APEC Energy Trade and Investment Roundtable Cairns, Australia 1 October 2008

1. APEC Energy Trade and Investment Roundtable Cairns, Australia 1 October 2008 Robert Pritchard APEC Gas Forum

2. Basic Truths: Energy in APEC • Economic activity underpinned by energy • Geographic disparity in energy supply and demand • Increasing reliance of APEC economies on cross-border energy trade

3. Why Was APGAS Established? • APEC Energy Ministers wished to accelerate cross-border natural gas trade • A response to energy security concerns • APGAS to create “a competitive, open and transparent marketplace for natural gas, particularly LNG, in the region” • APGAS applauds APEC for its ongoing commitment to open trade and investment

4. Dramatic Change in LNG Supply/Demand Balance • Demand has outstripped supply • Asia-Pacific and Atlantic Basin markets have started to converge over last 2 years • This has been commercially driven • The change is shown by next 2 slides

5. Asia-Pacific LNG Trade 2005 (bcmpa) EXPORTS IMPORTS Total trade: 122 bcmpa (89 mtpa)

6. Asia-Pacific LNG Trade 2007 (bcmpa) EXPORTS IMPORTS Total trade: 148 bcmpa (108 mtpa) new entrant *

7. Dramatic Change in the Climate Outlook • With an increasingly carbon-constrained global economy, climate change is now as important as energy security on the APEC policy agenda • LNG is the cleanest of all fossil fuels • Importance of accelerating cross-border natural gas trade continues to mount as every day passes

8. UNFCCC Thinking September 2008 • Energy sector is responsible for largest share of global emissions • Energy infrastructure requires a total investment of $22 trillion to 2030 • This should be invested in low-emissions technologies • Otherwise, emissions go up 50% (instead of down 50%)

9. Advantage of Switching to LNG Kg/MWh global emissions showing emissions of exporting economy at foot of columns (Australian case) Every tonne of emissions from LNG production avoids more than 4 tonnes globally Fuel Source Australian Emissions Global Emissions

10. Current Gas Industry Concerns • Key concern of customers: reliable supply at competitive price • Key concerns of developers: overheated construction market, escalating costs, difficulties with project approvals and uncertainty about the cost of carbon • Public trust in LNG must be maintained

11. Investment, Not Trade Barriers! • Barriers to natural gas trade? • Not really – they are more barriers to investment in new LNG capacity • Even then, they are not so much barriers as they are risks that discourage investors

12. Good Policy Settings Essential • To encourage investment, good policy settings are essential • There must be certainty of application • This means the entire spectrum of policies that impact on investment stability: fiscal terms to environmental requirements

13. Climate Policy • Uncertainty is actually increasing • Dampening effect on investment • Risk that international climate regime will infringe on international trade regime • A sector-specific approach to reduction of emissions in LNG sector merits attention in international climate negotiations

14. Conclusions • Intersection of the international climate and trade regimes requires examination for its effect on APEC energy trade • Greater domestic use of natural gas, and increased cross-border natural gas trade, will benefit the global climate • Any domestic policy that inhibits natural gas investment is bad climate policy and bad for energy security