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Transition through gas caspian

Transition through gas caspian






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    Transition through gas caspian Transition through gas caspian Presentation Transcript

    • Caspian Energy 3.0 - Transition through GasCaspian Oil & Gas 2013Chris Cook5th June 2013
    • 21stCentury problems cannot be solved with 20thcentury solutions.........
    • Introduction - ResilienceResilience - the enduring power of a body or bodies fortransformation, renewal and recovery through the flux ofinteractions and flow of eventsResource Resilience – Natural GridFinancial Resilience – Open Capital
    • Resource Resilience – Natural GridSince 1980 Denmarks GDP rose 78%Energy use has been stableCarbon fuel use has declinedHow did Denmark achieve this?
    • Resource Resilience - Natural GridLeast Energy Cost principle- not least Danish Krone cost (or least $, € or £ cost)- minimum carbon fuel input for a given output ofelectricity, heat or power- investment in renewables, heat, transport, energyefficiency
    • Emerging Outcomes of Natural Grid policy- decentralisation- skills base of knowledge and knowhow: eg Vestas isthe biggest global wind turbine manufacturer......in acountry of 6m people- trend to energy security and energy independence- not forgetting........reduction in carbon use
    • Funding the Natural Grid$ trillions required to fund transition to a Natural Grid$ trillions in carbon fuel use is wastedNeed to drill for oil and gas savings.......
    • Financial Resilience – Open CapitalMarket 2.0 – centralised, intermediated market paradigm- proprietary finance capital and for profit transactions- Debt (Banks) and Equity (Joint Stock Company)- October 2008 – the Market 2.0 paradigm brokeWhat Market 3.0 will replace it?
    • Financial Resilience – Open CapitalMarket 3.0- networked, decentralised and dis-intermediated marketparadigm- transition from intermediation to service provision- Reason? Market risk is distributed to end users & sofinance capital is limited to operating costs
    • Financial Resilience – Open CapitalTwo elements: market architecture & market instrumentCapital Partnership - neutral, collaborative frameworkPrepay - prepayment for production or use over time
    • Application to Caspian EnergyCaspian Capital Partnership (Nondominium)- neutral framework for Caspian energy co-operation- Energy Pool of future production, Gas & Power Grids,Gas Hub /Balancing Point benchmarkCaspian Prepay energy financial instrument- energy clearing union - (mutual guarantee of issue)- direct energy loan investment by energy investors,especially gas/power consumers
    • Caspian Capital Partnership (Nondominium)Stakeholders- Custodian – Clearing Union of Littoral Nations- Producers and Consumers – Littoral Nations- Manager – private sector service providers- Investor – energy funds & energy users
    • Custodian(Clearing Union)%InvestorEnergy Funds/UsersManagerService Providers%Littoral NationsPrepay
    • Nondominium – What it is and is notNondominium is neither an Organisation (eg EnergyCharter) nor a Trust (eg UK North Sea Master Deed)It is simply two parallel collaborative agreementsClearing Union - agreement between stakeholders jointly- governs & guarantees prepay unit issuance, exchange& returnCapital Partnership – project agreements betweenstakeholders individually- governs allocation of flows of production
    • Nondominium – How it WorksExisting rights held by Clearing Union as joint CustodianProduction shared by nations and service providers inaccordance with project-specific enterpriseagreements within Capital Partnership frameworkBalance of production available to create and issueprepay units to InvestorsNo nation or stakeholder has dominant rightsStakeholders have agreed rights of veto
    • Nondominium – OutcomesNeutrality– no sharing of sovereignty as in Condominium– takes politics out of energyEquity – ethical sharing of risk and rewardStability – no stakeholder has an interest in volatilityResilience – risk is distributedComplementary – not alternative but addition to existingagreements eg Law of the Sea, Energy Charter
    • Prepay InstrumentsTaxation
    • Energy Prepay – What it is and is notUndated credit returnable in payment for energysuppliedPrepay credit is issued & sold by energy producers atdiscountNot a futures contract: no right to demand delivery
    • Energy Prepay – How it Works$1.00s worth of energy sold for 80c gives absolutereturn of 25%Rate of Return - rate over time at which prepay unitreturnable to issuer in payment for energy supplyRate not fixed - depends on existence & amount of flowNo right to supply – accepted in payment for supply
    • Energy LoansPrepay - direct investment in future energy productionor energy savings- the earlier the investment, the greater the risk, and thegreater the discount- return in energy: no $ paid for the use of $
    • Energy Loans – the Value PropositionProducer- sells energy forward and locks in price- interest-free energy loan until credit returned vs supplyConsumer- prepays for energy and locks in priceInvestor- direct inflation hedge investment in energy- Consumers buy credits from Investors at best pricebelow physical energy price & return against supply
    • Generator(Iran)GasInvestorEnergy Funds/UsersManagerService Providers%TurkmenistanPowerPower PartnershipPowerPrepay
    • Refinery(Turkey)CrudeOilInvestorEnergy Funds/UsersManagerService Providers%AzerbaijanFuelPrepayFuel PartnershipFuel
    • Outcome – Caspian BenchmarkBalancing point pricing hub for gas and power providesspot benchmark priceEnergy standard unit for Caspian energy investment- 1 Mmbtu energy equivalent?- 10 KwH energy equivalent?
    • Outcome – energy denominated Carboncurrency
    • Outcome – new energy subsidy PolicyEnergy dividend made in energy prepay units- incentive to save energy- energy loan investment use- exchange units for other value
    • Outcome – Caspian Green DealEnergy loans- new renewable infrastructure: Caspian Supergrid;wind, solar, hydro- energy efficiency: least energy cost heating, cooling,transport, spatial infrastructure
    • Outcome – the Transition TradeA Big Trade of the 21stCenturyExchanging- value of carbon fuel saved (NegaBarrels andNegaTherms)- value of IP (knowledge) and Know How
    • 21stCentury problems cannot be solved with 20thcentury solutions.........
    • …....21stcentury solutions pre-date modern finance