Good afternoon. First of all can I thank the organizers of Forum Istanbul for inviting me to speak. It is extremely worrying to hear talk of a new cold war. I was born and lived for more then 40 years in the old cold war. No one wants to live under that shadow again and I don’t think we should use the word lightly because the situation today is very different. The cold war at the time seemed to be permanent and the only way, which anyone expected the cold war to end was by it becoming a hot war. The fact that it has ended remains one of the greatest achievements for which we have to thank obviously the Soviet leader Mr. Gorbatchov but also partners not only in the West but also in the rest of the world that made it possible for the cold war to end. We do face extraordinarily difficult questions concerning energy. But we have to distinguish between the permanent questions we face which concern perspective shortages of production competition for supplies and obviously improved use of efficiency and perhaps adaptation to high prices. And then we have to consider the short term issues are we as people would say bound to be in conflict, is there any reason to believe that Russia and the US are falling out on energy. They have very different views of energy but I don’t think there is any question of this arising into conflict. But working out what kind of relationship they are going to have is very difficult. First of all it is not straight bilateral relationship. The world is not divided between East and West. The world not necessarily even divided between producers and consumers. If you think of how energy crises were managed in 1970’s compare that to how they’re managed today. At the first sign of a supply shortage in oil the conversations are between international energy agency broadly speaking representing the world industrial consumers and OPEC broadly speaking representing the world oil producers. So it is very different.

But we have two things on Russia, loss of reputation as a result of Ukraine crises any who wants to challenge Russia as an unreliable supplier now has very good excuse to do so. So that’s changed, then we have Central Asia, a large area increasingly important essentially because it is the last major reserve or one of the last major reserves available for exploitation by international companies. Gas must be going East to the Asian Pacific markets but it is most likely to continue to go to the West because of existing and perspected pipeline roots. There is one exception to this, which is China, first of all China’s agreement to secure gas from Turkmenistan as extremely important. It becomes the first realistic project to take gas from Central Asia to a major market without transitive Russia and as is developed it is likely to include gas from Kazakhstan and probably some gas from Uzbekistan as well. The same goes for oil to China from Kazakhstan as well.

There are two more points that I am going to cover. First is Turkey then Iran. Turkey is not effected by pipelines going East because the supplies of oil and gas that come to the West are essentially those from Azerbaijan and they will come through pipelines that are on the verge of completion not only Baku-Ceyhan pipeline but Baku-Erzurum gas line which is due to start piping gas in September. Most importantly Turkey’s role as energy corridor requires flexibility because Turkey does join in effect and arc of countries from Kazakhstan, Turkmenistan, Iran, Iraq, Egypt even by extension with highly indicated the gas producers of Arabia all of which consent gas to European market via Turkey. None of them are necessarily guaranteed to develop this project but given the wide variety of alternatives some of them will surely come about. And I am just going to wind up with one core issue, which is Iran. Iran is the most difficult problem of all because of the nuclear issue. It is not for me to say whether Iran is developing nuclear weapons or not what we do know is that fears that it is developing weapons technology are widespread and this represents a barrier to doing business with Iran. But it is very interesting developments at the UN recently have focused in particular on incentives on ways that might encourage Iran to pursue peaceful use of nuclear energy solely. That obviously has to include energy. Indeed if you add all the figures together an Iran dedicated only to use nuclear energy for peaceful purposes has the capacity to export as much gas in the next 10 to 15 years as Russia does today. This is a simply massive figure, in the long run the EU could easily absorb between 60 and 80 bcm a year of Iranian gas. I take that figure from a figure of 157 bcm, which the IEA the International Energy Agency Chief Economist Dr. Fatih Birol suggested as a potential import of gas from the entire Middle East to the EU by 2030.

Secondly India and Pakistan in the absence of the nuclear raw there is very little doubt that a gas pipeline to India would be built delivering 30 bcm to India and Pakistan. But because the pipeline cost 7 billion dollars to built, 7 billion dollars cannot be raised the nuclear issue remains alive.

Lastly 4 Iranian LNG projects, roughly 10 bcm a year each, how can you finance them when they require Western technology, international finance, the involvement of international companies from France, Spain, Europe against a background of nuclear dispute. Solve those issues and Iran could be exporting 100 to 140 bcm of gas a year in the next 15 to 20 years. That is a remarkable goal and it is a remarkable offers in effect that can be put on the table to the Iranians as an incentive to resolve one of the world’s most difficult issues. Thank you.

Mehmet Öğütçü: Teşekkür ederim. John you want to say something?

One general point which is that technically BTC has the capability of being expanded above 1 million barrels a day relatively straight forwardly, partly by the reduction agents partly by the ability to put in increased pumping stations. There has been technical discussions on whether it could go up as high as 1.6 million barrels a day and some even said considerably more. So there is plenty of scope increased oil from Kazakhstan the question is whether they wish to put the oil into the system in the first place. But I have a question for the minister specifically concerning gas from Kazakhstan, is it your understanding that any gas pipeline from Kazakhstan to Azerbaijan would be direct or would it come via Turkmenistan?


Mehmet Öğütçü: Konuşmacılarımızdan başka müdahale etmek isteyen varsa son fırsat.

I’d like to pick up on couple of points that were made. One was that whatever happens demand is going to increase and the other was the statement in the paper quite correctly that Turkish consumer pay more for their petrol, their gasoline then anybody else in the world. Two are connected. First thing about demand is demand doesn’t rise inexorably in every field, it is overall energy demand that is increasing as we get richer. One of the things we seen in Japan and we may be seeing in Europe, Japan is already has reduced volumes of oil consumption and Europe is really starting to flatten out pretty much now and should start to decline soon. Why is that? In part the legacy of 1975-79 oil price increases we started using oil more efficiently, why, because it was very expensive. On that, this means that if Turkey is paying what it is paying and I am going to make some comments on that in a second then Turkey logically to become the most intelligent efficient user of oil. What is it paying at the moment, I did a calculation earlier, comes out at forgive me if I am slightly wrong around 2.30 dollar per liter. That’s quite a lot, in the UK we’re paying about 1.85 dollar per liter and if you take the US paying 80 cents per liter. So very very roughly the Turks who have a per capita income of 5.000 dollars may be a 1/5th of that in the US are paying close to 3 times the price for their gasoline. Are we saying in effect the Turks value gasoline 25 times or so greater then consumers in the US? Because that is the effect on their pocket, I think it is worth considering this because it means when you fill up at the petrol station, you are going to use that energy very very carefully because it really costs you. İt costs your shipping companies, it costs your transport companies, it costs everybody right across the board and it has an impact of course on the goods that you buy that are dependent on shipment by truck. But I still think it is good news one of the best things sort of happened has been high government taxation on oil for consumers. Why, because when we had the oil price shocks that have sent international oil prices up from 25 to close to 75 dollars a tripling in less then 3 years, what is it meant for consumers in Britain? It hasn’t meant tripling in prices, it’s meant increase of around 25%, not pleasant but quite bearable and indeed if you take inflation in Turkey into account it is not much more then 15% which is simply to say bear it in mind it is not Turkey that has a problem with high oil prices it is the US that has a problem with low taxation. Thank you.