 So I hope everyone found their way. We're still working out some glitches. I'm David Pumphrey. I'm a co-director and senior fellow in the Energy and National Security Program. And it's really a great pleasure to have Dr. Faridun Feshiraki here and join us for his presentations. I've known Faridun for a lot longer than I want to say. It's about 30 years, I think, something like that. And have watched him really grow a consulting company that has become one of the leading energy consulting companies in the world. And I think that of all the people that I've known over the years, he's the one I've always turned to for information on the oil market. And maybe that's because he doesn't come to Washington very often. So I think once a year he's in Washington, the rest of time he's out there in the rest of the world. The other thing that I think really makes Faridun unique is that he had been focusing on Asia long before others started focusing on developing Asia. So I think I went to the first China conference that he held when he was with the East-West Center in Honolulu in 1987 or something like that. And it was just the beginning of people trying to understand what might happen in China. So I think he's been ahead of the curve in many of these big developments throughout the energy world. So whenever he comes we immediately say, of course we'll have you join us. In the past we've done a variety of different presentations. He did a major one on China and India for us that was attended by just about this many people packed into a room. We talked last year with him about Iran sanctions and global LNG markets. But we thought this year it would be a really good moment in time to start talking about sort of the fundamental thing that many of us spend our time thinking about, which is what's happening in the global oil market and what are the new directions that we're likely to see. The tensions between continuing geopolitical risks but also major new supplies of oil coming onto the marketplace. Where is it, where are we heading with that? And I think that there's no one better to give us the answer, right Faridun? You'll give us an answer today? Tell us a story then about that. We will do questions and answers after he gets done with this presentation. We've got quite a bit of time. We'd actually had plans for having another speaker sharing this time but the shutdown has sort of made that a little more difficult. So get your questions ready and I don't think there's any question that Faridun won't have an answer for or a story for. Is that correct? So please join me in welcoming Faridun Feshraqi. Thank you very much, Dave. I'm happy to be here one more time in this new fancy building. And when I entered, I had the mission not to walk into any glass doors. I heard that this is too clean and too new so people do have the habit of walking into the glass doors. Dave, how long do we have in case of a talk first? I don't know. OK, I have a presentation for you which is actually only headline and I want to start talking about some of the key issues and hopefully I can challenge you. If you have a speaker who doesn't tell you anything that you won't remember later on, what's the point of it? So even if you disagree, then hopefully some parts of it you can remember. So you go to the first one. One of the most incredible stories we've seen is that all of these great changes come in the oil market and the price of oil is always the same past few years. Libya with Gaddafi goes out of business. The price of oil is the same. Libya comes back. The price of oil is the same. Sanctions are imposed on Iran. 1.3, 1.4 million barrels of Iranian oil disappears from the market. The price is the same. And then Libya goes out again. Price is the same. Libya half comes back. Price is the same. So it's a sort of quite an incredible feat that you have been able to keep the prices range bound. And you kept the range bound by the efforts of one very important player. And that is the production policies in Saudi Arabia. I've asked often who decides the price of oil. I say, God, Saudi Arabia, and the oil market in that order. So it is really a balance that you have to create. And many years ago, they used to say, well, the futures markets are leading, the oil markets, all the speculation. Well, they don't say it anymore. The impact of the futures markets is still there. But minor in terms of the size, the Saudis lead and the market follows. And everybody's happy because you have a good policeman who is keeping things in range. And we did not range. Consumers are happy. Producers are happy. There are a lot of new investors are happy. So we have been in this $110 range of oil, despite all of this crisis that we've seen. And here is an incredible chart. It shows what happens. The Saudi oil production is almost in total opposition to what happens to the price. When the price of oil goes up, then the price of Brent and the Saudi oil production, they adjust to each other. When the Libyan crisis came, the Saudis increased production. Then the Libyans came, the Saudis reduced production. Then the Iranian sanctions came, the Saudis increased production as the need for oil declined because of the substantial changes which are happening in the US and in Iraq and Canada. Then they reduced the production. And now they've increased the production. So for me, as an analyst in the market, number one issue I look about the future of the oil market is to look at the Saudi oil production. I don't look at the supply demand figures. It doesn't matter. The Saudis will come up with volume in the market and they will balance it. So if the Saudi production today is 10.1 million bar per day, there are serious physical issues in the market. It's not psychological issues. It's not Syria. It's not Libya. It is physical shortages because the numbers tell you. 10.1 million bar per day, the production. Only a few months ago, it was 9.2 million bar per day. So now I can see that while the psychological impacts may be a few dollars in the price, the real impact on the price is because of physical shortages. And the physical shortages show the volume in Saudi production. So here is my rule of thumb that I share with you. The Saudi production goes below 9 million bar per day. I see the price of oil below $100. If I see the Saudi production approaching 8 million bar per day, I will be looking for $80 oil or less. And there are reasons for this. The reason is in terms of what happens in the market today, just as we speak, between the Libyan outage and the Iranian sanction issue, 2.5 million bar per day of oil is not in the market. So let's say by some miracle, that could come in right away. The Saudis then would have to go to under 8 million bar per day. So either a substantial drop in the price of oil will be seen, or they would have to adjust. But is there a red line in Saudi Arabia? Now we're getting good with red lines. Everybody has a red line. Is there a red line in Saudi Arabia? Well, I think there is a red line. And the red line is around 8 million bar per day, at least with this government this thinking today. And the preferred price of oil is about $100 to $110. The range of oil prices are $80 to $120. In fact, the oil market has two bosses. One boss are the Saudis, and one boss is the US government. That once you go beyond certain levels, it's not acceptable. And you're supposed to behave properly. You cannot have the price of oil at $200, but it is not acceptable. So within that bound range, we go up and down. Now we've been at the higher part of the range in the past two, three years. We expect that we'll be sliding down towards the lower bound in the next two or three years. But it can come by different reasons. One factor right away could be somehow, miraculously, agreement was reached with Iran. And the Iranian production, this month, we're estimating exports of 800,000 bar per day. It can go to 2.2, 2.3 million bar per day overnight. Very quickly. 1.4 million bar per day could increase right away. And the Libyan production now, the last few days, has been reaching 650,000 bar per day. So for it to go up to back to 1.6 million bar per day is a matter of safety and security rather than technical issues are less important. So you can have actually a lot of new oil entering the market very quickly. And that would have to be absorbed by the shock absorber. And the shock absorber is only one in the market. The Iraqis do claim that I am part of OPEC, but I'm not. So essentially, I can do whatever I want. All the years I didn't export, so you owe me production. You, Saudis, increase the production while I wasn't there, so now produce and make up for it. So this is the argument which is made, which is, so far, has been tolerated. Because the price of oil is strong. Who is complaining with these prices? But if the prices go below $100, below $90, they will be severe repercussions. And that may be coming. The fact that now Iranian oil has been made into irrelevant and marginalized. Nobody wants Iranian oil to come back. It doesn't matter anymore. The Saudis don't want it. The oil market doesn't need it. None of the neighbors want it. And the oil market is counting it out permanently. So if it comes in there, it is like a new production coming from the country. So it's seen unnecessary now. Because the change in the market has meant that without the Iranian oil, the market can define. Actually, without the Libyan oil, the market would be fine too. If you want to stay in that $110 range, no need to have any production from Iran or Libya for indefinite period of time. Indefinite, like until 2020, beyond that. It's a bit too long. So these radical changes have taken place. Now let me stop that for a second and make a few comments on what's happening in the US. The US title production is increasing. We all know that the dramatic impact of it is so far has been almost nothing in the Middle East. Most of the impact is on African fruits. And those who surmise that the increase in production in the US would mean lower dependence on the Middle East are, at least in the medium term, fundamentally wrong. This is not going to happen. Now several interesting things are happening. One of the most important factors in all this thing that we need to keep in mind is, what's happening in Venezuela? The Venezuelan oil production is not growing. It's flat. Maybe up 100,000, maybe down 100,000. Also what's happening is that the synthetic crude production from Faha Belt is pretty flat at the existing volumes without solving the problem of Petro's water with Conoco Phillips and ExxonMobil. Nobody is going to invest new. So it's going to stay where it is. So we have now a flat situation. But the Venezuelan conventional crude is being re-diverted in a very dramatic fashion, more dramatic than anything I've seen in Venezuela for a decade. As of today, 480,000 barrels per day of Venezuelan crude is contracted to go to India. 400,000 barrels per day to reliance industries and about 65,000, but the contract will rise to 80,000 barrels per day with SR. That's half a million barrels per day. You have Venezuelan crude, about 250,000 barrels per day going to China, but a brand new refinery is being built between PDV and PetroChina. 400,000 barrels per day of average, 17-degree crude. Essentially, that's coming by 2015. So between China and India, 1 to 1.2 million barrels per day of Venezuelan crude diverted out of its natural market. And natural market would be the US market. That means that the availability of the heavy grades in US needed for blending operation into the lighter crudes to feed in the US refineries is severely restrained. 50% of the coaking capacity of the world is in the United States. And if you have light crudes that are produced in the US, they don't give any optimum yield. They actually are a problem for refineries. They don't want it. Of course, the buccane type of crude is almost the same as WTI. That's OK. But the eager for condensate is a pain. Nobody wants it. Or you wanted to have it discounted. So you have to have some heavy grades to blend it in. It is a problem, but the biggest source of heavy blends has to be either Mexico, Venezuela, or Canada. So the Canadian crudes, which come to the US, now the bitumen, are 8 to 10 degree API, really awful stuff. But they get blended into condensates. And they come as deal bits, about 20-22 degree crude. So actually, quite similar to what the Venezuelans can bring. So actually, the competition in the US market is Venezuelan crude and Canadian volumes coming in. If one of them comes in a big way, maybe no need for the other one. But the Middle East crude is not really part of this equation. The quality is so much higher. It's a different category, not the same family, distant family. So about 30 degree crude from the Middle East is in one category. It's heavy. It helps. But Venezuelan and Canadian would be competing. And I am concluding, Dave, now maybe there is no need for Keystone Excel anymore. Because it seemed like without it, you have a problem. But it seems that it may be OK. The oil will reach the US one way or the other through different channels. And the volumes will come. And the Venezuelans who took the crude outside this area, they may also become irrelevant and marginalized if the volumes from Canada continue to come, as we expect, even without Keystone Excel. So very dramatic shifts in the global crudes to the extent that we haven't seen anywhere else, that you have the crudes going out of the natural markets and unnatural markets are entering the market. And now you have lots of sweet crudes in the market. People are beginning to think in the US and in Asia, maybe I can debottleneck my refineries and use the sweeter crudes because it becomes so much cheaper. Two, three years ago, you couldn't even talk about this issue because everybody invested to have heavier grades. So lots of new thinking. What does it all mean for the fundamentals of the oil price? This means that the pressures points have changed. First, the Middle East oil in the US is not going to become irrelevant. It remains relevant. Post-2003, the volumes will go down. The Saudis, of course, have 1.1 million bicycle refining capacity, and they will feed the oil refineries under any scenario. So the Middle East crudes will get to the US. And in fact, they are not terribly impacted by Canadian volumes. It seems now that it is their competition is with Venezuela. And Venezuela, taking the volumes out, creating a global change in the flows. But when you add all these numbers together, you find that there are several centers of demand and several centers of production that I'd like to share with you. We have five oil demand centers in the world. Number one is still in China, without a doubt. People say, well, Chinese growth is slower. Yes, growth is slower, but from a higher base. The increase in production around 400,000 bar a speed in China for many years ahead of us is perfectly reasonable and feasible. But of course, the percentage is lower because the base has become so large. The second, are the countries in the Persian Gulf? They're growing 250,000 bar a speed a day. Why are they growing so fast? Population is much smaller. In fact, 2 third of the population in the Middle East is in one country, that's in Iran. So why is the demand growing so fast? Well, 70% of the population are under the age of 30. The prices are dirt cheap everywhere, and there's plenty of money. Sort of awesome combination of the factors which make the demand explode. And the demand is growing. So many people see the demand in the Middle East not far off from China, that five, 10 years down the road, if the existing trends continue, be about the same. Now, in the Middle East, it's interesting because the richer you become, the more subsidy you give. It's not the reverse of the rest of the world. They say, well, if you're richer, then you can afford to pay. No. More money you have, actually, you waste more money. And you waste more money by giving it away. If you have less money, you waste less. So I want to warn that a lot of people argue that the budgetary requirements of this country and that country, that I think is just nonsense. Budgetary requirements are only created because you have extra money. Murphy's law, your income, your expenditures will rise to exceed your income, always. But if you have less, you spend less. Look at the Saudi Arabia's planned budget in 2010. It was $50. What happened between 2010 and 2013, which has made it about $95? Well, you give away the money. But it is not the case, like many other countries, that if somehow the oil money is not there, social services will collapse, and people will die in the streets, and electricity stops. No, no, no. All you do is to become more efficient. You have less money, you become more efficient. So the ability to adjust onwards is there. And these numbers that countries say they want for the budgets, it's not really hard and fast numbers. And again, the best thing is to look at for every country's their own three, four years historical budget requirements. And you can see most of them are $45 to $50, $55. Suddenly, everybody wants around $100. So that adjustment is much easier than people think. So extra money means extra oil. In UAE, 92% of the population are foreigners. So actually, the government is subsidizing the foreigners. Economic theory is very clear. Raise the price, give cash to the 8% local population. No, the government decision has already been made. They want to subsidize everybody. So they have subsidized because you have money. If you don't have money, you don't have to do it. You won't do it. So Middle East is a Persian Gulf country. It's a second center of growth. The third center of growth, which is new, is what's happening in Latin America. Around 200,000 baros per day of demand growth is there. And it's important and it's sustainable for the long term. And number four is India, about 150,000 baros per day. Now, all of Africa would be less than India. So far, we haven't seen big growth in Africa. In consumption, it may come. But what we see in today is that these five centers of growth grow by about 1.2, 1.3 million baros per day a year. And the production of oil in the US growth, Canada and Iraq alone are about 1 to 1.2 million baros per day. Except that there is a demand decline in the industrialized countries. This is a picture I wanted to show you. The US is like a very sort of choppy person losing weight. And the Chinese boy is gaining weight. But somehow, the gain of weight and the loss of weight is not that different. About 2.3% of the gays that China make is lost in the US in automobile efficiency. Remembering again that 40% of gasoline demand in the world is the United States. So the US can lose 50% of it and still be bigger than all of Europe, 27 countries to Europe combined. So we shouldn't see this somehow that it just needs to be efficient. It's not going to hamstrung the US growth, by any means. It's just two ways to reduce consumption. The European model, raise the taxes, kill the demand. US, if you raise the taxes, then you are a traitor to the Constitution. So you can't do that. So what you have to do is you then go through these cafe standards slowly but surely. It'll make an impact over the period of time. So we see something like 1 and 1 half million baros per day of decline in the US gasoline demand between now and 2020. This is a substantial change. So a lot of what the Chinese gained, that one in the treadmill, is losing. And in the middle is the European already skinny. There is nothing to lose. You have a European crisis, a Euro crisis, all kinds of crisis. Impact on oil demand is minor. Actually, gas demand impact is more important in Europe than oil demand because there's nothing to lose. All the fat is gone already in the system. So as you go forward, you look at the crude production in different countries. You look at demand. And we have something like anywhere between 200,000 to 400,000 baros per day, more supply than demand every year. And this is with all the sanctions against Iran maintained, assuming there are no change in sanctions. Then you change the balance by 2016-17. So this is our view of what happens in the oil market. And if you change the sanctions issue right away, then this can be speeded up. But this is assuming the sanctions continue, or half-hearted sanctions will continue. I mean, I don't see that full removal of sanctions can take place. And I'll make some comments in a moment on that one. But some change in sanctions can take place. But with that, I think the decline in the price would be a bit later on, 2016-17, rather than 2014-15. But it is coming. The direction we are convinced is set is just a timing. However, in the house of oil, there are boundaries. There are ceilings and floors. You can't do whatever you want, because the world cannot let you. Let's say some unnamed open country says, I don't want to produce oil. And the price becomes $200 a barrel. I think the US Army Corps of Engineers will have to go and produce it for you. You can't say, I don't want to produce the oil and create a global crisis. Nobody wants the price of oil to go down. The price of oil goes down. It's a disaster. Below $80, even at $80, is a disaster for many people. And I'll come to that in a moment. So house of oil has some order. And the order is not decided by economics. Order is decided what can be tolerable. And in a funny way, it also makes the consumer and producers both happy. Some of you remember, it wasn't that long ago, that lawsuits were being sought against OPEC for cartel. And, oh, you remember, the windfall profit tax? Oh, you're making so much money. No more, not anymore. Nobody worries about it anymore. You spend $20 on conventional oil, and you make $100, and everybody's happy. This is a fantastic environment for the conventional oil industry. But lots of other complications have come in. These complications means that conventional oil is pretty OK at $80. But everything else is not. All of the new LNG projects, which are under construction today, were priced internally between $95 to $100 a barrel of oil. And now, most of them have had about 30%, 40% cost explosion. So you get the prices less than $110. These companies would actually be out of pocket. But who would know? Well, the shareholders will know, because cash flow comes in. Cash flow comes in. Everybody is excited. A lot of money comes in. And their money is already gone, sunk. But you have very tremendous changes with the change in the oil price. People counted on oil price, always saving them, and then the cost explosion on top of that makes the requirement for oil price at somewhere between $110 to $150 a barrel for almost all of the new LNG projects. And if I want to talk about Alaska, I'll even up that. So you have that environment. Then what happens to all the alternative energy, renewable energy? Pretty much everybody had to be subsidized at $100, $110. You go to 80, you need more subsidy. And I find myself, people talk about the oil lobby and the oil company's lobbying. Actually, solar lobby is the greatest lobby now. They are the people who have the muscle to spend the money, and they are a really tough bunch. If you go against them, they come after you. So you have to then, you've created an institutionalization of subsidy system for the alternatives, which with the lower oil prices becomes much more critical and has to continue. And then, of course, the story of unconventional oils, from Bakken to Eagle Fort to Canadian oil sands. It's all over the place. The numbers are anywhere between 55 to 100 bucks. This is very bad news if the prices go below 80. Now, when you dig a conventional oil, you dig a big hole, you spend all your money, and then the price of oil goes down. You have to produce it because your money is gone already. But unconventional oil, whether it is CBM or it's a shale, you can change your mind. If the prices are low, you just stop, switch it off. So switch on and off means that if the prices go down after a short while, there'll be substantial change in the system. Now, I would say today, many big oil companies have gotten themselves into big financial trouble by spending so much money. And I think a lot of people in the industry haven't gotten wise to this. That huge amount of commitments have been made. And if the oil prices go down and continue at an $18, $90 range is very bad news for even some of the biggest players in the industry. So nobody wants low oil prices. But I think the direction is set is very hard to avoid it. It would probably, in our view, reach the $80 range, sometimes down the road. Now, what happens beyond that? We say, still, it can continue to go up to make some. We see it slowly going up because we don't see a continuous growth in the US production. Maybe with new technology, it will come. It will make a jump and a stop, also the same assumption for Canada, that he makes a jump by 2020 and then stops. The Iraqis make a jump and a stop by 2020 because they have a lot of oil, but they have no way to export it. Please remember, the Iraqis are not on the Persian Gulf. They are on the side street. And to bring it from the side street to main street, there are serious physical limitations. Very hard to get the production above six. One of the other areas that nobody talks about is what can happen in Kurdistan. Kurdistan today has 400,000 barers per day of capacity, producing only 60,000 barers per day. I expect this to go to 2 million barers per day within five to 10 years. And then it has to be exported. So how does it get exported? You either give it to the Iraqi government and never get any money for it, or you sell it to Turkey legally. At the moment, all the sales are this called invisible pipelines and invisible trucks taking huge amount there. But now we have ExxonMobil, we have Total, we have Chevron, we have Stat Oil. A lot of big boys there. You're not gonna produce and sit on it and watch what happens to your investment. I expect to see substantial change in exports. Why are Turkey and in Turkey? And then the Turkish don't need any oil from Iraq or from Iran anymore. So very substantial change. So what the Turks always wanted can be achieved this time indirectly. They don't own the resources, but the resources will be available. So all of this together, look at the supply side. You have to have a force downwards. What happens after that? It depends how much new production comes. At the moment, we don't know. This trend is not likely to continue. So that's why you see the prices still going up to about $100. But by 2030, the prices would be still lower than they are today, even in real terms. So these are some of the fundamentals I wanted to share with you and I wanted to say a few things about what are the forces that we see impacting the market. Now, one part of the market I haven't touched, which goes right to the end, is subjects which kind of lost this glory in that refining business. Last year, US became the number one exporter of refined products in the world. Many people were shocked. But why? Because last year you had the Bucking crew at the big discount to WTI and Eagle Ford condensates at a much bigger discount. So essentially you have $25 to $30 discounts. And then WTI this year, last year, last year this time was $20 less than Brent. So you had a $30, $40 advantage. This made the US industry invigorate. On the other hand, all our friends in Latin America are kind of late. Nobody is building on time, though a lot of construction is taking place. So 500,000 dollars plus of the US volumes going to Latin America and Europe. This is the products. This year things have changed. Bucking is now a flat WTI. There is no discount. And Eagle Ford discounts are much less. Anywhere between five to $15 where you are. And WTI has been this last week was $7, but on average $3, $4 below Brent. So the big advantage hasn't taken place and the Latin American refinery is slowly coming in. This is not going to stop, but the big move which we've seen in the United States on the product side, I think it was a 2012, 13 story. I see that fundamentally coming to an end. Now the US refineries are the best in the world. The highest quality, but I see substantial closures taking place in the East Coast and West Coast. Gulf Coast would do better because they have still access to exports. But generally we see 2 million miles per day of refining closures in the US by 2020. So what happens is that the Europeans shot down a lot. Now the Americans escaped it, but it is not a permanent escape. The fundamental, the demand is going down and your sources will dry. The source of demand will dry. So you have to shut down, there's no other way around it. So this is a view about what's happening in different parts of the world, but much more changes will come in the US. And the idea of the US being the global exporter of products is only a major flash in the pan last year and it would be much smaller post 2015 and 16, although the US will not suffer as bad as the Europeans did. The Europeans now, like your country's person stuck between four trucks, the Russians are now exporting 600,000 miles per diesel to Europe. US, several hundred thousand miles per diesel. India, Asia and now the new Middle East refineries are going to pour in there. So very tough environment for them. The US much better than that, but still you can't escape the situation that your demand is going down. You have too much capacity. This is the other part. Now what happens? Does it impact the price of oil? It has a very strange impact. In the old days when I was studying the oil market at Guy Caruso 100 years ago, we were told that whenever the price of oil goes up it's very bad for the refining business. Nowadays it's not true. High oil prices are good for the refining business. Why? Because the high price of oil expands the differential between black and white. So the difference between fuel oil and gasoline or fuel and diesel expands. The oil market thinks in percentages. Investments are always in absolute terms. So if there's only $8 at cost to convert one to the other if the price has jumped, the price of what is $150 this gaps expands so all the refineries which have sophisticated units met money. But they go to $80, that becomes never. If they go to $60, it's a disaster. So the absolute price of oil, absolute price of oil also has a big impact on the margins, refining margins. Finally I wanted to say that you know people in the oil industry look for opportunities. And whenever they see an opportunity and imbalance they go for it. And their mistake is that they don't know that other people see the same imbalance. So if you go for it, they go for it and I go for it. It's not a good business anymore. Build rail cars in the US is much better than pipelines. Everybody builds it. So when you build it, the market says, oh, I saw that, so I raised the price anyway. Since you can get it from here to there I raised the price at the source. So a lot of the people who have made investments are very unhappy because they didn't get the benefits. I mean, they see the imbalance but they are not the only ones who saw it. Everybody else saw it too. So if everybody thinks of the same idea at the same time it's a bad idea, by definition. And if your economics is good you cannot move forward alone on your own economy. You have to watch your neighbor's economics. If my economics is good and Dave's economics is good and guy's economics are good combined it allows economics. One by one it's good. So don't always look at what you can do yourself but look at what happens with other people do the same. And I think that we see a lot of this, we can see that discussed at this afternoon on the LNG story. Everybody said, it's for me it's good. But for everybody is good, so combined it's not good. And all of the margins have disappeared or will disappear in this rush because there is no way that you can make a lot of money and somebody will not come for you. And this assumption that I can continue to do this indefinitely is unfortunately not the right assumption. With this, Dave, I stop and if there's any hard question I shall refer to yourself. Do you want to just stay there? Yes. So you can see a little bit of work. Well, great, Faraday, terrific. And so we have a few rules that will continue over into our new building. Many of you I think know the rules that we try to follow which is please identify yourself and your affiliation as well as when you ask your question would be great. If you have a statement to make you can make that first but have it end in a question as well as you go through that so we can make this a true question and answer period. And then wait, do we have microphones? So speak loudly is the idea? And all criticism please be constructive criticism. Okay, that's great. So why don't we go ahead? Well, actually if I could just take prerogative. I think one of the things Faraday and that's always been really helpful for us are your perspectives on Iran and what is happening in Iran. So if you don't mind spending maybe just a couple of minutes on your perspectives on what is happening with the most recent developments in this debate with Iran and where you think it might go? Okay, well there are two stories here really. One is to be efficient and reasonable and be willing to make deals by the professionals. I mean you have the new oil minister in Iran is a good friend of mine. He's a very, very good. He is actually the best oil minister Iran has had before or after the revolution. Competent, capable guy. But he can only operate within the bounds of the general policy that the supreme leader provides. So you can do a lot. For example, you can go and say, well, I will go for the low hanging fruit. I mean lots of things. The disaster during Ahmadinejad period. It's just so bad it's not so hard to fix some of it. Just look great. But to make a big impact internationally is not easy. Now in terms of the sanctions against Iran if the Iranians are prepared to give in some. And in my view, even if the Iranians fully give up on the nuclear issue, it's highly unlikely the sanctions will be fully lifted. Because what the international community wants is a change in behavior. There's no point in saying I will not do the nuclear, but I keep my troops in Syria and in Lebanon and have armed forces around the world and I do everything else, but I don't do this one. No, it's a change in behavior which is needed, which is something I don't think will be coming. So like everything else, like the House and Senate discussion, it'd be a compromise. It'd be a compromise of some kind. I expect the Iranians to give up the enrichment for 20% and I expect they will get some goodies. But some things are easy, some things are hard to do. The easiest thing to do is for the European community to lift the restrictions on insurance of oil tankers. That would make a huge difference. We expect three to 400,000 miles per day of increase in the Iranian oil exports can be seen pretty much within a month. So the Iranians will make more money because that would be still within the sanction structure. Second, the US on the sections which don't require acts of Congress can just ease the payment terms, don't restrict them. If somebody wants to get paid in yen or in euros, let them get paid. Or a portion of it, or 50% of it, 30%, something like that can come. That would also be easily achieved. The waiver that the State Department gives to different countries, that waiver can be, instead of every six months, can be once a year. Many things can be done which can increase the Iranian oil exports by 300,000 to 500,000 miles per day. I can see that possible if some agreements in principle on enrichment are reached. But to have a substantial change in behavior in Iran, substantial change in policy in Iran, and substantial removal of sanctions by Congress against Iran, I just don't see that happening for many years to come. This is not the time for it. This is the time for a minor compromise. And maybe a major compromise will come in a few years from now. The establishment in Iran, as now the oil minister has invited all the companies, please come back to Iran. Come back and do what? As long as the sanctions are there, as long as they're no contractors working around, there's nobody working around except the Iranians, not even the Chinese and Indians. They're all gone. And the Japanese companies have been invited to come back again. So none of these, I don't see having a dramatic change. Change which can come in and makes a difference is from the European side, not from the American side. And the European side, presumably, would have to do it with the signals of 5 plus 1 and from the US. But they can take a few steps to show the good will. And the US can ease payment terms. And that would have to be it, unfortunately, for a foreseeable future until a more substantial change in the structure of policies reached. OK, a question here, and then we'll take a question there. Yeah, we are going to bring the mic up to you. Hi, my name is Donna Wells. I'm a graduate student at Georgia Tech Samnon School. Can you talk about why you expect Russian oil production to decline through 2017? I'm sorry. I just noticed on the chart you expected Russian oil production to decline through 2017. Could you talk about that for a little bit? Yes. This comes from our analysts who focus on Russia, that essentially what you see is two groups of operations. You have conventional oil production. Conventional production is seen to be declining. There's some unconventional oil production with the help of international companies. Now, the international companies are pretty much only involved on the unconventional side. So they would slow down the decline. But this is what our analysts see, that the production will go down. Why things decline? Because they have two reasons for it. Either the terms of investments are not right. Either the technology is not, or it's running out. I can ask you, why is Alaskan production going down? Because it's running out. And if they open up and provide incentive for foreign investment, they can avoid it. But at this point in time, they seem to be OK with it, that slowly you go down in production. Not substantial. And more unconventional, more shale production in Russia will come into the place. But the total numbers are analyzed at the climate. He's coming up on this. Behind you. Good morning, ladies and gentlemen. My name is Rosemary Seguero. I'm Seguero's international group. Thank you so much for your wonderful presentation. I come from Kenya. That is Africa. You can see Africa was on with the very small oil production. And now that we have many African countries now, like my country, producing oil, how would you look at their future? Or what would you advise the upcoming African countries with oil? And the other thing is the refineries. Why is it that the countries producing oil should have their own refineries instead of taking the oil to China to make for the refineries, and then they come and buy the same oil again? Thank you. Actually, the outlook for African production looks better than it has looked in decades. And a lot of prospects, both for oil and gas, are seen. It used to be heavily dominated by the Chinese investment. Now everybody is rushing to Africa. And our expectations for oil production growth is quite substantial. But the demand still is becoming. All of African growth in a year is less than 100,000 baros per day, which shows the state of economic development. As Africa will have more money, more development, and the demand starts growing. So far, people who have made investments in Africa have been very unhappy. You had an SR of India investing in Mombasa refinery and pulling out because the governments control the price. They lose money. So either the governments have to do it themselves, or they have to come from outside. So a lot of these comes for, I think, poor government policy, the government policies which can be changed. Incidentally, a lot of African growth goes to China, but the refined products don't come from China to Africa. They actually buy them in the market, mainly from the Saudis. And from Africa is not the area everybody wants to rush in. Latin America and Africa export to that market, if you have refined products. So I think that it is a matter of change in policy. And should they have refineries? Maybe not. There are lots of refined products in the market. The question is that most governments would feel insecure if they don't have their own refineries. Should they be insecure? I think no. I think actually there's plenty of oil in the market. But many governments insist on having a certain volume of oil refining in their own countries. And I expect to see that in Africa also. However, the incentives are not good. And so far, I don't see anybody rushing, except for the Chinese. Because the Chinese are not in it for the money. They're in it for keeping this closed linkage with the suppliers. And the need for dependence. The question in the back, and then followed by the one here. Ken, excuse me. Ken Meijer, Gordon Roldachs. Mr. Tillerson, the CEO of ExxonMobil, recently told the Council on Foreign Relations that Exxon is losing its shirt in the unconventional market. I think he was talking about shale gas. But he could have been talking about shale oil, which is obviously more expensive to produce by fracking than conventional oil. It's not unforeseeable that shale oil is, to the extent that the United States is dependent on tight oil, it's at a competitive disadvantage against the rest of the world that's getting cheaper, not the sense of market price, but in the sense of cost to produce of conventional oil. In that situation, would the United States have the power to force the international price of oil up through pressure on Saudi Arabia to reduce production, sanctions, and that sort of thing? Interesting question. Yeah, it's a big question. We all confuse liquids from shale, shale oil, tight oil. We all use it interchangeably, but actually at different things. When we talk about liquids from shale, we're talking about liquids which come from shale gas. Shale oil itself, as a rock, the volumes of production are very small. It's not really what he was talking about. He was talking about the liquids from shale. And then tight oil is a different story by itself, different qualities. If you are in the refining business, you distinguish between these things very big. One looks like WTI with some changes. The other ones look totally different. So what I was alluding earlier is that the same story that I didn't name companies, because some of them I'm closely familiar with, but they are losing the shirts on unconventional. They have invested a lot of money. And the only way it would work is if the price of oil stays high. And I think the direction is different. Can the United States increase the oil? I suppose it's possible, except that there may be a few people in the US becoming very unhappy if the price of oil is 150 bucks, given the fact that we can't agree on a budget. So this kind of government, you're literally creating this kind of environment. I just don't say it. These days, the good thing with the oil market is that there are no big secrets anymore. Everybody understands 90% of what's happening. In the gas market, there are big secrets. In the oil market, no big secrets. So it's not something that you can do and then hide it. I think the Indians and the Chinese and the Bangladeshis and all the other people who be subject to high oil prices, they have something to say. And they would be very unhappy. So I don't see that possibility that the US can get involved and force the price up by making a call to my brother in Saudi Arabia, please raise the price of oil. I don't think anybody minds the higher prices. But we also know that once the prices go above $120, $125, the demand destruction is huge. So you kill the golden goose yourself if you do that. So I see that the problem is that a lot of these oil company executives will retire and the impact on the shareholders will be seen in 2025. So I'm not sure who will be there to answer, but they have made some huge bets, huge bets, on the assumption that prices will remain high. And not only the prices, I'd like to go down, but the costs have escalated out of control. So you have anywhere between 20% to 40% cost increase based on a high crude price. And so a lot of solid investments are not so solid. All the conventional investments are still pretty good. The big hole is on the unconventional side. And everybody assumes it must be great, so I must get in it. But everybody gets in it, and then it's not so fun anymore. Just to follow up, and I'll get to the question is going to be here, but just follow up. I don't know what this is on. OK, fair to. You're talking about the cost going up, but certainly in the hydraulic fracturing and horizontal drilling part of that cost structure, we keep hearing about innovation having driven the overall cost down. Are you beginning to see a change in that trend? Do you think that the demand for the equipment that's necessary for that drilling will be driving up the cost of that production as well? Well, we have two things. One is that most of these companies bought it when the prices were much higher. They bought this when Henry Hub price was $6 to $8. And now it's $3.50. So you have lost a lot of money before you start. And you have an unusual situation. The cost of production is still very high. Cost of production is 50% to 100% higher than the price. And though you need to have something to support it, and the liquids have supported it. The increase in costs are not so much in rigs and in fracking, because that is a cost which is controllable. And the environmental issues, I think, are all solvable. You just put some extra money in it, and you do it. But the issue would be on transformation. If you want to make it into LNG, if you want to transport it from one area to another area, if you want to make it into petrochemicals. Petrochemicals have become a very favorite area. Everybody wants to move to the US. But if everybody wants to, at the same time, then the costs escalate. I am sure that we will see a substantial escalation on many of the costs of the LNG projects in the US and on petrochemical projects, as we have seen other places, because there is a gold rush. Everybody says, oh, my economics are good. I get this. I'm making to that. But the issue is that there is only one true free market lab in the world, and that's the US. And everybody knows about everything. You can't hide it. And if something doesn't happen to you in the US, it shouldn't be happening. People say, what about gas to liquids? If it doesn't happen to the US, then it shouldn't be happening. If CNG is not happening to the US, then it shouldn't be happening, because nobody is stopping you. But everybody is rushing to the same area with increased costs. But the big question I was saying is that many of the initial investments that people have made, whether in CBM, whether in major areas to prepare the ground for exploration, unconventional is not only shale, but the other areas. These costs and then transformation costs between anything else have taken off in a big way. And so it becomes a bigger and bigger challenge. And I think that people will not know. They'll only know after all of the executives are retired. There's a question here, and then we'll follow with one. It's not a question. OK, we're good. So you forecast a fairly dramatic increase in Kurdish-Iraqi exports by around 2018, principally through Turkey, around 2 million barrels per day. So a three-part question about the implications. What does this mean for Iraq's oil production as a whole? If the investment climate is much more favorable in Kurdistan, will Iraq find people to do its investments aside from China? Secondly, what does this mean for the relationship between Kurdistan and Iraq as a whole? What does it mean for the country's stability? And on the third part, what does this mean for the increasingly problematic relationship between Iraq in general? What does this mean for the Kurdistan-specific and Saudi Arabia as part of OPEC? Well, you have three hours. I'm afraid. Well, the summary of the story is this, is that the Iraq proper production. In the southern ports, there are very strict infrastructure limits. You have to have single-point mooring, SPMs. Each SPM can carry 900,000 barrels per day. They have first SPM commissioned. Four SPMs are supposed to be built, and the fifth SPM may fit, may not fit. So you get four times 900,000 barrels per day, 3.6. The existing volume 2.2 is 5.8, which can go from the south, and it can only operate at 90% utilization factor. So you have a number in this. Then you have the exports going to the north. That exports to the north, who does it belong to? Is it the Kurdish area or is it the Iraqi oil? Iraq is still controlling the Iraqi government, but it's really still the area is the Kurdish area. That is not settled, and the volumes are much smaller. Several hundred thousand barrels per day, 300,000, 400,000 barrels per day. Capacity is well over a million barrels per day. So this you leave on one side. Then you have what's happening in Kurdistan. The investments are huge, and prospectivity in Iraq is better, but the terms are worse. So everybody wants to go to Iraq. You don't have to get your head blown off in Kurdistan, and you can actually go in an al-Spiti sort of reasonable civilized environment. So people much prefer to operate in that area, although the prospectivity is not as good. And the fact that the Iraqis have put sanctions, if you touch there, you can't do this. This was tested by ExxonMobil, who says, well, I'm going there. And the Iraqis realized that if you fire ExxonMobil, you make yourself look worse. So okay, but don't do it again. So just do it once. So they are going there and they're selling the assets to the Russian companies in Iraq. So this environment of how much they're going to export and what's gonna impact them. I think first lesson is that they must be and we are moving to a fundamental long-term accommodation between the Kurds and the Turks. And at the end, it is going to be treated as a separate country. They're going to export separately. And whatever the Iraqis say, it doesn't matter really. I think it's past the stage of no return. Next year, this time, there'll be elections in Iraq and we expect to see all the current leadership to be out of office. Even if the same party wins, maybe then they will come to some accommodation with the Kurds. But the Kurdish plan is moving ahead on its own accord. It is not waiting for what happens in Iraq. So I see these things as separate and independent activities unrelated. And it doesn't matter who thinks how much. You spend $20 billion in the country. You have to export and it will happen. Question here and then I know there's a hand way in the back, which I can't see very well. Followed up by the one in the back. I'm sorry, folks, in the back that I can't see you too well. Hi, Bill Murray with... He used to be able to see. That's right, yeah, I can't see anymore. Bill Murray with Energy Intelligence Group. What are the three secrets in the oil markets that have come out in the open that you were alluding to just a little earlier? You said there are no secrets in the oil markets anymore. What are the top three that have come out in the last 10 years in your mind? Top three. If they are... There's five. No, secrets. I think that you can take oil from an unnatural market, from a natural market to a natural market and move it in a big way and not tell people for a long time, when Mr. Chavez signed all the agreements in India, nobody knew. And then when I found out about it, I thought it can be done. But it was true and it can be done. And one of the reasons it can be done had to do with the timing of the contracts and the Brent to the WTI differentials. When it's $20 difference between them, actually Chavez deals simply the same. You sell it to a market which is Brent-based, you bring it to the U.S. and WTI-based, but when the gaps are becoming $4, $5, it doesn't look very good. So you can take the crudes in unnatural markets and nobody would expect you and nobody would know that you made these political deals and the political deals are not reversible because you have made such huge commitments. I don't think any government in Venezuela is gonna come and reverse it. They have to continue these investments. Another secret, of course, the secret of the frenzy of unconventional, buy it because it's good, buy it before it runs out. And especially because if the major oil companies honestly were involved in the shale gas develop in the U.S., I don't think it would be where we are. The independents did it and then the majors bought it and they brought additional technology and much better, stronger management. But many bought it at high prices. And at the time, it seemed to be like great investments, but now it's clear that these investments were too early and that so many of them, I mean, you look and look at the balance sheets, it looks very bad. A lot of people have spent money and some of these projects, I mean, I would say, I don't know whether I may be killed, anybody from Canada here? I can't even go. Canadian LAG projects are in logistical nightmare, logistical nightmare, almost as bad as Alaska, almost. But these things are against maybe God's will to go so dramatic, huge costs. So if you accept all these costs and you say, I'm gonna do it, I'm gonna do it because it's right. And then hope the market will rescue you. I think it is these investments, we thought that they had some fundamental basis of economics, but no, they didn't. They actually had wishes. I know I have faith and my faith will do it. So that may be another secret. We found out there is no fundamental basis to it, but it's fate. And again, never say never in this business, things change right after you convince something cannot happen. Things have happened by technology or by international politics. But this was sort of a very dramatic movement where people have done things or moved towards things because they have faith and they wanna do it. And they never really had the numbers in there. So one of the great things in the gas business is that you always sell it. You always do the project after you have a customer. If you're not a major, if you're a shinear, you have to find your customers first before you go to the bank and borrow money for the decrypt-action plan. You have to do it. But if you're a strong mobile share, kind of go Phillips, you don't have to do it. You have your money yourself. You're actually liable to be much braver. And if the management has a vision, you operate on that vision. And you don't need to have the customer at hand. You say, I will find the market later on. So I think you're pretty bold. And again, I have thought that everybody had deep basis for these things, but it's a lot of faith. So question in the back there, and then we'll take two more right in the center. Thank you very much. My name is Jeanine Nguyen with Voice of Vietnamese Americans. Would you please discuss the cost in the future for the trend that you were presenting? Did you take into account the situation of water and transportation regarding the connectivity and the infrastructure of all the market, the potential growth that you have listed? And in that context, would you put into account the changing situation in Indo-Pacific ocean, especially in the South China Sea? Thank you. I'm not sure what your question means. You talk about water, you mean waterways? Is that what it means? Yes, scarcity of water. Scarcity of water. Scarcity of water, I'm not an expert on it. Dave, let's talk about that. Scarcity of water. In the transformation of the oil. The issue of water in terms of transformation of oil is only serious in China. All of the shale formations are all dry and you have to bring it in. It's only a cost. The end of the day is cost. If it makes no sense, then you won't do it. If it's too difficult to do it, you won't do it. So I don't see somehow that this is a limiting factor as one of the components which come up with the calculation of the costs. If you talk about South China Sea story, that's a different story. So people argue about area. Whenever people argue about some strategic area, everybody says there is lots of oil there and gas there. So how do you know? Have you drilled there? No, but it looks good. Around it, it looks good. Historically, when people have argued about something, there is nothing there. So I don't know whether there is something there or not, but today, we have no clear evidence where the Spratly Islands, that Saudi Arabia is hiding under the Spratly Islands. All of South China Sea, you've drilled. You haven't found anything big, but all hidden in one spot area with the Chinese and other people are disputed. My question has to do with transportation. It has to do with freedom of navigation. Connectivity on land and on the sea. Well, we talk about Malacca Straits. On the Chuk Point. Chuk Point is Malacca Straits, but you know how the only country which seriously worries about this is China. 400,000 dollars per day pipeline is being built from Burma to China. Does Burma produce oil? No. It is the Saudi oil is going to go to Burma and from Burma, be transported to China so that at least to some extent, it protects against the Malacca strait. But I think this worries about called slugs. Yeah, slugs. Sort of sea lanes of communication. I think many of our friends in the strategic and military area have exaggerated these issues as being serious. I don't think they are. Nobody interferes with any movement. Strait of Hormones will never be closed because these straits go two ways. If the strait of Hormones is closed, everybody in the runway will starve because no food gets imported. It isn't that only goes out, it's also coming in. So I am generally not so interested in these arguments of the communication and freedom of navigation. There is only one superpower and as long as the US wants it to happen, it will happen. Such confidence. Take a question here and then one behind. Thank you. Salam al-Israeli, I'm independent. For Europe, of course, the oily demand is either flat or declining. How about gas? Do you think politics or economics will drive the demand of gas from Azerbaijan to go to Europe with pipelines and a step further from Turkmenistan so the project can be committed to and developed? The answer is no. In Europe, actually, demand for gas is also falling but not as radically as the oil demand. And one of the most important things we need to know, when the Russian pipeline was built years ago, I remember again, some of the old times, remember that it was a Reagan administration wanted to stop it because it did not create dependence on Europe and everybody thought it. The Russians now say, I wish I never built it. It's a liability. I've built it, I spent all the money and now I have to argue with the Europeans. They are, in Europe, every other contract, LNG or pipeline is in arbitration or some sort of lawsuits. The Europeans are kind of litigous people, even more than the Americans sort of. But the pipeline is built, the money is gone. Okay, so the only way that you put it, you put the gas from that side and it comes there and you argue with Ukraine or here or there but the investments are already made. And until about a year ago, the Russians exposed for about 30% below capacity and the additional volume was supplied by the other Europeans. So think of Russia as opaque and the rest of supplies as non-opaque. Opaque keeps the price up and non-opaque maximizes the production and enjoys it. So Norwegians, stat oil, the BP, Shale, ExxonMobil, they all maximize pipeline flows while the Russians suffered. This year, the Russians have come up with a novel system. The novel system is that my own indexation stays but I give you a discount on my gas, oil, and fuel oil price formula so that the price ends up to be exactly the same as what the national balancing point price in Europe is. So now I sell you, but year to year, I'm not giving up the formula, oil-based formula, but I'm adjusting it so that I'm not equal footing. So immediately the demand for exports from Norway and other countries declines because the Russians now increase the production. Meanwhile, a second pipeline is being built and it's coming. So I think that if you look at in Europe what the casualty is, is that all the LNG which is looking to go to Europe would have to be diverted outside because there's no need for it. With the new pipelines and with declining demand that essentially, and of course the domestic, the production in the North Sea is also falling at the same time. So the need for outside the Russian volume becomes more and Russians believe that if they wait, they will pick the price and I think that would be right, they would. Both of the pipelines would be operational. Now the other pipeline still has importance, but Turkmanistan to Europe, it makes no sense. Turkmanistan goes to China, gets much better price then you bring it all the way, all the money that you want to invest bringing it to Europe in a declining market, no bank would lend you a penny, it makes no sense. The Russians, they did it because they paid for it themselves. People will say, well, give me 25 billion dollars to build the pipeline to Europe to supply European gas demand. The banks will laugh you out of the room. So by itself it won't happen. It is going to be the Russians and domestic pipelines and the demand goes down, the supply goes down, the Russian gas is there. LNG comes in to balance things and more and more LNG gets diverted out to the Asian market where there's 40% higher prices. That's the way it will work. One thing that's been a point of some discussion for years in the US that it would be really nice to see that Turkmanistan gas get to India. So any perspectives on that? Well, you know that we have pipelines and pipe reams. This is a serious pipeline. I'll give you two or three reasons why it makes no sense. It makes no sense because look at the Iranian pipeline gas to Pakistan. The gas at the border is $12 a million BTU at $100 oil. This is now a domestic Iranian pipeline. And Mr. Shirazi was building this pipeline. I don't know, I got seven or I got nine. One of those things was planned during the time that he was running the gas industry. So this is a domestic pipeline which finally materialized and all they did is that they made the size of the pipeline to 54 inch wider. Just to the Pakistani border, $12 a million BTU and oil indexed, JCC Japan crude cocktail indexed. Amazing. So then, now suppose you want to take it inside of Pakistan to the Indian border. At least $2 a million BTU cost there. That's 14. Now the Pakistanis would like an arm and a leg because I'm getting the gas through. So they're already asking about what transit fees or one or two dollars. So 14, 15, 16. Then you get to the HPJ pipeline in India and the throughput fees for that would be about a dollar, dollar 50 to get at the centers of consumption in the West. So it's about $17, $18 by the time it gets there. Makes no sense. Now take this problem and then bring Turkmanistan gas. Not only it has the same problems, it has to go through Pakistan anyway, but it's gonna go through Afghanistan and shareholding by Taliban. And additional transit fee, transit surcharge. And whenever I don't like it, I just switch it off. So the governments can have as many MOUs with each other as they want. But if something makes no sense, it makes no sense. You said, but the committee, I was told in India, the committee of empowered ministers has gone and signed it. I don't care. They can have 10 prime ministers, 10 groups of cabinets come and sign. It makes no sense and it cannot happen because look at the Iran-Pakistan all the problems that it has, which is a simple, all of it becomes magnified. It comes from Turkmanistan. When it gets there, Turkmanistan has an interesting policy. They try to charge the same price at the border, which is about $8, $9 a million between you. You take that by the time it lands in India, between $8 a million between you. So the Indians, they don't wanna pay $8 or $6 at the moment. They're arguing with the government about the increase in domestic gas to $8.40 next April. So no, these are all pipe dreams. It cannot happen because it's against nature. It's against logic. Tom, I'm sorry. My name's Tom Cutler. I just retired from the Department of Energy. I'm now an independent consultant. And I was curious about your views of Southeast Asia. ASEAN didn't even come up in your top five. They have a growing demand. They're struggling with their production levels in part because of investment climates. Their net import dependence as a region is expected to grow rapidly in the foreseeable future. So I'd be interested in your views on Southeast Asia as a market driver. Well, in Southeast Asia, the biggest driver is Indonesia, of course. Indonesians do a few very interesting things, despite you go there, you see a chaos, but there is some order to the chaos. GDP growth rates are high, foreign investment is very high. The kind of the demand growth is very substantial and they don't build any refineries. So they have become now the largest import of refined products in the whole of the Eastern markets. Substantial player. The growth rate of demand, we'd be talking about orders. Probably 50, 60,000 bios per day growth a year. I mean, this is substantial, but by 2020, their imports still be no more than refined products, less than 800,000 bios per day. So it is important, Thailand also growing very well, but not as fast as Indonesia. Malaysia, it's all internalized inside the system. You don't see them too much in the market. Some changes in Vietnam. Vietnam is growing demand very, very fast, about 40, 50,000 bios per day a year. So these are in terms of the 500,000, 400,000, much smaller players. Combined, they are 100, the same size of India, such as Asia. So they are not insubstantial by any means, but many of them produce oil. Many of them have essentially the mentality of securing it in the free market. There is no feeling or fear that somehow I'm not gonna get it in China. There is a fear in India. There is a fear that I need to have. Even in Vietnam, there is a fear. But in this country, it's a two market oriented. They don't come up on the list because they don't seem to be worried themselves. And if they are not worried, I'm not worried. Okay, so I think you got time for maybe two more questions. There are still some questions. Okay, one. Brian Beery, Washington correspondent, EuroPolitics. You didn't mention anything about the Arctic region. What's your view about hydrocarbon potential in the Arctic? It's great. It's great, but you can't produce it. So it's okay. Our grandchildren will produce it. This is the interesting story. You have global warming, so you melt the ice so you can produce more oil to have more global warming. But practically, what are we gonna do? We have the estimated resources, 25 to 30% of oil and gas resources conventional are there. And pretty much is a Russian play. Everybody else plays a little bit here or there, but it's a Russian play. And everybody in Asia wants to get in. All the Europeans want to get in. And I think the Russians would ask for an arm and a leg to get in there. But practically, how much you can produce and make a difference in the world pre-2030s and 40s minor. So resources are there, but I can take it to the Manganese nodules story. I mean, they look at the hydrate methane. It's huge. Resources are in there. What affects Arctic as much as everything else? The price of oil. $80 oil, very bad for Arctic. 150, very good. So this is the, if in the world that I am showing the pathway, it's gonna be very slow. Expensive and slow, but as the British say in fullness of time, we'll get there. Great. Well, okay, one last question. Uh-oh. There are new things very much. She's been waiting. It won't be hard, I promise. So you said no more secrets, but definitely more surprises are likely. So just, you know, you do this for a living. Do you have a hunch about where surprises may be coming from? What do you check when you, you know, look at your blackberry two o'clock in the morning? What are you thinking about in terms of what could change that outlook fairly significantly? Well, I've learned whenever everybody thinks something is a good idea, I look at all the problems, you can go wrong with it. And no place again like the U.S., but we've learned now some of the changes in Australia, you know, incredible story. Everybody wanted to do CPM project in Australia. Everybody was so convinced it's a good idea. And at the time, the price of gas was $3 a million with the U. Now it's eight next year, we're forecasting 10 to 11. So all the fun is gone. Triple the price in there. So some of the players, the conical Philips has extra CPM gas, you know, it may be much more profitable just to sell it to the other people and let other people do it. But once you sunk the money, you can't get out of it, your money is gone. So all of these things, when I see the mad rush into one area, I worry what's gonna happen next. When I see an imbalance in the market that everybody is sure they're gonna fix it, I know something bad is gonna happen. And when people tell me how come my forecasts are not always right, I have an answer, is that, I point out the imbalance, you fixed the imbalance so my forecast by definition has to be wrong. Thank you very much, everybody. Okay, again, thank you everybody who turned out today, this is a great presentation, as usual, and we'll keep you on notice for our next events. Thank you very much.