1. Slide no 1 APEC Energy, 1 Oct 2008 APEC Energy Trade and Investment Cairns, 1 October 2008 A multilateral approach to energy security: the Energy Charter Pascal Laffont Office of the Secretary-General Energy Charter Secretariat

2. Slide no 2 APEC Energy, 1 Oct 2008 Objective Access to reliable energy supplies for all A multilateral framework encouraging state- to-state relations and confidence-building

3. Slide no 3 APEC Energy, 1 Oct 2008 Energy Charter Multilateral treaty ( “Energy Charter Treaty” ) Forum ( “Energy Charter Process” )

4. Slide no 4 APEC Energy, 1 Oct 2008 Energy Charter Process ENERGY CHARTER CONFERENCE (governing body) Budget Committee Energy Charter Secretariat (HQs: Brussels) Trade & Transit Group Investment Group Energy Efficiency Group Industry Advisory Panel

5. Slide no 5 APEC Energy, 1 Oct 2008 Energy Charter Constituency ■Signatory ■Observer

6. Slide no 6 APEC Energy, 1 Oct 2008 Energy Charter in context 1/2 Energy Charter Secretariat (Brussels) International Energy Forum (Riyadh) OPEC (Vienna) (some oil producers) International Energy Agency (Paris) (OECD based) (WTO Geneva)

7. Slide no 7 APEC Energy, 1 Oct 2008 Energy Charter in context 2/2 “G8” 2007: “global energy security principles” “ASEAN + 3” Declaration 2006 “ASEM” Heads of States 2006

8. Slide no 8 APEC Energy, 1 Oct 2008 Energy Charter: why use it?  To attract private capital (ECT)  To facilitate cross-border projects (ECT)  To promote energy efficiency policies (ECT)  To develop technology transfer (ECT)  To encourage amicable settlements of disputes (ECT/ECP)  For capacity building (ECP)  To be part of a constant and composite dialogue on cross-border energy issues among producer, transit and consumer countries (ECP)

9. Slide no 9 APEC Energy, 1 Oct 2008 Energy Charter: how to use it? observer (limited use of ECP) Member (ECP/ECT)

10. Slide no 10 APEC Energy, 1 Oct 2008 APEC Energy Trade and Investment Cairns, 1 October 2008 ECT Trade Provisions Pascal Laffont Office of the Secretary-General Energy Charter Secretariat

11. Slide no 11 APEC Energy, 1 Oct 2008 ECT vs. WTO ECT applies WTO rules to energy trade –NDS: national treatment, MFN –investments broadens energy sovereignty develops WTO rules on cross-border transit Adapts dispute resolution mechanisms membership complementarities

12. Slide no 12 APEC Energy, 1 Oct 2008 Complementarities: example between two WTO members –C closes its borders to S imports of oil bound for B –Potential breach of WTO and ECT –S and C are both WTO and ECT members –S and C choose ECT

13. Slide no 13 APEC Energy, 1 Oct 2008 APEC Energy Trade and Investment Cairns, 1 October 2008 ECT Investment Provisions Pascal Laffont Office of the Secretary-General Energy Charter Secretariat

14. Slide no 14 APEC Energy, 1 Oct 2008 Underlying Principles Promotion: attracting cheaper FDIs by sending signals that: –risk is reduced –country prepared to abide by their contractual commitments to investors (“pacta sunt servanda”) Protection: of investments abroad (DSM)

15. Slide no 15 APEC Energy, 1 Oct 2008 Prohibition on discrimination: limitations Of “existing investors” ie do not apply to entry “Discrimination” = not only different treatment but different treatment without legitimate reason for the distinction

16. Slide no 16 APEC Energy, 1 Oct 2008  Definitions of « investment » and « investor »  Protection of individual investment contracts  Freedom of investment-related capital transfers  Compensation in case of expropriation and losses due to war and similar events  Employment of key personnel  Prohibition of TRIMs: only for those countries which are not WTO members or which are exempted from WTO TRIMS agreement and which pursue an “infant industry” policy Protection

17. Slide no 17 APEC Energy, 1 Oct 2008 Exceptions In case of –Short supply –measures designed to benefit aboriginal or socially disadvantaged –the protection of the country’s essential security interests incl. the maintenance of public order (Art 24) –no diplomatic relations (Art 17)

18. Slide no 18 APEC Energy, 1 Oct 2008 APEC Energy Trade and Investment Cairns, 1 October 2008 ECT responses to risks associated with cross-border trade Pascal Laffont Office of the Secretary-General Energy Charter Secretariat

19. Slide no 19 APEC Energy, 1 Oct 2008 Challenges to energy transit  Why on-shore, multi-country transit is needed?  Demand is rising  Diversification of supply sources  Makes more economical sense on short to medium distances => cheaper price to the end-user  but  political: energy link is “as strong as its weakest link” => strengthen that link as much as possible  physical: paucity of the existing infrastructure => more is needed to avoid existing bottlenecks  financial: unprecedented level of investments required => cost

20. Slide no 20 APEC Energy, 1 Oct 2008 BTC Project

21. Slide no 21 APEC Energy, 1 Oct 2008 Challenges to energy transit: the IPI Gas Pipeline Project  Common challenges:  The legal structure of the project  Regional Volatility: political vicissitudes among the countries  India’s concerns  Interruption of transit  Interruption of supply (reserve production downgrades, termination of production licenses, …)  Over-dependence on Pakistan  Project financing (Public/Private) (for the Indian segment)  Protection of the Indian investment in Pakistan and Iran  Pakistan’s concerns  Interruption of supply (reserve production downgrades, termination of production licenses, …)  Promote foreign investment  Securing recovery of transit fee  Protection of the Pakistan investment in Iran  Creation of economic imbalance in the region  Iran’s concerns  Depletion of indigenous resources  Project financing (Public/Private) (for the Iranian wells and pipe segment)  Protection of the Iranian investment in Pakistan  Securing best possible price

22. Slide no 22 APEC Energy, 1 Oct 2008 Responses a multilateral framework/forum which –enshrines sovereignty while reducing political risks –gives minimum enforceable legal guarantees thus encouraging multi-country cross border projects and investments at a lower cost –leaves the parties free to work out their detailed contractual arrangements –encourages amicable settlement –provides a composite and constant dialogue thus minimising “tit- for-tat” responses –share best practices and knowledge confidence building process

23. Slide no 23 APEC Energy, 1 Oct 2008 Thank you