Transition through gas em

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Transition through gas em

  1. 1. A Natural Grid for the EasternMediterraneanTransition through GasChris Cook23 April 2013
  2. 2. 21stCentury problems cannot be solved with 20thcentury solutions.........
  3. 3. 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
  4. 4. Natural Grid – Resource ResilienceSince 1980 Denmarks GDP rose 78%, while energyuse has been stable and carbon fuel use declinedHow?Mandate - minimum carbon fuel input for a givenoutput of electricity, heat or powerLeast energy cost policy; not Least DK (or €, $, £) CostMassive investment in renewables, heat, energyefficiency, transportOutcome – decentralisation – trend to a Natural Grid
  5. 5. Open Capital – Financial Resilience300 year Market 2.0 paradigm of closed proprietaryfinance capital and for profit intermediation- Debt (Banks) and Equity (Joint Stock Company)- October 2008 the Market 2.0 paradigm brokeMarket 3.0 - emerging networked market paradigmOpen Capital- neutral, collaborative framework - Capital Partnership- prepayment for production or use over time - Prepay
  6. 6. Application - Eastern MediterraneanEastern Mediterranean Nondominium- neutral framework for East Med energy co-operation- Gas Pool of future production, Gas Grid, Gas Hub/Balancing Point benchmarkEast Med gas Prepay instrument- gas clearing union (mutual guarantee)- direct gas loan investment by energy investors,especially gas consumers
  7. 7. Eastern Mediterranean NondominiumStakeholders- Custodian – Clearing Union of Littoral Nations- Producers and Consumers – Littoral Nations- Manager – private sector service providers- Investor – energy funds & energy users
  8. 8. Joint Custodian%InvestorEnergy Funds/UsersManagerService Providers%Littoral NationsPrepay
  9. 9. Nondominium – What it is and is notNondominium is neither an Organisation (eg EnergyCharter) nor a Trust (eg UK North Sea Master Deed)- consists of 2 parallel collaborative agreementsClearing Union - agreement between stakeholders jointly- governs & guarantees prepay unit issuance, exchange& returnCapital Partnership - agreement between stakeholdersindividually- governs allocation of flows of production
  10. 10. Nondominium – How it WorksAll existing legal rights transferred to Clearing Union asjoint 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
  11. 11. 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
  12. 12. Prepay InstrumentsTaxation
  13. 13. Gas Prepay – What it is & How it WorksUndated credit returnable in payment for gas suppliedPrepay unit issued & sold by gas producers at discount$1.00s worth of gas sold for 80c gives absolute returnof 25%Rate of Return - rate over time at which prepay unitreturnable to issuer in payment for gas suppliedRate not fixed - depends on existence & amount of flowNo right to supply – accepted in payment for supply
  14. 14. Gas LoansPrepay - direct investment in future gas production orgas savings- the earlier the investment, the greater the risk, and thegreater the discount- return in energy: no $ paid for the use of $
  15. 15. Gas Loans – Value propositionProducer- sells gas forward and locks in price- interest-free gas loan until unit returned against supplyConsumer- prepays for gas and locks in priceInvestor- direct inflation hedge investment in energy- Consumers buy units from Investors at best pricebelow physical gas price & return them against supply
  16. 16. OutcomesEast Med Benchmark – gas unit could become energystandard unit for East Med energy investmentCarbon Currency – denominated in energy, not $Energy Subsidy - energy dividend of prepay units- incentive to save energy, & exchange units for valueEast Med energy pool fundEast Med Green Deal – energy loans invested directlyin renewable energy and energy saving projects
  17. 17. …....21stcentury solutions pre-date modern finance

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