exterior yet airing passions in public, and their loved him for it. this was the true source of what would be called in wenzel charm. there was one part of this personality they could not quite understand. he endured abuse from schoolyard bullies. he pursued close relationships with certain boys for whom he felt an especially deep devotion . these chums and bowser really reciprocated his affection, and as a child came to respect their objection and even take a kind of pleasure and. he loved being in love. for someone who found solace in their written world he lived in a word with no words for what he was.

never plan discussed. the last character to introduce it is in nicole brown. by the time she was 21 she has endured a lifetime with the tragedy. she was born in illinois and your father dies and she is young. her uncle is the founder of mormon is some. she grows up in an atmosphere of violence persecution. there were terrorizing that point in the midwest. she and her mother and stepfather and the rest of her siblings decide to go west to california and end up settling in los angeles. so they go to your this terrible divorce. gives birth to a child. all this happens by the time she's 21. the family decides to move to san francisco to bury her past

and start over. she starts to write columns and publish them in the golden era. this brings her into contact with people like stoddard and heart and twain. is because she is emerging the bohemians' have decided to start their own paper. the golden era has been good so far but they need something of their own their own forum and this marks a kind of new moment in the literary evolution of the west. the building a better paper would paying them closer together. it went from being acquaintances to friends colleagues to co-conspirators in a literary crusade. another writer and turned them. she had stayed mostly out of sight.

she returned home to help promote a washed dishes, scrubland, and in the rest of the domestic work. she had trouble sleeping at night persecuted by memories of her past. she had endured an abusive husband and the death of her infant child remaining wary of what she called on pitying world and wrote better verses about suffering and scorn inching needed a way out beyond grief and the burdens of her dreary work. so she would find france fulfillment, and finally a life for moving. she first met him at the home of a mutual friend, a slender delicate, handsome figure. this was a rush to remember them some 60 years lender. we were a little more of them born in girl. only 20 but his successors have been swift. he no longer put poland's in the

mailbox. he was now a fixture of bohemian san francisco. it helped that he looked the part. the ideal public in appearance. especially poetic for his frequent mood swings so inspiring moments of boom stark but security. the bond between her and stoddard took time to develop eventually becoming like a roller ancestor thread in the boxes years and acting population :. confined to the sorrows and solaces. too mature for her years having lived a lifetime. neither would never enjoy the comforts of conventional a bill to and of keeping secrets

shepherd passed. they remain close their entire lives. the furniture between as has been more to me than the man in a loud. she published her second poem struck a helpful non. she was steadily emerging from her shall just in time to take part in california's latest literary experiment. in recent weeks the area have been buzzing. laying our heads together and and have determined to start a paper. they speared a single purpose to wage all-out war. they deplored california's depraved intellectual condition its preponderance to my taste for columns in melodrama. the time had come for a new kind

of journalism more discriminating in town. the ad had been a good start but bohemians had outgrown it. so the story continues. i wish i had more time to keep reading. i thought i was stopped there and open it up to questions. thank you for listening. [applause] >> i've really got this book a couple weeks ago. i want to ask you, how did you get involved with mark twain in all of this? i mean i read mark twain once i was a teenager and read tom sawyer and huckleberry finn but never read king arthur, the innocents abroad but essays.

i knew that mark twain was involved in many different things. a lot of different -- so i was curious where your -- i mean it is an excellent polk and i deeply appreciate. >> well i always want to write about said francisco. i was. i had a sense many of us have a vague sense that he spend time here, but we're not really sure how much. it turns out as i learned more about how much time he had spent here i realize that was the stores are wanted to write and particularly you mentioned-and tom sawyer, i think that is better known to lawyers, one now we think of in our mind's eye. as coming to me, was stranger. to see him in this embryonic

face where his emotions are a bit more extreme and the fundamental aspects of the style of started to come and gather. to me that was fascinating. the california context. >> thank you. i appreciated their reading. i have a question. it given that san francisco has long been a bastion of gay rights and literature what has been the perception. claimed as a precursor to of the life of the castro? >> i think he has been rediscovered as of four father of the san francisco. it is tough. as i mentioned, the passes that i read the word gay is not one

now would have been turned. not even clear how police he kind of verbalizes the sexuality to himself. he has this correspondence or he says of one. , walt whitman is not responding to his letters. in the name of calamus reply to me. of course his palms written about homosexuality. there are these attempts to use a metaphor and symbols and images to describe own homosexuality. another favorite phase, and. now recognize. so there are coated ways to describe the call about homosexuality the way we would think of it now is not really current.

that does not prevent us from being able to claim him as a pioneer certainly. >> examining the characters with heavy emphasis on the cultural context of the time the enormous wealth running through the city. obviously there are close and longs then people have talked about. were you writing with that in mind? >> i think it is sneaks into it. i live in new york now. i return on lot and came back a lot to research. i think that that inevitably should shave my sent -- thinking subconsciously. unfortunately i don't have any great things to say about those parallels. there is something obviously reminiscent of the gold rush and

the current tech revolution which i think you saw back in the day as well. but once they have bought about is that the prosperity in san francisco in the 1860's really finances the letters seem. because it is such a rich city begin have so many newspapers. if you go into the library of congress defined more than 300 different papers. so that really allows a lot of people to make a living on riding which is how this literary scene comes together. so i'm not sure what the parallel would be today, of the prosperity nobel would sustain another literary scene and it's harder to know.

how this might have affected. he was here. he initially when i was thinking about this book was going to be the fifth character. those not get to the city. it is really toward the end. the overland monthly, a periodical. a major figure. obviously these days later than

many of these people do. twayne art stoddard. he is a wonderful figure. i think if you wanted to find a bridge between 1860's san francisco literary scene and later decades he is the ideal link between those organs. that would be great. >> wonder if he could talk about style. they have a manifesto. do you feel like they shared a sought out? so self-conscious about there doing. >> of the good question. we're the enough people and then eased or more aware or chicken live in describing what they were doing.

not very good at describing what is revolutionary, but someone like william d. howell, a young editor at the of lentic monthly and really offering and get away for the san francisco riders to enter lived -- literary establishment how is it perfect about how these represent a break from the past what they are drawing on this rich irony rambling flow looking at that and seeing, as he calls the artist of new american literature which is necessary to modernize american literature entering in of this provincial new england origen. he was an intolerable resources. as many artists they are not all is very articulate about their own mark.

>> in the introduction you briefly mentioned the parallel between the wars of 100 years apart and reference to the west indies and geography. i was wondering if you elaborate on that further or if you wanted to mention that for their now? >> while, the cultural revolution represented by the civil war is really essential to the book. i think you see it in a lot of different ways. all the rules are being real wooden and more fair and politics and business some literature. it is an unconventional wisdom of all kinds against this new modern reality. ..

>> would we be able to see where that is happening today or not

know for 30 years? >> i think we will probably not know for 30 years. i think you need the virtue of hindsight in that situation. she is not a great authority on what is interesting or revolutionary. i talk about the sketch he wrote in 1865 when he is here in san francisco and i feel it was a birth moment for his style and later literary renovation. he doesn't see it that way, though. it is really only with decades of hindsight and later works like huckleberry fin and tom swayer that you can track it back and say this is where it began. so in terms of the contemporary

scene we won't know. >> how do you think of the history of what they are writing relates to the history of vigilante in san francisco? >> well it was a major force in san francisco history particularly in the 1850's. there were two uprisings in the 1850s that the respectable citizens of san francisco cleaning up the town by taking justice into their own hands and lynching criminals and they hang two noted criminals in 1856 and control the city for a period of time. by the time these writers are working that phase is behind san francisco. 1860 san francisco has matureed ded and it is isn't the tough town

as before. you have the brothels but they are further back and all of the same activities are happening but they are more discreet. and the rampant lawlessness you can read about in books where you here about the australia ducks and thugs is fantastic reading but by this time that has mostly passed so i would not say it plays an enormus role in their work. >> is there a top research that you did for this book? >> i would say 75% happened at the bay cliff at berkeley.

it was invaluable. there is such good scholarship around mark twain. you can go see his letters and correspondence so when it comes to researching twain it is straight forward. with the other characters i had to dig deeper into archives because their work isn't as widely known so that was more detective work which in enjoyed. i was here in san francisco oakland and a couple collections on the east coast and in los angeles but i was mostly in berkeley. any other questions? thank you so much for having me. [ applause ]

i will be here signing books so if you want it signed i will be right here. thank you for coming.

influence on natural gas supply supplies for europe and asia. >> good morning and thank you for coming out. i think this is one of the most exciting programs we have had. i happen charles ebinger and we

are delighted to have everybody. i would like to thank edward chow and our own cliff gaddy and i would like to say it is a particular honor for me to sponsor this event because there are very few people professionally you can say in the jace of jonathan stern that we have known each other for 40 years and met each other when we was working on soviet gas. it is a delight to have him and james henderson here. without further ado, let me introduce jonathan stern and he will kick us off.

jonathan? >> thank you very much charlie and thank you all for coming. we appreciate the opportunity to launch our book here. i want to say in terms of protocol as far as the press is concerned the first launch is in london next tuesday so in a sense we are not here. this is actually the first time we have presented the book in public in this way. we come from a small institute part of oxford university and we are some of few people doing research on the unfashionably subject of oil and gas.

you can see the title of the book. we are going to give you a snapshot of had issues. some of issues. we will not talk about the ukraine crisis in the presentation but would be happy to talk about it in the q and a. this is the first book i have win since 2005 and the subtext of that book was would the russian's be able to develop enough supply for all of the markets they could deliver do. and now the question is no longer that. the question is can they deliver gas to rapidally changing

markets where the pricing conditions and they are facing much more competition than was ever the case in the past? and the idea is not to go through all of the numbers. it is just to give you an idea of the the situation. the russian government faces a very very complex mixture of supply sources and markets which have to be managed on an ongoing basis as those markets have -- are -- changing rapidly. i am still listening to people who keep saying things like what are they doing in europe? is this due to political or

commercial issues? these are the kind of complex complexities we'll be addressing in the presentation and addressed in the book. let me locate you in terms of the importance of gas in the macroeconomic picture. people and particularly journalist tend to talk about oil and gas in the russian economy not realizing the two are not comperable. this shows you and i hope you can see the three charts share the gdp and gas is significant and they share in export where gas is 12.5% compared with oil at 564% and the share of budget

revenue. gas is very, very important in the russian energy balance but it isn't important in the big financial picture of the russian economy. this is another way of look at it where the top two light blue and dark blue bars are the money the russian government earns from the gas taxes as opposed to the green bars which is the money from oil. those people that keep saying we must try and impact on the financial aspects of gas because this will punish the russian economy haven't got the picture remotely right. let me rush on and show you the big issue with gas problems on long take programs. the reason this is really important is that americans

some of you i can see i recognize, will remember an era before the 1980s when there were long term take home contracts in the country but that hasn't been for a long time. they are still alive in europe. these bars the top gray line this line is the 85% take home pay and this is the current situation. so what you see here are the contractual commitments for those of you not familiar with cubic years if you divide by ten you get a per day. what we are saying in the chart up till the mid 2020's european buyers are obligated to by closer to 15 billion cubic per

day with legally binding arbitration. so all of the discussion on how europe can reduce their dependence on natural gas, if europe wants to break the contracts it would need to spend $400-$600 billion euros. that is not going to happen. there is a difficult dependence math people try to do saying this country is dependence on this country for this percent of its gas supply and that is not helpful on a country basis let alone a european bases.

the thing you need to keep in mind is traditionally virtually all of russia's gas supply went through ukraine hence the problem we are having. but that has been diversified because of the lack of the truck the russian's have had in the whole post-cold war era due to non-payment and what the russians contrued as sacred gas. this has been the problem that the russian's haven't been able to control the supplies flowing through ukraine. as a lack of that control they have built pipelines of which the first you see here and better here.

where we have two pipelines now up and running. but despite the fact that we have probably around 5 and a half billion cubic feet of deliverability they have not and are not running at that rate. and that is principally due to complex regulation in the eu which means there has been a constraint on the amount of pipeline capacity that gas probe has been allowed to use. that might have been resolved but due to the ukrainian situation and the brussels situation it hasn't been resolved. that is a simple problem compared to this one. which is the new pipeline making

landfall in bulgeria. we will talk more about this if people are interested. but there are regulatory problems with the new regulation in europe connected with the fact the new regulation hasn't been written so it is difficult to comply. but the model for how it will work conflicts with the new principles of the regulation. and this is very important because the really big problems in january of 2009 and if we have a crisis in the next few months and weeks will be and have been in southeastern europe. romania, serbia and other areas that experience the huge

problems in january of 2009. and that is why this is a very important pipeline for one aspect of european gas security but as i am sure you will appreciate it is considered a threat in relation to other aspects of gas and energy security. so that is a brief snapshot of the europe part of this book and some relations to what -- the events of the moment. i will pass it on to james henderson now who is going to talk about other aspects of the book. >> thank you. so one of the interesting questions the biggest question that we try to ask in the book is what is going to happen to gas problem because that is by

far the largest producer and reserve holder in russia in terms of gas and the largest exporter into europe and the former soviet union and the larger seller of gas in the domestic market and the reason for the title "the russian gas matrix: how markets are driving change" is because what we have served since the book in 2005 and the economic problem in 2009 to put it frank is gas has become the least desirable option in the market and the biggest question is how is gas responding to the change and the need to find customers for its gas. i think the best way to explain how the shift came about is a

combination of factors. the first was the stagnation of gas in europe as the crisis and as the government started the shift toward renewables. the second was the gas revolution into the united states leading to cheap coal. the third was the rise in the oil prices which meant oil related gas prices in europe suddenly became expensive. all that was happening and leading to if you like a reduction in the demand for russian gas at the time when on the supply slide they had made a fundamental decision around 2006 they were going to develop a huge new region in northern siberia because there was a concern that russia might not

have enough gas to supply the markets. and the events coupled all together with the massive development of a new gas supply led to a perfect storm for gas problems which is somewhat reflected up this graph. and what we try to address in the book is how gas problems eventually has started to address the issue of its gas being the least desirable option and is now trying to develop stratgies to solve that problem. the dark blue on here is -- sorry gas problems, historic fields the big soviet legacy fields that have been in decline and you can see very sharp

decline and this is why the question was raised about the question of the malfields and the malfields are the light blue the third tier of blue. and so essentially in 2013 gas problem outlook for the blue fields production isn't going to rise at all really over the next 20 years. as it faces this new demand outlook. and this contrast with the outlook it had only a year earlier in 2012 which is reflected in the high case as they now call it the blue line and where you can see it downgraded the forecast by quite a bit. it had been a gross projectory and now it is flat. but nevertheless the light blue expands so what happens is

committed to developing gas in a more expensive regionf of russia and it is now becoming dependented on hire priced gas and has a lot of it and access of it because of the commitment to the development of the fields. it is being forced to cut back its production expectations so what we have in russia now is a gas bubble. an oversupply of gas. there is a lot of gas to be produced by the company and by independents as they are called. we have a competitive market developing in russia and also in the export market for russian gas. the other thing to point out is all of the growth you can see is going to come from the east which is another new thing that

is developed in the book and last week of course gas from finley signed the agreement which we can discuss in greater detail. gas problem in the west is fighting significant competition in all of the western markets. has a flat production outlook and a lot of gas to produce but not enough markets to sell it in and all of its growth is coming in the east. this just talks to the theme of the mal. the shift from the west siberian areas up to the northwest with the massive new pipeline that is being put in and the potential development of this area as

supplements which are being pushed further out and you can see also at the top the mg project when i will talk about in a little bit. but the shift away from the core areas into the expensive developments and this essentially gas that is tied into the new source of higher cost gas. in contrast with the gas problem story the other key theme in the russian gas supply story has been the immergence of independent producers and now the force of the national oil company which is moving much more into gas and this graph demonstrates the theoreticle growth of were introduction and you can see essentially it could more than double by 2020.

in reality what i think will happen because of contracts that have been signed with customers particularly in russia is domestic independence will peak. we see the shift either way because they have been forced to compete with the independent sector who has under cut them. so the gas share could fall below 4% by 2020 and the further element of competition that is emerging is in the export market where they are now allowed for the first time every to sell gas to customers outside of russia

in the form of lng and are preparing to do that. so they are under threat from domestic and international peers. this slide just makes the point i made at the beginning that essentially there is a lot of russian gas looking for a market. what i have done here in the graph on your left is just to say what was gas saying it can produce in 2012 and miller has outlined the capacity of 6 billion cubic meters per year and i show historic and independent production in 2012 and 2020 and you can see there is a huge potential surplus. it is theoretical of course but

a lot of gas is available. and within that position in russia gas is the high cost producer is essentially becoming the swing producer if you like of russian gas which of course puts it in a difficult position but a position of strength as well as i will describe at the end. it is high cost gas but in global terms it is competitive in western markets and in asia. in terms of moving to competition, this shows you russia's lng plans and highlights that gas controls the existing production from suckling two and in fact rose f has a competing project on the

same island which it plans to bring on stream with exxon by 2019. and most relative and immediately nov tech is planning to sell gas into asia and into europe and we are seeing the first elements of competition for gas problems in the core european market as well as in the new asian market. and you know, i think that competitive threat has much as anything else may have catalyzed them to get it done this year because significant pressure was bill building up to get an asian deal done. in terms of the asian deal we

can talk more about the details but the foundation will be the infu infu infustructure that is build by the option on the left via the pipeline that will run on the china border here and on to the lng plant there. these two pipelines will become the foundation of the strategy that could be russia producing and exporting. this is a fundamental shift in russia's export strategy. it is hugely important in terms of foreign policy and domestic

development of eastern region and provides gas with the ability to reestablish itself as the dominant force in the russian gas sector. a quick word about central asia. we talk about the shift in russian strategy in central asia from being the dominant buyer of gas to now taking a subordinent role to china. we have seen russia and gas accept a loss in the region as the commercial realities has

meant that the they are sending much more of their gas east than north and we would expect that to continue. we don't see exports from central asia into the russia rebounding and remaining into the 20-30 bc for the foreseeable future. just to conclude given the half hour is up. this graph at the end is intended to show that although some of the issue we addressed in the book are problems as markets have changed and driven a change in strategy particular at gas prom. russia is in an interesting competitive position relative to europe and asia. the vast amount of their

infrastructure is west toward the european market and we believe despite the fact that gas prom is quite high cost in the european context it is competitive and to put a number on that we calculate that the break even price of the mg at the german borders is $7-$8 which is competitive with anything we could see that could arrive in europe to compete with that. toward asia the new pipeline that will be built and reserves that develop will provide gas at $10-$11 and again allow russian gas to be competitive with future and current imports into china. so although russia has had to face significant competitive threats over the last 5-6 years

as the markets that they sold their gas evolved they find themselves in a competitive and geoographically good position and going forward they could find themselves in a strong position over the next decade. i will stop there and woe are happy to take lots of questions.

>> there are a lot of points for

discussion and i thank you for the commendable piece of work you have done. if i may use the power of the chair because the commentator is going to be edward chow and cliff gaddy. if i may raise a question you ended your presentation on jim and i guess the question that emerges in my mind is if the chinease deal comes into life and the gas moving into the far eastern power markets, do you have views on what that means for competitive lng sources? i am thinking does this make it more difficult for canadian lng to come in and gulf coast lng from the united states? are we kidding ourselves with all of hoopla about the lng that

it maybe subdude from the more optimistic forecast. >> i think the context is that assuming the deal goes ahead as as you say and gas from canada develops the infrastructure that is require we are talking about 38 of gas into northeast china into a market that is looking for 400 billion cubic meters of gas by 2020 if they meet their current target. so 10% of the supply for the market so there are plenty of room for supply and the chinese have developed a compass of supply. we have the western supply and the southern supply and supply on the eastern seaboard from lng and regasification is being expanded on the eastern sea

board and the russian side is the northern aspect to the supply and there is increase from conventional and non-conventional sources so there is plenty of room for other things than lng. but it does set a bench mark price for imports into china because the chinese have set a bench mark and this deal looks like it is linked to oil and oil products as well and would deliver gas into the eastern coast at around 12-13 and btu which looks like the price of united states lng would be delivered. so we are starting to get a bench mark price which does make it more difficult or forces the higher cost lng particularly

producers to assess how they will be in the chinese market. there is a gap for the volumes but we are convergeing on a price expectation which is lower than we have seen in the past couple weeks. >> ed? >> thank you charlie and jim and jonathan for putting the book together that is a contribution to the field. it is good to bring real base analysis to washington because here in washington we substitute perception for reality in policy making. i don't know about europe but that is always good to have prophets from overseas come to washington because sometimes they are not respected in their own country and i promise to do

the same in brussels and london as the community arises. i think one comment on gas and the importance of gas to russia that i might make is that it is definitely true oil is all about money in russia. but gas is often about politics. domestic and foreign policies as well. and sometimes even personal politics as well. and you can see that in mr. putin's personal involvement in ukraine and the china deal that was just announced. mr. putin would rather have gas statistics at the drop of the hat any time he is given the opportunities. so this is something that is close to the russian leadership. but the question i want to read and it maybe a subtext of book

and i will read it more carefully and that is in order to meet the various market challenges rather fundamental structural reform of the gas structure in russia is needed. it amuses me they are called independent. it would be like calling exxon mobile and con independent. are they going to be limited? the so-called independents to serving the domestic market as they have clearly expanded their scope there or are the one ong

one offs or do they pretend to something that is larger in the fuchl future that will be a real liberalization of the gas market and one could easily explain ong and the special relationships rather than the systemic change over the horizon. if you were to become more response to the changing global market it seems some changes would be necessary. and unbundling would allow better access to pipeline capacity by more producers than

just a privileged few. you think about the associated gas that is flairred all over russia given supply isn't the issue. on ukraine it seems to me not only is ukraine currently relied upon for these half of gas problems exports to europe there is also a question of whether the availability of transit through ukraine allows gas prom to compete in a way that the expensive projects do not afford because they are expensive

projects that need to be finance financed and require the long term pay on part of the buyer in part order for the programs to be financed. so gas prom is not given the flexibility to price their gas to meet the stock market where it is rather than be stuck with long term take or pay contracts. i would be really interested to hear you talk more of the assessment of the recent deal in chain china. some of the russian pronounce pronouncements haven't been agreed upon by the chinese side

and there is going to be a loan or prepayment required for the cost in terms of capital spending on gas prom's side. we don't have a lot of commercial term details. it is interesting in the slide that jim showed which was a gas prom forecast of the 2020 production from eastern siberia. it was modest in 2020 so maybe this deal will cause them to revise their forecast. how real is the deal and when and how might we be able to tell? one other point that is particularly interesting for europeans coming to washington to hear more about is the eu's

compitation case against gas prom and maybe a report should be -- competition -- filled not too long from now. maybe by the fall. the other part of the picture you can help us fill out maybe is how interested in russia in the gas exporting forum? is this something that will not lead to anything or is this something in the longer run may have more legs than we seem to expect right now? i happen to be in another country last week and the minister there invited the gas turk to the meeting forum so a

little bit about that would be interesting for the audience. >> you raised a lot of questions and before you address them i will ask cliff to make remarks. >> some of my questions will be the same so i will not repeat them. i want to say how happy i am to read the book and get a free copy which i think people in the audience are amazed with too. this is an amazing book and i think it is going to be the go-to reference book for anybody that works on russia and energy issues. it doesn't have to be focused on gas at all. i spook as a consumer -- speak -- there is no way i can

envision knowing a fraction of what i know without the book. i wanted to make the point that ed made to some extent. despite the title of the book talking about the marks and jonathan's remarks on the supply and demand. the book is more than just about the complexities of markets. it is also about the complexities trying to balance different interest and the tension between different interest. and this is largely between the political demands placed on the russian gas and to resolve the contention with the commercial demand. there is thee demands as the

book points out being placed on gas proem. it makeed no sense to make it up to libing up to the profit potential without taking into consideration this is more than a profit maximizing entity. and a small percentage of russia's formal tax revenue is funded this way. it has the go-political role and this book talks openly about this in a real and sensible way and debunks the idea that gas is a weapon and points out it is a lever and a point of pressure. it is used and if you use it you

will probably destroy your ability to use it in the future. and then the role of gas proem in russia which is economically and political and that boils down to gas proem's role in keeping an economy alive that is not always viable completely on its own. it reserves jobs and construction structures and im input producers and a huge part of the defense industry is kept alive and was especially kept alive during the '90s by orders from gas proem for equipment from cables pumps, aircraft engines and so forth. it is a hugely important role. it is expected to play that role. perhaps more than anything else.

it may only produce, gas proem, may only account for 5% of russia's tax revenue but that is formal tax revenue and if one were able to compute the imformal burdens social and political they play we would see it is an important role. the tradeoffs and contention is the overall themes of the book and i like that. it is two-fold message. the authors are identifying the huge nature of the complexities both in the market sense competitive market and the beyond non-commercial complexities that gas proem faces. and bigger than people imagined

and they will only grow larger. there was a positive message that jim ended the question on about real signs that gas proem and russia or the manager of the big russia incorporated we should say vladimer putin is able to see and adapt. maybe belatedly but who knows what he says publically is different than what he does. i have heard him poopooing shale gas and you tend take it seriously in the beginning then you wonder if it was a smoke screen. my sense is there is real capability for change in russia. it will not be the kind of change people are imagine but

there is going to be change to adapt to the changing environment that gas proem is in and just to end on this personal note of putin's role which ed outlined or indicated clearly. he does regard himself as head of the whole energy sector and gas but he hedges his bets and has fallback options. he avoids making a commitment that he cannot get out of somehow. with that sort of mentality given the challenges that have been described in the book here -- we don't know exactly what sort of changes he might undertake. i think they could span anything with respect to domestic organization of the industry as well as foreign markets but we have to keep our eyes open. i think the gas sector russia's energy-based economy is more resilient than many people seem

to realize or indicate when they go forward on assumptions about past behavior and that is the story of the book indicating the challenges tradeoffs and tensions and giving indications on how changes and adaptations have been made. >> thank you gentlemen. >> i will pick up the specific points. i will leave jim the talk about china and independence. i will pick up a point cliff made about the role of gas proem. if you look at energy business models it is caught between the model of a traditional company into producing company where they are expected to provide

energy for citizens at below cost. that is what they do almost everywhere in traditional producing countries. and one interesting point ed made about reform is the russian's have done well in relation to their peers for reforming their gas sector in relation to pricing and liberalization. i don't want to make too big of a deal of this. but if you take a look at the european countries in relation to price and liberalization you will see the russian have a long way to go. but in comparison to where they were ten years ago and where in my previous book predicted they would be they have done well. every cubic meter of gas sold in russia today is sold at a profit. maybe not a big one but that is a big thing to say about

producing countries. and in our book from 2012 on gas pricing around the world what we saw outside is subsidy and unsustainable subsidy and putin did address that. certainly the third party regime isn't perfect but it exist and it is talked about in the book. it is relatively complex and it isn't going to happen any time soon but it is talked about. that is a step forward that anyone would talk about it. let me just catch you in a few ukrainian european things. as far as the ukraine availability transit and that that means going forward i see this as a typical russian chess game. they have their pieces on the board in different pipelines and

if necessarily they will move them around the board depending on the commercial and political situation. they would be happy for a resolution of the ukrainian situation which would create a mon -- non-hostile relationship. rather they will succeed with that i would not venture an opinion. but normalization with the people in kiev is a priority. is it achievable given the kind of guy putin is? big question. the case against gas proem. yes we are closing in on what will need to be the statement of objection. this is what you call anti-trust. the key problem here is that the competitional authoritys are

objecting to the continuation of oil pricing in potentially the central east european countries. gas proem is resisting this for all kinds of reasons. if they don't settle with the authorities with if the authorities see the state of objections and if this was an eu company there would be so appeal our objection but it isn't so they will appeal and those guys don't hurry so this could stretch on for the next new years. but i believe by the time this is finally resolved if it goes all the way to the european court of justice, in contractual terms it will be settled, i would be surprised if the european court of justice tried to levy a fine for historical

violations which the russians wouldn't pay anyway. how interested in advertising but not in theterested in reality. putin did a major speech last year about this which didn't represent anybody's policy apart from his own. but only three countries are really high profile. the russian, the iranians and the algerians but the iranians don't export gas and the others don't agree on anything. so this is something that journalist get very excited about about not many other

people. >> talk about the independence and the deregulation of the russian market. and picking up the points about balance it is interesting to think about whey the independents have seen an increase. and it comes down to the problem gas proem has it balancing their objectives to survive and operate as a commercial entity and try to make some profit to keep it going and develop. i think what we saw around post crisis was as the markets changed and gas proem failed to adapt there was a risk that the commercial inad quit that it

would be loosing its dominant role and its ability to be a tool of foreign policy. i think pressure was being applied but from various angles and it isn't just about this issue. it is about vested in the as well. the owner of novco is related to putin or linked to putin and there was a notion that gas was failing and elements of competition and also elements of encouraging russia to start to develop its most competitive gas and get it into the market place was a driver and you saw that in the domestic market because gas

was expensive and new fields needed a higher price to underpin their economics. we saw the pricing increasing by 15%. and at some point the independent producers found they had russia's cheaper gas and could undercut gas proem and from 2012-onwards when the contract expired they were allowed and encouraged to compete and set what was a quazi price in russia. they will be allowed to set prices above and below the regulated price and this is because gas proem's higher price

was undermining the growth of russia and consumers were complaining about high energy prices. it means there was an incentive to encourage some competition and now we are seeing three big gas companies in russia and now we are starting to see this in the exporting market. gas proem's market share was one catalyst and the deal with china was another. we have seen it broken in a controlled patter. if you are a state company with

offshore gas you can develop lng. if you are a company with lng defined in your license you can develop that. so those are two specific projects. so it is limited. but it was a poke at gas proem to say get your act together. and it is interesting that novtech signed the deal and there is now a joint venture with siberia. so we are seeing a balance between the commercial political and vested interest. it would be a controlled process. looking forward the next step could be third party access to

the pipelines in the east. that is the next potential step towards a controlled liberalization of exports. there is no mention of the pipelines facing west and being liberalized in this faction. but you can see the step by step process in which the three companies try to find the balance in the east and then the west potentially and i think the liberalization process is a slow one and it will be many years before we see gas proem broken up but we are taking steps along the journey. in terms of the reality of the china deal i see what you see and it is difficult to be conquered about it. from a commercial perspective,

we believed that the price at which they appear to do the deal by some between $10-$11 is about the right price for both parties to make price. we estimate gas proem can make a reasonable rate of return assuming they invest efficiently in the program and we estimate the gas in china could be beneficial. it is appearing to be a balanced contract with lot of bells and nuance nuances it would seem to make sense to take the deal forward. commercially it looks sensible so i would not be surprised if it did proceed on the terms that

we know. >> thank you very much. i think it is time to open to the floor. we ask that you please identify yourself and please keep your question a question and not a lengthy statement. and you can address it to a member of the panel but if anybody else want to weigh in we will proceed that way. over here against the wall? >> thank you. i wanted to go back to the idea of the perspective bubble and throw out a few reconcilations for the bubble. and one is you reform the price you sell to europe and make the gas more competitive. the second option is build a western route to china. you try to lower the price within russia and shove more gas in the russian economy or leave it in the ground for a better day. if you were to think about the

four possible options how would you think about the attractiveness of each. >> the leaving it in the ground is what is happening now. even if you don't believe them saying they could produce 617 last year when it is 487, even if he is being lenient they have a lot of gas. what i think is interesting the most and we as an institute have conducted a public debate with gas proem on pricing and they are still saying the same thing. they have after a lot of hard talking with their customers, they have adapted where they needed to adapt which is in the competitive market. so their prices are now

competitive with hub prices and in europe. the way they have done it is incrediblely bizarre way of doing it. you have to pay and you get paid back to you pay too much. it is crazy way of doing but they did it. the question going forward is do they want to push more gas into europe? and here we come back to what we described in the 2012 book of the discriminateing monopoly situation and they all do this which is how do i continue to compete in my main markets without crushing the price. and every so often they make a mistake and crash the market or they starve it and it goes up. but what is interesting with

this quote unquote threat in europe prices in europe are falling and have fallen around 25% from the beginning of the year and that is telling everyone which they should have known, gas is in trouble in europe. demand is falling and falling faster than domestic production. gas proem figured this out in 2013 lowered its prices and it in creased its sales. >> i think the interesting thing about gas proem is it isn't competitive and at some points it has been cheaper than hub gas price which is why the volume is rebounding and i think the russian's are confidant that

europe isn't going to find alternative alternatives and there is no doubt they can undercut lng in europe. if they want to they can undercut the competition. there is no reason to crash the price now. in terms of your question about what do you do with the oversupply. they were loosing money in the domestic market until 2009 when they first broke even. the price now is given or take the break even price delivered to moscow. we reached a level where it can make money and break even on the most expensive fields. they could pump more gas into the market but there is no need as the customers and producers

found a level at which they are happy and the price isn't going up and going forward it looks good. in terms of the western pipe to china absolutely, that you would love to do that. but the chinese are not falling that. they can see the gas strategy to play of the europe and chine market. i think gas proems best hope is to sell more gas or russia's best hope is sell more gas in the east using the new and existing pipelines and the western route is something in realistic term that is out 2030's before we see gas coming from the west siberia.

>> the western route is where the lack of chinese comment is making us question. they are talking about the rate to get it up but drawing gas from a pool that is western siberia is precisely what the chinese don't want. it was specific that besides the determination of the route is the definition of those as the source of the gas which raises the suspicion in my mind that maybe they are going to try claw upstream eventually.

the supply from china and if they develop the field with the usually way there might be a question down the road to bring up the question of equitly. >> tim and airial. >> thank you. i am tim with brookings. i would like to ask a question. you have hinted at the answer in the previous response but i would like to learn more about europe's desire to diversify supplies. it isn't new and it has been diversified in the light of the events. if i listen to you correctly with the background knowledge we have on the competitive of fuel

sources in europe there is going to be an incrose creasing number of coal and then russian gas. if that is correct what does that tell us about how willing russia is to diverseifydiversify. >> i mentioned that we are some of the few people working on the unfashionablely subject of oil and gas and this is because 99% of people in european university are working on energy and sustainable issues. let me tell you this is a horrible generalization but i think it is reasonable. for most of the old west states in europe and everyone under 35 this is the only subject that

matters. the planet is at risk why are we bothering with this old hydro carbon stuff. this is the problem with promotion of code. the environmental committee hasn't understood what is happening. it is basically a manfesto for coal and to treat coal as an energy product. europe is nowhere with the trading scheme. this is something the commission will have to do as it picks up in the fall. i don't know how that will work out but what i do know is that i am confidantly expecting the coal to be resistant outside of germany. the question as alternatives to

natural gas and this is a political alternative thing to say but there is no other alternative. probably in the whole of europe no more than a hundred wells have been drilled anywhere and mostly where they have been drilled they have been unsuccessful or massive resistance. my own country you drill a well just drill it and it is headline news and there is a punch up between environmentalist and police. this is for one well! the big gas cruse crisis in europe that no one talks about is north africa. egypt. and algerians haven't issued

data even because we know what it will say. but once things get too serious no one can talk about it. east may is going to stay in the region probably. and so on and so on. so this is something that many studies have been done and many consultants have gotten rich but it isn't anything new. >> there is a simple analogy with the situation. they have to look at the japanese example and say you can do that but there is a price and that is what the russians are saying. if you want to do that go ahead. but you know, if you want gas at

$10 come back and see us. and that is why the russians are keeping quite and letting it play out. i think the interesting delima is playinged out and ridding europe of one source of supply and they are being blocked from doing that for short term physical reasons. so we will see how that plays out. but you know of course that doesn't diversify europe but reduces its transit use. just to endorse his point. >> good morning. great presentation. cost of production. if you look at eastern siberia

or if you look at the arctic cost of productions are very high this is land gas as opposed to offshore, but offshore that is shallow or offshore gunie they are signing new licenses as we speak, don't you think this will be to europe as well and the picture in the early 2020's is going to be different than what we see today where russia gas has an advantage for west siberia. and the second question is about ukraine. do you think they have viable options with gas coming from europe as lng or otherwise or lng even into the black sea with

the floating terminals? thank you. >> well in terms of the outstream cost the overall cost are high. the overall capital expenditures are expensive and russia is competitive. i think gas delivered to europe can be delivered at $7-$80 so i think it can compete with the offshore sources. i don't think octy gas is in our life. >> you are a young man -- >> i don't think i will see arctic gas coming out of. there is plenty of gas to satisfy the west demand. georgia is difficult with the helium issue but it is all about transportation cost.

it is huge distance to market from both. but i think that you know russian gas up stream can be competitive and the interesting thing in the east is that we are going to see if gas proem fails to deliver, you will see the same thing happen in the east as we have seen happen in the west and that has been mentioned by the energy minister. ...

>> there are complicated reverse flow options for the ukraine that we need to discussed throughout life. what the russians are clear about because they saw this happen in 2012 and 2013 area this is all of it that they will be careful to try to place this in a way that wouldn't happen. but of this country can be run by people who would even give the place a chance or if we

could just get some and this is something that we have to be a success. >> please use the microphone. >> thank you for the remarkable presentation. and it is quite astounding what you have been describing and my

question is this. and we have the index that are having to mention slow climate change and etc. those occurred in copenhagen. so not in a 22nd clip through. including about environmental implications greenhouse gas implications and etc., which as we know it swamping the west in terms of offshore issues and all of the above. and i am just wondering how and if that fits in both as a cost dimension and also as a strategic dimension of give and the exceeding acceleration of carbon fuels and i guess i would be particularly interested or

this might be off topic of the exxon mobil center that is being constructed in st. petersburg to take on environmental corporate responsibility issues. >> let me try to address the reason why we haven't done very much in this really focuses on what this is about which is not in that area. and that is about it.

and there is some evidence of greater sensitivity to environmentally these when we develop their projects. and if you take a look at the developments on gas pumps sites you will see a lot of references what we have done in order to try to counter the environmental problems that could have arisen. and so one of the things is very notable in europe, that while the gas industry has tried to play the climate card it is almost very logical and this is part of the fact that it environmentalists tend to focus on me feeling mission issues which are unquantifiable and one

of the reasons but not the only one there they are so fundamentally opposed. and so that is kind of the start of the story. >> have i would just like to say that i think that for the rest of the year risks have been underestimating the impact in europe. and from what i have seen it has made one of the presentations outlining the traditional view of gas as a supplementary fuel to substitute this. and it has made some effort to demonstrate the benefit of gas or coal. and it has failed to make an impact. and in the east, of course, it's very obvious.

and we have a natural environmental story. and it's quite clear about what is going on with gas substituted for coal and so forth. >> thank you kevin. thank you for that presentation. >> this is related to the u.s. role in what is happening to ukraine. and i think the reason that jonathan outlined, with the europeans quickly adopting punitive measures. but there has been a lot of talk here with legislation and draft legislation in congress that directly outline for this. i'd be interested to know your perspectives on what the effect

would be of u.s. sanctions against this. and would that have an impact on this and what do you see as being the material effects of the u.s. sanctions against it? >> welcome i will start and i will ask my question to jim. but i have been very careful in saying that we have a political crisis with the russians and must not make that into an energy crisis ridden and we are completely supportive to the general view of annexation and i think that we need to be very clear in europe that we have an

enormous amount to lose from this relationship. and so if we are going to impose significant costs on ourselves let's be clear while we are doing it. and so we all hope that there is an any incursion in eastern ukraine and if the status quo is maintained, my guess is that there won't be any increase in sanctions into the industry sector. but the one thing that we should keep in mind is of course, this is not a new situation and u.s. actions on soviet energy have the strongest antecedents. and i think the u.s. should look that from what happens between those episodes in achieving this and.

>> i think the technology sanctions in the gas area and i was with with a few things that are of concern to that project and one is the political faction technology for this company and if there was a specific targeting of that the back of her. and the other thing that is already having an impact as the financial sanctions of making things nervous about lending. and it's taking longer than expected for precisely that reason. but of course, what we are seeing in both instances just to complete the technology, the other two areas are all related and particularly this in the sea

and then there is the unconventional from a number of companies now. and honestly that transfers technology as well. but the response of a number of issues is as we are seeing is you'd have to finance a lot of this stuff and it's not quite as easy certainly in terms of this and in terms of drilling in the unconventional side and you can get some of these to come from there as well. so on that front there is a sort of offshore that is kind of difficult and i can't see how

they can drill in this without the support of these technologies and how that can impact things. so i think this is a massive pr event and that would be an interesting one to follow. >> unfortunately we are going to have to cut it off they are. i want to thank jonathan and jim very much for joining us and we are so pleased the you could be here. i would like you to think our gas. [applause]n massachusetts at the

concord bookstore for a little less than an hour. the bottom line is i like to type. thank you very much come forking out today and i was wondering if it was going to rain on me and i was thinking i should not be worried about that because it is henry david thoreau and you ask not worry about things.

my wife loves to tweak because she was tolerated henry david thoreau -- she has taken to tweet his quotes. she says bewear of enterprises unless it is a frilly skirt you had your eye on. had he not returned to conquer because i was writing the book and want today keep the 19th century in my head. where was emersed in the era and had the three demissional view of the day that henry moved into cabin on the wall