President APS


Energy is crucial to any nation, affecting every aspect of life. Natural gas will become a vital source of energy in the Middle East and, more important, it can generate national and inter-regional dynamism towards peaceful inter-action among the Middle East communities.

Once available as a stable source of energy. gas penetration becomes rapid and accelerates socioeconomic development establishing a positive balance between the development of rural areas (the Italian & Indian models) and the development of urban centres (the Japanese & Indonesian models). Gas will be the key to rapid and qualitative economic growth in the Middle East.

Recoverable reserves of natural gas in the Middle East are abundant now in excess of 45 TCM, accounting for almost a third of the world’s total proven gas reserves. This region has been under-explored for natural gas. as hitherto exploration has concentrated on looking for oil: gas was only discovered in the process of finding oil. There are believed to be between 100 150 TCM of additional gas resources in the Middle East yet to be properly explored.

The proven gas reserves in the Middle East are relatively cheap to produce but quite expensive to develop. In most cases they require considerable investment and technology by major foreign companies.

There are several ways successfully tested elsewhere in the world, to develop these gas reserves for both export and consumption in the Middle East countries. With most of these countries oil freed for export to generate more income gas developed for national and inter regional utilisation and export will be sufficient to fuel rapid socioeconomic development in the Middle East sustainable for several generations.


Peace and energy inter-dependence are the two most crucial factors to socioeconomic development in the Middle East. I say the most crucial because the problems we have in the Middle East ar colossal. far too complex for the current generation to resolve. Peace between the Arabs and Israelis is the starting point on a long and painful journey to solving these problems. Energy interdependence in the Middle East is the starting point on the parallel journey to finding early solutions along the way. My proposal is to link the peace to energy interdependence: link it by charter. My proposal is a Middle East Energy Charter quite different from energy charters proposed for other parts of the world.

Before I go any further I would like to outline a national energy model which is the fruit of 30 years of my work in the energy world. My model is Very Large Integrated Energy System (VLIES) for each and every country in the Middle East, which I will simplify by saying it consists of four inter-dependent frameworks: each framework for One of the four basic sectors: Education, Information, Government and Enterprises. Each framework is to be filled with modules for planning, action. innovation. etc. starting with the easiest and ending with what you really intend to achieve. The framework for Education in this model, for example, consists of modules for energy related items to be included in the curricula starting with the Kindergarten not forgetting that through the kindergarten you will be educating the parents as well. The framework for Information consists of modules ranging from the simplest was of creating awareness of the importance of energy in one’s life to the channelling of the most suitable technologies within the various aspects of energy.The modules for the framework of Enterprises consists of modules for execution, through the whole spectrum of the energy business, from exploration to the end user of energy .

My model is simple and I will bc, glad to give it to any nation interested. The aim of this model is to make the nation efficient in energy other than getting it and in using it; the more efficient you are the better life you will have.

You may visualise this model as a parabola: You start using energy to grow and keep using more energy to grow further and further until the energy content of your unit of production has reached its peak, i.e., until the marginal returns on energy use begin to diminish. This is the peak of the parabola. Then you begin to climb down by reducing the energy content of your unit of production and keep using less energy to grow further and further until you are satisfied that you have really become energy efficient. Most modules in the framework of Enterprises can be visualised as parabolic curves.

Through this model, if adopted for inclusion in the Middle East Energy Charter as one of the common denominators, energy inter-dependence in the Middle East will become a reality a happy reality. And, starting from peace, the long journey to solving our problems will become less painful. It is a model for creative dynamics, a model for the intellect to overcome the instinct. We in the Middle East have long suffered from models of reactive dynamism, models where the instinct guided us to self-destructive action.

Again, before I go any further, I would like to present to you the Middle East Gas Trunkline Loop. This is a life-giving infrastructure now being promoted jointly by Chiyoda Corp. of Japan, UNIDO and ENI of Italy. It is a supergrid – I call it a super-highway collecting gas and giving it to those in need and creating a boom in business every kilometre of the way. This is an infrastructure which will enable Middle East reserves of natural gas to multiply, will enable Middle East reserves to link up with the markets on both sides of Suez – Europe and Asia – and will make Middle East peace a happier reality for all concerned.

The project’s nucleus, as I personally call it, is a 7,000 km pipeline to be built across the Middle East from Turkey down to the Sea of Oman, including Iran as one of the main suppliers.

In my opinion, the present geography and technical details of this project are less important than the idea of the loop itself. The loop will eventually pass through, or be close to connect with, any nation joining the Middle East Energy Charter group. This in my opinion – I say it just to free the real promoter of the loop from any responsibility – as I have personally enlarged the concept of a Middle East loop to include important elements related to the peace process.

Progress on this project was reported to the 8th annual APS Conference, "Middle East Strategy to the Year 2007" held in Limassol on Sept. 26-28, 1994, by Dr. Claudio Simeoni of ENI. It was conceived in the late 1980’s out of a conversation between friends and the idea was turned into a concrete proposal by Chiyoda Corp. at the 6th Annual APS Conference in September 1992.

To cost about $10 billion, the loop – or rather the nucleus of what I personally hope will develop – is planned to be on stream by 2010. An expansion of its capacity is planned to be completed by 2020. Its gas supply capacity is planned to be as follows:

– 13.9 BCM/y to Middle East countries, rising to 22.4 BCM/y by 2020;
– 15 BCM/y to Europe, rising to 23 BDM/y by 2020; and
– 28.7 BCM/y to Asia and Japan, rising to 43.1 BCM/y by 2020.

Related LNG export plans could be build, one for Europe from the Syrian coast, and a major one for Japan/Asia from southern Iran (Shah Bahar) and/or Oman (Bimmah).

The Chiyoda project was adopted by UNIDO in 1993 and ENI joined in as a promoter from the European side. Chiyoda is the promoter from the Japan/Asian side. Chiyoda’s original plan was scaled down, mainly because of lack of response from the Saudi government as the loop was first intended to pass through Saudi territory from the UAE to Jordan. The North African section was suspended. But the promoters have kept both options open, in the hope that Riyadh and the North African government would back the project in the future. It is my hope that all Middle East countries will link up with the loop; this is why I call the present version a nucleus of that great life-giving loop.

I stressed during the APS conference that the loop project was to be executed over the next 15 years. So, in my judgement. today it does not necessarily depend only on the views of current Middle East governments. Times are changing rapidly: opinions will also be revised to include countries and areas not mentioned at present. What is important today is to follow logic and at the same time, have a clear vision of the future needs of the Middle East, North Africa, Europe and Asia.

Now again in my opinion, we must have, a blueprint for this major infrastructure – to be backed by the big powers. We must have it as soon as possible.

I have repeatedly asked the promoters to give much weight to the negative responses of today. I have urged them to stick to their project and come up with the second phase of their study a detailed technical and economic feasibility study estimated to cost about $6 million, of which $3 million is to be provided by the Japanese/Asian side and the other $3 million to be funded by the EU side.

Why not implement the loop now, one would be tempted to ask. It is not possible to implement such a project today simply because the basic elements mentality the peace culture and the seeds of creative dynamism are not in place today. Perhaps in a few years? Why not! but we must have the blue print today i.e.. before end 1996. Then we shall see.

According to the promoters the loop would consist of four segments with each segment to be owned and run by a private company. The shareholders will each of the four companies would be from the gas buyer and supplier countries involved. Each company would be in charge of the construction of its section. A fifth company could be formed jointly by the four companies to act as a central entity to coordinate the collection and distribution of natural gas, pricing, technical services, etc.

The loop would have an operating life of up to 100 years, with the life of these companies to be for the first 50 years.

Construction of the loop would be financed by 50-year soft loans, at 3% interest with a 10-year grace period. to be provided mostly by EU and Japanese agencies.

The average cost of gas transmission of the loop’s four segments should be $0.30/million BTU, with the cost for one southern segment estimated at $0.18/million BTU, and the cost for one northern segment (from Qatar to Turkey) yet to be lowered from an estimate of $0.57/million BTU (see table below).

The right of way along the route and cost of land for compressor stations would be provided free of charge by the countries through which the loop is to pass. As a result, the four operating companies would have a guaranteed 15% rate of return on equity, net of all expenses. So the project pays for itself and yields good profit.

The economic viability of the loop – or the huge socio-economic benefit from such a project – was underlined in the first phase of the promoters’ study, which was completed in 1993 and was the subject of a joint presentation last June at the UN offices in Vienna by Chiyoda, UNIDO and ENI. The meeting was attended by representatives from Middle East governments, major West European gas companies, consultants, and independent observers including myself.

Among other things, the first report noted that gas transmission by the proposed loop was by far more economical than electric power transmission

(.e., "the cost of gas transmission is less than half of the cost of electric power transmission per unit of energy").

Reserves of natural gas along and near the loop’s route will increase considerably as many small fields hitherto neglected would become commercially viable. Exploration for gas along the route will a the number of foreign E&P companies and as a result, more gas will be found and produced. Gas production and marketing costs will be very low, compared to OECD areas, and God knows what other opportunities will turn up.

                     THE MIDDLE EAST GAS LOOP                                        Construct        Transmsn                       Pipe-  lengths  Cost    Compltn  Costs                       Size     Km    (US$ Bn) (Year)  (US$/MMBTU)                        NORTH TRUNKLINE LOOP Southern Segment*      48"   1,180     1.91    2010     0.18 Northern Segment       48"   1,782     3.17    2010     0.30  SOUTH TRUNKLINE LOOP Southern Segment*      36"   1,203     1.43    2010     0.27 Northern Segment      36"    2,738     3.46    2020     0.57  Total                        6,903     9.97             0.30  * Includes 50% length of the mechanical connection under the   Gulf of 0man south to the Strait of Hormuz (36", 345 km).    Includes 24" branch pipeline from Palmyra to Tartus (210 km). 

LOOP SUPPLY CAPACITIES By 2021 By 2020 To Europe 15 BCMY 23 BCMY (10.5 MMTY) (16.0 MMTY) To Japan/Asia 28.7 BCMY 43.1 BCMY (20 MMTY) (30 MMTY) To Regional Countries 13.9 BCMY 2.4 BCMY (9.7 MMTY) 5.6 MMTY) including: - Jordan - 8.5 BCMY - Turkey 13.9 BCMY 13.9 BCMY

The TransMed Experience

In his presentation to the APS conference, Dr. Simeoni mentioned the pipeline between Algeria and Italy, TransMed, as one of the examples he gave of the way demand for gas grew rapidly from the moment it arrived at the market. I recall the days, from the early 1970s. when the idea of a major gas pipeline between North Africa and Europe was floated around and people in the energy business ridiculed those ‘dreamers’ behind such ideas. Of course when the idea of a marine pipeline crossing the Mediterranean emerged people called it crazy! Well, Snam in 1977 did sign an agreement with Sonatrach to import 12 BCM/y of Algerian gas through a pipeline across the Mediterranean for a 25-year period.

Ten years later the Italians realised that demand for gas. having outstripped projections made in the mid-1970s. was going to be strong irrespective of factors prevailing in 1987: so they negotiated the doubling of TransMed’s capacity. At the end of the 1980s Snam and Sonatrach signed an agreement for supplies to reach a total of 20 BCM/y. In addition to this was the 4 BCM/y volume to be taken by Enel using the same pipeline. Recently Snam signed a contract with Sonatrach to take 2 BCM/y of LNG to the Panigaglia regasification plant in Northern Italy.

Now a pipeline is being built from Algeria to West Europe through Morocco and Spain, to pass through the Straits of Gibraltar where water depths reach 400 metres.

The Middle East Energy Charter

My proposal for the loop is to make it part of efforts to realise the Middle East Energy Charter.

Why? Well, remember, the Middle East is littered with rusting pipelines – made idle because they were used as a weapon by one country against another. A pipeline was cut off, or blown up, because one regime did not agree with the other and, from the former’s standpoint, needed to punish the latter. We must all make sure that. from now on, inter-dependence should never make the dependence of one punishable by the other. The Middle East Energy Charter is a must, and here are its broad lines:

We plan and then agree on the implementation of the loop, in whatever form or size the nations involved will agree upon eventually. I propose you begin with the Chiyoda/UNIDO/ENI blueprint which is forthcoming.

We establish the basic elements needed for inclusion in the Middle East Energy Charter. The motivations and mechanics of this Charter will be based on:

– Lasting peace among the Middle East countries and among the various communities within each country to be motivated by the need to place socioeconomic priorities above all other considerations. Since this is not an easy objective, there should at least be a common definition of what can help establish lasting peace and what all the member states and their communities should at any cost avoid doing to each other.

– Excluding energy from all aspects of future conflict. Since this is a difficult objective to attain. there should be an agreement binding on all members and communities not to use energy as a weapon against each other and as a starting point the members should agree at least to exclude natural gas supplies from any embargo or punitive measures by any member against another.

– A common definition of socio-economic interdependence, based on energy interdependence. taking into account both the characteristics and priorities of each community within each of the member states. Since this is difficult to attain, start with what is simple and easy.

– An evolutionary process, i.e., make the charter as simple as possible and flexible enough for it to be evolved in time.

All the member states should agree that energy interdependence is the key to their future security – the security of all their communities. The reasons for such an agreement are obvious and I would be glad to discuss them in detail.

Securing stable supplies of energy, for socio-economic development and a lasting social contract within each society, is more important than expanding ones territory. Security of energy supply is more important than political independence.

The World Bank Trade Organisation – with the help of the five permanent members of the Security Council and the Group of Seven – should back the Middle East Energy Charter as an international document related to the Middle East peace process and its various multilateral tracks. They should jointly spearhead the initiative in helping to make the gas loop a reality. As part of the joint initiative, the World Bank would concentrate on raising the funds for the project from the rich nations. The UN would concentrate on making the Charter a reality, and the WTO should declare its commitment to punish those who would violate the Charter.


The attainment of creative dynamism, a dynamism driven by the intellect, is not an impossible objective for the Middle East. This part of the world, so vital to global peace, has been seized with reactive. instinctive dynamism for too long. Energy made available and well used feeds the intellect and will help us control our instinct.