 I'm sure that there are still people coming because of the weather problems outside, but I think we should sit down and get started, please, because Speaker's time is short and I want to take maximum advantage of him. Thank everyone for coming. Dr. Byler-Bioff and I are old friends from Caspian days. I won't say how long ago it was, but it was quite a long time ago and it's a real pleasure to welcome you to Washington and to CSIS. Generally, we meet in Baku and points east, but not here in Washington. For those of us who have been following the Caspian story since the 1990s, tremendous progress has been made in the oil and gas sector, certainly in Azerbaijan and so far has played a leading role in that. We will be talking about a recent announcement that was made in December of the next major step in the development of the Caspian, particularly for gas and volumes of gas that will be going to markets a little bit farther than where it has reached in the past. This announcement was long in the making and I must say long anticipated. Vitaly played a key role in putting the project together and nurturing it to the point where it is today. So it's a real pleasure to welcome you, Vitaly, to CSIS when we are eager to hear the perspective from Baku on the announcements of December as well as more recent developments in the region. Thank you. Thank you very much. Thank you all very much for the great opportunity to be again here, again with CSIS, which I value very high as organization with extremely deep knowledge and understanding of the processes taking place in the Caspian region and the Caucasus and in the other regions of the world. It is honestly a pleasure also to see many, many faces which I know very well and with whom we basically started working together and among those to see Mr. Ambassador Kozlarich yourself. I very well remember time when we were discussing how to make new pipelines a reality, how to, what we can do all together in order to achieve that goal. Today we basically there to the very big extent with Azerbaijan oil developments. Yes, we have pipeline which connects us with the Mediterranean Sea and I'm proud, really and honestly proud with the fact that I was part of that effort. I was part of the state oil company, my country's effort to conclude the contract which people now call the contract of the century, but for the sake of clarification we are now calling it contract of the 20th century because we have now contract of the 21st one as at least that's we believe it will prove to be and we're doing everything we can in order really to make this not really second, 37th if you wish contract which Azerbaijan has in the area of oil and gas developments, the contract of the 21st century. I'm talking about gas developments, I'm talking about contract for Chardonnay's and in fact when I'm talking before I will start the presentation when I'm talking about contract for Chardonnay's we're talking about chain of the contracts. People trying to impress each other all the time with the sizes, with the distances, with the dimensions so that's how BP was trying to impress me when they were talking about in the contract from the past but could be ECG contract was 24,000 pages they were saying. 24,000 pages of different contracts when you put them together it was only BCC without any ECG. Different countries, different regulatory frameworks all of that has been put together. So for the Chardonnay's we have another impressive figure and this is four meters high. So four meters high is what we have in terms of the contracts assigned for the only second stage of the Chardonnay's field development. A lot of paperwork, a lot of legal work, huge amount of the legal fees paid to everywhere in this world and we have the result which should prove to be really contract of the 21st century but let's go a bit further to what we have. How we are moving here? Just I'm doing that, yeah? Okay. So 17th, okay, I'm sure we are on the same page. Thank you. 17th of December, 2013. Results for me at least five years of very active work in preparing this four meters of different contracts and pages together with colleagues from Chardonnay's consortium led by BP and SOCAR. Extensive negotiations with the different government, with the different owners of the territories with those who was interested in purchasing our gas. All of that resulted in so-called final investment decision for the second stage of development of Chardonnay's field. Yes it was inaugurated in Baku, it was inaugurated in the ceremony which has been attended by many. They were presidents and prime ministers, they were ministers and foreign ministers sitting in the same hall, they were European commissar for energy, there and all of them were praising efforts made with all these years and I should state immediately that this achievement, which was really an achievement, achievement to spend money, achievement to build something which we all were trying to establish as our strategic goal for many years, five at least for me as I mentioned, much longer for the others, this was achievement of many. This was achievement of a lot of countries who were interested in supporting that effort. It was achievement of a lot of companies who were spending their money, their time, their expertise on this and in the first place I should obviously mention the support we were always enjoying, we were always having from the United States of America and from the European Union. That was a constant dialogue which our country had, which our state or company had, which our partners had with the institutions in all these countries and in the United States and in the European Union. That was continuous support of the European Union and in particular of Günther Oettinger and his cabinet which allowed us to overcome all these difficulties, to choose between number of choices and all those choices, if we're talking about pipelines for example, they were never easy choices. We were choosing first between ITGI, NABUCA and trans-adiatic pipelines and we were left with primarily NABUCA and trans-adiatic pipeline but there was also option of using the existing infrastructure of the thousand Europe, which we started very carefully. So never those choices were easy, they were not easy commercially, they were not easy technically. But at the end of the day, results of these choices, results of these selections, results of the negotiations with the buyers and intensive negotiations within the partnership itself, led us to this fit decision which was so successfully celebrated and covered and delivered to the rest of the world as something which starts happening from Azerbaijan, across the countries which are neighbouring with Azerbaijan, to Europe, crossing Greece, crossing Albania, reaching Italy, hopefully in the future going further. That's what is our decision. So here it's time to mention that what we have is project of obviously international scale. Seven countries are involved into the implementation of this project directly. Direct involvement of seven different countries but six different regulatory systems and that's again, it's not at all easy to build the project which should satisfy all requirements whether of technical nature or environmental nature which will be cooperating successfully with so different approaches which people may have in Georgia, in Turkey, in European Union and in the other countries including obviously Azerbaijan. So that's something which we are honestly proud of and we believe that this will be a project which will provide tremendous opportunity for many, many companies, a lot of people, a lot of contractors who are involved, who will be involved including obviously opportunities for the United States companies including opportunities for the European companies. We are taking care of our own companies, local companies in Azerbaijan, outside of Azerbaijan, participating in engineering, participating in construction of this project. So that's what we are more or less. So just a bit of data of the field. 1.2 trillion cubic meters of natural gas that what we see Shardinis as being as of today, standing as of today. Just to remind you, when we signed ACG contract, there were obviously estimates of what ACG in terms of oil is containing. But there were also ideas or if you wish dreams about what it might contain. So what we have at the moment is almost double size in the ACG, is almost double size of what we were planning to see in the ACG in the past. So we are well over 1 trillion barrels in the ACG and that is obviously, as I said, at least twice more than we were projecting for that field at that moment. So what we have at the moment is 1.2 trillion cubic meters of natural gas. What does this say to me and to the others? Again, when we are talking about estimates which companies and our esteemed partners, and I'm pointing on you just without any idea, our esteemed partners had in their mind before, it was never more than 1 trillion cubic meters. It was much less. It was 700, 800, cautiously companies were saying. So today, BP and the rest of the partnership and partnership consists of seven companies including obviously us, state-owned company of Azerbaijan, quotes a figure of 1.2. And 1.2 is what we are planning to get from the stage one and stage two of this particular field. But expectations are going further than this. Expectations are higher and I will touch upon that today. Together with obviously gas, we have condensates there. This is one of the biggest in the world gas and gas condensate fields overall and this is definitely, at least for now, the biggest offshore gas and gas condensate development in the world. It's huge. I told you about meters, so to impress the size of the field is size of Manhattan. So that's probably another something which we're trying to impress people with. We were always saying that ACG is like size of London, so now we are comparing this field with Manhattan. Currently, this field produces 55,000 barrels of condensate. Our plan is to produce 120 at least. And again, this is based on the current vision of the field having 1.2 trillion cubic meters of gas. That's a lot. That's a lot for the, let's say, middle-size field and that, but that makes also important contribution into the Chardonnay's field overall economy. Condensate is important part of this development. Condensate is what is transported through, but could be ECG on pipeline and even when necessary we can use other infrastructure for the transportation of this condensate. What we contracted already within this is 10 million cubic meters of gas a bit more. In fact, a bit more than that to be more precise. 10.9 billion cubic meters of gas will go to Europe out of which 10 is contracted and close to one BCM is kind of additional what we can supply to the European customers. And six, and again a bit more than six, to Turkey at the moment. Just not to make any mistake. This is all and always in addition to what we have from the stage one of this field development. So at the peak, at least as we see it, at the peak of the production of this field from two stages, one and two. Only it will be at the level of 23, 24 billion cubic meters of gas and the same will go for condensate. So the numbers from 55 will increase to 120. Can this be expanded further? And that's also important to keep in mind. It can. More than can, it will. It will and this was a subject of the conversations which I mentioned to you. We had conversations also, actually not only conversations, it was very tough negotiations within the partnership. So with the partnership, what we were discussing with group of partners led by BP was how to develop this field further, to maximize the effectiveness of this development, to maximize the extraction of the resources which field has, to reach the levels which are usually acknowledged, recognized in the oil and gas industry. And target is obviously to be somewhere between 60 and 70 percent of the gas recovery and with much higher numbers for the oil recovery, condensate recovery. But also we were discussing with our partners potential for involving the further structures, both laying higher and lower than the horizons, which we included into the development of stage two of this field. We call it stage three. Stage three of the development of the Shandanese field is now something which we have already as a project, as a project which we are jointly developing. That project will require additional technologies. That project is something which will be dealing with extremely high reservoir pressures. So something which we never tried with oil industry experts and specialists, excluding myself because I'm not a technician, which we never tried in the oil and gas industry. We're planning to apply in Azerbaijan and to develop the relevant technologies. Among those technologies will be subsea compression, which will allow us to increase the level of the gas ratio, gas extraction ratio significantly to the numbers which I indicated. That's again something which should come. That's again something which our design institutions and the best design companies all over the world are working at the moment. Some of these technologies are at the moment tried in the northern, in the North Sea. Some will be first time applied in Azerbaijan. But this is the core of the development of this field to apply new technologies and to develop the new structures. Structures were identified in the course of the development of reservoirs within stage one and stage two. So we're now talking about additional reserves in the range of at least 0.2, 0.3 trillion cubic meters. So overall we can expect that this field will be producing, and again when I'm quoting this, I'm quoting not only myself but consortium. And I'm using what we expect, we might get, we forecast. But that is, I would say, at least from the state or company point of view, with very high level of awareness. We believe that this will take place at least 1.4, 1.5 trillion cubic meters of gas what we expect to get from this field in the course of its future stages of the development. This gas is not yet produced. This gas is not at all contracted. This gas obviously is something which we are having in mind when we were designing the capacity of our pipelines and considering what we can do in the future. Those pipelines which are already mentioned, they shown on this map and they constitute what we call 1000 gas corridor. 1000 gas corridor is a development which originates in Azerbaijan and is planned to be connected with Italian SNAM project system of the main gas transportation distribution system in Italy by 2019. By 2018 we expect these fields to start producing and then obviously to deliver to the customers all along the whole route of the 1000 gas corridor. Starting from Georgia, obviously part of the gas will be consumed in Azerbaijan but then will come Georgia. Turkey with this 6 BCM which I already mentioned. And then comes the territory of the 1000 Europe with a bunch of customers, with a bunch of buyers with whom we have contracts. We signed contract currently with 11 companies. Most of them are very well known names, major oil and gas companies who are very active in the area of the gas industry. And also we intend to develop this 1000 gas corridor further and I will again come back to that but I am just asking you to remember this map and to remember that there is a possibility to build connectors from this particular network which does not yet exist. So what you see on the map is existing only on the territories of Azerbaijan, Georgia and partially Turkey. So the system needs to be built but when it will be built there will be additional opportunity to connect it with the neighboring countries, with the further network of the pipelines and among those we are mentioning Ioni-Kadriatic pipeline. Among those we have in mind the pipelines crossing the territory of Bulgaria and going further if you wish, repeating the idea of Nabokarut. When it can be done it will be obviously dictated by the market, it will be dictated by the fact of need in our and others gas resources, i.e. in the appetite, i.e. in the demand of those markets but we again can talk about that a bit further. So I mentioned already that 2018 is our plan to start with the first deliveries of gas to our customers. This is important for Georgia, this is important for Turkey that we will be in time with our gas. From one hand side, Georgia is major consumer of Azerbaijani gas. Close to 90% of the Georgian supply comes from Azerbaijan in terms of natural gas. Obviously there are other supplies which we are providing to Georgia. It is oil products and that's cooperation which has very wide grounds I would say. So for Georgia the supply of gas in Azerbaijan is important, Georgia is important customer but Georgia for us is also important transit country. So both because Georgia gets their transit fee in kind, in gas. So this gas which will be coming across the territory of Georgia which will stay there which we believe will be needed for the Georgian internal consumption and we have certain forecasts and consideration will be playing, still playing for many years to come will be playing important role in the sufficient let's say provision of the energy security of Georgia. Turkey, 6 billion cubic meters of additional gas to be supplied to Turkey from the same shelf in this field the same source is again important element in Turkish energy balance. The country is planning the consumption of gas relying on the supplies from Shau-de-Nise, timely supplies from Shau-de-Nise and obviously we will do everything we can everything we are able to do in order to achieve this together with our partners in time. In order to achieve it in time we obviously among other things we need to expand the capacity of the existing pipeline, South Caucasus pipeline from the current 9 billion cubic meters in fact we are using less of that capacity to the future allowing us gradual increase to the level which I mentioned to you already as gas available from Shau-de-Nise field for expert from the stages one and two all together. So that's what we are planning to do and for that we will need not that expansion will meet the usage of existing pipeline plus laying a parallel to it in most of the cases and adding compressor stations to the existing system the expansion of the existing system through the looping and through the additional compression. This will all together allow us to deliver at peak existing capacity I mentioned it and 23 let's say all from Shau-de-Nise all together making the capacity of the SCP system close to 30 plus billion cubic meters of gas which will reach Turkey where we will see turn up being pipeline of at most of the Turkish territory 56 inch diameter and then making it 48 inch diameter after Eskişehir after the point where Turkey will get most of the gas they purchased already or they are planning to purchase in the future let's say for their domestic consumption for their domestic use. Then we are continuing with the 48 inch pipeline to the border with Greece where the pipeline turn up Trans Anatolian pipeline will be connected with the Trans Adriatic pipeline having similar capacity allowing us to deliver at least 10 billion cubic meter of gas to the European customers both those being those in Greece, Bulgaria or Italy itself. The point here is also that not only TAP can be connected to the turn up pipeline but also Greek-owned system of the pipelines operated by the company named DESFA and DESFA system could be also connected and will be connected to TAP could be connected also to the Trans Anatolian pipeline thus making or establishing a possibility for delivering more volumes into the territory of Greece more volumes into the territory of Bulgaria which is connected with Greece through the existing infrastructure but also plans to have a new one so called IGB Interconnector Interconnector Greece Bulgaria is again something which we planning to use for the delivery of our gas to Bulgaria. So there are plans with this regard as well and we will be following them quite strongly. Largest and most complex project in the world yes seven wells already drilled within the framework of the stage two but total of the stage two wells which will be drilled from the two platforms we are planning to have twenty six obviously seven plus this nineteen. Commercial components of the corridor sorry I'm kind of running ahead of my own slides but I already covered the expansion of the existing pipelines turn up across Turkey, TAP across these countries to Italy where it should be connected and infrastructure to Bulgaria. The latter is important. The latter is important because it does not yet exist except for the infrastructure which currently exists but supplies gas let's say from the territory of Bulgaria into the territory of Greece. Will this infrastructure be available or not we don't know that's why we are relying more on the establishment of the new Interconnector IGB Greece and Bulgaria Interconnector which could be a project where we will obviously participate as a company which is interested in having capacity. We are not among the shareholders of that project yet but we will see the future will show if there will be interest to our participation we can consider it but the most important is that physical connection allowing transportation of gas from the southern gas corridor to the territory of Bulgaria should be established and we obviously as I mentioned are very interested in that this is properly reflected in this four meters high stack of documents which we prepare it and it has its own shelf in that stack so this all should be in place. I will not spend too much time on this this is shareholding of this different elements of the southern gas corridor this is mainly at the moment consisting of eleven companies working along the value chain and I should probably mention that Socar obviously has a serious role in all elements of that chain starting of course from the upstream project and going as far as transatlantic pipeline where we together with two other partners to the upstream development having 20% of top that is important because all the way people were trying to establish a conundrum producers versus transporters who should dominate, how should dominate I don't know when how should dominate I know that commercial balance should be found and we believe that we got this commercial balance in this development where we have primarily those who is interested in the development of the resources because those people are most interested in the successful implementation of the project these are companies present in all elements of the value chain who will spend, who already committed to spend overall more than $45 billion which is huge even for Azerbaijan with its increased economy and quite high GDP that's huge amount of money for Socar it's huge amount of money which we will be spending on upstream development, expansion of the pipeline construction of completely new single line crossing the whole territory of Turkey almost 2000 kilometers across the territory of Turkey and then transatlantic pipeline with its own complexities going through natural areas, going along the seabed so reaching Italy in also a region which has environmental sensitivities so all this is all together huge commitment and this commitment is made by producers who as we believe are extremely interested in developing it properly but also not only producers we have a botash pipeline company who is a shareholder in Trans-Sanatolian pipeline in TNAP we have interest of that company to participate in the upstream development of Shakhdeniz itself so we have an interest tendency here which we never could register before that company which is traditionally is in charge of transportation is also interested now and I can state that this is kind of new fact it's interested in participation in the upstream development itself it makes a lot of sense from our point of view from Turkey point of view and we fully share this interest if there will be commercial agreement achieved with this regard with those who is owning percentages in the upstream we will just welcome them then we have buyers our buyers are present among those who are shareholders of the Trans-Sanatolian pipeline that's again important development let's try to move this further and let's try to dwell on why this project why this corridor is important for the others for those who is planning to consume this gas and obviously to us as well from our point of view security of supply is something which has been debated in many forms for many years and it's quite clear that security of supply is possible to reach only in combination between demand and interest to supply i.e. price there should be certain price balance between those who consumes and those who is producing there was big gap as we believe in this balance this gap was primarily because of the fact that number of suppliers was limited and those suppliers were trying to use their dominating position in the market not to say that we are not interested in the high prices as well but obviously when we are competing when you are competing with someone you're trying to do something in order to achieve improve your own situation in the market to get certain niche you are usually showing a very good level very good sense of realism and that's what we are showing and it will not be a secret that contracts which we have signed they are mutually beneficial for both for us and for our buyers and if they are beneficial for our buyers then you can judge that buyers are getting something more from us than they could get from the others they are not driven by the state interest our buyers are mostly private companies and those are driven by their commercial interest so that commercial balance which exists reflects obviously what we were able to achieve with them but as we understand it as people are evaluating this it significantly increases the security of supply for the different reasons here comes another issue what kind of energy we are supplying what we are supplying is it making the environmental aspects of economies in those countries better or worse and here comes obviously competition with the coal which is cheaper fuel for many but obviously environmentally it's not so friendly as gas is at least that's how we see it we are providing Europe with the energy which is for sure greener than the energy which Europe is using at the moment price issue and North American supplies shale gas supplies it's important it's taken into account by us in our projections, in our views we see that these supplies will be growing that's certainly true we see that those supplies will be seriously affecting the price of gas for the buyers through the much more liquid gas markets than before obviously these supplies will be affecting the prices of our contracts also and that's all true but at the same time it's absolutely absolutely normal that the gas which is cheaper is consumed and is affecting the prices of the others who are supplying those markets so for us this is fine this is taken into account in our projections this is taken into account in the final investment decision made in the 17th of December but I will disclose to you something which we didn't speak much before Azerbaijan is also the country which has a lot of shale gas resources and absolutely not given to anyone there is no company working on this but there are many companies already showing great interest in the developing of our shale resources one should always keep in mind that we are a very small country territorially we are extremely small and our territories we have nine climatic zones those climatic zones some of them are mountainous areas some are continental areas some are tropics and sub tropics even within such a small country our environment is extremely fragile so when making decision whether to develop this or not whether to give to someone license or start this ourselves as a stable company only we will be taking all this into account I don't expect that this resources will be developed in the near future in Azerbaijan because we have a lot of gas which we are producing from the different fields in the country which we are producing already or planning to involve into the production but there is shale gas in Azerbaijan and it will be also I am sure developed at certain point in the future and that's important another element we are planning additional gas to Europe we are planning this additional gas to Europe at the time when the European economy is not on its peak but we are thinking about the economy economic recovery in Europe we are thinking about the period of time between let's say 2020 and onwards when the European economy will be growing and will be growing rapidly and will need much more gas than we or others are supplying to Europe currently so that's our if you wish vision with this regard and I can continue with the rest we are in new volumes in Europe that's obvious those Caspian Caspian sea Azerbaijanic gas practically never was in Europe before yes in fact we were in Europe we were supplying into the territory of Greece through the supplies across the territory of Turkey Botash was buying our gas and reselling our gas to DEPA the major gas buyer in Greece so by this we were there but now we will be there for the first time in the other countries and in the same Greece directly directly as suppliers supplier from Azerbaijan we are not large we are not large in terms of our supplies that's true and we will not be large we will not be large taking the size of the European consumption we do not think that there will be point in time when we will be significantly over 10% of the consumption of gas in the European Union or in the European countries but still for us it's a huge development for us it's very big for us it's almost everything which we will be producing and then living obviously for our own consumption the rest will be export to those who is leading who is needed in that single source not single source well we are happy not to be single source we are happy to compete with the others suppliers from traditionally from traditional suppliers like Gazprom from Africa but to say that we are competing again how can a small supplier of something in the range of 10 billion cubic meters to Europe really compete with somebody who is supplying let's say 10 times more at least and intends to supply even more but we will be affecting obviously the market and affecting it seriously the next is the fact of this project which was supported from many angles and by many is a catalyst for the other projects I mentioned already Ionic Adriatic Pipeline on a number of occasions I mentioned IGB these are real interconnectors which we believe will be built because of the existence because of the implementation of this corridor and this is one which is important not talking but doing because Azerbaijan was always able to justify this and we hope to be able to justify it again this is important investment for Greece and this is important investment in 2000 Europe economy biggest in Greece in Greece in fact at the moment and will be biggest in the countries like like Bosnia-Gerzegovina like Albania for the years to come that's investment by the way which will provide a lot of employment which is more than 1000 people will be employed along the whole value chain but that's direct employment but if we will talk about indirect employment because this project will require a lot of services a lot of pipeline pipes should be supplied from the different countries the whole industry in fact should be working in order to supply Chardonnay's and southern gas corridor with pipes necessary to fill in the 5000 kilometers from one end to another end of the project that's huge so at least 40,000 but multiplying effect would save probably 200,000 people all over the world will be somehow involved in the implementation of this gasification Albania for example Albania has no gas consumption whatsoever and we do not have at the moment plans to start immediately gasification of Albania but how it can be that pipeline will be crossing the territory of Albania without some gas being used in Albania we will be catalyst for the new power stations in Albania we will be catalyst for the gas distribution system in Albania and we will be prepared obviously to support that development by ourselves and by the others and others will come also because if there is gas then there is a desire to develop this gas into something which countries can consume we are first we are first stage as Chardonnay's we are first stage in the development of the corridor but we are not the last at all so there will be further expansion of our supplies but there will be further expansion of what we will be doing and I will come to that in a second I mentioned already that in order to build pipelines you need to have gas available whether we're talking about interconnectors whether we're talking about 1000 gas corridor itself without Chardonnay 1000 gas corridor will never happen without this 20 billion cubic meters of gas available at peak 23 in fact 1000 gas corridor will never happen but there are other fields and there are other opportunities which needs to be taken into account and we will keep them in our account all the time these are opportunities in Central Asia and when we are saying Central Asia this is all traditional what people are discussing all this time Turkmenistan, Kazakhstan other suppliers possible or not absolutely possible 1000 gas corridor system of pipeline crossing the territory of the Republic will be available for those who would like to use them yes it will require additional investment into this pipeline they are at the moment designed in order to deliver what we have or what we are planning to have and I will come to that in a second but they are easily expandable so they could be used Iraq, Israel, others additional opportunities for sure they are and if you remember the map I was trying to tell you please keep in mind this map and 2000 kilometers there is a single brand new pipeline built which will be built to the highest international standards crossing the territory of Turkey this pipeline will be available for those who will be prepared to use it for their own gas whether this gas is coming from Iraq whether this gas is coming from Israel or any other place we do not have any prejudices to our cooperation we are cooperating with those who are legally allowed to cooperate we are fully prepared to working within the boundaries of this international agreements international legislation our own agreements with those producers or countries the producers are coming from to develop this corridor to the extent it will turn into the real serious alternative source of supply of gas into the European Union and into the other countries which are not European Union countries but countries who are interested in developing those resources remember very well that in the past yes it was past there was a lot said about possibility to supply gas from the territory of Syria across the territory of Turkey and then further to Europe if the time will come when it will become possible we will be prepared to do that it's not at all reasonable even to consider that at the moment but why not to think about the future but in doing all of that we have our strategic goals I'm almost there and I think we will have some time for questions after that Azerbaijan has its strategic goals of course yes we could in theory we could make more money to selling much bigger than we are planning to sell volumes to the existing customers to the customers with whom we are neighbors but we are selling to Europe we are selling there for number of reasons yes those are strategic yes those are attempts to or desire belief that we will establish strategic partnership by the way our sales contracts are 25 years contracts most of them our European sales contracts are have 25 years duration that's extremely long that's extremely long and nobody except for Gazprom probably signed this type of contract before 25 years long but of course they have mechanisms which allow them to satisfy the needs of the suppliers producers and the buyers overall with an oldest 25 years our contracts also allow flexibility of moving gas along the value chain and the more we will be producing the more will be that flexibility and ability of us who will be regulating the deliveries of the shagging gas to the different customers to satisfy all their needs on a daily basis because one always need to remember that when we talking about big volumes etc annual deliveries in fact this is not annual this is seasonal deliveries which are important for the buyers buyer in Greece for example may have higher demand for gas in this particular day or week for number of reasons and who knows what are these reasons these reasons could be of unexpected nature somebody is not supplying so we will be able to increase our supplies for those who needs gas along our value chain at any certain point in time so flexibility if the corridor is established if the corridor is properly coordinated operated then you have the operation of flexibility which allows you to satisfy your customers in the best available way that's what we never had in the past when we were supplier to the limited number of customers so the pipelines with very limited capacity etc yes being connected with Europe through our energy bridges it's a strategic goal for Azerbaijan which we hope to be able successfully to implement by 2019-2020 we already have an oil bridge with our customers worldwide customers crossing the territory of Turkey and then from the port of Jehan we are reaching more than 35 different customers international customers with regard to our crude oil the scale of our crude oil operations is now extremely broad we are operating from North America up to Japan not the same but similar and huge scale of the gas development we expect to take place when the contract of the 21st century will be implemented and Sokar itself Sokar is state oil company of the republic if you wish it's national oil company of the republic what our government wants and what we in Sokar are trying to implement is to make Sokar not only national oil company but international oil company international oil and gas company and for that we are successfully working in the different areas of course we are biggest foreign investment in Georgia that's relatively small taking the size of the country but we are biggest there biggest investor, biggest taxpayer, biggest supplier etc. what the biggest foreign investor in Turkey at the moment with what we have and what we will have including petkin, petrochemical complex and star refinery, TANAP and other projects which we are implementing on the territory of Turkey we are the biggest foreign investment in Turkey at the moment I don't know whether we always will be the biggest foreign investment investor in Turkey but at least we are for now and that's a very big investment for us Turkey is important partner in the country with which we have very good relationships, special relationships and those relationships will continue we are important player now in Greece with purchase of the majority 66% of the shares in Desva where turning Sokar into important player in the Greece energy market Yes, Desva is transportation operator but our natural normal interest is to transport as much as possible through Desva to improve our own return on investment we made into Desva and to develop Desva further in order to make this system being connected with their neighbors through the same IGB connector or the other future interconnectors which might be built, the system which will be supplying much more gas than it is doing right now and the last what we will we hope transport through this corridor it is not only Chardonnay's it's Chardonnay's one, it's Chardonnay's two and this is further gas coming from the resources in Azerbaijan I mentioned already that our pipelines are open for cooperation for others but we when planning or designing the capacity of the system when talking about ability to increase the capacity of those pipeline easily when talking about establishment of the pipelines with the big diameter in Turkey and having two parallel in fact two parallel pipelines crossing Azerbaijan and Georgia we were taking into account the future developments which are available in Azerbaijan Chardonnay's two is sanctioned 45 billion dollars part of which more than 25 will be spent on the upstream and the reminder on the pipelines is already on the way those cash calls are coming on the daily basis our companies and so on are paying them off but then comes comes ACG deep gas and we see this ACG deep gas as something which is available probably faster than the other developments Chardonnay developed by Total in partnership with Gas de France and Socar want to see by 2020 2021 hopefully we will and the further fields over Azerbaijan they include those fields which are operated by BP and those which will be operated by Socar among them is Umit which is already field producing with the two working wells among those is Shafaga-Siman operated by BP and other fields which we have in mind one of those each of these fields will contain at least and I will probably not say how much it will contain in our but the significant volumes of gas which will support the further development of the southern gas corridor into as I mentioned serious alternative supply supplier of gas to the European and non-European economy Thank you very much Thank you Vitaly for this very rich presentation on how complex it is the complexity of the effort involved in putting together a project of the scale of 40 some billion dollars investment in the value chain and the importance of sequencing of the work from well head to burner tip I would next um uh Beth Urbanus from the international affairs team at DOE to share the US government perspective on this important project Thank you Ed and thank you Vitaly for that great presentation it's going to be hard to top that so I'll be brief um the signing of the final investment decision in December for Shondini's too and the moving forward of the southern uh corridor projects um they mark a culmination of over a decade of intense diplomatic and commercial negotiations among many countries many companies and many interests and so the fact that these are moving forward um and that these two projects are moving beyond the concept stage and into reality um is significant and I think we all have to recognize that it is required the companies and governments involve to take very hard decisions to align their interests to achieve a common vision to move forward together and to make all of this possible and so the United States very much welcomes this and congratulates the various parties involved including Socar major player on their ability to move these things forward it's been a long process the United States government has been a supporter of the process and hope for the realization of these projects for the past 15 years um and so we're very happy to see these things move forward um from the US standpoint I think we look at the two projects we're talking about today um as uh very important from a couple different perspectives obviously they're important in terms of providing energy security uh energy security to Europe uh and our allies there that's always important but also to global markets in general we see increasing global demand for gas uh and having uh projects like this increasing uh the variety of suppliers in the market important not just for Europe but also globally uh as gas markets develop and globalize um we also uh see that this is also uh significant in terms of aligning aligning the interests of the countries in the Caspian with the other countries involved um with Turkey um with the countries that will be involved in the other pipelines in the southern corridor and so this is also very important development and I think the United States also takes the perspective that this project is extremely important for the continued economic development and security of the countries in the caucuses and the countries along the pipeline including Turkey and the countries in Europe so for all these uh from all these perspectives um we see this as a globally important project um and we've been very happy uh to to be supportive of it uh and we will be happy to see it as it comes to fruition uh be successful um so I think those are the key uh viewpoints of the US government um in my shop obviously we we watch things very closely um I think the slideshow has has explained a lot about the complexity of the project um there have been a lot of moving pieces to watch there have been the meters upon meters of documentation not all of which I've looked at I looked at some of the BTC stuff back in my World Bank days but um so you know it's not lost on us how difficult it is to get these things done um and so we we we understand that and I think we all realize that we have to work together to make these things possible um and that while at the end of the day it is a commercial decision um about how these projects move forward uh and that's an important aspect we also have to understand that it has much broader global economic impacts and to some extent political ones as well uh thank you very much Beth um I would like next to uh ask CSI as his own Robin West to uh the discussion a little bit and talk about uh what's been going on in the global gas picture and as he and I know uh gas is a very different business from oil which we have focused our attention on in the gas being up until recently yeah um the gas business is entirely different um as Fatali knows it's uh much more capital intensive um the oil business uh does not require the same kind of infrastructure and there's a lot more flexibility um but the to me the the real challenge is a dog that hasn't barked here this morning and that's Ukraine uh and um the fact is that uh the development of alternative gas sources to Europe is gone up in importance enormously in the last week and it seems to me that the this whole southern gas corridor which has been talked about for years and the buco all these different projects is that this is really the first real step and Beth is absolutely correct that the governments can huff and puff but it's going to be companies that are going to um a sign the contracts which are going to finance the pipelines which are going to justify the investment but I guess um my question to you Fatali is um uh as you you look at uh uh uh well it seems to me that that socar has an extraordinary opportunity to be the the real architects of the gas business going feeding into Europe feeding into countries that are very very vulnerable uh to supply from a single market Russia um and uh do you see um um uh sooner rather than later um uh this network of pipelines and supply that you're building do you see it playing an important role into Europe and you know is there anything that can be done commercially because what governments can do is really pretty limited uh to accelerate this process because I mean it's become of geopolitical importance yes we do um my answer will be kind of short but very uh answer oriented uh yes we do uh but one always need to realize that ability which Azerbaijan with its higher carbon resources can provide for the implementation of the southern gas corridor are limited uh the real alternative source of supply could be achieved if there is volumes from Azerbaijan and volumes from the other countries only in that particular case we can go above what I already mentioned as at maximum around 10 percent of overall European consumption uh being being able to supply from one particular field even if this field is biggest in the world the biggest of shore gas and gas condensate development Azerbaijan and the private investors need to be together in order to develop further the resources existing in Azerbaijan but also others in the other countries along the route or even far from the route but who have an ability to be connected to this route to this corridor should be together in developing its further that will be my answer I shouldn't underestimate the value of an anchor project uh in establishing such a corridor I would like next to invite you to ask questions I will only make two points one is Vitaly's time is short particularly with the number of meetings that had to be rescheduled from yesterday I'm sure so please direct his question your questions to him the rest of us may be able to stay a little bit longer Robin and I are not going anywhere uh and the second request is please identify yourself as well as ask your question your subject in the point in the way of a question rather than a comment Ambassador Kosarich for this questions and as I mentioned in the beginning of my presentation I'm with a great pleasure coming back to the memory so the past when we were working together and doing really really important things but now we are involved into even more important ones at least a lot of people say that those are not less important and I'm again glad so the first question of yours was consisting of two parts who will finance and why they why we believe in these markets they are not engines at the moment but we believe that they will be engines in the new future when we're talking about Greece in particular we believe that these two countries the need in energy resources will be increasing with the time going by 2020 as I mentioned we believe that their energy consumption will be at least from us the volumes of energy which they intend to buy from us will at least double I will just allow myself to use somebody else a quote for business regard and that is not our projections this is something which Plaminary Sharsky the founder of Bulgaria recently mentioned that in the long-term run Bulgaria intends to buy up to 3 BCM 3 billion cubic meters of gas from Azerbaijan yes this is an intention at the moment this gas is not sold to Bulgaria at the moment we do not have additional billion cubic meters of gas to sell to Bulgaria within the time frame we are talking about but we believe that in the future if they will be interested and has certain plans then it will be done it will be achievable as for Greece they believe there has even much stronger ground we believe that Greece will be able to overcome the crisis we believe that Greece will successfully go through the period when the economy was very low and will go to the spike of their development and Greece in particular us being involved into Greece through our now affiliation with DESFA will greatly benefit from the abilities to consume gas from Azerbaijan who will finance financing will be of course done primarily as using the resources of the shareholders including state-owned company of Azerbaijan it was mentioned already at number of occasions that since state-owned company will not be even on this lens sincerely speaking itself simply to afford such huge volumes of money which we are talking about here there will be support from the sovereign oil fund of Azerbaijan state oil fund of Azerbaijan there will be support to this particular development the rest of the partnership whether this partnership is upstream partnership or South Caucasus partnership South Caucasus pipeline partnership or TANAP or TAP partnership they have an obligation obviously to finance their shares in the project but in order to achieve that there will be combination of external finance and equity finance and in this particular role in this particular corridor ambassador again you are right the expedient development of the project particularly of certain elements of it interdependence of the different elements of the value chain will dictate that equity financing will be portion of the equity financing will be higher than the external this corridor will be financed from the equity of its shareholders but of course there will be external finance as well and external institution including expert import agencies and you can imagine how big is portion of the supply of the goods materials line pipe etc coming from the different locations so exims will be involved into that closely and as for the eastern partnership that's obviously not something which I'm kind of following in my agenda I'm working for the state or company primarily in the gas pipelines area at the moment before it was different but I can just repeat what others were saying about us as a country working towards the eastern partnership we very highly we estimate very highly our existing cooperation with the European Union I mentioned that in the beginning including the one within the framework of the eastern partnership and we believe that Azerbaijan will be able to achieve even higher level than level which was suggested within the framework of the partnership for the last summit taking place I believe it's in September if I'm not wrong so our cooperation with the European Union is strategic cooperation subsequent reflection in the documentation which could be and will be we're sure developed between us and the European Union and there are elements of this which are in progress at the moment some of them and for me most of those which I've seen they have always energy component but energy is the driver for the further development of the relationships as far as I can see it you have time for one more question maybe Eric Cohen from Heritage Foundation Vitaliy it's Vitaliy it's always terrific to see you both here and in Baku you mentioned briefly some of the potential competitors the 800 pound gorilla that Robin West mentioned but I wanted you to focus specifically on Northern Iraq Eastern Med and North Africa I just did a report on Tunisia and Algeria they have a lot of gas they have a lot of LNG spare capacity and they have shale they really want to emphasize shale moving forward to what extent do you see competition to what extent do you see Eastern Med and North Iraq really getting the critical mass for exporting which you guys of course have already well again I will not overestimate what we have already it's long time to go and strong efforts which we need to apply along the value chain in order to achieve what I was describing but I also mentioned that soccer is not afraid of competition soccer used to work in the competitive environment and of course our partners in the Shau Deniz consortium they even more used to that and they working in this environment for the long time what makes us different from the others that also that we are state company so to the very big extent we are following the policies which are established or goal strategic goals which are established by the state of Azerbaijan and state of Azerbaijan proclaimed already at number of occasions fully prepared to cooperate with the other suppliers whether those suppliers are from the east or from the west the only requirement is that this should be legitimate cooperation which is properly organized in the framework of international legislation agreements, documents which are signed or we are party too so with this regard shale gas I also mentioned yes that's a reality this reality will take place in the volumes of the gas supplied from the northern America other regions will be growing we itself we as I also mentioned considering shale gas as an opportunity which Azerbaijan will be using in our future developments in the future developments at the moment we have enough of gas produced with the traditional methods but there will be others as well so we are not afraid of competition more than that we are prepared to work in the environment which is competitive to all but also which allows the close cooperation with the others because we believe that cooperation and partnerships which we have which we will have with those companies from Iraq with those companies from Turkmenistan will be just healthy competition and healthy cooperation which will allow us to achieve much more remember it's not only upstream which Azerbaijan has Azerbaijan has interest in the downstream as well and these pipelines will be the gas of others we will be also benefitting that truth of life which is unavoidable the fact that we are owners of the big gas resources is not forever but building relationships and long-term relationships with others in the region and beyond we hope will be probably forever at least for the very very long perspective and those relationships which should be built with the neighbors at the first place with all neighbors and their relationships are extremely complicated but still we need to maintain the relationships and improve them improve them with everyone we need to maintain the relationships with our buyers, customers with our political friends and not friends and that's the truth of life if we will isolate ourselves or our pipelines then we will not be successful so the only way to succeed is to develop a cooperation whether it goes in competition or without competition but really and honestly transparent and fair Vitaliy this is such a rich discussion certainly sound like you don't plan to live in isolation we would love to keep you and welcome you back to CSIS but your assistants are getting anxious to get you to your next meeting so please join me in thanking thank you very much some of us can't stay behind Robin if you take over for a few minutes the question I'd like to put to some people here is really this issue of this is really the first gas transmission system from this region and going to Europe and is this going to be the base load is this the beginning, is this the key element or the whole question of other competing projects will this impact South Stream and some of the other projects what do you think in Ukraine South Stream was a political project of Vladimir Putin now it is even more so and if this project is being built is somehow competing with Russia certainly in a size sense it isn't but the markets that he's talking about penetrating gas from already has penetrated and owns assets companies pipelines I just don't I just don't see that you don't see what I don't see this southern corridor as being a game changer in terms of European energy security it's one element but not a game changer Julia what do you think I see your point to some degree I mean I think that other by John is shipping gas to markets where Turkey I guess yes gas has a presence but the Turkish market is growing so there will be room Bulgaria there is an interconnector that needs to be built so that's still not sure maybe small market at this point I guess it will grow the one that you're talking about maybe more mainly is Italy but I suppose since this goes into southern Italy there's this issue of maybe gas supplies from North Africa not being as secure so maybe it can and we're only talking about 10 BCM so it's not compared to what gas prom ships to Europe and well you know in the future ship if things work out for gas prom you know you're talking upwards of 160 BCM so 10 BCM versus gas proms 160 maybe 200 eventually it's hard to compare I agree on the capacity of course but I think something is happening on the map in the last couple of weeks that may change the hierarchical order of the suppliers for our European friends and partners so that they would de-emphasize one oligopolistic supplier and move to diversify risks that's why I mentioned North Africa both piped and LNG there is a capacity to push LNG out of Algeria for example to UK and other markets provided the terminals are there and if for example we speed up building the authorization licensing and building of East Coast LNG terminals in this country so that the environment in Europe may become more competitive for gas LNG and piped shale I don't want to touch it because other people want to talk but shale is also something to pay attention to thank you could you identify yourself yes my name is Anthony Leuvenius and I am with energy stream GmbH which is an oil and gas advisory firm based in Frankfurt, Germany so I would like to say that the southern gas corridor as it was presented this morning yes the 10 BCM is not a large quantity but the infrastructure is very important and I would like to take your point that you said gas business is very different than oil business because it's capital intensive and you need the cost of infrastructure before you actually produce gas so if for a second we focus on the gas business and we can understand the gas business in reality it is not the 10 BCM that are going to be shipped in Europe in reality is the gas infrastructure that is very important because once you have this pipeline which is a 25 billion plus dollars investment then in the future you can send more gas by expanding this infrastructure or even build up another pipeline that would go to Baumgarten Austria which is a gas business per se and thinking that in the future you can link also gas supplies from Turkmenistan via trans-Caspian pipeline then this I know it's very challenging it's very difficult and if it took us such a long time to have the southern gas corridor how long it might take us for a trans-Caspian pipeline but it is there and there is a commitment from Europeans on the west to actually build and import gas from Turkmenistan and I think we should give up that so my point is that this infrastructure is the start to allow the gas business to operate and to diversify from the Caspian region and make European Union less dependent on Russian gas you know those of us who look at this from a business end of things believe that the structure to deal is really very important now BTC was supposed to lead to Kazakh volumes going to the Mediterranean and that hasn't happened because the structure to deal was not really attractive for Kazakh producers to move their oil through BTC so in order to establish a corridor which I think Shaktanis too is a key project for doing that you also need a structure to deal that allows particularly for gas third party access in a fair and equitable way that will allow additional volumes to be attracted if you look at Vitaly's last slide of the amount of gas that may be coming out of Isabaijando you wonder when we will see the Turkmen gas crossing over to Isabaijan to take advantage of some of this corridor that may be the contract of the next century the 22nd century one other question I'd like to put to people is in America energy security is usually about oil in Europe energy security is about gas energy security is front page above the fold right now given what is happening in Ukraine and I'd be interested do people feel there really will Europeans act as they always have or will things actually change in Europe this time and I really don't know I mean Germany's response was to build Nord Stream which is hardly a diversity of supply so I'd be curious one thing we all use the short hand of Europe there are different Europe's from a gas point of view and those that are most dependent on Russia in particular tend to be in Central and Eastern Europe so that's one issue and there really are divergent interests from the point of view use the mic this mic yours not working sorry I mean there are divergent interests between France and Czechoslovakia, Hungary when it comes to these questions so it's going to be hard to get a single European position whether this the events in Ukraine focus the attention I can't say I'm not smart enough to know what's going to be happening in this dynamic situation but I would like to just pick up on Ed's point I mean I think it's a little premature to talk about Central Asian gas going to Europe because there's no legal agreement over transiting the Caspian with a pipeline and if Russian behavior in the last two weeks is any indication I don't believe either they or the Iranians will be very interested in seeing the competition for those supplies going to somebody else's pipeline system well the other thing about what's happened in the last week it seems to me is where does that happen? On the one hand one could say that South Stream becomes an even more important strategic project for Russia and Gazprom given the uncertainty of the relationship with Ukraine on the other hand it may make South Stream a less bankable project than what it already is which is not a very economically attractive project for anyone to invest in and that would have a real impact in southeast European gas market over the next 5, 10 years it seems to me. I would like to focus again on the business dimension of the gas and you mentioned Iran which is key I am very skeptical what will happen with Iran if Iran opens up as a market and if there are western companies allowed to invest in Iran this very existing infrastructure will be a game changer because the only country in reality that counterbalance Russia on sending gas to Europe is Iran as we know Iran is the second largest country in gas proven reserves as I said I am very skeptical about that as I agree with you about Central Asian gas but you see these are two alternatives and because in reality commercial decisions are driving the market and not geopolitical agreements I think once the market allows for either Iranian gas or Central Asian gas to be shipped in Europe and we have ready for this this small but for companies quite large to actually put 45 billion dollars is a quite large investment it is the largest investment of BP right now in the world it is the largest gas investment for the European Union and some of the major European companies which is the largest private gas trading company from Germany the European Union is investing and is actually buying a substantial quantity from the so the bottom line is that the gas business is being facilitated from this infrastructure and the opportunities that seem difficult now which they are they might allow in the future easier the commerciality of those of Europe with the heavy investment and expansion that so far is going through for contribution to the energy security of Europe how far do you think so far is from becoming another BP thank you well, Robin you may want to comment it seems to me that so far is the next step maybe to be another rather than another BP a NOC which truly wants to internationalize and be competitive beyond this territory which there are other examples of NOCs that have done that Robin I guess actually a pretty good answer but Petronas is a very large organization with enormous resources and a highly diversified international portfolio so this is a positive first step but I do think that if so far is the catalyst behind this infrastructure this initial infrastructure I agree with you that the experience of the gas business is usually gas demand in fact almost always exceeds initial projections once gas starts flowing things start happening what exactly is going to happen? I don't know but it's terribly important that something be in place to start moving what are potentially very large volumes to this part of the world any how long do we have the room for? we're good alright thank you everyone for staying Ariel what we're looking at is an interplay between the political risk factors and geopolitics and the desire of the market to be supplied from various sources at the lowest price so for example given today's political situation between Turkey and Israel Israeli offshore gas cannot go to Turkey despite what my friend Matt Breiser published in an op-ed but I can easily see in 5 years Israel and even maybe Cyprus figuring out how to ship their offshore gas through a pipeline to Turkey Ditto in a similar way North Iraqi gas today Baghdad is vehemently opposing the North Iraqi slash Kurdistan gas to go to Turkey through the pipeline but this is exactly what the colleague said here once the infrastructure is there it's kind of like the baseball field will come and the Turkmen gas if the Chinese will not finish it by the 22nd century and there's more gas in Turkmenistan may go across the Caspian to the west if the demand is there and if European economic growth is reasonable now in terms of Gazprom as a competition yeah it's a huge it's a huge national gas company however it's locked in a serious fight with Rosneft Rosneft is moving to the LNG sector it's moving to the shale gas sector it's more dynamic and so far Gazprom did not demonstrate a lot of agility so I think there is a space with a certain piece of the European market share that other more nimble and agile competitors including Socar and others may move in there and grab some of that market share not all of it but some of it I think what's interesting when I was listening to Vitaly and how he described well there could be rock there could be other gas sources that come in but clearly you know it's Socar that's controlling this infrastructure they will own 80% of TANAP or 68% I guess as it's spanning out now but one of the things that is clear is that the Azari Oil Fund is going to be the largest financier of this effort so ultimately what will be interesting is to see in the future as other sources come in I think the referee will have to be Socar because it will have the biggest stake and the biggest financial stake also in terms of the existing infrastructure so how this develops will be I think also dependent on Azerbaijan's desire to work with certain other suppliers or potentially if there's 50 BCM eventually of gas out of Azerbaijan then I would imagine that's going to occupy most of whatever this expanded pipeline will be. That's a very important point Julia I mean those of us who have been watching this for a while noticed that one of the difference this time around on as the downstream pipelines is that Socar has really taken a leadership role compared to the BTC days when it was really the oil companies in BP in particular which Vitaly paid proper respect to but he understated Socar's own role in moving these projects along determining the size of pipe what direction the pipeline is going to go their investment in DEFSA is clearly a strategic one so there's a lot the game is being played a lot differently not only because it's gas but also because the state company champion is playing a bigger role than before. Rich? Do the existing agreement allow that to happen in ways that don't back out supplies from the shareholders in Shockton East too? That was the problem with BTC and I haven't even seen the four meters of agreements never mind examined them but I think this is really important and I think the point that Julia made which is that as I said by Sean over quite a long period of time transitions from a producing country to a transit country where transit is its own profit center for Azerbaijan then those commercial agreements will have to be a lot more accommodating than the ones that are by design protective or producer shippers who after all have to guarantee the financing for the current project but there is a commercial logic behind why those agreements are written the way they are but that may need to change over time. I thank all of you very much for coming out on a snowy day and at least yesterday was a snowy day and cold day and staying behind and joining in this robust discussion hope to see all of you again soon.