7. Presentation - BP - EUGBC

Speech to Georgia Energy Conference
Introduction
Ladies and Gentlemen,
Thank you for this opportunity to speak this morning.
Energy Corridor
Georgia stands at the historic crossroads of Asia and Europe and nowhere is this
more evident than in the world of energy. Attention has already been given this
morning to the energy resources of the Caspian and Central Asia and the
concept of an energy corridor through Georgia and Turkey into south-eastern
Europe.
My first point is simply that this energy corridor is not a future concept but
already a practical reality.
Energy Corridor
East-West Energy Corridor already up and running
The decision in 1999 to construct the Baku-Tbilisi-Ceyhan (BTC) oil pipeline
fundamentally changed the strategic geography of the region. This remarkable
1768 km engineering achievement runs from Azerbaijan through Georgia to
Ceyhan on the Turkish Mediterranean coast. It moves oil worth around $100
million per day from Azerbaijan to the world markets and permanently ties
together the interests of the three countries along its route i.e. Azerbaijan,
Georgia and Turkey.
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BP Operated Energy Projects in Georgia
Supsa Oil
Terminal
Turkey
BP
BP
–
–
Operating
Operating
in
in
Georgia
Georgia
since
since
1996
1996
Russia
Azerbaijan
The construction of this oil pipeline was followed by the development of the
South Caucasus Gas Pipeline (SCP) along the same route to Erzurum in Turkey.
Since commissioning in 2006, this pipeline has delivered 6 bcma of natural gas
from the BP operated Shah Deniz gas field offshore Azerbaijan to customers in
Georgia and Turkey.
This in turn has diversified the energy supplies of both countries and underpins
the importance of BTC and SCP as the first stage of southern energy corridor
development.
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Shah Deniz 2 Project
Contracts to sell gas to EU and
Turkey
To EU markets
Transit across Turkey
Major upgrade for
SCP, with a new line in Azerbaijan
and compression stations in Georgia
Terminal expansion at Sangachal
with additional compressors for Shah
Deniz 2
Two new bridge linked
platforms provide 16 bcma
offshore processing
110 km of subsea flowlines
in up to 550m water depth
Existing Stage 1 Platform
26 subsea wells drilled
with two semisubmersible
rigs
Together with Statoil, Total, the State Oil Company of Azerbaijan and our other
partners, we are now working hard on the next stage of expansion of the
southern corridor. This will be based on the $20 billion full field development of
Shah Deniz, adding another 16bcma of natural gas to the first phase of
production.
This gas will be supplied through an expanded South Caucasus Pipeline (SCPX)
from Azerbaijan through Georgia to Turkey. This will involve major investment in
additional compression capacity in Georgia. Some of the gas will be sold in the
Georgian and Turkish markets. The remaining gas volumes of around 10 bcma
will be available to extend the southern corridor through Turkey to south-eastern
Europe and the European Union.
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Transit to Europe – main options
EU
Turkey
SCPX
BOTAS
Nabucco
DESFA
Interconnector Turkey-Greece-Italy (ITGI): comprising ITG, IGI Onshore (DESFA) & IGI Poseidon
Trans Adriatic Pipeline (TAP)
Shah Deniz partners are now in commercial negotiations with a range of
potential European gas buyers. Naturally I cannot say anything more about these
negotiations, except that there appears to be good demand for the gas for the
period from 2017 onwards, when Shah Deniz full field development will come on
stream.
Potential European markets include Greece, Italy and the countries of southeastern
and Central Europe. The outcome of these gas sales negotiations will
determine not only the eventual markets but also the infrastructure required to
deliver gas to market – whether this be through the ITGI, TAP or Nabucco
options or some other configuration.
Track Record
The importance of Georgia as a trade corridor extends well outside oil and gas.
We have heard already about the substantial hydro-electric potential, for export
as well as domestic use. Upgrading of the railway system is advancing and the
future potential of rail, road, air and sea transport is clear.
In all these sectors, the key requirement for all investors is to see a track record
of consistent and fair treatment. Georgia has already taken important steps to
build a strong track record in the oil and gas sector as a reliable transit country
and a credible destination for inward investment.
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It is very important that Georgia build on this track record in energy
transportation, to consolidate its reputation as a good place to invest and do
business.
Invest in Georgia
This brings to some wider comments about investment in Georgia. As a major
investor in energy supply and transit in Georgia, we share an interest with all
investors in the longer term success of the Georgia economy.
For this reason, since its foundation early 2006, we have been a leading
supporter of the Brussels based EU-Georgia Business Council (EUGBC). I am
very pleased to be the current Chairman of the organisation.
Amongst more than forty members we count many of the leading Georgian
businesses in the finance, IT, manufacturing, agriculture, property and other
sectors, as well as major international investors in Georgia.
Our role is to promote trade and investment between Georgia and the EU and to
assist our members in developing business in both directions. We have a good
level of dialogue and partnership with the relevant Georgian Ministries, the
European Commission, the respective Ambassadors and other trade and
business associations.
A few key points deserve to be made in this context. My comments about
consistent and fair treatment of investors apply not only in energy and transport
but in all economic sectors. Further improvements to applicable legislation, to
the effective functioning of relevant institutions and to ensuring high standards
of quality control on Georgian products, will all contribute to the strengthening of
trade and investment.
We also look to the deepening of the Association Agreement with the EU and
the next steps towards a Deep and Comprehensive Free Trade Agreement, as
key elements of a closer long-term economic and business relationship.
We welcome the signing of Visa Facilitation Agreement between Georgia and
the EU in June 2010 and look for this agreement to enter into force in near
future. This will significantly benefit Georgian entrepreneurs in developing their
businesses and make an important practical contribution to economic
cooperation between Georgia and the EU.
And finally we welcome the completion of negotiations between the EU and
Georgia on an agreement for Mutual Protection of Agricultural Products and
Other Foodstuffs. This agreement is important because it will help safeguard
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important European and Georgian brand names. The EUGBC looks forward to
the agreement being signed and entering into force as soon as possible.
Real progress is being made in all these areas and in our experience there is also
good reason for confidence in the quality and dynamism of young Georgian
managers and business people. So the prospects are encouraging for a strong
and diverse economy, based on energy transportation and production, the
transportation sector, agriculture and food products, finance and construction
and tourism.
As major investors in the southern energy corridor we are pleased to be part of
this story and look to the future with confidence.
Howard Chase
5 th November 2010
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