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

2. 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. 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. 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. 5 Asia-Pacific LNG Trade 2005 (bcmpa) EXPORTS IMPORTS Total trade: 122 bcmpa (89 mtpa)

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

7. 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. 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. 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 Australian Emissions Global Emissions Fuel Source

10. 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. 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. 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. 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. 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