A Priority Project of the EU and integral component of the Southern Gas Corridor

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1 White Stream A Priority Project of the EU and integral component of the Southern Gas Corridor Roberto Pirani Chairman of the Board November 2010 Project development by the White Stream Consortium White Stream Pipeline Company Ltd London, UK White Stream Pipeline Company Limited,

2 The White Stream gas transportation project in the context of the Southern Gas Corridor A factor important for Caspian region governments and for potential upstream investors is the security and continuity of demand The concurrent development of White Stream with Nabucco and other Turkish loop projects offers producers and exporters such security of demand and security of export. White Stream The EU s Southern Corridor projects are mutually reinforcing The important result is not only 60 Bcm/y+ of capacity, but also dramatic reduction of perceived transportation risks 2

3 East-West Energy Corridor pipelines paved the way for Caspian Gas to Europe The three success stories from the Eastwest corridor prove that market-transforming pipelines can be realised Supsa Kazakh Sangachal Erzurum Picture from CB&I John Brown Limited Ceyhan 3

4 The EU needs to replace declining production and meet new demand growth IAE: Demand for gas in Europe will increase from 526 bcm/y in 2010 to 622 bcm/y in 2030 Europe gas imports will increase from current 232 bcm/y to 476 bcm/y (+244 bcm/y) Volume Bcm EU27 consumption 2020 import gap yet to be contracted White Stream: 32 Bcm North Sea production Continental European production IEA 2007 IEA 2008 IEA 2009 IEA 2009 IEA Data from: IEA WEO , BP Statistical Review of World Energy, and other sources 3% 6% There is a growing need for additional gas from new supply routes to the EU 4

5 Reserves and resources to supply EU s Southern Corridor are huge Change of PARADIGM: Caspian basin the third major league gas supply centre in the world. Gaffney Cline REPORT confirms many companies long-held view the gas is there Main data: BP Statistical Review of World Energy, 2009 (Tcm) GUEU-White Stream Stream Pipeline Pipeline Company Company Limited, Limited, the White the Stream White Stream Consortium Consortium 5 1.6

6 The EU Southern Corridor vision will STRENGTHEN Europe s single gas market Main data: BP Statistical Review of World Energy, 2009 (Tcm) GUEU-White Stream Stream Pipeline Pipeline Company Company Limited, Limited, the White the Stream White Stream Consortium Consortium 6 1.6

7 Without Southern Corridor Main data: BP Statistical Review of World Energy, 2009 (Tcm) GUEU-White Stream Stream Pipeline Pipeline Company Company Limited, Limited, the White the Stream White Stream Consortium Consortium 7 1.6

8 EU support the development of the Southern Corridor The EU Energy Commissioner Günther Oettinger told the energy forum in Ashgabat on the 14th of April 2010: The Commission will continue to strongly support the development of the Southern Corridor Several projects make up the southern corridor, including Nabucco, the ITGI and White Stream. The importance of the southern corridor was explicitly recognized by all 27 Head of States of the European Union at the European Council in March White Stream Pipeline Company Limited,

9 The European Parliament Resolution on the need for an EU strategy for the South Caucasus The European Parliament Recognises the significance of the region for the EU's energy cooperation and energy security, especially in the context of the development of the Southern Corridor (Nabucco and White Stream) European Parliament resolution of 20 May 2010 on the need for an EU strategy for the South Caucasus (2009/2216(INI)) para.29

10 A successful Caspian gas strategy: BIG GAS offer If Caspian countries are expected to decide on allowing western companies for E&P and support westbound projects, they will need to see that potential exports to Europe are sufficiently high and capable of providing a significant part of their future revenues. otherwise it will be difficult for them to get engaged in the complex process not favored by some of the established partners CDC conceived by the Commission as a component of the Southern Gas Corridor will be able to provide such expanded opportunity.

11 Two key strategies The Southern Corridor plan includes two key strategies needed to open up Caspian gas to western investments and direct export to the European gas market 1 BIG GAS strategy by stressing its aim to buy large import volume from Caspian (90 Bcm/y or more) EU reduces barriers hindering the development. 2 Effective CORRIDOR strategy - by stressing its aim to develop all key projects of the Southern Corridor the EU reduces the perceived transportation risks for the Caspian producers and enables decisions on trans-caspian crossing and new PSAs with western companies. Upstream investments are huge and risky. Caspian producers will want to have a secure gas export infrastructure to Europe 11

12 White Stream is feasible Our work up to date cofunded by the European Commission has proven: Market feasibility Demand for gas Supply of gas Economic and commercial feasibility Technical feasibility proven ultra-deep water pipeline technology Legal feasibility White Stream s development schedule aims to deliver first gas shortly after Nabucco White Stream is already economical with 8 bcm/y Capacity can be increased to meet need by adding offshore strings The volume of gas will build-up gradually to 32 Bcm/y The build-up schedule is flexible and can be ACCELERATED! 12

13 The White Stream project is commercially viable and offers flexibility in capacity build-up The volume of gas will build-up gradually to 32 Bcm/y Capacity can be increased to meet need by adding offshore strings The build-up schedule is flexible and can be ACCELERATED! White Stream is already economical with 8 bcm/y Bcm Stage 2nd 2: string: 16 Bcm/y Stage 1: 1st 2nd string: string: Stage 3: 32 Bcm/y Volumes 4th string: 8 Bcm/y Bcm/y 3rd string: 8 Bcm/y 8 Bcm/y 88 Bcm/y Bcm/y 1st string: 8 Bcm/y

14 White Stream aligns multiple interests There are three broad sets of interests in play with respect to the Southern Corridor: The EU needs diversity of routes as well as of sources. Caspian need a sufficiently large, guaranteed revenue stream to warrant large, new direct gas trade deals and investment in upstream exploration and production. Turkey s land bridge to Europe is in many ways the natural or obvious gas pipeline route, but the prospect of a transport monopoly slows progress on agreements, while the existence of a range of joint interests with Russia further complicates Turkey s decisions. 14

15 How to align these interests? (1/2) The Southern Corridor can align the interests of the EU, Caspian gas producers and Turkey with much higher certainty and in much shorter time frame if it has White Stream as an integral component. For Turkey, the development of White Stream concurrently with Nabucco will neutralise concerns about a future transport monopoly. The three-way alignment of interests outlined above will catalyse earlier and larger scale investment in exploration and production of Caspian gas. The transported gas volumes will be larger and the timing of developments will be sooner, leading to outcomes with greater overall economic attractiveness and energy security for Turkey. 15

16 How to align these interests? (2/2) The limited production capacity that investors have developed and the volumes of Caspian gas produced at present are a reflection of the current lack of westward export infrastructure, and not a reflection of the lack of reserves or the limitations of the resource base Development of White Stream concurrently with Nabucco will accelerate the development of Nabucco. White Stream and Nabucco together will catalyse TCGP and the huge Caspian gas potential. Beyond this initial catalysing effect, the mutually reinforcing effect of the two projects will increase as increments of capacity in each project dove-tail with each other. 16

17 First string - Georgia to Constanta White Stream Length: 1100 km (subsea to Romania) Depth: 2150 m Diameter: 28 inch Volume: 8

18 The Pipeline Concept fully meets the project s requirements Current deep-water proven technology dictates the phased development of the White Stream pipeline project: capacity of each separate string equals to 8bcm/year. The option for the Black Sea crossing using LNG tankers was also examined but the pipeline concept was found to have commercial advantage, particularly for large volumes over this relatively short distance. More importantly, the pipeline will provide the required security of demand for the success of the Southern Corridor plan. But for the volumes availably before Shah Deniz 2 and other major fields could start production, LNG and CNG transportation can play an important bridging role and we welcome developments on using these technologies for trans-black Sea transportation White Stream Pipeline Company Limited, the White Stream Consortium 18

19 Route design from Sangachal to Constanta has been accelerated due to fast developments in the Caspian White Stream Onshore: 650 km (Sangachal-Black Sea) Diameter: 46/56 inch Offshore: 1100 km (subsea to Romania) Offshore: 630 km (subsea to Ukraine at one of the next stages) Depth: 2150 m Diameter: 28 inch (subsea to Romania) Volume: 8~32+ Bcm/y (8 Bcm x of strings ) Completion: (first string ) 19

20 Saipem 7000 J-laybarge

21 There are no legal barriers to White Stream International and National laws define the rights and obligations Precedent: Blue Stream pipeline has already crossed the Black Sea Key legal issues: Coastal states do not have the legal means to prevent construction and operation of White Stream White Stream will enter 12 nautical mile territorial waters only at the landing points at either end of the route International Law guarantees freedom to lay pipelines on the continental shelf and in the Exclusive Economic Zone The existence of Blue Stream is not a legal obstacle to White Stream there are many examples of submarine pipelines that cross other pipelines and cables White Stream will implement international standard EIA requirements 21

22 White Stream will facilitate a beneficial balance between major gas market players Market European Union Major transit Ukraine Major sources Russia Black Sea Turkey Caspian and Central Asian states 2010 White Stream Pipeline Company Limited, the White Stream Consortium

23 White Stream project development update White Stream continues to reduce the project s political risk in co-operation with the EU, governments and companies White Stream will deliver first gas shortly after Nabucco, with White Stream s promarket role as a key team player accelerating the overall EU s Southern Corridor plan Studies supported by TEN-E have confirmed that White Stream is feasible: legally, technically and commercially The relevant legal rights and obligations are defined in international law Preparations are under way for the Black Sea marine reconnaissance This will prepare the way for the detailed route survey and ESIA Milestones Scoping and reconnaissance Survey Permits and approvals Financial close EPC Commercial Operation / > 2010 White Stream Pipeline Company Limited, the White Stream Consortium 23

24 ALIGNMENT OIF INTERESTS Three broad sets of interests in play with respect to the Southern Corridor: Turkey, the EU and the Caspian countries White Stream and Nabucco will be mutually reinforcing and will catalyse earlier and larger scale investment in exploration and production of Caspian gas. White Stream and Nabucco together will catalyse TCGP and the huge Caspian gas potential. Development of White Stream concurrently with Nabucco will accelerate the development of Nabucco. The transported gas volumes will be larger and the timing of developments will be sooner. 24