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The Energy Charter – Can It Make a Contribution in …The Energy Charter – Can It Make a...
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The Energy Charter –Can It Make a Contribution in East Asia and Eurasia?
Eurasian Pipelines – Road to Peace, Development and Interdependencies
Harriman Institute, Columbia University 30 November – 1 December 2006
Tim GouldTim GouldSenior AdvisorSenior AdvisorEnergy Charter SecretariatEnergy Charter Secretariat
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The Energy Charter Treaty
■ Signatories (51 Signatory Countries + EU: 47 ratifications), Pakistan invited to accede (November 2006)
■ Observers (19 Countries, 10 International Organisations)
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Primary Energy Demand by Region
Source: IEA WEO 2006
Developing countries become the biggest energy consumers within
a decade
0
2 000
4 000
6 000
8 000
10 000
1980 1990 2000 2010 2020 2030
Mtoe
OECD Developing countries Transition economies
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CO2 Emissions, 1971-2030
Source: adapted from IEA WEO 2006
0
4 000
8 000
12 000
16 000
20 000
1970 1980 1990 2000 2010 2020 2030
Mt o
f CO
2
OECD Transition economies Developing countries
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World Fossil Fuel Supply
Source: IEA WEO 2006
Oil
Coal
Gas
11%
15%
48%
54%
11%
20%
trade as % of world demand
0 1 000 2 000 3 000 4 000 5 000 6 000
20302004
20302004
20302004
MtoeProduction consumed within each region Traded between regions
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Why is Energy Different?Availability of hydrocarbons is determined by geology and by the sovereign decisions of resource-owning countries interdependence of states and other actors along the entire energy chainEnergy projects tend to be highly strategic and capital-intensive, where risks need to be assessed and mitigated across a long time horizon particular risks linked to energy investmentFor natural gas and electricity – and partly also for oil –international trade is mainly linked to dedicated and fixed infrastructure need for disciplines regarding access, tariffs, non-interruptible supplyEnvironmental impact of energy use global challenges require global responses
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Contribution of the Energy Charter?Mechanism to mitigate non-commercial risks:
Affecting investment in the energy sector; the only multilateral investment protection TreatyAffecting cross-border energy flows through pipelines and networks, especially energy resources in transit
Accessible Forum for:Cooperation and knowledge-sharing on policies to improve investment climate and energy efficiencyDevelopment of (binding and non-binding) instruments to meet new energy challenges
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Europe and the ECTSecuring External Supply for the Internal Market
LocalProd.
LNG Imports
PipelineImports
Demand
in Bcm515
570- 610
2004 2010 20202004 2010 2020
40
100
~700
140
207185 307
325 295 230
Source: Total,EON - Ruhrgas
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The Energy Charter in Asia
■ Signatories: Russia, Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan, Tajikistan, Mongolia, Japan; Pakistan invited to accede (November 2006)
■ Observers: Afghanistan, Bahrain, China, Iran, Korea, Kuwait, Oman, Pakistan, Qatar, Saudi Arabia, United Arab Emirates, ASEAN
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Kazakhstan-China Oil PipelineOmsk
PS Atasu
Pavlodar
Atyrau
Samara
Aktau
Karachaganak
Tengiz
Caspian
Sea
Kashagan
ShymkentAlmaty
RUSSIA
CHINA
UZBEKISTAN
TURKMENISTAN KYRGYZSTAN
IRANChardzhou
Alashankou
Urumqi
Orsk 2. Kenkiyak-Kumkol (-Atasu)L = 752 kmFeasibility Study planned
Kenkiyak-AtyrauCommissioned in 2004L = 449 km, d = 610 mmCapacity up to 12 mtyReverse Pumping envisioned
1. Atasu-AlashankouL = 962 km, d = 813 mmInitial capacity 10 mty.To be raised to 20 mty
Oil Pipelines
Kazakhstan-China Pipeline Stages
Possible Oil Supplies from West Siberia
Resources for Atasu-Alashankou
Kumkol
Kenkiyak
1st stage:Construction of the Atasu-Alashankou Pipeline with 10 mtycapacity
2nd stage:- construction of the Kenkiyak-Kumkol section- modernization of the existing Kumkol-Karakoin-Atasu section- reverse of the Kenkiyak-Atyrau Pipeline- capacity expansion to 20 mty for Atasu-Alashankou section
PS 384 km
Atasu-Alashankou Pipeline:Addressing the Energy Charter Principles
Non-discrimination as to the origin, destination, and ownership of energy resourcesGuarantee of free access to the pipeline, acceptance and transportation of oil to China including transitIntentions to attract any resources, particularly, Russian oil supplies from West Siberia
Rules for pipeline accessAll potential shippers are guaranteed equal access to the pipeline when capacity is availableCNPC and KMG have priority rights of accessing the pipeline capacityPipeline capacity, first of all, will be used to fulfill the obligations under long-term oil transportation agreementsIf one of the parties does not use its pipeline capacity in full, the other party has the right to use such unused capacityIn case transportation volumes under contracts exceed the pipeline capacity, the rights for transportation will be executed according to the shares of KMG and CNPC in the Project Company
Tariffs for transit/transportationThe tariff should be competitive and non-discriminatory compared to other options for exporting oil from KazakhstanThe following principles are observed when calculating the tariff:
Compensation of economically sound costs (including cost of financing);Payment of taxes and other duties imposed in accordance with the Kazakhstan laws;Profit made should ensure effective operation of the company (being a natural monopoly);The transportation option should be competitive compared to other options;The existing pipeline capacity should be utilized to full extent
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Russia and the Energy CharterOne of the original signatories of the Treaty (1994) Applies the Treaty on a provisional basisEngaged in the Energy Charter’s workPosition has been that conclusion of the Energy Charter Protocol on Transit would open door to ratification… but other issues also on the tableGenuine interest in the substance of the Transit ProtocolEnergy Charter principles and related issues formpart of the EU-Russia negotiations on a new bilateral legal arrangement
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Recognising the Asian dimensionof the Charter
“Leaders thoroughly discussed questions related to energy security, reiterating their earlier calls for multilateral measures to promote stable, effective, and transparent global energy markets, and agreed to cooperate in relevant international fora with a view to meeting these challenges. In this context, they noted the importance of the Energy Charter Treaty.”
From the Chairman’s Statement on the meeting of Heads of State of the Europe-Asia Meeting (ASEM), which brings together the ten members of ASEAN, China, Japan, Korea, the Member States of the European Union and the European Commission, Helsinki, 10-11 September 2006