprus-Turkey relationship with the Israel-Lebanon relationship, there is even a gas discovery on voters which would belong to the Gaza Strip if Palestine was an independent state. So it's really a remarkable web of geopolitical sensitivities. Now, having said that, the region actually has a 3,000-year tradition of sorting out political hostilities if there is a lot of money on the table. So there is a lot of money on the table. So again, these developments will eventually go ahead, but we will see still a lot of adventures before the happy end. Which countries from the Central and Eastern European countries and also from from a Soviet Union do expect to be amongst the fastest importers of the LNG gas from the US? What are the major obstacles along this way? And what is the expected framework to achieve this objective? Thank you. We don't expect LNG imports in South Eastern Europe. So there, Greece has already existing LNG terminal. There was a project idea in Croatia, another one in Ukraine, but none of that seems to be credible for me. I spent several years from my life working on the Croatian LNG project and that made me deeply skeptical. What we see much more interesting is that the existing LNG facilities in Europe are running at a roughly 50% capacity utilization because of the weak demand. So you can have, if additional LNG supply is available, you can have very large quantities of LNG delivered into Europe on the existing capacities. And then the question is whether Europe already has a properly functioning single market because if it does, then it doesn't really matter where the LNG is entering to. And there the development is remarkably remarkable. One taste of things to come was Croatia, where the long-term contract between Croatia and Gazprom ran out in 2011. The traditional way of handling such situations in Eastern Europe would have been for the prime minister to fly to Moscow and sign up to a new long-term contract. Instead, Croatia opened an open competitive tender for gas supplies, which Gazprom lost, and ENI won it. ENI has a diversified international portfolio of various gas sources, and ENI is supplying Croatia from its diversified international portfolio. Or right now, for example, there are two pipelines crossing the Ukraine-Hungary border, bringing in the Russian gas imports. The import needs are lower because of the weak demand. So actually one of the pipelines was physically revealed for a reverse flow operation. So currently, one pipeline is bringing in Russian gas to Hungary, and the other pipeline is bringing gas back from the European market physically to Ukraine. So we are not yet there, but the progress towards a genuinely integrated single market in Europe is much better than I would have expected a couple of years ago. And once you have a single market, you don't need to build new LNG facilities in Europe, probably ever. So one last question that I was going to ask is related to the regional pricing question, but there's a lot of debate as to whether the emergence of Henry Hub-type pricing with US exports will mean the death of the long-term oil-priced contract. So we'll let you have that one as the last question. Yes. It's not the debt. It's not the debt because the LNG is very capital-intensive. It's a very reasonable requirement for the project developers to have investment security, and on the other side of the contract, the major Asia utilities tend to value long-term strategic relationships, so I wouldn't expect them to walk away from contracts. Having said that, it would put a pressure on the existing business model. And I have a feeling that the industry is a bit complacent about Asia in this respect, because there will be market developments, there will be other gas sources. It's not going to be we wake up one day, I know it's gone, but still there will be competition between the projects. So having your project, being an investor in the most expensive LNG project, where your only prospect of recovering your capital investment is an oil-priced contract running for 25 years, is not necessarily a good strategy position. So it's always good to have a cost-efficient project. Well, please join me in thanking Vosla for a great presentation this afternoon.