Transition through gas caspian
- 1. Caspian Energy 3.0 - Transition through Gas Caspian Oil & Gas 2013 Chris Cook 5th June 2013
- 2. 21st Century problems cannot be solved with 20th century solutions.........
- 3. Introduction - Resilience Resilience - the enduring power of a body or bodies for transformation, renewal and recovery through the flux of interactions and flow of events Resource Resilience – Natural Grid Financial Resilience – Open Capital
- 4. Resource Resilience – Natural Grid Since 1980 Denmark's GDP rose 78% Energy use has been stable Carbon fuel use has declined How did Denmark achieve this?
- 5. Resource Resilience - Natural Grid Least Energy Cost principle - not 'least Danish Krone cost' (or least $, € or £ cost) - minimum carbon fuel input for a given output of electricity, heat or power - investment in renewables, heat, transport, energy efficiency
- 6. Emerging Outcomes of Natural Grid policy - decentralisation - skills base of knowledge and knowhow: eg Vestas is the biggest global wind turbine manufacturer......in a country of 6m people - trend to energy security and energy independence - not forgetting........reduction in carbon use
- 7. Funding the Natural Grid $ trillions required to fund transition to a Natural Grid $ trillions in carbon fuel use is wasted Need to drill for oil and gas savings.......
- 8. Financial Resilience – Open Capital Market 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 broke What Market 3.0 will replace it?
- 9. Financial Resilience – Open Capital Market 3.0 - networked, decentralised and dis-intermediated market paradigm - transition from intermediation to service provision - Reason? Finance capital is limited to operating costs
- 10. Financial Resilience – Open Capital Two elements: market architecture & market instrument Capital Partnership - neutral, collaborative framework Prepay - prepayment for production or use over time
- 11. Application to Caspian Energy Caspian Capital Partnership ('Nondominium') - neutral framework for Caspian energy co-operation - Energy Pool of future production, Gas & Power Grids, Gas Hub /Balancing Point benchmark Caspian Prepay energy financial instrument - energy clearing union - (mutual guarantee of issue) - direct 'energy loan' investment by energy investors, especially gas/power consumers
- 12. 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
- 13. Custodian (Clearing Union) % Investor Energy Funds/Users Manager Service Providers % Littoral Nations Prepay
- 14. Nondominium – What it is and is not Nondominium is neither an Organisation (eg Energy Charter) nor a Trust (eg UK North Sea Master Deed) It is simply two parallel collaborative agreements Clearing Union - agreement between stakeholders jointly - governs & guarantees prepay unit issuance, exchange & return Capital Partnership – project agreements between stakeholders individually - governs allocation of flows of production
- 15. Nondominium – How it Works Existing rights held by Clearing Union as joint Custodian Production shared by nations and service providers in accordance with project-specific 'enterprise agreements' within Capital Partnership framework Balance of production available to create and issue prepay units to Investors No nation or stakeholder has dominant rights Stakeholders have agreed rights of veto
- 16. Nondominium – Outcomes Neutrality – no sharing of sovereignty as in Condominium – takes politics out of energy Equity – ethical sharing of risk and reward Stability – no stakeholder has an interest in volatility Resilience – risk is distributed Complementary – not alternative but addition to existing agreements eg Law of the Sea, Energy Charter
- 18. Energy Prepay – What it is and is not Undated credit returnable in payment for energy supplied Prepay credit is issued & sold by energy producers at discount Not a futures contract: no right to demand delivery
- 19. Energy Prepay – How it Works $1.00's worth of energy sold for 80c gives absolute return of 25% Rate of Return - rate over time at which prepay unit returnable to issuer in payment for energy supply Rate not fixed - depends on existence & amount of flow No right to supply – accepted in payment for supply
- 20. Energy Loans Prepay - direct investment in future energy production or energy savings - the earlier the investment, the greater the risk, and the greater the discount - return in energy: no $ paid for the use of $
- 21. Energy Loans – the Value Proposition Producer - sells energy forward and locks in price - interest-free energy loan until credit returned vs supply Consumer - prepays for energy and locks in price Investor - direct 'inflation hedge' investment in energy - Consumers buy credits from Investors at best price below physical energy price & return against supply
- 22. Generator (Iran) Gas Investor Energy Funds/Users Manager Service Providers % Turkmenistan Power Power Partnership Power Prepay
- 23. Refinery (Turkey) Crude Oil Investor Energy Funds/Users Manager Service Providers % Azerbaijan Fuel Prepay Fuel Partnership Fuel
- 24. Outcome – Caspian Benchmark Energy standard unit for Caspian energy investment - 1 Mmbtu energy equivalent? - 10 KwH energy equivalent?
- 25. Outcome – energy denominated Carbon currency
- 26. Outcome – new energy subsidy Policy Energy dividend made in energy prepay units - incentive to save energy - energy loan investment use - exchange units for other value
- 27. Outcome – Caspian Green Deal Energy loans - new renewable infrastructure: Caspian Supergrid; wind, solar, hydro - energy efficiency: least energy cost heating, cooling, transport, spatial infrastructure
- 28. Outcome – the Transition Trade A Big Trade of the 21st Century Exchanging - value of carbon fuel saved (NegaBarrels and NegaTherms) - value of IP (knowledge) and Know How
- 29. 21st Century problems cannot be solved with 20th century solutions.........
- 30. …....21st century solutions pre-date modern finance