Atlantic Council

2020 Global Energy Forum

Energy Interconnections: A Tool for Stability or a Vector of Geopolitical Risk?

Speakers:

H.E. Dr. Matar Al Neyadi,

Undersecretary,

Ministry of Energy and Industry of the United Arab Emirates

Thorsten Herdan,

Director General, Federal Ministry for Economic Affairs and Energy,

Germany

Ramzi Mroueh,

Managing Director, Origination,

Cheniere Energy Inc.

Nandita Parshad,

Managing Director, Sustainable Infrastructure Group,

European Bank for Reconstruction and Development

Zheng Baihua,

Director-General of Development Bureau,

Global Energy Interconnection Development and Cooperation Organization

Moderated By:

Jennifer Gnana,

Energy Correspondent,

The National

Location:  Abu Dhabi, United Arab Emirates

Time:  12:00 p.m. Local

Date:  Sunday, January 12, 2020

ANNOUNCER: Ladies and gentlemen, the next session will include Chinese translation, so please make sure to grab your headset before we start.

Ladies and gentlemen, please welcome to the stage energy correspondent at The National Jennifer Gnana. (Applause.)

JENNIFER GNANA: Good afternoon and welcome to the last session before lunch on the second day of the Atlantic Council’s Global Energy Forum. I’m Jennifer Gnana, energy correspondent with the Abu Dhabi-based newspaper The National. Thank you all for joining us.

We’re going to be talking about interconnections in energy at a regional and, you know, continental, as well as a global level, and whether these interconnections are a force for good and stability or they increase our vulnerabilities to geopolitical vectors – a conversation that’s really critical and important to be had here in this region given the susceptibility to geopolitical risks. We’ve had attacks on pipelines and oil-processing infrastructure last year, and geopolitical escalations do not seem to have died down, you know, the start of this year.

Globally, on the other hand, there is a move to connect more. There is a push for greater integration from a state, to a regional level, to a continental, transcontinental, to a global level as countries look to pool their resources together, integrate, and push for a greener transition.

Joining us to talk about this very timely topic are our distinguished panelists. And it is my pleasure to welcome Dr. Matar Al Neyadi, undersecretary, Ministry of Energy and Industry of the UAE. He is also a member of the board of the GCC’s Interconnection Authority. (Applause.)

We also have Ramzi Mroueh, managing director, origination, at Cheniere Energy. (Applause.)

Nandita Parshad, managing director, Sustainable Infrastructure Group, at the European Bank for Reconstruction and Development. (Applause.)

Zheng Baihua, director-general of Development Bureau at the Global Energy Interconnection Development and Cooperation Organization. (Applause.)

We’re also saving a seat for Thorsten Herdan, the director general at the German Federal Ministry for Economic Affairs and Energy. He is a bit late, but he’ll be joining us soon. I’ll be starting with a regional angle and then moving towards, you know, global interconnection, and then also bringing in how interconnections help with – welcome, Thorsten. (Applause.)

So we’ll be moving from a regional focus to a global interconnection focus, and also look to see how this helps with the push for green transition and the risks associated with greater integration. We’re also keen to have questions from our audience, so feel free to raise your hands anytime throughout the session and we’ll have microphones sent to you.

I’m going to turn to our host, Dr. Neyadi. And if you could talk us through why there was a need for integration at the GCC. The countries are fairly self-sufficient in terms of power requirements and there’s vast hydrocarbon resources at their disposal, so why was there need for greater interconnection amongst GCC members?

MATAR AL NEYADI: Thank you, Jennifer. I mean, the idea of a GCC interconnection line, it start in early ’19 with an idea at the university, and the idea had been picked up at the electricity sectors, and the momentum – (inaudible) – the GCC General Council.

I think there was two main reason. The first reason is it’s important to provide security of electricity and the reliability of electricity in the six countries. No doubt that the important of electricity without blackout is important for sustainable development and prosperity of economy, and that was the major reason why the six country come together during the ’19 to start thinking/discussing the need of having an interconnection link in six countries together are sharing the capacity they have, better utilization for the resource. So the first reason, the first priority, is to prevent any blackout. And after almost 10 years I think the line – the project has succeed to prevent almost 1,400 incident of blackout. Nobody from the consumer has noticed that.

The second reason or second objective why the project has been introduced is to start trading among the six countries. Although there is a lack of opportunity in the region – and I will go back to that – but we still have occasion where is trading is going on. And the reason why there is a lack of opportunity is the similarity of the big time. Everybody in the summer we need electricity for the AC and everybody in the winter has surplus. In fact, we have in the winter 70 percent surplus available. That’s why in 2015 a proposal been put to the – to the GCC Electricity Ministerial Committee to go beyond the six country. But I will come back to that. I know you have a question on that. But this is the idea where we start.

I need to conclude with something. The project itself is unique. The model how its operate is unique. The uniqueness of the project is coming about that there is one single line, 400 kV, linking the six country. So it’s not leapfrogging from one country to the other. And because it is one line managing by an independent authorities, help to avoid any challenging that you will find it in the interconnection between countries. One of these challenges is finance. One of the challenges is a regulator. One of the challenging is the capacity. One of the challenging is the reliability, the technical code. All this stuff has been avoided because you have one single line independent about the network, does not rely on the net of the national grid in each country, is linking the six country together. It’s a backbone. And that line is managing and run and maintained by an independent authority. And in fact, something that we are proud of it here in the region, that interconnection authority is becoming a platform for even sharing an experience between – among the engineers. So it’s become like the technical arm for the GCC Secretariat if they need any advice, anything about the electricity.

And now we have a very good partnership with a number of the GO-15 (ph), with a number of major interconnection in the world, and we have with the Chinese. We are proud of that relation. We come back also to this – to this point. But it is a project running for 10 years and we have an ambition for that project to grow. Thank you.

MS. GNANA: And there are also plans for the GCC IA, or the GCC Interconnection Authority, to expand. They are expanding.

Now I’ll move on to a very successful example of grid integration, which we’ve seen in the EU, the European grid integration system. Thorsten, could you talk us through how this has been very successful? I believe at the end of 2009 there was about 667 gigawatts of electricity connected to the grid in Europe alone? It must be much more now. But could you talk about how it has been a success and how it has benefitted Germany in particular?

THORSTEN HERDAN: Yeah. Well, I think the name as such, European Union, makes clear that you don’t have a European Union if you don’t have an energy union. That was the driving idea behind it. And an energy union means that you have – as Dr. Matar said, you have to trade energy and you have to help each other because the one is needing energy, the other one has energy.

And I just put one very interesting example out of that, which is a connection we are right now building between Germany and Norway, a sea cable. Why? Because Norway has a lot of hydropower available. We have deployed a lot of wind power in the northern parts of Germany. So we connect the hydropower of Norway with the wind power of Germany. And what is that at the end? For the Norwegians it’s a battery in Germany and for the Germans it’s a battery in Norway because they complement each other. So that was the driving idea behind it. You can either help each other or you can do it on your own. And if you look into that, into the details, then you’ve really identified that you get better friends if you help each other and it’s cheaper. So it’s a(n) always win-win situation.

And that led us to the point that now in the latest piece of legislation, a very important one for Europe, which is the so-called green energy package – that’s the energy package for greening Europe – we have put a lot of emphasis on energy infrastructure amongst Europe, but also with the countries then looking to the outside, because we say that we need to open our interconnectors. We need to open our interconnectors to a certain percentage, and it is there said that we need to open the interconnectors up to 75 percent of capacity, which I have to say for us in Germany creates right now a big problem because we cannot open it right now because we don’t have the grid available. But that means that we need to push ourselves – and by this we pushing ourselves – to further expand the grid in each and every country.

So to put it in a – in a nutshell, you cannot have a union without an energy union. And with that, you have to integrate your infrastructure of energy. As we are not planting our kVs on our own, we have no need to produce our electricity on our own; we can make use of other countries. And that’s why we need the infrastructure.

MS. GNANA: Now, China has a very ambitious strategy for interconnections. They plan to have a global grid connecting continents, transcontinental networks. It was a vision of the former CEO for the State Grid Corporation of China, who is now the head of GEIDCO, the Global Energy Interconnection Development (and) Cooperation Organization.

So I’m going to turn to Mr. Zheng to try and find out what was the origin for the GEI or the Global Energy Interconnection network.

(Note: Mr. Zheng’s remarks are made through an interpreter.)

ZHENG BAIHUA: Thank you, Moderator, and all the panelists and our attendees, for this meeting, as well as the organization set up in China for Global Energy Interconnection. I’m very delighted to have this opportunity to join this conference and exchange our ideas with all of you.

First of all, in our views we believe that after the first industrial revolution that the fossil fuel has played a very important role in the human development, human history. However, as the climate changes and a lot of pollution issues and house issues we are facing currently, we do suggest that to develop clean energy is very important.

Second of all, we hope that the clean energy will be delivered to all of the world, that all people around the world can be able to have access to these clean energies.

In the last 30 years, Chinese economy has developed very fast, as all of you know. The energy grid in China is also not balanced. Our clean energy are mostly located in the northwest and southeast, the center of which is located in the southern east part of China. Currently the Chinese electrical grid is one of the most sophisticated and the largest in the world, similar to the electricity grid in Europe. Our electric grid is very highly efficient.

Currently, you know that the Chinese solar energy and wind power energy are the largest in scale in the world, so we greatly hope that to interconnect our power grid with all of that in the world. And we are very honest to share and eager to share our experience, our views with the rest of the world.

Today I’m very happy to be here to share my views with the GCC countries and other OSCE countries and areas, including Africa, Southeast Asia. And we are currently in the stage also to research all these issues, and we hope that with all of your enrollments we can together promote this interconnection and give great promotion for the clean energies, and give our support to the clean energy adoption and to reduce the pollution to the Earth. I think this is our common goal.

And thank you all.

MS. GNANA: Thank you, Mr. Zheng.

Moving on to Nandita, who is from the EBRD. Now, geopolitical disrupters have been behind Europe’s push for greater integration of energy flows, particularly gas flows. Could you talk us through specific projects that you have perhaps worked on which have helped countries realize some sort of stability in securing their supplies?

NANDITA PARSHAD: Thank you, Jennifer. And thank you to my fellow panelists.

I think Jennifer is dropping a broad hint here for me to talk about a very large project that Europe and Europe’s gas companies have embarked on, which is the Southern Gas Corridor. This is a 3,500-kilometer pipeline bringing Azeri gas to Europe. And it – the whole purpose of this project was to diversify sources of fuel for Europe. So that was the seed for why this enormous project – which, by the way, at a very high cost; I think it’s 20 billion plus – was started and the idea was started. It was, well, how do we find an alternative to the one sole supplier that Europe has, and the understanding that, you know, you have stability and you have security of supply when you have diversified your sources of fuel.

But I also want to make the point that for the EBRD, the European Bank for Reconstruction and Development, that is not a bank that works in Western Europe. That is not necessarily a bank that is working in the interests of Western Europe. We are about Central and Eastern Europe and beyond. We’re about the CIS countries and North Africa and the Middle East now.

So why would an EBRD be interested in a project like the Southern Gas Corridor? And for us the driver was, one, that the source of gas is from one of our countries of operation, from Azerbaijan, so it’s a project that had direct economic benefit for a country that is producing the gas. But also, that this pipeline – which, by the way, goes from Azerbaijan across Turkey, Greece, Albania, and Italy – actually passes through three major countries of operation for EBRD, which is Turkey, Greece, and Albania. So this really turned into a project which had a lot of importance for EBRD’s region.

But more importantly, we viewed this project as, yes, a project bringing diversified fuel, but more importantly a project that could bring gas to the regions beyond Europe. This is an opportunity to bring gas to Southeast Europe, to the Balkans, to countries that are heavily dependent on coal and could really find a way of helping these countries make the much-needed coal-to-gas switch.

So, you know, so again I want to say is infrastructure projects, interconnection projects like Southern Gas Corridor start out as projects for fuel diversification, security of supply, but actually interconnection projects go way beyond. These are infrastructure projects built for the next 50, 100 years. The have an option value. They can bring so much more benefit along the way to the countries along the way, but beyond.

We did a calculation, a very conservative calculation, of what the CO2 impact of this project would be just by the displacement of coal in the countries that it physically flows through currently, and it’s 20 million tons of CO2 a year. So eventually you say these projects are done for fuel diversification, but they have – they have benefits that go way beyond that.

Just to say this was a megaproject, a really huge project, but there are also small projects – small interconnections that you can do to bring security of supply. So one we did recently, just approved by our board, a 20 million financing to connect Moldova with Romania. Moldova is a country entirely dependent on one country for its gas supplies. By building this – this 20 million investment connects it to Romania, connects it to all of the gas markets of Southeast Europe; will even get it to benefit from Southern Gas Corridor, Black Sea gas. And for 20 million through a small interconnection, we bring enormous energy security to Moldova.

MS. GNANA: Now, Ramzi, we were talking about how we see gas very differently today, from being an immovable, you know, a built infrastructure sort of space to a fuel that’s easily transported, can be moved to meet shortages anywhere. Could you talk about how liquefaction has changed the game for interconnection – greater interconnection and for a greener economy?

RAMZI MROUEH: Thank you. Thank you, Jennifer.

So I’d like to talk about how U.S. LNG changed the way natural gas works around the world. Let me first give you some numbers around Cheniere and U.S. LNG.

Today we produce around 35 million tons per annum. That’s 80 percent of U.S. LNG so far. And last year, if we think – just to put it in context – the world LNG market was around 360 million tons. So we’re still around 10 percent.

U.S. LNG will grow to around 100, 110 million tons in the next few years, and then we’ll be around half of that. So U.S. LNG is going to go from nothing in 2016 – early 2016 to being the number-one LNG producer in less than 10 years, which is an incredible feat.

Now, besides bringing lots of LNG on the market, I think it’s had a huge impact on the structure of the way natural gas trades around the world. So if you go back 10, 15 years, before U.S. LNG, the way it used to work is an upstream producer goes to Australia, Indonesia, Malaysia; they find a big upstream field; and then they spend the next five, 10 years working with a utility in Japan, in Korea to work together to monetize it. When that commitment happens, which is a 20-year bilateral SPA, then the producer is able to get financing, the project happens, and then most of the time you will see those ships going back and forth between Australia and Japan for the next 20 years. There was very little liquidity, very little transparency, and very little trading.

Then fast forward to 2016. We bring LNG on the market, and some of the characteristics of that LNG is very different. First thing, that LNG is destination-flexible. So that’s the first time in the history of LNG big quantities of LNG comes with complete right to go – for the LNG to go wherever it wants, wherever the price signal is.

The second element of this LNG is that it’s priced on cost, and that cost is based on Henry Hub and fixed cost. And Henry Hub is low and it’s dependable, so I think it’s very stable pricing.

And the third element is when Cheniere started its journey we were a very small company. Every contract we signed was deemed substantive by the SEC, so we had to publish all of those. An unintended consequence of us publishing those contracts is that they became public. People can see them, and they created some sort of a standard. So nowadays sometimes we sell a cargo to a buyer, they sell it to their buyer, and they sell it to another buyer, everybody under the same terms and conditions. So the cargo is sold four or five times before it even leaves our dock.

So big impact, U.S. LNG. What’s the market look like today? Today around 35 percent of LNG trades on a short or spot basis. That’s coming from 5 percent, early 2000s. In 2019 the trading houses did around 50 million tons. Go back 10 years, that’s almost nothing. And then most importantly is price discovery. So you have the JKM index – Japan-Korea Marker – which shows the LNG price around the world. In 2015, 0.5 million tons traded at JKM; last year it was more than 100 million tons, so 200 times increase.

So when we look at the flows from our facility, how is that reflected in the flows? You see the LNG from our facilities and from the U.S. in general, they just go where the price tells them to go. So you have Brazil, a 65 percent hydro country. Every two or three years there’s a low hydro year; LNG is there to supply that. Korea, they use 50 percent of their natural gas for domestic consumption, means – in the winters it’s very exposed to cold winters. Whenever there’s a cold winter in Korea, LNG is there to deliver there. So we see our LNG goes all over China. 2017-2018, big draw on natural gas; LNG is there to deliver.

So much more global commodity, very tradeable. LNG has connected natural gas markets and energy markets around the world, and that’s just going to increase with the future.

MS. GNANA: I’m going to go back to Dr. Neyadi. We stopped at where you were talking about expansion of the GCCI. Now, Iraq is a part of the GCCI, a country with very serious power issues, and was currently – was undertaking a power reconstruction overhaul last year. It remains to be seen how it progresses this year. Jordan is also a member country, which is an importer of fuel. What is your vision? Is it to expand the GCCI to a more regional interconnection authority?

And also, you mentioned the problem of having – you know, all countries in the GCC having access at the same time. How do you plan to manage these deficits and surpluses?

MR. AL NEYADI: Thank you. I mean, there is no doubt that – just to go back about the importance of the interconnection, if you have an interconnection that will make integration of renewables much easy and much stable for the network. So there is a lot of thing to gain from the interconnection.

Iraq, by the way, is not part of the interconnection yet. We are working with Iraq to reach that point. A framework agreement has been signed last September, but still some work need to be done to build that line from Kuwait to Basra. It’s about almost 200 kilo from Kuwait, Al Jahra, to al-Basra – no, from Kuwait, Zour, to al-Basra. I think that line, when it will be built and reach the existing, an agreement – (uptaker ?) agreement with the Ministry of Electricity in Iraq, that will open door for the GCC and for Iraq to exchange in better utilization of their natural resources, take into account the different big time.

But Iraq, as you said rightly, is not the only one in our radar. I mean, we work with our colleague in China to start a technical study with Afubia (ph). We believe Afubia (ph) is feeding the Horn of Africa, in which they have a line to Djibouti. That line, the 200 line, could be expanded to 400 kV with abundant resource of electricity in Afubia (ph). When the situation in Yemen will get stable, I think that line could easily – we built, yeah, on the – on the technical study that has been conducted between Yemen and Djibouti to extend the marine cable about 25 nautical mile from the two coasts, that will open, again, a new opportunity connecting the Horn of Africa with the Arabian Peninsula.

Going to Jordan, Jordan also in our radar. A technical study has been conducted, then the route need to be identify either through Iraq or through Saudi Arabia. But that, as you see, will also complementing the work the Arab League is doing at the moment to create an Arab market, which the GCC as an authority and the GCC country is actively working with Egypt and Arab League and the world bank to that project, to be implemented in the future.

In 2017 an agreement has been signed. And I hope a general agreement and trading agreement will be signed in the next year or so after all this difficulty has been cleared about the code. We have different technical code between North Africa and the GCC. All these technicality need to be solved before that agreement need to be signed.

So the future is there. We hope we got political stability in the area where that line need to be built. That will enable more integration, more better utilization, less emission. Where the sun shine in Abu Dhabi it could be that we ship somewhere better utilize it.

Thank you.

MS. GNANA: I’m going to switch things up a bit before moving to risks, talk more about energy transition and then talk about how interconnections can mitigate risk effects.

Moving to Thorsten now, I don’t know if I’m pronouncing this right – energiewende, the energy transition within the German policies is key to your foreign policy goals and also to your environment and climate policy goals. How has greater integration of the grid helped Germany and will help Europe achieve a greener economy and a greener transition?

MR. HERDAN: I think, first of all, we have to understand that an energy transition is much more than building power plants. We’re talking about energy, which is much more than electricity. For instance, in Germany we have from our energy demand only 20 percent electricity. So 80 percent is something different. Gas. A lot of gas. Supply heat, transport, other things.

So once we understood that, then this gives an implication for the – what we are talking today – infrastructure. So we don’t need to talk only about electric grid infrastructure. We need to talk about energy infrastructure and that then means we need to go to the next step to combine the various energy infrastructures, and I think that is one of the biggest tasks we, in Germany, we, in Europe, and we, all over the world, have to have.

And as it was just said by you, to ship the sun, that is a very good example that we have to consider in what format the sun can be shipped. Then it comes, perhaps, to the hydrogen issue, which we are discussing during the whole week a lot and it comes to the point that a gas infrastructure, an electric grid infrastructure, and also, in some countries like northern Germany and also Europe, the heat infrastructure has to be combined, and then also hydrogen plays a role.

And that now comes to a very important point – to a very important point is that something which we haven’t done so far, that we have to consider the CO2 footprint together with the infrastructure. That means for Europe, for instance, we will now design in the next phase of the Energy Union a certification scheme that energy coming from third countries into Europe has to have a CO2 footprint which has to be, first of all, determined, secondly, monitored and, thirdly, some requirements that above a certain footprint we will not take this energy. Energy – not electricity. Whatever it is. That gives us all a very, very, I would say, promising challenge.

But we can win with that. What does it mean? It means that we are looking more and more for partners around the world from which we can receive CO2-free energy, shipping sun, shipping wind, shipping water. And it also means that we have to consider the overall production of energy, transportation of energy, distribution of energy then amongst Europe in order to look at the CO2 footprint.

And then we have to compare, for instance, LNG from whatever country with sun from whatever country and come to a conclusion. Very, very interesting task, a very promising one, and, I would say, this very much helps to enlarge security of supply whilst going the Paris route and that is – that is our goal.

And, therefore, for us it is so important that we look to the energy infrastructure in combination with the production of energy as such, and that has not been done so far. But I think the hydrogen story helps us a lot in that.

MS. GNANA: And moving to Mr. Zheng, in terms of the GEI and energy transition in China, I believe the concept really came from when China was looking to connect renewable energy projects, large ones that stretched over, you know, a significant portion of land, to – and in remote parts of China to the grid.

Now, how successful was that within China and how are you looking to help other countries connect to the grid in a similar way, in a greener way?

MR. ZHENG: In China – thanks for you ask this question. It’s a very good question. During the last decades of development in China, for the electricity power grid transport in a larger scale that for China to transmit this power supply this is also one of our main work. This is one of the production of electricity by traditional fossil fuel and the biggest supplement to the basic fossil power generation and also one of our commitments to the world, and I look forward contribution from China.

This meeting was held in Abu Dhabi during the last decades as a very abandoned supply for you and the nuclear power generation was the focus. But in the next decade, including Middle East, West Asia, and North Africa in this area, solar energy will become the focus of the next decade in power generation as we all know that 50 percent of solar energy in the West Asia and North Africa are able to support the whole world for around 10 years.

So I believe that if we’re united together and develop this clean solar energy and transport such kind of energy to the rest of the world, we can greatly reduce the impact on the – on our climate, and this is why I am here.

And I look forward for the transformation for the Middle East and the surrounding area for the power reform.

MS. GNANA: And, Mr. Zheng, I want to remain with you, and you identified a few regions – Africa, Middle East, and we spoke yesterday and you mentioned South America. How do you plan to increase integration in these areas? Is there a way that GEIDCO, your organization, will allow some of these countries to have access to finance? How will this – will there be a way for Chinese utility firms to also participate in this integration process?

MR. ZHENG: It’s our great wish that the Earth will be – go greener and better. We are in sincere hope to work together with all of the people in the world to strive to achieve this goal. We (will ?) together to do the research and along with our counterparties all over the world to put our focus on the green energy development.

In Brazil, we have developed two lines of power grid to transport the energy to São Paulo and other surrounding areas with 2,000 kilometers distance. So we look forward to work together with other counterparties in other countries together to set up more projects, and this is in sincere hope that – and with co-efforts from all our counterparties in different countries, including Saudi and the surrounding African countries. They have already taken out a lot of actions and we also see a lot of countries that even though they have very abundant of fossil fuel they are still in great eager to develop the clean energy, and we are very pleased to see these trends.

MS. GNANA: As an aside, China has made significant inroads in renewable energy development here in the Middle East, particular in the Gulf, and in December we saw Chinese state utility firm, SGCC, buy 49 percent of Oman’s electricity holding company in a very – in a historic deal for the Gulf region, showing that, you know, grid integration is being undertaken and China is playing a leading role in that.

Moving to Nandita, Dr. Neyadi mentioned about, you know, surpluses and deficits and how they’re managing. A strong case for grid integration is managing these things. Could you talk about some examples, particularly in the Caucasus where you’ve worked, about how this has been possible?

MS. PARSHAD: Yes. So a very interesting project that we did about 10 years ago now, I think, we started it, actually, with support from KFW from Germany as well, where we – so we’re very active in, as I mentioned, the Caucuses and in Turkey, and one of the countries in the Caucuses that has an enormous potential for renewable hydropower is Georgia. But, of course, it’s a small country with a small market. Most of its hydro potential generates a lot of electricity at a time of the year where Georgia doesn’t actually need it.

On the other hand, we realized right next door over the border is Turkey, and Turkey has an enormous summer demand for electricity. And so we developed this project where we built a line that sort of went east to west within Georgia but then put a back-to-back station on the border with Turkey, and it was really sort of like setting a match to the hydropower industry in Georgia.

We saw a flood of foreign investment, private investment, into Georgia to develop its hydropower potential because, of course, suddenly there was a much larger market for this than had ever been envisaged before. And so this has allowed, on the one hand, Turkey to diversify its sources of supply of electricity, but it’s given a great stimulus to the Georgian hydropower industry. Brought in foreign direct investment, created jobs, and, frankly, brought in much needed revenues as well.

MS. GNANA: We’re going to pause for a bit and try and get the audience’s reaction on whether you see greater integration of grid systems and energy systems as a force for stability or a risk, and we have word cloud, which, I think, you can – I’m not sure how it works because I haven’t tried yet. But if you could just key in some words that come to your mind and we can have a look to see what it throws up.

So in terms of mitigating risks, I think Europe has been a good example in terms of how countries have managed to mitigate the risks by integrating through multilateral development, bank-funded projects, and so on. But here in the GCC, most of the projects are, largely, state funded, though we have more private participation. But these projects are also becoming increasingly susceptible to risks and we’ve seen this last year in terms of attacks on Aramco facilities, for instance, before the tanker attacks and then also we’ve seen large-scale very debilitating attacks on Saudi Aramco’s oil-processing facilities.

I want to come – I want to hear your thoughts on this in a bit. But let’s have a look to see what the word cloud is saying. So pricing, efficient, stability, mutual compensation, collective security, interdependence, opportunity risks. So we have a very optimistic word cloud. We don’t really see this as a very negative trend.

Dr. Neyadi, I wanted to hear your thoughts on what is being done at a GCC level to secure these assets.

MR. NEYADI: I mean, if we are speaking about the interconnection, I mean, the obvious risk will be from cybersecurity, not from an attack. I mean, we see power line in different – yeah, in the unstable region where there are still. I mean, the obvious example is in Afghanistan. With all the wars have been still – a transmission line from Turkmenistan to Afghanistan, about 500 megawatts, with all this incident, all the war that is going on.

So the transmission line tend to have – to be friendly for everybody. So I think – but the most threat to transmission is cybersecurity, and I think a tremendous measure has been taken all over the world to protect that asset from any cyberattack. So I think if we’re talking only about the transmission line and about the interconnection as a subject of this panel, I think they are pretty secure from any – from any cybersecurity. This is the only threat that we could see that as a real – a real threat for the interconnection.

MS. GNANA: I also want to bring in Ramzi here. Now, LNG comes with less risks than pipeline infrastructure. But could you talk through – you’ve been in the Middle East before with Shell. What do you see as some of the possible solutions to mitigate risk factors, particularly in an era where we see more and more asymmetrical warfare?

MR. MROUEH: I think the – I mean, the problem with – first, the good thing about pipelines is when something happens to them they’re easy to fix. But the bad thing is that in a situation like you mentioned, they’re easy to break again. So I think that’s – they’ll always be exposed to disruptions by kind of – these kind of circumstances.

I guess the only way to really mitigate is to have redundant infrastructure, and then I’d like to give example of countries that have all the pipeline capacity required for them to import the required natural gas but they end up setting up LNG infrastructure anyway and then those who have done that the LNG infrastructure has come very handy in the moments of stress. And not only that, also we’ve seen examples like Turkey, Poland, Lithuania where they set up that LNG infrastructure for times of stress or times of security.

But then what they realize actually there’s an additional benefit – that it gives them diversity and access to a much wider market than just pipelines. So I think setting up redundant infrastructure is probably the best way to increase security but also has the additional benefit to give them access to more pricing power.

MS. GNANA: Nandita, you mentioned how bidirectional, or reverse flow, capabilities have also helped countries manage these flows in times of geopolitical insecurity. Could you talk us through some of the projects that you’ve seen?

MS. PARSHAD: Yes. I think, you know, one of the most recent examples we saw of this was the crisis between Russia and Ukraine in 2014, and you remember that Ukraine was a very major transit country for gas that went from Russia through Ukraine to Western Europe, but also Ukraine was very dependent on the same pipeline for its own source of gas from Russia. And during the crisis between the countries, of course, this was hugely challenging and Ukraine needed to find a way to reduce its dependency on Russian gas.

And we actually helped finance and it was – we called it an emergency loan because it was done very, very quickly. It was a 150 million (dollars) loan we provided to Ukraine to do an emergency upgrade to that very same pipeline that went from Russia, Ukraine, to Europe to create reverse flows and we were able to then help Ukraine also to finance purchases now from Europe into Ukraine, and Ukraine was able to become independent of Russia as a source of its own gas needs.

So this is an example how you can use a piece of infrastructure quite flexibly and I think it comes back to the point I was making earlier about Southern gas as well is, you know, infrastructure is being built for a very, very long time and I think the use of these infrastructure will change over time and we need to create flexible forms of infrastructure, and I think we’ve learned lessons.

So the Trans Adriatic Pipeline – part of the Southern Gas Corridor, for example – is already designed to have reverse flows. It’s already been designed so that if more LNG starts to flow into parts of Europe we can actually use the pipeline, perhaps, to distribute LNG in the future, and it’s also been designed to be hydrogen ready so that this could end up being a piece of infrastructure that’s not just about diversifying fuel and from bringing Azeri gas to Europe but could be, who knows, in the future European gas to Azerbaijan, East Med gas to somewhere else, and eventually green hydrogen from renewable-rich countries to renewable-poor consumers.

MS. GNANA: Thorsten, Dr. Neyadi identified cybersecurity risks as one of the biggest threats to such systems. How are you managing this risk at a European level and also, perhaps, at a German federal level?

MR. HERDAN: Well, the question is that is it – put it the other way around – is it a question of interconnectors or is it a question of infrastructure. So I think with the digitalization cyberthreat comes among everything. It is an interconnector. It’s a whatsoever kind of infrastructure. So we don’t see that as a specialty for interconnecting countries or interconnecting sources or whatever.

I think we have to consider that in a complete different way the cybersecurity risk and for that we have set up rules in Europe, all over Europe, and, of course, in the various countries. But we don’t see that as a specific threat for interconnectors. What we see is very much in line with what was said by you. What we need to have is a diversification of fuels and diversification of rules and by that also a diversification of different types of infrastructure.

That then would reduce cyberthreat risks because if we can switch to something different then it helps the same as if a source for whatsoever reason is not available as it was available, perhaps, beforehand. But for us, when you’re talking about Europe, the diversification is important order to get new sources on board and for that we need different types of cooperation, and I will make that example because it is a huge amount of energy coming from – which could come from there, which is the North Sea.

We have a huge potential of energy in the North Sea in terms of offshore wind, which is more or less not deployed yet for a simple reason, because every country is working on its own building its wind farm, connecting it to land. That’s it. If you now consider that you have a huge combined power plant in different areas of the North Sea, which is, first of all, combining every and each country associated all together and then producing electricity or hydrogen, whatever the demand is, then this would add enormously to the diversification of sources, of routes, and also of cyberthreat because, again, you have a very much diversified type of power plan together with infrastructure.

We are – we are counting up to 450 gigawatts produced in the North Sea, but not only for the European market. I think we can think about that further on it can go to the eastern states because they are very much connected through the Baltic Sea. So that also shows that new types of infrastructures have to be thought in order to deploy, well, energy sources which are completely unemployed so far.

MS. GNANA: So a final question to Mr. Zheng before I ask the audience for their questions. In the earlier panel discussion that we had, Dr. Adnan Amin mentioned how China is building these grid systems that are highly sophisticated with AI capabilities.

How are you building new infrastructure that, you know, contains these risks that we’ve just talked about and how are you helping the countries, you know, in Africa and South America and other places that you are looking to integrate to also – to also counter these risks?

MR. ZHENG: This is a great question. The China power grid is very large because our – we have a large landscape and as well as a very large number of population. So this kind of a power grid is huge. I very indeed agree that the security for the power interconnection, in general it’s not a technical question and it’s a(n) other issue. I don’t want to highlight too much on this but I want to give an example.

Fifteen years I lived in Beijing one neighborhood and every week there was a half day of power break. But in the recent 10 years, I never had a single second of a power blackout. This is because we have a few power grids interconnected with our neighborhood. I just want to give this example that with more interconnections more security we’ll be. So I want to say we have to strive more hard to uplift the level of the mission for the people and to finally solve the problem of security.

Thank you.

MS. GNANA: Are there any questions? Yes, please.

Q: Thank you for all of your presentations. But I’d like to direct my question to Mr. Zheng. I believe we have a translator so I will just ask my question directly. (In Chinese.)

(Continues in English.) It would be a little bit similar to your question. I want to ask that under the One Belt and the One Road Initiative that clean energy is having a kind of a very important role in this initiative. How important –

MR. ZHENG: It’s a very good question. Thanks for your question as well. Under the One Belt and One Road Initiative, which proposed by China and our president, Xi Jinping, the interconnection of the power grid will not be only implemented around the One Belt and One Road area. We also plan to do cooperations with – around the world with the African Union.

This is not a(n) issue that China is paying attention. It’s a global issue that all the world is paying attention to. The interconnection of energy among the globe in the power generation aspect we hope that – to replace the fossil energy with more of the clean energy – to replace the other form of power with more electricity.

In China, we have a goal of 50 policy. We hope to improve the clean energy supply with 50 percent of all the energy supplies. In China, we hope that in the global scape we can use more and more clean energies. We are looking forward under the 100 percent of clean energy adoption the world will be better and our life will be better.

Thank you.

MS. GNANA: I think we have just one more minute for – yes, please.

Q: Hello. My name is – (inaudible). I’m from Ministry of Foreign Affairs of Turkey.

First, I must thank Ms. Parshad and Mr. Ramzi for their words on Turkey because I don’t need to add a single word. So you made the promotion of my country in that way. Thanks for that.

Well, the question goes to Mr. Herdan. Well, you talked about CO2 emission criteria as an example – CO2 emission criteria from external sources that comes through the EU. I mean, here it comes to my mind the Nord Stream 2. I mean, what would be the position of Germany in this context?

And another related question, how will you be proceeding in that after the U.S. sanctions plus how it’s going to be integrated into the new gas directive of EU? Because the responsibility will be on the shoulders of Germany, it seems. Thanks.

MR. HERDAN: Well, I think the gas directive in the EU most probably many of the auditorium will not understand so that may be a bilateral issue, I would suggest. But the message I would like to send is that we think, as Germany, that we need to initiate a process for Europe and I believe that processes for other regions of the world also have to be initiated not only about their own production of energy and the distribution of energy and the CO2 footprint of that, but also the import of energy from other regions through the respective regions.

So, for us, it’s quite clear if we don’t look at that – if we don’t look at that and just believe that what is imported is good in terms of CO2, then we will end up in a mess. Then we will end up in a mess and that means that we, as Germany, will initiate the process in Europe that we set further requirements for the CO2 footprint of energy imported into Europe. And I really believe that in many countries and areas and regions around the world a similar process will start – will have to start because otherwise we will never ever meet what we’ve all agreed in Paris and what we are aiming for, as our Chinese colleague just rightful mentioned.

MS. GNANA: Thank you. That’s all we have time for. It’s been a very insightful discussion. We’ve identified cybersecurity risks as one of the biggest risks facing these systems. But we also have come to an understanding that greater integration of grid systems is inevitable and is also perhaps a way for – you know, for people in different parts of the world who may not have access to an uninterrupted supply of electricity and access to energy to have that access, and it’s also a way to push for greener economy.

Thank you all for joining us. We’ll have lunch served in the ballroom foyer until about 2:15. Thank you very much. (Applause.)

(END)