Back to Black Sea Energy and Economic Forum 2010 event page














Transcript by
Federal News Service
Washington, D.C.

ROSS WILSON:  My name is Ross Wilson.  I’m the director of the Atlantic Council’s Dinu Patriciu Eurasia Center.  I am delighted to welcome you to the second day.  Today what we will do is start to drill down into some of the specifics.  And we begin with two panels that look at different aspects of energy issues.  One, energy from the standpoint of government.  We have several ministers with us today.  Energy from the standpoint of the resources.  What are the next stages of Caspian Basin energy development?

Looking at energy from the perspective of companies and looking at energy from the perspective of moving resources from the Caspian Basin to the international marketplace.  And I think 2000 – many people believe 2011, 2012 will be critical years for decisions on the next phase of infrastructure.

What we will do is hear first from our keynote speaker, move directly into our first panel and then move directly from that into our second panel and try to move as quickly as we can so we do not fall further behind schedule. 

To start us off, we will hear the view from Turkey, our host country.  And I am very pleased to be able to introduce our keynote speaker, Taner Yildiz, Turkey’s minister of energy and natural resources.  Minister Yildiz has served in this position since 2009.  Prior to that, he was a senior figure in the Turkish Parliament’s commission on energy, commerce, natural resources and industry. 

He served on the board of the Kayseri Electric Generation Company – Kayseri, being his home district, as a member of Turkish Parliament.  He is a graduate of Istanbul Technical University and has a degree in electrical engineering.  And I think both that engineering background, as well as his experience on the board of an electricity company, uniquely qualifies him for the position he now holds with the Turkish government.  Please join me in welcoming Minister Taner Yildiz.  (Applause.) 

(Mr. Yildiz’s remarks are delivered via translator.)

TANER YILDIZ:  Distinguished ministers, esteemed colleagues, dear bureaucrats, participants, ladies and gentlemen, I also would like to begin my speech by saying that I am very pleased to be with you within the framework of the Black Sea Energy and Economic Forum organized by the Atlantic Council. 

First of all, I have to say that energy is a common denominator in international politics.  It became the most important argument for a long time.  Energy has been the causes of many wars and conflicts, but also of peace.  It is a problem on the one hand, but it is a solution in itself.  This is the reason why, when we look at energy issues in our world and in our country, we must not just be looking at the subject from our own point of view but take it into account within the framework of international relations.  We have to think that it is something that is very much related to international politics, economy and development.

Growth and development are the main subjects.  And the supply and the security of energy supply is one of the main topics that we have to deal with.  The structure that determines the government of a certain country is very much shaped by energy.  And again, the most important growth is through energy, through production, transportation, distribution.  This is the reason why we have to make sure that all of these correlations are regulated, the government of a given country, the structure that exists in a given country has to regulate these.

As a person who deals with energy and as a politician, I believe it is a structure that needs to be carefully designed because I have to say that all of the investments around the world are subjected to tariffs and those are the resources that you sell to the final consumer, be it the private sector or the public sector.  They have a certain share among themselves.  You could sell or lease or give credit or give land or you could have a build-operate system or a build-operate-transfer system.  No matter which model you make use of, those are the investments that you actually sell to the citizens. 

This is the reason why the governments are in touch with the public and they have to find an optimum point between their citizens and the private sector.  We need to pay attention to this for national projects and also for international projects.  We have to agree on some common concepts.  Only then we can refer to the restructuring or structuring of energy in our own respective countries.

All of these values that you share with the private sector might bring huge profits.  Then it turns into a transfer of capital.  But if the profits and the margins are too low, then this means that the private sector isn’t difficult and you are responsible for the private sector.  So in international projects, we have to look at the following issues.  The world growth is determined by certain ratios.  Safe and secure energy supply is based on this main theme.  And I think that this is how it should be regulated, 15.7 trillion worth of – 25.7 worth of dollars of investment is foreseen in the world.  Those need to be in parallel with the revenues that the citizens have in different countries.

So in the sociological, analytical part of this issue, we are obliged to look at it.  According to the data of the energy agency, the production of energy and the raw material like oil, natural gas will remain the same resources.  But we will have restructuring efforts with renewable energy, technological advancements that come along.  Obviously, these renewable energies and other structures will contribute to the existing structure and it will help us solve some of the paradoxes, some of the contradictions.

The security in energy supply comes with pollution.  The CO2 depletion of ozone layer or when we see other environmental degradation, those are shown as the main reasons for air pollution.  So we need to set a certain balance by providing secure energy.  Seventy-five percent of the energy of the world is around Turkey.  And the consumption is right at the Western part of Turkey.  This is the reason why we need to develop projects that aim at having a certain balance. 

Our prime minister, in his inauguration speech, touched upon some of these projects and explained the outlining principles, the main aspects of these projects.  And I want to briefly go back to those in the Caspian region, Caspian Basin.  Azerbaijan, Turkmenistan, Kazakhstan, Russia and Iran and Iraq are the countries surrounding this region.  They are very important natural gas and oil reserves. 

When people ask how big are these reserves, just in the Siberian part in the northern part of Russia, a new reserve was found.  This reserve only can satisfy the needs of Turkey for 80 years to come – 35 billion cubic meters of energy for 80 years is an important figure.  The same holds true for Azerbaijan, for Turkmenistan and other regions – other countries surrounding the region. 

The countries in Europe have to solve the problems related to the security of energy.  Projects must find solutions to the problems.  Nabucco is one of those projects.  As you know, it is a consortia of six partners.  Turkey, Bulgaria, Romania, Hungary, Germany are involved in this process.  And maybe in the long run, some other countries will also join the project.  So this is a common project.  As long as we have these consumption areas on our west and as long as we have the resources on our east, we believe that the solution to satisfy this goes through such projects. 

Turkey is not just a transit country.  It is at the same time a country which has the capacity to become an energy hub.  We believe that it is, so this is the reason why we need to look out for the interest of each country and this is one of the projects which brings together the common denominator for the interest of all these countries. 

The ITI commerce is involved in another natural gas pipeline project that also involves Italy.  This project also needs to be realized.  We don’t know if those projects are going to be competing with one another.  In the long run, I don’t believe they will because security of supply is very much related to importation.  The pipelines need to be diversified.  Countries providing resources need to be diversified.  So this sheds a light in the way in which we shall organize those projects.  We need to have patience for that. 

If you recall, the Baku-Tbilisi-Ceyhan oil pipeline, when it was first designed, people thought that it was a dream.  Right now oil runs through those pipes and the project is running.  So be it at the level of design or at the realization stage, we need to be precautious and patient about these projects.  Sometimes we ask ourselves whether we would face problems if we don’t find a revenue, money.  But I believe Nabucco shall be realized.

I have to openly say that the countries providing the resources have a certain interest.  If you don’t have an interest on the part of each country, you cannot have the realization of a given project.  But these, in the case of Nabucco, or other pipelines that will enable you to convey natural resources to the West, Turkey will always maintain a positive attitude.  Up until now, the policies that we pursued always confirmed that we have such a policy. 

Of course, studies about nuclear power plants are also on the table.  Despite the global crisis in 2008, we were able to overcome the difficulties of that crisis.  The growth numbers in the first quarter and the second quarter were along 11 percent, along the lines of 11 to 10 percent.  And right now we will have a growth figure of seven to 8 percent, which tells us that when it comes to security of energy supply, we will have a certain growth.  So we say to the international investors that they will find a strong robust background that will have the necessary legal framework.  We can say that there is a good investment environment.  And $5.5 billion is the amount of investment that is envisaged in that framework.

The revenues by privatization of electricity distribution is around $11.5 billion.  So the investment and production values are not calculated in this amount.  So the privatization revenue is also kept aside.  This is the reason why we can say that as far as security of energy supply is concerned, Turkey is very determined and very serious.  Just this month, about a couple of weeks ago, we have had some works on – thesis with Greece electrification and interconnection systems were the tests, if you will, of the future projects. 

This means the following.  In the coming year in the southern part of Mediterranean, a production of a certain energy can be sold in Turkey technically, theoretically.  And if the prices are convenient, this energy can also be sold in Europe.  So what we call as secondary energy resource, the electricity production is being realized with an integrated approach with Europe.  It shows that the market that we envisage is getting greater and greater.  There are eight countries that are being coordinated by Turkey around Mediterranean.  Libya, Egypt, Palestine are among those countries.  And we are thinking that we would be able to realize those projects in the coming six to seven years.

Prosperity that will come out of energy is judged by the use of electricity.  When we take into account Morocco and Algeria, we can say that a common project will turn the Mediterranean into a common basin.  And as far as the study is carried out in the southern part of the Mediterranean is concerned, Turkey is in charge of the technical coordination and the general structuring of such projects.  There are also other projects that are produced by Russia and Turkey.  This shows that you don’t have to give up on other projects while you continue preparing some others.

Turkey is working with the Russian Federation, the countries on the east, the resources countries, the countries that consume energy.  Turkey is also dealing with oil research, oil drill activities.  So Turkey has come to a level where it can deal with each state of energy.  With the income per capita, GDP of $1 trillion, we can say that we have come to a point where we can embrace all sorts of projects.  The Turkey Oil Corporation is another consortium.  There are separate projects.  You have Petroplus and ExxonMobil and Chevron.  These are separate enterprises with which we carry out these projects. 

We just signed a $780-million worth project.  As you know, ExxonMobil is the biggest company which made it shares public.  Our friends who deal with the subject specifically would know it much better than I do.  So we are determined.  We make seismic research activities and we want to be able to deal with natural gas and oil.  But there is – I believe it is going to be successful, but there is a problem.  In this beautiful city of Istanbul with a history of 8,500 years with its natural beauty, we can say that the number of ships that go through the Bosporus Straits is too much.

They carry 150 or 170 tons of oil.  If we just let these ships, we can see that the number is going to exceed 200 million tons.  But we cannot leave this as it is.  You will all recall the platform tragedy in the Gulf of Mexico.  So imagine if you had just an accident.  That would be one-tenth – we cannot even dream of the chaos that it will cause.  The Bosporus Straits is one of the most difficult straits, most difficult, most risky 12 straits of the world.  So we cannot take that risk. 

So with your permission, I have to say the following.  Of course, we cannot forbid the passage of these ships through the Bosporus because we have a certain respect to international law and to the agreements that were signed.  But I can say that the barriers that will restrict the passage of the ships will be put in place.  We said years ago that we could only allow this to happen if we have alternative passageways because Samsun-Ceyhan pipeline is another alternative.  This is something that we can easily observe.  Due to ecological reasons, environmental reasons, we have to take into account the nature and the history of Istanbul, the Canakkale Straits, the Dardanelles Straits and the Istanbul Straits must be straits where there should be certain restriction.

If the BTC pipeline was not built, we have colleagues from Azerbaijan, Georgia, Kazakhstan.  We can observe that we are conveying oil through the BTC.  If BTC wasn’t realized, now in the Bosporus Straits, we would have more than 200,000 tons.  We have to rearrange the social notions just as we do with others.  When we think of Samsun-Ceyhan oil pipeline and the pipelines that are going to be realized in other parts, those are the guarantees and alternatives to prevent accidents in the straits.

There are about 20 companies (that) work on a voluntary basis.  I have no doubt that they will take these matters into account.  They are not less sensitive to environmental issues than we are.  They have research and development projects, which make up an important part of their budget.  So we appreciate that and we believe that they will also be sensitive with regards to the risks involving the Bosporus Straits and the Dardanelle Strait.  I don’t want to give you too many figures.  There are a lot of numbers.  But during the panel, we will go into those numbers.  The economic growth, global crisis in the world are issues that show us that we need to be more precautious when we manage our companies.

If you recall in 2004, the International Energy Agency and the World Energy Council and the OECD carried out studies.  And some of the numbers were not given out, which was normal because in a world where the global crisis hit everyone, you couldn’t have thought of these results.  And the prices, the supply and demand did not really meet, so the prices were affected by that and the consumer habits change accordingly.  Some authorities thought that natural gas must be at the forefront of energy consumption.  But now they are asking why don’t we think about nuclear energy.  They have a point.  I have to say that. 

When it comes to security, it is a block solution.  The main title of our meeting is energy.  But if we were to talk about energy, what we would have to say in an environment meeting must not mislead what we say here.  The world is ours.  We need to think of – we need to tackle issues from the environmental point of view and from the energy point of view.  We need to take into account all aspects, technological developments and the fact that material science developed shows us that those can pave the way to alternative solutions.

But what counts here is that we have to think of environments, security of supply related to energy and the mechanisms of pricing.  As I mentioned at the beginning of my speech, governments have to take the balances between its citizens and the government into account.  Those are the balances that need to be paid attention to.  The profit margins must also be brought to such a point where energy is best made use of.  This is very important.  Be it nuclear energy, natural gas, renewable energy, oil, wind energy, geothermal energy, hydraulic energy, all of these energy resources actually come out of reconciliation from the triangle that I just mentioned, the triangle, which is price – price mechanism, environmental issues and energy security.

So the fact that we are situated in a region where countries rich in resources are situated do not change – doesn’t change that reality.  The fact that some of the issues related to the determination of prices are pending do not change these realities. 

Distinguished participants, ladies and gentlemen, I don’t want to go too much into the details of numbers.  I have to say that I am very pleased to be amongst you.  I would like to say welcome again to Istanbul.  I hope that you will be able to go out and do some sightseeing aside from participating to this energy symposium.  You will find that everybody is very hospitable.  I would like to greet you with respect and I would like to congratulate all of the organizers of the meeting.  (Applause.)

MR. WILSON:  Thank you very much, Mr. Minister.  You have put a lot of very good issues on the table for us here this morning.  What I would like now to do is to invite our first set of panelists to please come up and take your seats.  If we might please – and is everybody miked? 

I hope this mike works.  Excellent.  Perfect.  We have an interesting and important group of panelists today.  We have with us a good friend from my service in Baku, Natiq Aliyev, minister of energy of the Republic of Azerbaijan.  Alexander Khetaguri, minister of energy of the Republic of Georgia.  Ian MacDonald, vice president for Europe, Eurasia and the Middle East exploration and production of Chevron.  Ambassador Mithat Rende, energy advisor in the Turkish Foreign Ministry.  And Mehmet Uysal, co-chair of this Black Sea Energy and Economic Forum and also chairman and president of TPAO.

I thought that, as I indicated, Minister Yildiz put a number of important issues on the table, issues of resources, investments, where the money will come from, security, security of supply, renewables, nuclear energy, environmental concerns, pricing and the economics and the economic feasibility of projects.  And he also noted the important issue of the Turkish straits, which will be, I think, a particularly useful topic to take up in the next panel that deals with moving energy to market.

What I might do first just to round out the picture from our host country’s perspective is to turn to you, Mr. Uysal, just to say a few words about Turkey’s own energy production goals and objectives and where you see – how you see that developing over the course of the next several years.

MEHMET UYSAL:  Thank you.  Good morning, everybody.  Turkish Petroleum Corporation is a national oil company of Turkey, but somehow different than the regular national oil companies.  Our activities are definitely for enlightening Turkey’s potential, but also making investment outside of Turkey just like Azerbaijan, Kazakhstan and Libya and the other countries.

Turkish Petroleum Corporation is producing around 70,000 barrels of oil per day.  Half of it is production of international projects.  And definitely our exploration efforts are increasing since 2002.  Every year, we almost doubled our exploration budget.  Right now in less than seven years, we have made about $4 or 5 billion exploration investment.  And the next two-year investment will be around $3 billion domestically and internationally.

Our production will be increased about 3,000 barrels per day in the year of 2016 by our projects in Iraq, Libya and elsewhere in the world.  But our main target is definitely the offshore of Turkey.  And one of the areas is Black Sea and other potential area is Mediterranean.  As you know, we are the biggest player in the Black Sea.  We have been shot more than 80,000 kilometers 2D seismic.  And we have been shot more than 20,000 square kilometers three-dimensional seismic of Black Sea.  And now we are in dealing phase and we have been – (inaudible) – by Petrobras in Sinop-1 well.  Now we are dealing with Chevron and Yassihoyuk-1 well.  And right after this, the Leiv Eiriksson, the platform will move to the Eastern Black Sea to Sinop-1 (ph).  And we are starting to farm out operations for the Sinop-1 (ph) prospects.

The potentials on the Black Sea is somehow 1.5 trillion cubic meters for the gas and it is more than 5 billion barrels of oil just for Black Sea.  Once we complete the Black Sea exploration as seismic and other just – (inaudible) – activities, now we are moving to the Mediterranean.  We will do the same procedures in the Mediterranean.  We will shoot required seismic and we will open up for international companies and other farm-out operation for the Black Sea.  Therefore, our activities are having a high importance for Turkish oil and gas exploration.  We are now waiting to discover our offshore.  Sooner or later, we will do it.  But preferably, it will be sooner. 

MR. WILSON:  And let me just briefly follow up on that.  What is the timeline?  Do you expect in the course of 2011 that it will become clear what are the production potentials?

MR. UYSAL:  Well, our domestic production is around 12 million barrels yearly.  And our international production is just about the same number.  So we are positioned around 25 million barrels per year.  And it is just about 10 percent of what Turkey needs.  And for the future years, the exploration – depending on the success on the exploration on the Black Sea, our production will be increased after 2015, step by step. 

In the current projects we have in Azerbaijan and we have in Iraq, for example, Badra and mission (ph) projects.  They will start the full production.  By the year of 2014 and 2015, our production will increase up to 300,000 barrels per day, which will be almost half of the Turkey’s –

MR. WILSON:  Good.  Well, thank you very much.  I think that is the perspective of Turkey not just as an energy transit company, but as a producer is an interesting one and important, especially given that Turkey is our host. 

Minister Aliyev, Azerbaijan, of course, is the big producer, one of the big producers along, of course, with Kazakhstan.  I wonder if you could share with us a little bit your thinking about next stages of development.  Is Azeri-Chirag-Guneshli now well-developed?  Decisions to be expected soon now for the full-scale development of Shah Deniz 2?  If you could give us a sense of what you expect and what is the timeline. 

NATIQ ALIYEV:  Thank you very much, first of all.  I would like to express my sincere gratitude for invitation to participate in this very important event.  And, you know, questions and problems arised yesterday and today in the speech of Honorable Prime Minister and my friend, Taner Yildiz.  It is very important because, you know, we are – our country is situated in Eurasia.  And – (inaudible) – continent is to be in the 21st century very important not only for itself, but for all the world.  That is why as a whole world, we will face in 21st century with some problems and changes like, you know, environmental problem, energy problems, poverty, you know.  It is food problems, it is clean water problems and so on and so on.

And we have to decide these problems in the 21st century.  But everybody knows that, you know, behind of the development of economic and economy and society, the force drive is energy.  The energy is the force drive who developed all the economics.  And when we see in our region, we see that in our region, we have developed countries, we have developing countries and we have the countries who has no electricity now.

With most population like India and so on and yesterday Mr. Prime Minister Tayyip Erdogan said that 1.4 billion of people in whole world may have no access to modern electricity and most of them and more than 2 billion continue to cook only traditional biomass.  It is really very alarming signal for all of us. 

What we have now in our region – first of all, I would like to say that on one hand, our Eurasia have tremendous reserves of energy.  On the second hand, we have a lot of countries who has no reserves.  And the main problem is to deliver these energy resources from the regions who has tremendous resources of oil and gas and energy to West, where we have customers.  That is why when we see in Azerbaijan, Azerbaijan in Black Sea region is only – when we see Black region, it is population more than 300 million population and 12 countries among the Black Sea, around the Black Sea.  And just only Azerbaijan and Russia exported the energy resources.  No one country have opportunities.  And they are just only customers.

And Azerbaijan, I would like to say that Azerbaijan very successfully implement itself oil strategy, which was begun in 1994 and continues nowadays.  And just I show you two figures.  In 1993 and 1994, Azerbaijan oil economy, oil industry, it was going down – every year, about 10 percent.  And now in those days, we just produced only 9 million tons of oil a year.  Now in this year, Azerbaijan will produce more than 52 million tons.  It is more than 1 billion barrels a day.  If several times ago, we imported the natural gas from Russia, you know, about two, three bcm per year, now we produce this year – this year we will produce 30 bcm and we exported this natural gas, you know, to Iran, to Russia, to Georgia, to Turkey and a little bit to Greece now.

What we have (to do?)?  What is our expectations?  You know, I think that first our task is develop what we have now.  It is Azeri-Chirag-Guneshli.  And you know that in a couple of years, we continue to increase our production on the Azeri-Chirag-Guneshli.  Now it is – the Azeri-Chirag-Guneshli oil fields produce 44 million tons per year.  I think in a couple of years, up to 2015, it will be more than 50 million tons, up to 60 million tons.  We have these opportunities to increase the volume of oil.

In gas, natural gas, you know, we have very wide opportunities to increase.  First, our reserves, it is Shah Deniz 2.  And we signed with Turkey, you know, in June 13, 2010, very great, you know, memorandum of understanding.  We signed documents, you know, about sale purchase agreement, about development Shah Deniz Stage 2 and our very important issues were solved.  And we now think that it is time for action, for Shah Deniz Stage 2, it is time for action in our very perspective structure like we are working with Total on Absheron structure.  It is similar like Shah Deniz.  And I think that in Absheron structure, we have reserves not less than half trillion cubic meters.

That is why Azeri-Chirag-Guneshli, you know, we have the gas.  And on our calculations, it is more than 300 billion cubic meters gas of – deep gas in Azeri-Chirag-Guneshli.  And now we work with BP about development of this field.  We have structures; we have Nakhchivan and so on.  And if just we calculate Azerbaijan’s, you know, reserves and what Azerbaijan can produce, I think that it will be not less than 50, 60 bcm per year.  And most of them, naturally it will be exported.  And that is why there is the second problem, how we will export so much gas. 

And that is why, you know, in the past, we start to diversify our net gas system.  And we now have pipeline to Iran and we are working on the expanded crude (ph) capacity to Iran.  We have the gas pipeline to Russia and we are working as well to expand this route.  We have, you know – it is the project of maybe 21st century for Azerbaijan.  It was Baku-Tbilisi-Erzurum because it was the first export gas pipeline was Azerbaijan, which was constructed by ourselves.  And now we expanded.  Now we have, you know, capacity of this gas pipeline up to 20 bcm.  But we are working now and we have negotiations with our partners to expand this – (inaudible) – capacity up to 30 bcm.

That is why, you know, what we are interested in now, it is not just only the pipelines from Azerbaijan, but we are very interested in our projects, you know, which are implemented in Europe like Mr. Taner Yildiz, my friend in – (inaudible) – said that we are very interesting together in the Nabucco project.  We are interesting in the ITGI project.  We are very interesting, you know, in projects which connect Greece and Bulgaria.  You know, we are very interesting in the project, which connect Romania and Hungary interconnection gas network system.  

We are now agreed just a month ago, you know, we had a summit in Baku with presidents of Romania, Georgia and prime minister of Hungary came to Azerbaijan and we signed the new declaration about Azerbaijan, Georgia, Romania interconnection project, which is planned to deliver Azeri gas to the coast of the Black Sea in Georgia.  And after that, it will be transformed to LNG, you know, on the plant after delivered by the tankers to Romania.  A lot of projects now is under consideration. 

But it is not just only in energy sector.  You know, when we see you speaking about not only energy, but economy, Azerbaijan now invests a lot of money in Turkey, you know, Petkim.  It is now – we have a big share in the Petkim in Turkey.  We constructed the Kulevi terminal in Georgia.  We have net gas pipelines in Georgia and provide Georgia with Azeri gas and so on and so on.

MR. WILSON:  It is clearly a great success story.

MR. ALIYEV:  Yes, I think that we – you know, fulfill all our task on this first stage because Azerbaijan is independent country.  Azerbaijan fully provides their security and energy security.  We are now most developing country in the world.  You know that our GDP growth several years, last several years is more than 20, 25, 30 percent per year.  And in spite of the global crisis in the world, last year, we have 10.3 GDP growth and so on and so on.  That is why I think that prosperity is very right, you know.  And we cooperate with our neighbors, with our regions – in our regions and we are very glad to do it.

But yesterday, Mr. Prime Minister said that if we would like to have growth economy, developed economy, first of all, we have to have peace.  We have to liquidate all the conflicts, ethnic conflicts, liquidate the separatism, you know, terrorism and so on.  It is the main task of the humanities, you know, of our society because if we have peace, we have developed economy.  Thank you.

MR. WILSON:  Thank you very much, Mr. Minister.  Several of us in this room are closely involved with you, with President Ilham Aliyev on very important projects.  And it is very heartening to hear someone who has spent a lot of time in Baku how much progress has been made. 

Minister Khetaguri, your prime minister spoke very eloquently yesterday about Georgia’s steps on energy and the progress that is made from previous years when there were frequent blackouts and annual energy crises to a very different picture today.  And I wonder if you would like to elaborate on that and talk a little bit about Georgia’s role as a producer and, of course, Georgia’s role as a transit country.

H.E. ALEXANDER KHETAGURI:  First of all, thank you for inviting me to this event.  It is my pleasure to be here.  Of course, the prime minister has talked a lot yesterday about our development.  But I would also say a few words about that.

In 2005, in Georgia, we had total blackouts.  In the capital of Georgia, the electric supply was only for 18 hours.  And there were the regions of Georgia without electric supply for months.  So at this stage, since 2007, we have become the net exporter of electricity.  So how we achieve that? 

First was the restructuring of the sector and the liberalization.  We have abolished a lot of licenses, including the licenses for electricity export and electricity import.  We have rehabilitated whole system, including the hydropower plants, high transmission networks, added distribution networks and then privatized – (inaudible).  So at this stage in Georgia, we have all the generation assets and all the distribution assets in the private hands.

So that is how we have resolved this crisis.  Now, as I said, we are the net exporter of electricity.  And what is the importance of that?  In 2005, we have imported from Russia 1.2 billion kilowatt hours.  This year we have been exported already 1.4 billion kilowatt hours.  And the main export directions are Turkey and Russia.  Of course, we are exporting – also, we are working in the – (inaudible) – and we are exchanging electricity with Azerbaijan.  And this summer, we have been already exporting to Romania also around 300 million kilowatt hours. 

And what is the importance that our hydro potential is not utilized practically at all?  At this stage, only 18 percent of our total hydro resources is utilized and there is a huge reserve for the developing of this sector.  Also, we have no utilization of our wind resources and it is also significant.  According to studies, around 24,000 megawatt is the potential, economically feasible potential of hydro and around 2,000 megawatt of wind.  And that is why in this sector, in electricity sector, we have an ambitious goal – (inaudible) – exporter of green energy in the region.  So that is why our strategy at this stage is to stage by stage construct and develop the infrastructure, construct the new high-voltage transmission lines with our neighborhood countries.  And we have already started the construction of the new 400 kiloline (ph) with Turkey.  Yesterday we have signed the memorandum of understanding for the further development of this route, further construction, additional new line and for the technical investigation, additional one or two. 

At the same time we construct, we have started the construction of the new high-voltage line with Azerbaijan and with Romania.  And, of course, we are paying a lot of attention also for the transit of energy resources from East to West and not from North to South.  And I want to say that as soon as the new high-voltage transmission line will be constructed with Turkey and it is in May of 2012, the new high-voltage transmission line will be constructed with Azerbaijan at the end of 2011, it will mean that out of the Baku-Tbilisi-Ceyhan and the Baku-Tbilisi-Erzurum projects – it will mean that out of the oil and gas transmission project, we will have one more connection, one more energy commodity connection.  We will have an electricity transmission project.  And why?  Because with this high-voltage transmission line, Azerbaijan will be connected to Georgia and Georgia will be connected to Turkey.

So it means that Azerbaijan also will be able to transit with Georgia and sell electricity to Turkey.  And not only in Turkey – why?  Because Turkey has successfully – (inaudible) – with the European network and it will mean that this is a kind of new route and new – (inaudible).  We will be able to deliver the Caspian and – (inaudible) – not only in oil and gas resources to the Western markets, but also the green energy and the electricity.

MR. WILSON:  I think one thing that is reflected in your comments is the development of a local energy market that is quite different from the conversation that tends to dominate about big hydrocarbon development projects, big pipeline developments.  And this sort of micro-market development, I think, is an extremely important step.  Georgia clearly has an important role.

I want to have some time for questions.  We don’t want to fall too far behind.  Ambassador Rende, Ian MacDonald, if you want to briefly put some of your issues on the table and then we will have a few minutes for questions.

MITHAT RENDE:  First of all, I thank Mr. Kempe and Ambassador Ross Wilson for their leadership, for organizing this successful conference.  I also wholeheartedly welcome the presence and the participation of many important energy players from Turkey and from all over the world.  I recognize the major contribution made by Minister Taner Yildiz and, in fact, this morning, in his key speech, he covered most of the issues.  So I will have only a few remarks.

First of all, Excellency, sir, ladies and gentlemen, Turkey is recognized as an important energy player.  Energy policy is part of our foreign policy.  It is an integral part of our foreign policy.  We run this policy together with the ministry of energy and, of course, our minister here, the minister of energy and natural resources, he is the key player.  Our role has been recognized – I just returned from New York.  I accompanied the president and the minister of foreign affairs; also Deputy Prime Minister Babacan was in New York.  And we had a total of 88 bilateral and multilateral meetings.

And during many meetings, the role of Turkey as an important energy player, as an important player in enhancing the supply security of Europe was recognized by many ministers and presidents.  So this is an important point that I wanted to share with you.  We are an important player because we are a major consumer, also a transit country, a hub.  And also probably – I would like also to point out that Turkey is also an important security provider in the field of energy.

Probably some of you will recognize that Turkey has successfully protected pipelines and major infrastructure and also the Turkish straits, we have diligently implemented the – (inaudible) – impartially and, of course, the Turkish straits and oil transportation through the Turkish straits has become all the more important.  Minister Yildiz has dwelled on this matter.  And, of course, it is clear that following the Deepwater Horizon accident in the Gulf of Mexico, the public awareness is growing and probably as was already pointed out, we will have to take additional measures in the interest of security and the environment and the safety of a world heritage city, Istanbul.

So having said this, I would like also to underline another point that was on the agenda of the United Nations last week.  And that is the importance of eradication of poverty, combating climate change and relationship between climate change, eradication of poverty and energy.  This was high on the agenda of the United Nations.  And most of the ministers who may their statements in the context of climate change and also MDG goals in New York, they emphasized the importance of having access to electricity, access to safe drinking water and sanitation and, of course, to energy because we cannot eradicate poverty, we cannot – on a global level, and we cannot achieve sustainable development without electricity and energy.

This is why we need also, first of all, affordable energy, uninterrupted energy, constant and also we need renewable – a good mix of renewable energy, nuclear energy and, of course, fossil fuels.  So here most of the participants in the United Nations highlighted the importance of a low-carbon economy.  Probably some of you might not like it.  But the fact that today everybody is talking about switching to low-carbon economy and we have to keep it in mind.  And this is essential for economic growth and we cannot avoid it.

And it is for also combating climate change.  So we are talking about a paradigm shift, a paradigm shift.  And also as a climate negotiator, we are discussing it in the context of negotiating a new climate change agreement.  We will meet in Cancun very soon.  And I was very surprised to see 61 ministers attending the climate change – (inaudible) – also organized by the – (inaudible) – before Cancun – (inaudible) – also there recognized the fact that we have to switch to a lower-carbon economy.  And in this context, energy efficiency has become all the more important energy conservation and energy efficiency.  And I believe that this conference should also deal with these issues.  I thank you very much.

MR. WILSON:  Thank you very much.  Ian MacDonald, briefly on the private sector perspective.

IAN MACDONALD:  Well, thank you very much for inviting Chevron to participate in this forum.  In a world where resource nationalism is on the increase and access to resources is becoming increasingly difficult for international oil companies, I think the countries represented at this forum are to be commended for their openness to investment in the energy sector.  And that goes right across the spectrum of countries here.

Very recently, we were able to sign a joint venture agreement for exploration in the Black Sea with TPAO.  We in the last few months have acquired some 800,000 hectares of lease in Romania for shale gas exploration.  And we are a company that remains quite bullish about the potential for shale gas in Europe and in this region.  We have applied for a similar position in Bulgaria. 

In countries, Chevron is very active across in Kazakhstan, where Tengizchevroil produces some 25 million tons of oil a year.  All of that oil transits through the Black Sea.  As you know, much of it transits through CPC and the rest through rail and goes through the Turkey straits.  We take a great deal of care to ensure that the vessels we use for that transit are the most modern and safest and under the highest standards of ship management.

I think also countries like Georgia are to be commended.  Georgia is not a significant producer of hydrocarbons today.  But here is a country that allows two major oil pipelines, three major oil ports on its territory.  Many countries are not that open.  And Georgia’s openness has been key to, I think, the success of Azerbaijan and its ability to develop.  And Azerbaijan, again, is a country to be commended for its openness to international investment. 

And these countries, Kazakhstan, Azerbaijan, are very successful in developing energy resources.  Turkey is becoming increasingly successful in establishing itself as an energy hub.  And these countries are doing that because they are willing to enter into, I would say, commercially competitive, but nevertheless, effective joint ventures with the international oil companies.  That is something that I think is greatly appreciated.  Thank you.

MR. WILSON:  We are already, I think, about five minutes over, but in fairness, I think just to take a couple of questions.  If someone in the audience has one and if you would please identify yourself.  There in the back?  Please be very brief because we are over.

Q:  Thank you very much.  (Inaudible.)  I have a question to the panel – (inaudible) – related to the fact that first, Minister Yildiz mentioned that energy has been reason for war and peace.  At the same time, Minister Aliyev indicated that the role of Eurasia will continue to grow worldwide in the context of securing energy supply.  So from this perspective, also having in mind how the differences in the availability and development of energy resources, my question to the panel is what the forecast, what their forecast is?  Will energy continue removing boundaries in legal and market terms or in short and medium terms; it might turn to be the opposite, just to harden them, to harden the boundaries?

MR. WILSON:  So the nexus of energy and politics.

Q:  Yes.

MR. WILSON:  Who would like to answer that?  Maybe Ambassador Rende?

MR. RENDE:  Thank you.  As I said in my short remarks, energy and politics, they are all interrelated.  Of course, as I said, it is very important to provide security for the uninterrupted flow of energy resources toward markets.  And Turkey in this regard is an important player.  Energy and politics – if Turkey is an important player and a soft power in the region, we believe that in the long run, we will contribute further to enhancing energy security and the security of world markets.

MR. WILSON:  Thank you.  Another question?  If not, we will move onto the next panel.  I would like to thank this group for participating.  Thank you for your comments.  (Applause.)  And the next session – we will not be having a formal break, so if you need to step out, please be quiet.  The next session will be led by Ambassador Steven Mann of ExxonMobil. 


Related Experts: Ross Wilson