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BBC OnePanorama


Last Updated: Monday, 6 November 2006, 18:13 GMT
The High Price of Gas: Transcript


ROBERT JONES, BALLOON PILOT: My gas bill at home - 500. Gas bill for the balloon is probably 2000 a year.

STEVE BRADSHAW: Going up. His balloon - everyone's fuel bill.

ROBERT JONES: It's on the increase - seems to be on the increase all the time actually . I think its going to go up even more.

STEVE BRADSHAW: Gas heats most of our homes, and makes a third of our electricity. For decades we've had our own. One of the biggest fields here in Morecambe Bay. Now the gas under British seas is running out. Soon we'll have to rely on gas coming from the east - down a 4,000 mile pipeline.

PAUL DOMJAN, ENERGY SECURITY ADVISER, US DEFENSE DEPARTMENT (2004-2006): Once you build a gas pipeline you're in bed with the person on the other end of it for years and years and years, and the cost of getting out of it is very, very high. So you're stuck with the people youre doing business with now for the foreseeable future. You need to know who they are. You absolutely have to know who they are.

STEVE BRADSHAW: Tonight - meet the man who knows just how high the price of gas can be. Meet the Romanian actress with a controversial role in Europe's gas supply. The former prime minister they call the gas princess. The man on the FBI's most wanted list claims he could push our gas bills even higher. And the girl with the gas bill to die for.

Travel with us down the pipeline to the future. See if it will keep you from the cold and dark. Find out what it will mean for jobs and for your fuel bills.

First stop - East of Morecambe, to where rising gas bills have left an eerie mark.

DAVID ROUT: Well what we're walking on is what's left of the glass.

It'd be 1500 degrees it'd be like an inferno. The flames would come two thirds of the way across - so like an inferno. All powered by gas.

STEVE BRADSHAW: Dave Rout watched gas prices help kill his business. This gas-fired furnace used to make glass. Gas was the biggest cost. but the price hikes proved unbearable.

DAVID ROUT: The difference in the price for purchasing the gas was 2.5 m- STEVE BRADSHAW: Went up by 2.5 m DAVID ROUT: Went up by 2.5 m. STEVE BRADSHAW: Over what - a couple of years? DAVID ROUT: Over less than two years. STEVE BRADSHAW: Could you swallow that?

DAVID ROUT: No. The rising gas price meant we went out of business - quite simply..

STEVE BRADSHAW: We're all affected by the rising price of gas - but this is the hidden cost. Over 200 jobs gone in Sli Glass alone. And Harworth - North Notts - not a community that can wear the loss lightly.

Ged Pope worked at Sli Glass for almost 40 years. Rising gas bills cost him his job. And like the rest of us he's paying a price at home too. His Powergen bill has almost doubled in two years. Other suppliers are putting prices up just as fast.

GED POPE: Gas bill's about 78 this quarter and that's quite high for a single person. Don't use heating a lot I only cook minimum so I'm really using very little gas but that's still quite a lot of money for a single person.


GED POPE: Yes as everybody else's has done - by quite a bit.

STEVE BRADSHAW: With Britain relying so heavily on gas in power stations Ged's electricity bill's gone up too.

The average fuel bill has now risen for the first time to almost 1,000 a year. Ged's most worried about his daughter. Her monthly income's a 1,000 and she now spends over 100 of it on fuel.

GED POPE: She's got a young family on minimum wage, her husband's on minimum wage and they're struggling as it is now to meet their bills and increasing gas prices is just gonna make it harder for them.

STEVE BRADSHAW: But did it have to be this way?

ARCHIVED ADVERT: Deep below the cold north sea nature has filled a vast storehouse of warmth for our comfort. The flame from the seas is high speed gas and it means more and more heat for everyone.

STEVE BRADSHAW: Ged's factory opened amid the glory days of Britain's newfound oil and gas discoveries. We burnt gas in power stations, we sold it abroad, and we enjoyed some of the lowest gas bills in Europe.

Mrs Thatcher allowed the market to decide on Britain's energy policy. It was known as the dash for gas.

JONATHAN STERN, DIRECTOR, OXFORD INSTITUTE FOR ENERGY STUDIES: Mrs Thatcher herself believed that the nuclear industry had a great future. She found out very quickly that the market didn't like nuclear power, it didn't like coal. The only thing it wanted to build was gas, and it built much more gas fire power generation, much more quickly than anyone expected.

STEVE BRADSHAW: But there are now regrets we didn't save more of our gas for future generations.

PAUL DOMJAN: When North Sea gas was discovered there were a number of people in Britain who argued that at least a portion of the North Sea gas should be saved, as a national strategic reserve for the future in case, in the future, once most of the gas had been used up Britain had a serious gas supply problem like it did last winter. Sadly none of those people were listened to.

GED POPE: There's no reason why it couldn't have been used for the benefits of this country - no other reason, keep it. We've got the fuel, we can compete with anybody's prices and now we cant - we're at the mercy of everybody.

STEVE BRADSHAW: And depending on the kindness of strangers may not always be wise - as we're about to discover.

We're somewhere in central England. This is the national grids secret operations room. From here half a dozen controllers ensure the flow of gas along Britain's pipelines. The market should make sure those pipelines contain all the gas we need - all the best possible price.

JONATHAN STERN: The way the market works is that if you remove regulation, allow maximum freedom, maximum transparency, you get the lowest possible prices for consumers.

STEVE BRADSHAW: And maximum information.

JONATHAN STERN: Maximum information, but also maximum transparency of information, so that people can see what's happening. //

STEVE BRADSHAW: And that should lead to lower prices?

JONATHAN STERN: It should lead to lower prices; it did lead to lower prices for a very long time.

STEVE BRADSHAW: But last winter the market failed. Instead of having the lowest possible prices Britain was close to an energy disaster. Linda Burgess watched the crisis unfold on a daily basis in her role as energy buyer for a glass company. One that was strong enough to survive the almost daily price hikes.

LINDA BURGESS: It was extraordinary. The Met Office were forecasting a colder than average winter and prices did start to rise// then come the middle of November when we had the first cold snap they just rocketed

STEVE BRADSHAW: Worldwide energy demand meant soaring prices anyway - but there was clearly something else going on.

LINDA BURGESS: You're It was extraordinary. It was literally looking at a screen and the numbers are changing, minutes, second by second. You can't buy gas in that kind of market because traders wont sell it to you because by the time they've sold it to you and then gone back to their trading desk to actually cover it, the price may have moved by another 5p. So you can't buy it, you literally have to sit there and watch and wait and wonder when it's all going to return to normal.

STEVE BRADSHAW: She knew that the wholesale prices her company was paying would soon affect her gas bill at home too.

LINDA BURGESS: As a buyer you can see the writing on the wall for the domestic customer and we could see that wholesale prices were doubling, trebling.

STEVE BRADSHAW: As anxiety mounted that the market wouldn't deliver more gas, prices rose still further - raising fears some wouldn't be able to cope.

Then something else the market hadn't predicted.

Britain stores about two weeks of gas for emergencies - most of it here in an old gasfield in the North Sea - the Rough Field.

In February the access rig caught fire. For months Rough was out of action altogether.

JONATHAN STERN: The Rough fire had huge significance and very few people outside the gas industry realise how... how close the country came to a very major supply crisis. It was just a nasty little incident that happened on a platform, which closed off getting on for 80% of the UK's gas storage. Had it happened it any earlier in the winter, the consequences could have been very devastating for... for large parts of the country.

STEVE BRADSHAW: Britain's never been too keen on storing gas. Everyone else in Europe stores far more - Germany over two months and France about three.

We'd relied on the market not storage to deliver in an emergency.

But the market hadn't banked on this. Only the British weather could make things worse.

LINDA BURGESS: In March we had another cold snap which was right at the end of the winter, came out of the blue, and we couldn't get any gas out of storage, we couldn't get any gas in from Europe and the country literally was running out of gas.

STEVE BRADSHAW: We were down to a few day supply - there was even talk of gas rationing. The lesson many drew - Britain's model of relying on the free market to secure gas supplies was flawed.

JONATHAN STERN: I personally think that it's a very big fault of the UK market model is it doesn't give the right signals for building storage, and it doesn't value security of supply in the way that it should.

STEVE BRADSHAW: Cold weather, volatile markets, too little storage - surely we could depend on the next folk along the pipelines to help us out of the emergency.

What about all that gas in store on the Continent? The Germans for example keep huge gas reserves under these Ruhr valley fields. If the market worked correctly high prices should have attracted more of it down the pipeline from Europe.

But that's not what happened.

JAKE ULRICH, MD Centrica Energy: I asked one of my traders to ask some of our counter-parties, i.e. European Continental players if we could buy some gas to replace later. Now, the response from two of these parties was nearly identical and it was along the lines of: 'What good is it for us to make several million euros selling you gas this week when we may run out of gas later this year? And if we run out of gas later this year we're out of a job, so making money is not so important for us, it's, you know, making sure that we keep the gas for our own customers.'

STEVE BRADSHAW: Centrica aren't naming names. We asjed Powergen's owners EON Ruhrgas why they couldn't have done more to help.

Dr JOCHEN WEISE: Why couldn't you sell more gas to Britain last winter?

The supply and demand situation was very tight, and we had to honour our long term commitments with our traditional customers. We simply cannot tell them in February, "sorry, we've sold all the gas in storage to the UK because the prices were higher there". That's not the way we honour our commitments.

STEVE BRADSHAW: According to one estimate Europe's failure to deliver more gas cost not only jobs but added 200 to average household bills. British gas regulator Ofgem wrote to the EU wanting reassurance nobody on the Continent was "seeking to withhold gas to drive up prices".

LINDA BURGESS: We are more liberalised than they are. So we will continue to sell into their markets when the price is right and when conditions are right. But when the situation is reversed, they're not always ready to sell into our market.

STEVE BRADSHAW: In May the EU carried out 22 raids on major bags companies in five European countries. The EU was also concerned they may have been rigging the gas market. Inspectors, some accompanied by police, commandeered computers. They took away thousands of pages of possible evidence. And sealed some offices overnight. The row over alleged market abuse shows how far Europe is from a true common market in energy.

PAUL DOMJAN: .We need to recognise that we should talk about the European energy system, not the British one, and the German one, and the Italian one, and that by fragmenting like this we're actually stabbing each other in the back.

STEVE BRADSHAW: EON Ruhrgas - owners of Powergen - say they're doing everything they can to help their British customers. They flew us along one of the new pipelines they're helping build to bring more gas to Britain. Below me is the new pipelines which should help ease Britain's gas crisis this winter.

To the Germans it's really our fault gas bills have soared so far so fast - we didn't build more storage, our industries didn't take out more long term contracts, we didn't prepare for our own gas running out.

JOCHEN WEISE: So I think the issue is how do you tackle the challenges of a market which has been self-reliant for a long time, and becomes import dependent like we are in Germany, for me the key is to adapt your system to a new reality.

STEVE BRADSHAW: And that new reality? By 2020 Britain will have to import up to 90% of its gas. We can bid for some of the expensive liquid or frozen gas sent around the world in tankers. And there will be new pipelines bringing more gas - one from Norway opened last month. But we'll still have to rely largely on pipelines to some very remote places.

JAKE ULRICH: We know there's a lot of gas in the world, we know that Europe is surrounded by a ring of gas, and we look at it and it's true but how do you get the gas to the UK?

STEVE BRADSHAW: The biggest reserves in that huge ring of gas are in Russia and Central Asia.And as our supplies run out they are increasingly exercising their newfound energy power. Russia alone already supplying a third of Europe's gas imports. How it reaches Europe? Almost all through...Ukraine. Anyone who controls this pipeline could have a grip on our fuel bills.

JONATHAN STERN: Ukraine brings roughly 20% of Europe's gas supplies in from Russia. If there is a disruption there, for any reason, that will affect prices all over Europe, and therefore it will affect our prices.

STEVE BRADSHAW: There's no obvious reason to worry. Ukraine is an ancient country and a young hopeful democracy. It's people voted to break the old Soviet link with Russia. There's been talk of joining the EU. But what happened hear last winter made the whole of Europe fear for its energy future.

Ukraine in the autumn. For Sasha and her son beautiful weather for mushrooming in the woods. But it's not like this in winter.

SASHA VORONINA : Generally we have a lot of snow here and its snow is really deep - this winter was really cold it was minus 25c.

STEVE BRADSHAW: What keeps the cold away - gas that comes mostly down the pipeline from Russia.

Sasha had never imagined their Russian neighbours - who also know a thing or two about cold - could possibly cut their gas off. Then came New Years Day.

SASHA VORONINA : We were surprised because we woke up, and I was trying to make some coffee, yes, and I turn it on and there there was no fire, and I


SASHA VORONINA: Yes, no flam. and our neighbour from the first floor, she came and asked, "What happened to the gas? What happened? We have no gas,". It was on TV that Russia cut... cut off the gas.

STEVE BRADSHAW: Sasha was particularly unlucky - few neighbourhoods were directly affected. But it was a reminder of the power of the pipeline.

SASHA VORONINA: It was bad, because I couldn't take a shower, I couldn't cook anything. It was very uncomfortable, and very bad.

STEVE BRADSHAW: Russia said it acted because Ukraine had been enjoying subsidized gas and was refusing to pay more. Russia restored gas a day later. But not before western Europe had felt the effects with reduced gas supplies and yet more pressure on prices.

If you believe the Russians, that was because Ukraine had nicked gas destined for western Europe. Ukraine protests its innocence.

VASYL TODER, Manager, Uzhgorod pumping station: What happened on the 1st of January was that the volume of gas supplied from Russia was reduced. Therefore, the gas supplies to Europe were reduced, as well. STEVE BRADSHAW: Were you stealing Europe's gas? VASYL TODER: You can't steal gas. There no such thing in the gas industry as stealing gas. This has become a purely political matter. What you can actually do is take a certain amount of gas without a prior contract. But volumes of consumed gas are metered anyway, so one can pay for it later.

STEVE BRADSHAW: Ukraine's gas crisis escalated over the summer - demonstrators worried Russia would cut them off again this winter. A row between two neighbours could once again threaten the rest of us along the pipeline. Many Ukrainians believed the Russians were really teaching everyone a political lesson. Look what can happen if Ukraine gets too close to the EU.

SASHA VORONINA: I'm afraid that we will have our problems with gas, because the they scare us in some... they're trying to scare us in some ways. They say, "Yes, of course, we'll cut the gas, and you will be.. you will be freezing," STEVE BRADSHAW: Do you think people play politics with the pipeline?

SASHA VORONINA: Yes, I think, I think, of course. It's all about politics.

STEVE BRADSHAW: In Ukraine, just like in Britain, glass factories were among the first victims of the gas crisis.

Russian gas subsisides used to help keep Ukraine's old fashioned industries competitive. But - under the deal that resolved the dispute - prices soared.

BOGDAN GAIDUK, Commercial Director ISKRA: 12.03.01 In this year, the increase was from $80 to $130, which is more than 60%. So this has definitely influenced our cost of glass really significantly.

STEVE BRADSHAW: It's economics though, isn't it?

BOGDAN GAIDUK: No, I don't think it's the market price because because if you take a look,. Ukraine turn to European Union. In this point of view for Russia, it's really important to push Ukraine to change their decisions. So for me, from my point of view definitely it's only a political decision to put the prices up.

STEVE BRADSHAW: It's all about politics?

BOGDAN GAIDUK: Definitely.

STEVE BRADSHAW: With gas bills rising ISKRA glass had to cut costs. They've done it by bringing in more efficient machinery - but - wait till you hear where it comes from.

BOGDAN GAIDUK: Here's where we're putting it - bought kit from factories that went bankrupt.

STEVE BRADSHAW: Like SLI - where we filmed in Doncaster.

Yes, IKSRA bought the kit from Ged's factory in Harworth - a reminder of how fuel costs can permanently affect jobs.

Whatever the truth behind the gas crisis in Ukraine the political damage had been done.

In Europe and the USA there was NOW talk of a new age - the age of energy insecurity, with governments using the power of the gas pipeline to threaten their enemies.

PAUL DOMJAN: The events of January 1st, I think, looking back would be seen as a game changer for Europe. The events of January 1st were hugely significant. On January 1st Russia effectively said 'we will use this as a tactical weapon to achieve our political aims.' And that's very, very important, and something that I think was not sufficiently appreciated.

STEVE BRADSHAW: But it's not just the politics of the pipeline that can be scary - it's the people. Powerful individuals can also affect our gas bills and national security. When Ukraine and Russia settled their gas war they gave a company called RosUkrEnergo monopoly right over Ukraine's gas imports.

It's a huge business which last year made close to $800m in profits. And it's of vital importance to us.

YULIA TYMOSHENKO, FORMER UKRAINE PM: Ukraine, with gas pipelines, has a vital role in energy security for both Ukraine and Europe, including Britain.

STEVE BRADSHAW: Former Prime Minister Julia Tymoshenko has been called the gas princess, because of the fortune she made from gas back in the 1990s.

She went on to become one of the stars of Ukraine's democratic orange revolution. Now at the helm of Ukraine's opposition she's drawn the world's attention to RosUkrEnergo's hold on the pipeline to Europe.

STEVE BRADSHAW: Should we worry about sharing a gas pipeline with RosUkrEnergo?

YULIA TYMOSHENKO: Without any doubt! There is a real reason to worry, because with such a corrupt politicalset-up no-one can feel secure. From the day this company was created both I and my political team have said very clearly that RosUkrEnergo itself and all the agreements signed with this companyare not just about gas - they're about big politics that might threaten the stability of gas supplies not only to Ukraine but to Europe as well. Stability and security cannot be achieved when such a shady structure is involved with such huge volumes of gas supplies.

STEVE BRADSHAW: Mrs Tymoshenko's party claimed in parliament the enterprise was a front for the local mafia and top Russian politicians.

RosUkrEnergo is half-owned by Gazprom - Russia's largely state-owned gas monopoly. The people behind the other half remained a mystery. But Mrs Tymoshenko's party suggested they included an infamous alleged UKRANIAN mobster.

YULIA TYMOSHENKO: When I was the Prime Minister, we provided the President of Ukraine with documented proof that some powerful criminal structures, are behind the RosUkrEnergo company. I can only say as a politician: we have no doubts whatsoever that the man named Mogilevich is behind the whole operation called RosUkrEnergo.

When I was the Prime Minister,. We provided the President of Ukraine with documented proof that some powerful criminal structures, are behind the RosUkrEnergo company. I can only say as a politician: we have no doubts whatsoever that the man named Mogilevich is behind the whole operation called RosUkrEnergo.

STEVE BRADSHAW: Simeon Mogilevich is on the FBI's most wanted list - wanted for alleged money-laundering.

Seven years ago Panorama made a film about him and asked about his complex business deals- and why he'd opened offshore accounts in Britain's channel islands.

Then in April this man - Dimitry Firtash - a Ukranian gas trader - said it's not Mogilevich - it's my company that owns the mystery half of RosUkrEnergo.

Attention now focussed on mister firtash's business associates - including one who did seem - well - unusual.

Her name - Louise Lukacs.

Gas baron?


No - out of work Romanian actress with a role in another gas trading company MR Firtash had helped set up.

She'd agreed to be on the share register saying she needed help with her phone bill.

We asked Mr Firtash for an interview, but were offered instead his British representative.

STEVE BRADSHAW:But what on earth was this woman doing with a company in the first place?

ROBERT SHETLER-JONES: As is usual in some private businesses, ownership is held on trust for the beneficial owner. It was ... this was one of the trustees who was known to the team that created the company and she was asked, approached, to be a trustee on behalf of Mr Firtash.

STEVE BRADSHAW: Figure head for Mr Firtash.


STEVE BRADSHAW: Necessarily because... ?

ROBERT SHETLER-JONES: Mr Fertash at that time did not want to be a public figure.

STEVE BRADSHAW: Was Mr Mogilevich - people wanted to know - perhaps using Mr Firtash as a figurehead? The two men had met and had used the same lawyer.

But both deny ever having done business together. Mr Firtash says the hugely lucrative shares he holds in RosUkrEnergo are his own.

ROBERT SHETLER-JONES: Mr Fertash is his own man. I think you have to look at...

STEVE BRADSHAW: Are you sure he's not acting on behalf of anybody else?

ROBERT SHETLER-JONES: I'm positive he's not acting on behalf of anybody else

STEVE BRADSHAW: Would you know?

ROBERT SHETLER-JONES:Given how close I am to him and his business I would know. I would argue that Rosukrenergo is not a murky company, in fact it is very open and transparent. It is a Swiss registered company. The owners of the company are known, and Ukraine is benefiting today from some of the cheaper gas in Europe as a result of RosUkrenergo's business.

STEVE BRADSHAW: Why could Rosukrenergo matter to us?

JONATHAN STERN: What happens ... if RosUkrenergo breaks up because there are some problems of governance, or some problems of alleged mafia connections, that could eventually disrupt gas supplies, and that's what we should be concerned about.

STEVE BRADSHAW: Gas supplies to?

JONATHAN STERN: That could disrupt Russian gas supplies to Europe. That's why we need to be concerned about it.

STEVE BRADSHAW: But whatever the concerns about Rosukrenergo it's Russia's gazprom that must ultimately guarantee the flow of gas to Europe.

This is where Russia could flick the switch - if it ever wanted to cut Europe off.

We're in the Gazprom control room - state-controlled Gazprom - Russia's monopoly gas company. Decades ago the West feared Moscow's nuclear war rooms. Now Russia has the energy weapon instead - a weapon that can be used. So when Russia cut Ukraine off - this warning from the White House.

DICK CHENEY US Vice President: No legitimate interest is served by using oil and gas as tools of blackmail and intimidation.

ALEXANDER MEDVEDEV DEPUTY CHAIRMAN, GAZPROM : No, it was absolutely an unfair statement, because we have acted in accordance with the prevailing international trade practice. Please show me any company in Europe or in UK which will deliver the goods they are producing without contract. I'm very doubtful that it could happen, and we didn't have a contract to supply gas to Ukraine.

STEVE BRADSHAW: But it's not just Ukraine. All along the pipeline, rows about Russia playing pipeline politics.

West-Gazprom's new pipeline to Germany by-passes Poland - Poles fear that makes it easier for Moscow to cut Poland off.

North - Gazprom's saying it'll send Arctic gas to Europe instead of the States - a political message to Washington perhaps.

East - where Western companies fear russia is using environmental regulations to keep them out of lucrative gas fields.

And south - Russia's pipeline to Georgie blown up last winter. Terrorists say Moscow - not our fault. Anyway, we mended it.

But gas-short Georgia really did start to freeze. The Georgian government was confronted by every politicians nightmare - not being able to keep your voters from the cold and the dark. The Georgians said there's a lesson for us all.

MIKHAIL SAAKASHVILI, President Georgia: I think the world should wake- up to these threats - yesterday Ukraine - today Georgia - much worse- and it could be any European county dependent on unpredictable supplier.

STEVE BRADSHAW: Gazprom say that's just pipeline paranoia. They don't accept the simplistic analysis that energy must always be divorced from politics.

ALEXANDER MEDVEDEV: Energy is so important that it has a political aspect, inevitably, it would be too naive to tell that energy and politics has nothing to do with each other.

STEVE BRADSHAW: And you'll play the game to your best advantage.

ALEXANDER MEDVEDEV: No, but, I could tell you, when the... Russia was supplying cheap gas to the neighbourhood countries with a discount prices and actually subsidising it, this was a policy. Now, when we have switched to commercial terms, we are told that we are using it as a political weapon. It's... it's no logic behind this.

STEVE BRADSHAW: But you're saying it's OK to play politics if you make profits too.

ALEXANDER MEDVEDEV:No, it's not ... I believe it's dangerous to play politics at ... at any case. Every country has its policy, and our policy is that energy should be a bridge between the countries, not to divide them.

STEVE BRADSHAW: But Russian President Vladimir Putin does divide Europe - with all that gas he just can't help it. Last month he met EU leaders in Finland - with soothing words.

PRESIDENT PUTIN: Russia is more dependant on Europe than the other way round. We're natural partners in energy.

STEVE BRADSHAW: But confronted by the world's ultimate gas baron every EU country looked to defend its own energy interests. Including Britain.

PAUL DOMJAN: If Europe got together and had a sensible, cooperative, unified energy policy, so Europe as a whole talk to Russia as a whole, then the balance of power would be equal, and we'd be much safer. Today Russia as a whole talks with everyone in Europe separately, and everyone in Europe is trying to be the girl that Russia picks at the ball, not realising that Russia can play them off against one another.

STEVE BRADSHAW: Russia says we are reliable - and ambitious. Gazprom wants to supply 10% of the British market. And confirmed to us it won't rule out a take over for our biggest gas supplier - Centrica.

But there are fears Gazprom can't get gas out of its frozen wastes fast enough. Russia needs more gas too - this summer, talk of shortages. That could leave us dependent on the next fold along the pipeline.

Central Asia and our trail ends at the eastern edge of the last country along our pipeline - Kazakhstan.

Down below the mountains is the biggest city Almaty is where we'll find the end of the pipeline that runs 4,000 miles from Britain.

So this is the end of the pipeline. It runs around the edge of the city - distributing gas to the people who live here. What we'd expected to find was soviet style apartment blocks - but what we've actually found is something very different.

What they're building - here on the gas frontier - an enclave of mansions for Kazakhstan's new oil and gas elite. And in a luxury hotel close by - the kind of party Britain had 40 years ago when we discovered our gas fields.

Kazakhstan now courted by the Russians, the Americans, and the British and just about anyone who may need energy.

Dr DAVID ROBSON Managing director Tethys: We're developing fields in Kazakhstan. We hope to bring on a dry gas development next spring.

STEVE BRADSHAW: How important is Kazakhstan?

Dr DAVID ROBSON: Very important to ..us and to o future european supplies.

STEVE BRADSHAW: Hoping to benefit from this new boom is ad executive Nazym. Part of Kazakhstan's new elite. But she thinks her country should learn a lesson from our history - don't just burn it all up or sell it.

NAZYM SUTBAYEVA: I think we shouldn't sell to everybody.

Because we will have a future - and for our kids and the kids of our kids ... should pay the small price for gas that we do.

STEVE BRADSHAW: And no wonder in her ads they're cooking with gas - at prices you wouldn't believe.

Right now all Kazakhstan's gas flows west through Russia. But just over those over those mountains is China with its own soaring energy demands.

No pipeline there yet - but there are plans to build one. That would mean central Asian and Russian gas flowing east instead of west to Europe.


Back down the pipeline home. And to a future without our own gas.

PAUL DOMJAN: We should be honest about the fact that reliance on gas means that we're going to have to understand what's going on down the pipeline, that we're going to have to have an accommodation with the Russians, that we're going to have to learn how to play power politics with energy. It also means that we're going to need to think about diversity.

STEVE BRADSHAW: Back in Lancashire the options are laid out below Bob Jones balloon - nuclear power ... wind ... the tides.

We'll still need gas too - but Britain will have to get used to being at the worst place on the pipeline and that's at the end of it.

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