Transition through Gas

An Energy Accord

Chris Cook

Wimpole International

31 October 2012

21st Century problems cannot be solved with 20th Century solutions

20th Century - Energy Charter

Stakeholders

- Producers

- Consumers

- Intermediaries – public (State) and private

- Investors

Legal framework – Energy Charter Treaty & Organisation

Investment – Debt and Credit (Equity) instruments

21st Century - Energy Accord

Complementary consensual addition to Energy Charter

Stakeholders

- Custodian

- Producers

- Consumers

- Managers (service providers)

- Investors

Legal framework – Nondominium agreement

Investment – Prepay credit instrument ('stock')

Nondominium – What it is and is not

Nondominium is not an organisation

Parallel agreements for self-organisation

Clearing Union - agreement between stakeholders jointly

- governs & guarantees energy stock issue & exchange

Capital Partnership - agreement between stakeholders individually

- governs allocation of energy flow

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Managers

Producers

Investors

ConsumersConsumers(via Custodian)

Capital Partnership

Nondominium – How it Works

All rights held by Clearing Union as common Custodian

Production shared by Producers and Managers in accordance with Capital Partnership

Balance of production after Manager's share is available to create, issue and sell Stock to Investors

No stakeholder has dominant rights

Stakeholders have agreed 'stewardship' rights of veto

Nondominium – Outcomes

Neutrality

– no competing sovereigns as in Condominium

– takes politics out of energy

Equity – ethical sharing of risk and reward

Stability – no stakeholder has an interest in volatility

Resilience – risk is distributed

Complementary – not an alternative but an addition to existing agreements

Prepay ('Stock')

Gas Prepay – What it is & How it Works

Undated credit returnable in payment for gas supplied

Stock is issued by gas producers and sold at a discount

$1.00's worth of gas sold for 80c gives absolute return of 25%

Rate of Return is the rate over time at which Stock may be returned to the issuer in payment for gas supplied

Rate not fixed - depends on existence & amount of flow

Gas Prepay - Outcomes

Gas Loans

Prepay - direct investment in future gas production

Producer – sells gas forward; locks in price; interest-free loan until stock returned against gas supplied

Consumer – prepays for gas; locks in gas price, but not supply

Investor – investment in energy; if a financial investor does not buy, a Consumer will

Gas Prepay - Outcomes

Subsidy Policy

Gas price increased to global level

Populations compensated with issue of gas stock

Incentive to save gas, and exchange stock for value

Gas Prepay - Regulation

Transparency

Existence of prepay must be visible to stakeholders

Management

Issuance managed by service providers with a stake in the outcome

Managers accountably supervised on behalf of stakeholders collectively

Next Steps

Energy Co-operation - Caspian Gas 5 + 1

All 5 Caspian littoral nations + Turkey

Caspian 'balancing point' physical market price

Caspian benchmark gas price

Gas Clearing Union

Gas Prepay investment – 'gas loans' fund infrastructure

Gas Capital Partnership - private sector service providers need minimal capital

Energy Co-operation:Transition through Gas

Eurasian Energy Clearing Union extending to EU, SCO...

Energy-based framework for financing trade and funding investment in renewables and energy savings

Energy standard of exchange

Transition through Gas

Energy Accord

Energy Principles – Values underpinning policy

- Accessibility, Equity, Neutrality, Resilience, Security, Stability, Sustainability, Transparency

Energy Doctrine – basis for policy

- Energy Economics – least energy cost

- Energy Co-operation – funding from shared surplus

- Energy Resilience – distributed production and risk

- Energy Savings – saving energy is saving money

- Energy Standard – price dollars and oil in gas