Okay, I think it would be, I think we can go ahead and get started. It's great to see such a big crowd here, but I know it's not for me. I'm David Pumphrey. I'm the Deputy Director and Senior Fellow with the Energy and National Security Program here at CSIS. And it's always a great pleasure to have my good friend, I was going to say old friend, but I don't know if that's the right term, Faraday. A friend of long standing, Faraday and Feshiraki here to talk with us. It's been really interesting. This is, I think, the fourth time that we've had you here, and I think the crowd gets bigger every time. So it's really great. You can tell that everyone is very interested in what you have to say. Faradun's biography, for those of you who don't know him, and I think most of the crowd here does know him, is available. And I think it's really a remarkable history from these early days in the Iranian government to then moving to Hawaii and starting an energy program, looking at Asia in particular and trying to penetrate into the midst of the energy policy circles and really moving that into a very successful consulting business that looks worldwide. So I think that your knowledge and experience will benefit us today. The topics for Faradun's conversation were China and India's energy policy directions with a little bit of discussion about Iran. And this came about after we tried to narrow down on what we should have Faradun talk about because there's so many things. So I would encourage you, if you have any questions on energy globally, go ahead and think those up too and we'll hit him with additional questions in the Q&A. So with that Faradun, much please. Thank you very much, Dave. I'm very happy to be here. I was told, you know, Washington is a town of Synex, so unless you give lunch to people, they don't come. But I am very impressed that so many of you have turned up. My job is to entertain you and amuse you and give you a few facts in between. The topics are very wide and we were just talking that, you know, I have 47 slides here and if I want to go through each of them one by one, you'll be here until 6 p.m. So I will jump across them and I try to sort of compare and contrast India and I'll talk a little bit about what they are doing in Iran. And as Dave said, you should feel free to ask questions on any topic, as long as it's not about specific retail stations in Arizona. I should be able to say something. Let me first start by saying something about, you know, comparing China and India from the perspective of an analyst. If we look at the incremental growth for oil demand in the world and also for natural gas, you have three countries, three areas standing up to show the power to you. Number one is China and the annual growth in China has been significant. We expect it to remain in the 400,000 baros per day a year incremental growth over the next 8-10 years and then significantly slow down and I'll tell you why. After China is not India actually, it's the countries of the Persian Gulf. Persian Gulf countries, they grow by about 300,000 baros per day, 250-300,000 baros per day, and India about 100-250,000 baros per day. So China and India should not surprise you, the big countries, the growing countries and dynamic economies, but the countries in the Persian Gulf are, add them all together, you know, sort of even including the large population country like Iran, they're still pretty small. But why are they growing so fast is because the price of oil is next to nothing and the incomes are high and the population is 70% under the age of 30. So sort of a dynamic criteria for a massive growth in energy demand. But in China and India, it is very much I think the industry, the economy and the way that the system is organized which is leading to the growth. So India about a third to 40% of the Chinese growth rate is what we expect. The systems are set up in relatively similar ways. There are multiple national oil companies in both countries. These national companies are very rich and very powerful. In China, the three state oil companies this year are expected to make $45 billion of net profit. I mean that would put to shame a lot of the big companies. They don't have to pay taxes. They don't have to give the money to the government. They keep the money. As long as they can invest it properly, the government let them keep it. And this is why you find a great deal of aggressiveness and brave strategies in going international acquisition as well as domestic expansions. India similar, but smaller scale. Much smaller scale, but you have very aggressive activities by India except that the Indian companies, they don't make that amount of money. And some of them in fact have to be subsidized because of the losses they suffered in the downstream sector, retail sector. Both countries kept the prices below the international market for a long time. China came out of that and in fact in China there is a schedule that unless the price of oil goes above $130 a barrel, the government will not intervene to fix the prices. But above $80 there are moderation systems in place, but you can still have higher prices for petroleum products even at above $80 crude. Both India and China have undertaken significant reforms. Last month was an amazing month. India and China both have raised price of natural gas substantially. But India doubled the price of natural gas from the administered pricing mechanism, the APM, cheap prices they had. And they have raised the price of petroleum products to the point that in China and India today, they are selling prices at around international prices. So they have done substantial actions to try to bring things in balance with the world market. So in China, the oil companies drive government policy. In India the government drives the oil company policies. So the state companies, the big giants which operate in these two countries are not the same. The Chinese ones are much more powerful and much stronger. If they want something really done, they will put it, couch it in the terms of security and they will pull the government with themselves who will use their muscle to sign the contracts on their behalf. In India the government has to tell the companies what to do. So the roles are not quite the same. The Chinese are much more powerful in the area. The provincial authorities in China are a lot more powerful than the provincial authorities in India. But the direction and the importance of both of the countries remain the same. So again, as I mentioned, this is going to be available from CSIS and I'm not going to go through every chart. I will jump across very fast. But I wanted to show you just a few things. One thing is that don't count, hold your breath about significant reduction in coal use in China. It still remains very large. Though it's taken a big change from 70% to 60% and we expected probably to go down to 50%. But coal remains very important. Gas is slated for massive increases both by domestic production as well as through imports where China has not become a big important global player as far as gas is concerned. Oil remains important. The growth rate for oil in China will be sustained for the next many years. But there is a huge debate in China today about bringing oil demand under control. In fact, it's the number one issue to my mind today of how to create peak demand in China. And I think that is coming. The government has mooted now 12.5 million bar per day as a ceiling for oil demand in 2020 and to keep it that way. And of course you can't be precise about these things but they are determined lots so when they want to do something I believe they have the tools at the disposal to bring the demand very close to what they are hoping. So certainly we have moderated significantly our forecast of the demand growth in China. You know the economists and I am guilty of that forecasting demand is very easy. Just give me two points of history of GDP and one elasticity and I'll forecast anything for you. Don't ever ask me where the supply comes from but that's not my job. It's a geologist.  So China becomes bigger than the US and becomes double the size of the US. If everybody in China drives a car then everybody in the US has to walk. There is not enough oil in the world to accommodate some of these forecasts but the people who do the forecast they don't actually care about where the supply comes from. So whoever does forecasting for you anywhere please tell him show me where the supply comes from. Hold them to it. And in case of China the Chinese government understands that. That is why they realize that if they keep growing their own action will make sure that the price of oil goes up and the energy security will be in trouble. So because of that they have taken deliberate measures and they are taking deliberate measures to try and bring the demand and control. So maybe they cannot do it at 12 and a half maybe with 13 or 14. Maybe the growth rate will not be zero maybe only 50,000 bar per day but it is a high priority issue and it is something that I believe they intend to do and they can do and it should enter our calculations as we look at the future of demand in China. This is who is who of the Chinese oil industry. A complicated story but actually quite logical. You can see the big boys. This is the CNPC Petro-China, CNOC and Sinopec. Then you have the fourth one. Sinokem, China Oil here and Unipec are the trading arms of Sinopec and CNPC. This is a company, GenRong, which is only authorized to buy oil from Iran. This company is only formed with for trading from Iran. Now because other companies objected anything more than 250,000 bar per day that they purchase after they buy it on a 50,000 bar per day then other Chinese companies can also approach Iran for volume but before that it cannot and so many people ask the question well the Chinese are working in Iran bringing volume to China. Actually if the Chinese company works in Iran what they produce will have to go to GenRong, not to them. This is a company which came from the military is now registered as a civilian company and it is a very important player a very important player and it is has a mandate for the first quarter of a million bar per day imports to be done through them. There is a the government here is represented by oops okay okay now I can make you move. NDRC National Development Reform Commission and the NAC NEO these are the government apparatus in which report to the council of ministers or state council but essentially you have these giant enterprises which are very powerful and very strong and very rich and they are both the tools of the state and the state is the tool of them. The principle in my view is that survival of the enterprise is more important than the state. So first you focus on these companies and the state is there to support them being very successful and being globalized and I will come and tell you how much oil they control around the world today this is what I told you about the profits of the Chinese companies these guys are really rich and they have a lot to shame many of the international majors I told you about demand demand 6 or 7% growth but this is expected to slow down significantly I don't want to talk too much about refining capacity the Chinese policy essentially is I don't want to export I don't want to import but since I don't want to import exports so some volume may go out of the country as balancing but huge amount of capacity has been built in China and a huge amount is under construction so we don't expect China to become a huge exporter of petroleum products because they don't want to they just want to make sure that they produce enough for themselves now I will tell you India is very different India has become a hub of refining exports today India exports more refined products than Saudi Arabia that may come as a surprise to you as a Singaporean which is the trading hub of the Asian market but India is number one that is part of a different kind of thinking different kinds of policy but China still builds a lot a lot of the people who supply technology manufacturing are very keen but the Chinese use most of the technology they developed themselves during the years and the technology is pretty good the level of sophistication of the Chinese finally is only second in the world after the US a lot more than it is in Japan or most of Europe oil product prices I mentioned to you they have managed a system now that as long as the prices are under $80 you can sell at the market level now they will tell you what the market level is but they are very very close to the market between $80 to $100 they have some level of control between $100 to $130 a bit more control after $130 oil they keep the price flat this is the current regulation but in China for a period of time the companies were losing a lot of money because the price of oil was $147 they kept it as if it was 80 and the government companies at the end of the year received the check from the government they were kept whole but they had to wait a whole year for it they didn't like it some of them started to export and left the domestic market not supplied the government was not pleased put their foot down you can't export until you make sure the domestic market is supplied but there is a sort of happy arrangement between the government there is no big tension there is no big sort of conflict more conflict in India than in China particularly India because there is a robust and strong private sector operating so the system has worked more and more moving to the free market and contrary to everybody's expectation this is going to slow down the demand it hasn't happened the demand is about the same as it was before almost unchanged at about 400-500,000 per day growth a year which scares the Chinese government itself who they want to see some level of control there let me talk about where the Chinese get their oil the Middle East is almost 50% and Africa is 30% Africa is very important because of number one Angola and then Sudan now why do the Chinese like Angola very much because Angolan crude is very much very similar to Chinese crude is heavy and is sweet and it fits the Chinese to find this very well this last two weeks China even imports from Angola has gone higher than Saudi Arabia but essentially the lowest Saudi Arabia is number one Angola is number two and Iran is number three that's how the system is kind of designed to and Angola is imported by CNPC Petrochina because they are the ones which are owners of the refining system which can handle heavier sweeter crude what comes from Saudi Arabia, Iran, Kuwait, Iraq goes mostly inside the Sinopec system which is designed to handle sour crude now you would say why would Venezuela want to say to sell heavy crude to CNPC Petrochina since they don't have a system to handle crude so that sort of shows I think a level of lack of understanding of who is who in China and what does what the companies do because CNPC was in upstream business in Venezuela that was seen to be by Venezuela to be the obvious choice but actually CNPC and its public affiliate Petrochina are the least able to handle the sour crude the ones which who can handle it very well are the people in Sinopec and there is no the Chinese concept if you deal with this group the other group is not going to deal with you so as a result of this you really need to get large volumes from Venezuela into China you need to have dedicated refinery built and that is the plan $10-12 billion $400,000 so you can make it work but there are massive associated costs and de facto discounts which have to come to the system so the volume they get from Russia is also significant but they get oil from Russia by train it's amazing these dedicated trains which just go from one spot to another spot this is roughly their system and it's highly unlikely that this level of buying in terms of the relationships change as the growth comes the same kind of people will be expected to supply Saudi Arabia will go to a million buyers per day I expect within the next 3-4 years when they are likely to take a partnership or a special arrangement with the Qingdao refinery in the northeast and supply $200,000 they dedicated to that too essentially Saudi Arabia becomes unchallengable in the system and now the Saudis have invested together with Exxon Mobil in the refinery in Fujian province which is already in operation for more than a year and a half when we look at the outlook for imports they will buy a lot more as time goes by as you see we see their production as flat not changing so any kind of growth will have to go towards imports so they become a bigger and bigger player as time goes by in terms of the oil imports you have potential of refining surplus because they are building the refineries assuming the demand will come but at the same time they are putting their foot on the brake on the demand side so that may end up giving them a surplus of refineries but as of now the policies that we don't want to export we will export what we have to as a balancing but it is not a strategy for us to be in the product market the strategic petroleum reserves the three phases phase one which ended in 2008 103 million barrels 31 days of net imports and 15 days of total consumption in the four sites already completed and all the tanks were filled and the price of oil to go down and then they started to buy the Chinese are very much sensitive to being accused of being a reason for the price of oil goes up and of course many people want to blame somebody used to blame OPEC and Saudi Arabia but now blame the Chinese went up and nobody says the reason the price of oil goes up is that because I am consuming too much oil myself I should cut it back myself and if anybody mentions taxes so it is really the Chinese are so sensitive and they just want to wait until they see a lol in the price of oil before they start buying and you know the other day when IEA said China has become the largest energy consumer in the world immediately disputed IEA no I'm the second US is first I don't want to be the first year this is a bad position to be in they don't mind being better than the Japanese and the Koreans that's fine but they don't want to be bigger than the US the US has to be the biggest one first so we can not pass the blame to us target phase 2 2012 this is 170 million barrels which brings a total to 272 60 days of imports and 30 days of total consumption this one half done and phase 3 2015-16 is to come up to a total of 500 million barrels of SPRs which is what they intend to do and I believe they will achieve it but their buying is going to be very much affected by the price of oil they don't want to be accused the price of oil is going up you started buying from them that's why you pushed the prices up they don't want to be blamed for that the question is how much oil they own around the world this is the equity position and here are different players and you can see of course in the blue is Petro-China number one of course in China and around the world and the big upstream player they own most of the assets and number two the green the red and others including Sino-Chem are above so as of 2009 almost 1.2 million barrels per day of equity on their own around the world which I must tell you that it's a remarkable achievement after 40 years the Japanese could not come to one sixth of that level and in Korea where there is a major effort by Korean National Corporation on the way there are 300,000 barrels per day would be sort of pretty much the likely upper ceiling in the near term but China is 1.2 already and different players this is not the kind of service contracts that they have in places like Iran this is actually equity oil so very substantial now where will this number go based on existing agreements signed this would be about 1.5 million so it's a significant even by international standards and it comes from a strategy of acquiring what other people have found the mistake in the Japanese strategy was to always try to find it yourself and if you're not very good at it then you can't find it but let somebody else find it and I'll just buy it and I'll buy it for my 45 billion dollars that if I don't spend I may lose so the Chinese policy has a great deal of logic inside it and if it doesn't make sense to you that's because you don't understand why they do what they do but there is always a good reason for it every time I didn't understand it I looked deep and there was a good reason so if you're going to go and look at the production of the Chinese companies between CNPC, CNOX, SinoPak you of course see that CNPC is number one number two, CNOC outside and of course SinoChem is emerging and SinoChem is an oil trading company which now has refining assets and also upstream assets outside storage assets in China it's very important for these companies to show themselves to be integrated if they're not integrated another of the big boys may gobble them up those of you who follow China might remember China National Star was one of our clients a very successful company upstream one morning doesn't exist anymore became part of SinoPak you have to say you have to have refining, petrochemical upstream at home upstream abroad and LNG now SinoChem still doesn't have LNG so they just want to get their hands into something too so that they are now in a seat at the table for being integrated domestically and internationally and of course these are CNPC has 1.4 million employees SinoPak is pretty small 1.2 million employees SinoChem is really lean at 600,000 people so when they register these companies publicly listed companies in Hong Kong and New York you put the good assets and a small number of people CNPC put 400,000 people in the publicly listed company PetroChina and all of the sort of liabilities social security system they have to provide housing medical everything else is put in the parent company so whatever profit they make of course these activities will go to the parent company and get dumped into the system that they are committed to do but for the shareholders the value is only of the good parts of the good assets of the companies now gas I want to say a few words in China gas is growing is very important and is growing very very fast but starting with a very small role 3.5% in 2009 used to be only 1% 8 or 9 years ago and we are expecting it to go to anywhere between 7 to 9% in the 2020 so still a huge growth in China but it is much smaller than oil and coal of course as we look towards the demand sectoral demand in China the demand is industry not power power is a secondary player residential and commercial are likely to come but they have to build the pipelines a reticulation system that they don't have but it is coming today the residential sector can pay you $12 $14 a million BTU the power sector cannot pay you much more than $6 so if you want to buy gas in China one of the state companies they go to the government the government gives you permission to do whatever you want pretty much you can buy at the price you want but you cannot sell at the price that you want you have to sell it at the prices which are mandated by the government and the government has raised the prices in June 25% this is the second increase in China intending to keep raising it all the time it won't reach the oil price which are pretty much at the oil market parity but they have become very realistic about subsidizing gas the power sector in China still has problems paying higher prices industrial sector can do better residential can do much better but there is various you can see very minor residential system in place this has a big impact on the global market especially as some of the exporters like guitar they say well if you don't buy from me I just sell to the Chinese well in China the base case that we have is still quite radical it's about 40, 50 million tons of LNG if you look at Japan being about 68 and probably looking at 75 or so this is one thing that the Chinese cannot overtake Japan everything has already overtaken but in LNG imports still I think Japan would be highest now a high case they can go near Japan and low case would be based on pretty much whatever they have contracted or committed today so they have already committed a lot and contracted a lot so since you can't fly the stuff in look at the terminals policies who is building a forecast in China and India than it is in other places at least in the near term because it takes so many years to build a terminal and the gasification facilities and develop the market so this is our estimate that they will be a big player but they would be second largest importer in the world after Japan exceeding Korea and Spain as the third and fourth player in the old days we thought the US would be the number one but that is now sort of taking 100 years or 8 to 50 years delay let me switch to India India fifth largest consumer of energy in the world let's compare to China number 2 very powerful system but again heavily dominated by coal but in coal in India there is a story which is untold coal is controlled by a union which is similar to what the Mexican oil unions used to be they don't want anybody in the country so because they don't want anybody in the country they don't allow foreign investment in the coal sector it is now clearly understood that if the foreign investment comes to coal sector coal production India can go up a lot but the government struggles with the sort of mafia type unions who will really try to stop the development in India I think things are changing the changes will come and there will be more coal coming in India but India is busy outside buying everybody's coal every time these Indonesians want to sell something there are 15 bidders and 12 of them are Indians and they want to bring coal to India coal still remains very high on the radar in India and they are very actively seeking worldwide acquisition of coal and they are looking for acquisition of oil now this is the structure of the oil and gas industry in India different you have the crown jewels on top this is Oil and Natural Gas Corporation of India, Indian this is upstream company which has one refinery in Mangalore you have the Indian Oil Corporation and the National Thermal Power Company in charge of the essentially most of the state owned oil sector in India then you have the blue ones which are secondary companies government owned Hindustan Petroleum, Bahara Petroleum Gas Authority of India Limited and Oil India Limited which is conveniently called Oil these are all state owned companies HPCL and BPCL are downstream refining companies which now have substantial assets which has huge position in Brazil they go international and try to get assets everybody is there trying to buy upstream asset worldwide and the government is in between there are lots of smaller players subsidiaries in India which operate and one of the interesting ones is Petronet you can see on the left which is owned by GDF International Indian Oil, Gale these guys essentially are in charge of the importation of LNG into the main terminals they are not the only ones there is no monopoly but they are the most important importance of LNG into India the government has different titles for them established companies the sort of smaller companies the mini companies and these are the smaller players which are in India each of them very powerful now in India when the government controlled the price of oil and the companies were forced to lose money unlike China which gets a check at the end of the year they got no check they got a bond and this is called the oil bonds and these oil bonds have been issued for a number of years now about 30-40 billion dollars of them essentially the government said I issued a bond and the future generation will pay and sort of the public they don't like these bonds because they think that somebody may say one day what the hell have you done all this amount of money you generated so what happens was that the market has started discounting the oil bond up to 25% so the Indian government stepped in buying the bonds back by the Reserve Bank of India just so they can sort of keep these companies whole and of course if you're a private company in India then you have a big problem because you get no check from anybody and this is why the big players like the Reliance people they have been exporting and not selling in India because selling India is a guaranteed loss but export market will pay you more so these things with the price increases which came in the past 2-3 weeks a lot of these issues now have started a new game I think the international market is better but by marginal amount only kerosene and LPG remain heavily subsidized but most of the other products are at or near the market now if the price of oil jumps up from $80-$75 to $100 there'll be a problem but if it stays at these levels I think the Indians will be moving to the international market very shortly demand growth in India sort of growing very fast 3 million dollars per day total petroleum consumption in India and the production of oil in India is very low much much smaller than China and so imports become bigger and bigger as time goes by now if you look at 2008-2010 this is the time of the global recession which did affect India but the surge in diesel demand has been seen where consumption grew by 8% then on the gas side entry of Krishna Godavari basin gas from the famous D6 gas field has become a very important play it has reduced NAFTA consumption alone by 16% just this new gas field and incidentally that gas is priced by the government edict at the price of $4.20 at the landfall which is just outside the offshore area and is selling $7 so people paying higher price for gas in India than people are paying in the United States and actually the same in China people are paying higher price for gas in China than they are paying in the United States so we move in substantially to try to bring the gas and oil prices together towards the international market while in the US we see in the oil and gas prices divorcing and going away from each other in the US market demand outlook for India we see revival of industrial manufacturing centered the fiscal stimulus in China and India have been very successful a lot of transition from lower to middle income class you see again all of the issues that you expect and of course the one lakh rupee car, $2,000 car which is I driven in it and it's not very fast but it does protect you from rain and all of the negative air outside in Bombay if you want to be sitting in it 600 cc only so it's sort of a motorcycle with the box outside but for $2,000 it seems okay negative factors again some slowed on GDP growth rate they haven't gotten to the issue of I want to have a limit on my consumption yet substitution after by natural gas in fertilizer and natural gas entry into India has changed the game in a big way and it's much more radical impact than the impact of things that we've seen in China improved efficiency in road transport and the fuel price reform essentially they are moving towards the international market and I think that this is a very positive step on both sides I think the impact on demand in India will be more severe than the impact of demand of the higher prices in China now I told you about India becoming one of the largest global refining markets if the Indian growth rate is only $100,000, $150,000 per day they would be in surplus 15 more years so a lot of the best refinery and the largest refinery in the world today is India who would have believed a refinery in India better than a refinery in the United States and the lower cost of plastic management by Reliance Industries Corporation of course they expected to come and export to the United States before things kind of fell apart and of course remember the old days where people thought there is a huge refining capacity shortage in the US and build the refineries in the military camps now of course these Americans they can't make any refinery for themselves so we built it and exported to them and while everybody was ready to export gee we don't want it we don't need it anymore so part of the global surplus is the massive change which came in the United States itself but India remains very big and part of it encouraged by government as government in India believes that energy security is improved by having too much refining capacity I'm not sure why because if you don't have the crude you still don't have the energy security but there you have it they are still building a couple more major refineries still coming and India becomes a powerhouse as far as the refining industry is concerned this is a list of the key projects which is being done this is all in the next 2-3 years a lot of new refineries are being built and there is the strong case for price reform I mean if you look at the amount of money that has put in 21 billion dollars last year and now we are looking at a smaller subsidy of 10 billion still is substantial this is the target is to bring it to less than 5 billion and eventually eliminate it and you can see in terms of the different products that the of course kerosene has been heavily subsidized domestic LPG diesel heavily subsidized sort of gasoline less of a subsidy they have received in terms of the total amount but it has been across the board and this recent price reform of June put that in different context overseas investment ONGC Vidish which is a subsidiary of ONGC in India OVL has now 40 assets in 16 countries and the assets which are producing including the Greater Nile Oil Project in Sudan Block 5A Block 6-1 in Vietnam Alfred in Syria they are part of Sakhalin 1 consortium they are all over the place also in Venezuela they are in a place that they wanted to be but they are not very active now in Iran ONGC bought Imperial Energy of UK and they are targeting 16 million tons of overseas oil and gas production 60 million tons would translate to about 1.2 million barrels per day which is what China has today so what India wants to have in 2025 is equal to what China has today and as I mentioned IOC, HPCL, BPCL are involved in international activities Iran and Nigeria's substantial effort has gone into it but nothing very much has materialized and India has followed China by setting aside Africa and Latin America as well as Russia but Africa and Latin America are very high on the list but whenever they get into competition they lose and the losses in China come because in China the companies the state companies they don't need to get they need to inform the government about what they want to buy they don't need permission they have the money already in India everything they have to do they have to ask and often it becomes a cabinet decision by the time the cabinet says yes Chinese have got it already very difficult for anybody to compete with China but the system flexibility has been put in there to give them authority to move forward as long as they operate within these huge budgets that they have natural gas demand India different than China power is driving natural gas demand industry to be much cheaper residential and commercial the same way but in India transportation of CNG gas has become very important and if you have traveled to Delhi and Bombay you will see the public transportation all by CNG and I remember I was in Delhi the day of transition they had to go to CNG from gasoline and there were very few cars on the street but one good thing about India I don't know what the good thing about in India is I don't want the same thing to be done in the US but the decisions and environment are made by the Supreme Court and there is no appeal, no discussion once they say it you have to do it and so there is a sort of terminal aspect of the decision so when the government went and made appeals and I was assisting the government that this speed they wanted was too fast they have to give it time and we went to Supreme Court in India and they said we've already ruled, we just haven't announced it so no need for you guys to make a presentation and so we said but this is not ready this is all this I have 300 transparencies and charts for you they said well thank you very much you can leave it with the clerk and register it and decisions are made so by George they did it and it worked and it worked the air in Delhi has improved significantly and you know some sort of bit of force here or there may have its own value in Bombay it's been slower but pretty much all public transport has gone to CNG this is not something which has happened in China and of course the CNG was based on the cheap $2.50 million BTU administered price of gas now that gas has been raised to $5 as of 2-3 weeks ago it's not so much fun anymore now you have to end up giving a subsidy or somehow remove all taxes to make the CNG completed gasoline of course one of the largest CNG users in the world is Iran there are thousands of service stations but if the price of gas is nothing CNG is an easy decision but if the prices are high then you have to complete the oil market and make the decisions for LNG imports much smaller player than China but a significant global player we're looking at 15 million tons by 2020 and about 2025 million tons afterwards the sky is the limit again remembering in China and India if the price of gas is cheap there is no limit to demand if the price of gas is high there are lots of limits to demand so when we do our analysis in China and India we always do it under different price scenarios so here assuming the price of gas remains cheap of course if the price of gas is cheap and India is buying it all it becomes expensive so it doesn't work that way but the upper case could be very high the upper case could be equal to the lower case or the base case of China but India is an important player and they have not paid any of the high prices for gas that China has paid so they've been a lot more diligent in the negotiations over gas imports now in terms of Iran this is a list of activities which are done by China in Iran many many activities most important role of course that China has today is actually not in the upstream sector is in the downstream sector in upstream they're famously discussed about the so-called other Dagon field which was managed the original contract was with impacts in Japan still holds a 10% share nominally although they have gone totally but the impacts plan was pretty clear you can go up first phase within 3-4 years to about 150,000 barrels per day then go up to 250 this is with access to all technology plenty of money being spent and you need about 7 years so it isn't something that suddenly you can just produce a lot because now Chinese are the instead of the Japanese it's just not done so it is a high cost expensive other Dagon has a 30 billion barrel reserve but the recovery of only 4 billion barrels so one of the lowest recovery factors in the world because of the great complexity and difficulty of production so whether in the future we can get more out of it maybe but certainly at the moment much smaller play Chinese side they have been active and actually they are really the only main players left in the country everybody else is gone but the amount of contribution they have created for Iran in terms of exports in terms of money in terms of the prestige is actually very very small but in terms of the downstream Chinese activity Sinopec is now involved in development of the one of the largest catalytic crackers in the world in the Iraq refinery which is just outside of Tehran this is around 85,000 barrels per day 90,000 barrels per day cat cracker together with the joint venture with the Iranian consultants very competent and I understand first hand that this project is more than 70% complete and by the end of 2011 it will be operational adding between 75 to 85,000 barrels per day to production capacity of gasoline in Iran now there are two other refineries in Iran which are also receiving catalytic crackers one is in my hometown in Isfahan and one is in Abadan they will be finished by 2012 or 13 and combined the Iranian gasoline production will go up by 200,000 barrels per day as a result of this so sort of I think the sanctions policy would have been much more effective a few years ago not now as you know in Iran there is a policy of smart cards which gives a quota for each car now I'll try to say the numbers so that you can in an easy way so that you can remember in Iran 65% of gasoline consumption is domestically produced and 35% is imported so one third has been imported before now each car is given smart card which gives 100 liters per month access and if you want more than 100 liters you could buy it from the service stations outside of the smart cards for which you pay international price of about 50 cents a liter as compared to 10 cents a 500% price increase if you want to go in the outside of your quota so everything started 96% of total consumption was subsidized and 4% was free market last year when I was here I was predicting that the Iranian government is going to reduce that 100 liters to lower volume using the threat of sanction by the US to justify their actions so they went to 80 liters per car and this immediately we expected a lot of that will mean that people will buy the 20 liters extra from the free market well they didn't they just cut the waste so it actually sort of increased efficiency so the 4% went to about 6% or 7% almost doubled but not substantially because the rest of it people just wasted because it was so cheap and waiting desperately for the US sanctions to be imposed on July 1 they reduced the sanction they reduced the quota to 60 liters so if your 100 liters was your mechanism before now 40% of it is outside the subsidized rate and if you have a 2 third 1 third domestic production versus imports it kind of tallies with that in a way so now 60 liters is the quota but you can buy with 500% premium well the elasticity is really work because the wastage is so large in the month of July the first 2-3 weeks of July the imports in Iran has fallen by half compared to June of course everybody can pat them on the back themselves on the back so I did it it's because everybody is scared of me in the US that's why they're not selling because of course have built huge inventory but the fact is that the higher prices are reducing the demand themselves and I am a firm believer that international sanctions cannot impact flow of gasoline gasoline will flow now it may not be so easy the big players will give it to somebody else who will pass it on you can't stop the flow of gasoline unless you put a naval blockade without that it's not possible for crude oil it's much easier because only a few big buyers but for gasoline there are virtually thousands of suppliers and all the big boys we say well I'm not selling anymore they're just selling to somebody else and that somebody else can export to Iran with somebody else to another country we don't know but the reality is that this move to a smaller quota has significantly cut the requirement so I think the number has gone down it will go up a bit later on but I think the Iranian government would have saved several billion dollars in imports and also the air will be much clearer the government will get a lot of credit for less traffic this is actually this is the best thing which could have happened to Iran anyway without the Ahmadinejad government the government is forced to do something which was the right thing for themselves but as a result of an external threat which could be used to allow that to happen as strong as governments could have been in Iran or in Indonesia under President Soharto you raise the price of gasoline and you lose your job now you can raise the price of gasoline and you keep your job because you are worried about somebody else who can probably change the reason for your actions again Chinese companies are not only involved in the development of oil and gas they are key supplies of upstream equipment in Iran and they face potential sanctions in that area I mentioned about the Sinopec in Iraq and also the Persian Gulf Star which is a condensate splitter they haven't started building it yet because they are going to build this before they convert the condensate from the south parts field to gasoline kind of is not so urgent anymore because the demand is disappearing and the domestic refineries are coming up fast enough with the catalytic crackers to reduce the import requirements so essentially China is very still heavily involved in Iran most of what they do they don't make any money from the assumptions that they go there to be able to get crude the buyback contracts will give them some cash maybe some crude but if they sell crude it's going to go to Jenrong it's not going to go to themselves because Jenrong is the one which is authorized to import the first quarter of a million barrels per day from Iran India a lot less relationship lots of people took credit for the US government to persuade the Indian government not to buy natural gas from Iran it was not the US government it was economics if reliance can produce the gas and sell it at $4.20 a million BTU at the landfall and the customers hand by 6 the Iranian gas would cost $13 plus in the Indian market you have to be really crazy to go for that kind of deal and the deal that Iran has signed with India with Pakistan and this is a firm deal it's not a MOU it's a firm which is agreement would give at $80 oil about $9 a million BTU gas Pakistan extremely expensive extremely expensive and then they wanted to add 2 box of transit fee and 2 box plus something else extra on top of it to give it to the Indian border and then they had to put it in the HPJ pipeline in India which would have been atrociously expensive for the consumer so it was economics which killed it so it was very interesting the Pakistan deal is still is on Iran is not building a pipeline to supply Pakistan Iran is building a pipeline to supply itself it's a domestic pipeline which has been planned as I got 9 for decades to bring the gas from Asaliyah to Iran Shah which is about 100 kilometers from the Pakistani border and only the extension has to be built and it's a 54 inch pipeline so it can add 2 billion cubic feet a day of extra gas but remember Iran today is a net gas importer and we think the net gas imports to Iran will be maintained even if Iran exports to Pakistan because the additional requirements from Turkmanistan are there and Iran is paying more to Turkmanistan in import of gas today that it can charge from Pakistan so a lot of these things are for other reasons than economics I don't see Iran as a big gas exporter now or in the future unless the domestic pricing system changes in a big way and it's very difficult to see that one thing I have to remind you we all know that the US is the largest consumer of gas in the world and Russia is the second largest consumer but Iran is the third largest consumer of gas in the world bigger than China, bigger than anywhere else in Europe bigger than Japan on the back of 10 cents to 30 cents a million between you gas you can't raise it because you paralyze the economy and people will die it is as a result of Mr. Shiraz is here he first instance before the revolution he built the gas pipelines gas pipelines you built in the country were continued ferociously by the Islamic Republic when you build it you can't change the price anymore you have to keep it because if you change the price you create an implosion in the economy so with the best of intentions the government is hostage to bad macroeconomic policy and oil you can change but gas you cannot so in terms of the involvements or NGC or IOC where kind of fingers are shaken by the US government reliance got fingers shaken at them too the US government reliance did not renew its contract with an IOC they have disagreements over buying the heavy crude from Iran also but the activities which are undertaken both China and India as a sanction busting activities are pretty minor the scheme of things really pretty minor and you know if you see the Iranians importing NGC it's your fault you have to begin to question the policy itself rather than the other people who are trying to bust it and I think that when you put everything together for Chinese I think it's more sort of psychological minor returns and they need to be connected to resource owners but how much money they make what they get out of it is very small and India has pretty much checked out thank you very much thank you Faridun we appreciate you taking the time to walk through all those issues I'd like to open it now for some questions we have a couple of rules here at CSIS one is if you would please identify yourself in your affiliation and then also if you could make sure that when you end up whatever statement you're making it has a question attached that would be helpful as well unless you'd like to start an argument I'm sure Faridun would engage in that as well constructive criticism is also welcome and I actually wanted to note that I like your comment about being hostage to bad macroeconomic policy I think it's a lesson perhaps in many other countries in the world could learn to be aware of one thing I was going to ask you about to follow up was the potential role for unconventional gas resources in both of these countries obviously it's changed the dynamics of the US gas market we're hearing more and more about China's exploration for shale gas and the potential there India has tremendous coal deposits and potential for coal bed methane and we're seeing for the first time coal bed methane in Australia being actually used to support an LNG project which I would have never thought would have happened so I was just wondering if you'd like to have any comments on whether or not we can expect these resources to come into play in a major way I think in China coal bed methane already is huge and becomes bigger and bigger we have very bullish forecast of coal bed methane inside of the Chinese system in India it's a little bit hustered to the same unions who don't allow for an investment if you produce more coal then you have more coal bed methane but if you don't produce the coal then it's not there I expect that it becomes bigger and bigger in India also and now that coal bed methane beyond the two of them also Indonesia is the place with the 200TCF coal bed methane could be available to them coal bed methane becomes a very very important part of the total system now in some shale gas there are large geological areas in China which has shale gas people are surprised that the Chinese are not rushing to do it and actually there is an official statement in China that produced two BCF a day by 2015 which is absolutely impossible to do because you know so the first I mean if they started a year ago they couldn't do it it's a timing issue the whole of the system is still being evaluated they have a partnership with shale and shale also quite bullish that they could do a production reasonable production costs also but they also if you go back there are 15 licenses given by China just to shale for coal gasification and lots of coal liquefaction lots of these things have been signed but nothing has happened and the reason nothing has happened is that they have to evaluate if the economics works out and the coal side is easy if they do all the coal one million barrels per day of oil they produce from coal from everywhere else so they go short of coal it is you can keep your one side constant and then convert it from one side to another side you would have to have a global balance change I think shale gas will come my guess is that it's going to be post 2020 and my guess is that the cost would be pretty steep that it will not be much lower than the LNG prices being the $8 to $10 range but it's all guesses because they have not done the evaluation they haven't drilled one well yet you have to go this start digging evaluating and then building the infrastructure to receive it the Chinese have built more pipeline in the past 10 years than they built in the past 40 years but to create a system in the US it's quite fantastic just get something out and put it in the grid and it goes as long as the government regulators and the environmentalists allow you to do it you don't have the need to create a whole infrastructure they would have to create a whole infrastructure and this is I think what's holding back it's going to be slow relatively expensive but they'll do it so we do have microphones so when you if you could wait just a second until the microphone comes so that we can pick it up on the web broadcast as well so we have one question on the side here Cliff Cuppsion with Eurasia Group first just a comment it seems to me that increasingly the threat that China faces as far as securing supply from Iran is not US energy sanctions but financial sanctions the news seems to be being closed around banks and the prospect of how China will settle account seems to be coming into play short North Azerbaijan and Yadavidon from what I can tell China is active there how small is that and secondly and slightly on a different topic the European Union is going to announce new sanctions on Monday it will ban both technical assistance and equipment sales to Iran of any kind are there European IOCs still involved in that even though they're not in the upstream and how much will that hurt Iran I think that in terms of the if I want to measure what sanctions are hurting Iran the US sanctions are just nothing I see UN sanctions are nothing US sanctions have been less effective than the Treasury arm twisting Treasury arm twisting has been very effective and I think in so far as what has really hurt is the people in black suits visiting you and telling you if you do this then something you and your cousins will never be allowed in the US and your houses, your properties will be seized which essentially this has had a huge impact and a lot of the top officials CEOs of banks CEOs of the contracting companies after one visit they kind of essentially pulled out so that I think is very effective and that has I think been the most important sort of powerful part of the sanctions the current set of sanctions in the US are making life difficult but they are not on their own going to bring the system to knees I think the gasoline sanctions actually minor impact but the European sanctions are quite serious and indeed they may stop all the Iran air flights outside of Iran it is quite a serious issue I think the government in Iran is brushing it off as nothing it is another one part of propaganda we will do what we want but already the realization was so severe in this area that Mr. Moussa with the leader of opposition let's have a referendum on the nuclear issue do we want it do we want this nuclear power plant at the end of the day Iran adds 3,500 megawatts of electricity every year to its grid this is only 1,000 megawatts which has been going on for 10 years it makes nothing it is dropping the bucket while they are arguing about this they have added 40,000 megawatts already to the system and they are still arguing about 1,000 megawatts the sort of system inside of Iran so worried about the European sanctions that they question to the level that they are asking for a referendum 3-4 years ago if somebody asked for a referendum the government said let's do it and the referendum would be 70-80% in favor of continuing not today anymore with the system imploding from inside and people talk about problems of energy security with Iran it is not a nuclear issue it is a big implosion and a potential chaos after that as there is no organized opposition which is I think the problem in my view but in that way I think that the European sanctions issue becomes a serious issue the European companies today they are they have one toe there but nobody is doing anything one of the largest new discoveries which was made by stat oil actually by old North Kedro which is part of stat oil and are unfilled in Iran 100,000 bar of oil they just abandoned it they said no problem we give it to the Chinese everything said no problem we give it to the Chinese the Shell and Total essentially walked away from the LNG project they said ok we give it to the Chinese some of these things the Chinese cannot do they don't have the technology some of them they don't want to do so I think that although some of the offices there and some of the discussions continue as they see after investing 20 years they don't see that they should walk away they should just sit there and wait until something happens but effectively I think that there is nothing going on from the European side and the Chinese side also a minor so the Iranian oil production is now in the sort of decline the decline rates are high the decline is about 400,000 bar of oil per day a year and they have to add 400,000 to stay in the same place they can't do it so you have 100 to 200,000 bar of oil per day of declining capacity which over the 5,8,7 period of time would put the production exports well over under 3 million bar of oil per day and then easily can go to less than 2 billion bar of oil per day Iran is losing its position while Iraq is gaining and of course Iranians are very very competitive in terms of the oil production with Iraq but you see one side going up and one side coming down so these things I think this time is different this time I think sanctions creates internal discord in a much bigger way rather than creating a force behind the government supporting them because they are under pressure how much is produced as I mentioned the impact plan was 150,000 going to 250 at the moment only 50,000 bar of oil per day is produced and this is from what they call experimental wells unsustainable at this stage Yadavaran is a much bigger field Yadavaran can go to between 250,000 to 300,000 bar of oil per day and that is not producing yet but it's in full swing as far as I understand it should be operational within a year or two it's a large field and the other one which is next to it given to the Indians it was given to Belarus Naft which is a great exploration company in the world but the first time now you see them it's international exploration but it's not different from Petro-Vietnam in Venezuela we had a question here and then we'll take one over on the side after that I'm Batrudev I'm a student from University of Nevada Reno when we consider the energy security China tries to build a secure pipeline the example of the Sino-Saint relation pipelines actually China achieved successfully the Turkmenistan China pipeline natural gas pipeline and ongoing Kazakhstan China pipeline so when we consider that how China will affect the future energy development of Caspian basin and how it will affect the energy security of European countries thanks you have pipelines and you have pipe dreams some of these things are dreams some are pipelines but you have the pipeline from Kazakhstan to China Israel is working and they're going to be increased in size and some volume of Russian oil already is in the system and maybe increased so that one and the Turkmenistan pipeline are real and operating the pipeline from Burma to China will be completed soon and that will be natural gas from Burma to China the Russian pipeline bringing oil from Eastern Siberia to China also in full swing it hasn't come yet and for the first time Russia will be connected to China outside of the railway system which has been dedicated export system so I think yes the pipelines continue does it affect the development of the Caspian oil and gas I don't know everybody will produce whatever they want to do anyway and China is one of the buyers but not the biggest buyer by any means just for China because you can't fly it to China you have to have a mode of transportation very expensive takes time you have to plan a decade in advance size the right amount of inches of the pipeline to be able to get the volume in more gas from Russia from the Kovitka area I think is certainly possible but slow diversity of diversified supply from anybody who has volumes from pipeline from ships from LNG, natural gas pipelines all of these things have to be followed simultaneously so the plan is a comprehensive plan but one is not at the expense of the other it's not like Europe that you say well okay if you bring in LNG you don't have to buy Russian gas then for example and they are prepared to pay the international prices slowly have accepted the realities and I think they have a reasonably sort of clear line of what they want to import from where some great ambitions in the future but I think many of them will become reality Thank you so much for the informative talk I share your views on many aspects of Iran's petroleum industry but you keep promising a major decline in Iran's production I think four or five years ago you were the first analyst Imports, I mean not production, imports or crude oil production I have gas as well on the gas you mentioned that Iran would not be able to export any gas you were very negative on the possibility of exporting to Pakistan as well if I recall correctly but it happened at least the contract has been signed and Iran has really many options Iran can eject the gas can use it for a petrochemical as they have done in fact since the end of the war Iran-Iraq war that chemical petrochemical products has gone up by like 50 or 64 so there are many options for Iran it's not just the gas sales to other countries but on the oil side you also modified your position five years ago you were talking about 500,000 barrels per day decline now you revised it to 100 to 200,000 400 I said you have declined and you have increased so I said net loss of 100 this is about the same as I said last year when you talk about the total decline it's including your new wells and new fields and so on but in any rate during the past several years prices have been higher sanctions have been tightened Iran has developed new ways to reduce the demand and they also have many problems with the gas injection so the impact of all these factors have been very favorable to your viewpoint and yet we haven't really seen much of a decline in fact right now Iran's export Iran's total production is limited by Dakota that was imposed by OPEC rather than its total capacity or its wishes the level of production that the country wants to produce and export are you confident on those figures that you have now with the total net impact on the production and does Iran really need to emphasize on oil when they have substantial amount of reserves of natural gas and in fact there seems to be a shift of direction development of gas instead of oil do they really need to produce that much oil thank you I think some of the things I said you may have misunderstood because when you talk about natural decline you don't talk about net natural decline you talk about gross natural decline you say natural decline in Saudi Arabia 6,700,000 per day and which is sort of publicly accepted so that doesn't mean that Saudi Arabia has production capacities falling by 6,700,000 per day so you have a natural decline OPEC has a natural decline of 1.2 million per day or 1.5 a year and has to add that much to stay even so in the case of Iran they were losing 4,500,000 per day before and actually the 500,000 per day is quoted by Minister Zangini personally and he said on TV somebody interviewed him and he said Dr. Fasharaki says that are these are exaggerated under he said no that's exactly what the number is this is quoting from the minister on Iranian TV the issue was that before they were adding 4,500,000 per day every year so the decline actually was zero now because they are not able to add because of the sanctions because of the lack of financing because of the variety of other issues there is a net decline of 100,000-200,000 per day so let me clarify so there is no misunderstanding I had never expected if Iranian capacity holds 500,000 per day in two or three years they can go to 2 million per day or 1 million per day exports so that's sort of it's a gross number not a net number you are right in terms of natural gas options Iran has actually the reason Iran is in the predicament it is as a net gas importer is because of the domestic pricing policies if domestic prices changed Iran it could be a huge export and could do a lot of things but one of the reasons that Iran has failed to export for example LNG is not only the international sanctions but the poor design of the projects in Qatar when you export LNG you have upstream downstream negotiation on one hand in Iran upstream was impartial oil and gas company downstream on Niger which has become a lot of NIGC NIGC then does all the pipeline so if one of them in between could not do the job the system collapsed so it was not because it wasn't there one was the poor terms that were offered second was the poor way the system was organized but yes Iranian requirements for the injection at the minimum is bigger than total Qatar LNG exports these are huge numbers minimum 10 BCF a day 10 is now official plan in Iran but actually if you talk to Dr. Saidi you know very well people like that experienced reserve engineers they say you need 20 billion in a few days all of south parts has to go so sort of the options are great options, reinjection, CNG in Iran very big if you have gasoline problem why import it convert the natural gas to CNG and of course petrochemicals have also grown by leaps and bounds and less of a focus of international sanctions on petrochemicals than it's been so a lot of foreign investors have actually come in in there so the options are great it's just managing them properly which has been the problem Pastor Schaefer Taisy Schaefer from CSIS I'm interested in your comments on how the big change in both India and China was in their pricing policy and moving closer to international pricing both countries if I remember rightly seem to be trying to rely a lot on captive sources of captive international sources of oil on investing upstream does the change in pricing policy suggest that they are moving away from this essentially mercantilist approach towards one that looks more at the market as a single source of whatever it is they need to import well I think you put it in a complicated way which I'm not sure whether I can I can answer in a simpler way a simpler way is that they saw the light essentially you cannot continue to be a huge player international market and regulate prices significantly underneath the international prices international market you realize the folly of the activities that you keep buying more and more yourself and then you actually damage yourself if you are so big and look at the past few years more than 50% of the global incremental demand has been China China and India that's two-third of the global demand growth they say okay I just continue isolating myself from the international market you are essentially doing yourself in plus you develop all these companies which survive on exporting products and they are uneconomic themselves now China says you know maybe a state own company but you make a deal and you lose money don't come to me ask them so you do your due diligence before don't assume that because they're a state company I'm going to protect them and I think that's been a very important change both in China and India so the issue of getting towards the market is more for moderating domestic demand for allowing industries which get into the export of domestic market to understand economic realities and to be able to be a global player in the international market in all the products that you produce and you don't want someone to say okay you subsidize your domestic prices and that's how you can beat me in the international market they realize that it's good for them and they realize this approach of being part of the global market actually beneficial for themselves I think that's really the incentive for them to do the right thing I think we have time for one or maybe two short questions so I see two hands so you guys will have to take this question here first and why don't we get both questions on the floor before you answer Tony and Constellation it's actually a follow-up question what you talked about where it seems like China's policy right now is some sort of contradiction where you talked about China has to diversify their energy sources but if they go out and try to acquire let's say upstream assets they don't have the technology to do that or advanced technology to buy the companies let's say the US Congress certainly is not going to approve that or are the European countries and also domestically if they keep producing coal and coal fire generation they're going to suffocate to death because right now you can't breathe over there and so why are they still taking the time to develop some other domestic sources like natural gas and as long as when let's say they develop the west or inland areas then they have even greater demand and essentially also the price control is more relaxed than India already so it seems like they have this ferocious need for supply but it seems like where are they getting all of that so any prescription on China's energy policy going forward thank you we'll get the other question out Katelyn McGovern from Stat Oil I just had a question in reference to the shale gas that David was referring to in China we're seeing a lot of European companies going you had mentioned Shell and a lot others why do you think the Americans are so slow to the table is it more of a U.S. policy dynamic or just slower corporate agendas in America the American company is kind of busy themselves I mean I think the international majors look at everywhere if you're at Chesapeake you're kind of busy at home and sort of I really don't see any kind of policy impact here the government has no say on these things anyway or do they I thought they don't have a say on this kind of thing don't tell you but I think that still first stage is that you have to do some evaluation of how much is there and what is there we don't know that yet we still don't know what is there it's all kind of it's very preliminary but if something is good the Chinese will do it themselves remember if there is something profitable they will give a bit to the foreigners and keep the rest of it themselves I don't see there is need for too many people there is nobody in upstream in China except for themselves because they don't need to I think it's a mistake to believe the Chinese don't have a technology they are pretty good at the technology they may not be as good as some of the American companies on some of the sophisticated process technologies but they have a technology and I'm not sure exactly what the question was really because in a way the Chinese they have a huge economy they have to do many things at the same time and when they wanted to buy European companies nobody said anything only in the US you say something about these things do you swallow something big I mean if they want to buy BP the British government may have something to say but if you want to buy imperial oil who cares if they didn't want to buy Unical and the US wanted to buy a small player I don't know whether anybody would have cared to try to interfere with them the case of Unical was exceptional poorly handled and very strong Washington lobby effort very successful that's not necessarily repeatable but I think in the case of China they have technology, they have ability but they follow multiple strategies and they try to do the best they can within all these problems now you mentioned something like about strong demand inland in China or western province western China has the smallest demand growth and inland areas also the demand growth is not great, most of the demand is in the coastal areas but in China any supply issue which can be handled will be handled no left stone is left unturned but there's the speed and the focus when people say why are the Chinese rushing on the shale oil, well they're kind of busy with other things, there are lots of priorities somebody asked why don't the Chinese have hybrid cars they worry about consumption well they'll get to it, it's on the plan and already they're building some but they're kind of busy with other things so for this huge country with the huge and multiple problems that they have I think they're doing a pretty good job so that would be the nature of your advice to the Chinese government, you're doing a pretty good job you're doing a pretty good job just focus on some issues more than the others well join me in thanking Faridio for a great presentation