The role of the Energy Charter in promoting international energy trade: Energy security, reliable transit and diversification UNECE Committee on Sustainable Energy Geneva, November 2013 Amb. Urban Rusnák Secretary General Energy Charter Secretariat

Eurasia – abundant reserves and major consumer Share of world proved reserves (2012): 55 % of oil ( mt) 74 % of gas (139 tcm) 56 % of coal ( mt) Share of world primary energy demand (IEA New Policies Scenario, 2035) 65 % ( mtoe)

Mutually beneficial co-operation and diversification „This Treaty establishes a legal framework in order to promote long-term cooperation in the energy field, based on complementarities and mutual benefits“… „The Contracting Parties shall work to promote access to international markets on commercial terms, and generally to develop an open and competitive market for energy“… Articles 2 and 3 of the Energy Charter Treaty of 1994 „The global nature of [energy] challenges and the growing interdependence between producing, consuming and transiting countries require strengthened partnership between all stakeholders to enhance global energy security.“ „ the Leaders of the G8, commit to diversification of energy supply and demand, energy sources, geographical and sectoral markets, transportation routes and means of transport‘ G8 2006, Declaration on Global Energy Security

Energy Charter Members and Observers MembersObservers, signed the 1991 Charter This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area Observers, by Conference invitation

Energy Charter Treaty (1994/98) features Sovereignty over Energy Resources Trade Transit Energy Efficiency Investment Promotion and Protection Dispute Resolution Policy Forum Energy Security Open and efficient energy markets

Modernisation of the Energy Charter Process Rome Statement, Dec  Recognised principles and rules of Energy Charter, need to reflect new developments and challenges in international energy markets  Envisaged preparation of practical proposals on how Energy Charter Process could be modernized  Recognised principles in Conceptual Approach to New Legal Framework for Energy Co-operation Road Map for the Modernisation of the Energy Charter Process, Nov  Activities in core areas – geographical expansion, transit, emergency response, investment, energy efficiency, energy security Policy on Consolidation, Expansion, Outreach,Jun Secretary General’s consolidation agenda, Mandate to negotiate updated version of the European Energy Charter (Warsaw, Nov. 2012)

Prominent calls to address energy infrastructure challenges and transit UN Resolution 67/263 (2013) and 63/210 (2008) sponsored by Turkmenistan: – “need for extensive international cooperation to promote reliable transportation of energy to international markets through pipelines and transportation systems” G8, Camp David, „To facilitate the trade of energy around the world, we commit to take further steps to remove obstacles to the evolution of global energy infrastructure; to reduce barriers and refrain from discriminatory measures that impede market access…“ WTO Doha round - trade facilitation: clarify GATT transit provisions

Energy trade and fixed infrastructure What is special about energy transit? Reliance of energy trade on fixed infrastructure – built specifically for transporting energy High up-front investments; large economies of scale, natural monopolies Capacity constraints Pipelines often controlled by incumbent companies Sensitive for energy security

Cross-border and transit pipelines Conditions to make an international pipeline project viable (financeable): Economic viability:  Supply/ demand  Gas pricing, long-term contracts Reliable framework conditions  ECT Art. 7: Non-discrimination, favourable treatment, facilitation of transit Non-interruption of flow, dispute resolution  ECT Investment framework  Model Agreements  Draft Transit Protocol Conditions of access, tariffs, taxes Right of way, approval procedures, licensing, standards Political support  Build confidence, trust, political support for projects  Political, regulatory framework  Credit guarantees, public loans, projects of public interest Energy Charter Policy forum

Experience from Transit Protocol negotiations  Negotiations on Transit Protocol were suspended in 2011, reset possible  Basic principles reflected industry standard  Challenge to reconcile interests of energy producing, consuming and transit countries  Challenge of different regulatory environments  Parallel regional integration processes  Political constraints: geopolitical perspective vs. common rules-based approach

Findings of Energy Charter Stakeholder consultations (2012) Cross-border and transit energy infrastructure crucial in view of the main energy policy goals  Growing dependence of consuming countries on imported energy  Emergence of new energy producers, often in land-locked countries  Increasing volumes of energy traded across borders, often involving transit Transit remains special case due to the different interests of producers, consumers and transit countries. But also construction of new bypass pipelines.

12 Relevant current work of the Energy Charter  Stakeholder consultations in view of a possible reset of negotiations on the Transit Protocol  Contribution of Energy Charter Secretariat (observer status at UNGA) to the report of the UN Secretary General implementing Resolution 67/263 on reliable and stable transit of energy – included in Work Programme 2014  ECS prepared to contribute to international meeting of experts to be hosted by Turkmenistan in early 2014  Making the conciliation procedure for transit disputes in Art. 7(7) ECT more effective  Possible contribution of the Energy Charter Conference in early warning, preventing and settling disputes  Workshop on Long-term gas supply contracts and gas trading at hubs (March 2013)  Feasibility studies for concrete infrastructure projects (“Gobi Tec” and “Asian Super Grid”)  Task Force on Regional Energy Cooperation in Central and South Asia

13 Conclusion Energy Charter is well positioned to play a strong role in developing international transit framework Legal framework of the Energy Charter Treaty on trade, transit and investments Policy forum comprising 52 members 25 observers, network of governments, international org. and industry Experience with negotiating multilateral transit framework Expertise of the Energy Charter Secretariat, designated government working group (Trade and Transit Group)  Energy Charter’s contribution to implementation of UNGA Resolution 67/263 on reliable and stable transit of energy and its role in ensuring sustainable development and international cooperation is part of organisation’s work programme for 2014