WEBVTT 1 00:00:04.719 --> 00:00:07.559 With a round segle end from London and Gerard read 2 00:00:07.639 --> 00:00:08.279 from Berlin. 3 00:00:08.759 --> 00:00:10.880 This is redefining energy. 4 00:00:10.839 --> 00:00:14.400 Today on refain ergy job. It's the crisis in the 5 00:00:14.439 --> 00:00:17.440 Middle East and we want to understand what's happening to 6 00:00:17.600 --> 00:00:18.559 the energy market. 7 00:00:18.839 --> 00:00:22.120 Absolutely looking forward to this conversation. Crazy times we live. 8 00:00:22.039 --> 00:00:23.719 In, but to us the world from my partner. 9 00:00:24.359 --> 00:00:27.679 A Loco Energy is Europe's premier leaser of ten foot 10 00:00:27.760 --> 00:00:32.759 container mobile batteries built in Europe with coatl best LFP cells. 11 00:00:33.320 --> 00:00:38.640 A Bloco Energy serves fourteen European countries, including France, Germany 12 00:00:38.719 --> 00:00:42.159 and the UK. Bloco's batteries can be leased for any 13 00:00:42.240 --> 00:00:45.320 duration between six weeks and six years and they are 14 00:00:45.399 --> 00:00:49.359 monitored by the Dutch award winning platform school a block 15 00:00:49.399 --> 00:00:53.119 O Energy. Make your life easier, make your business more flexible. 16 00:00:53.359 --> 00:00:56.479 Back to the show. Yeah, I mean there are so 17 00:00:56.520 --> 00:00:59.920 many scenarios, so many experts with our opinion, but too 18 00:01:00.039 --> 00:01:02.880 We've decided to bring someone really know something about the 19 00:01:03.000 --> 00:01:07.560 energy market, and that's Ira Joseph, who is a leading 20 00:01:08.000 --> 00:01:11.280 global gas analyst. It was at SMP Global and now 21 00:01:11.319 --> 00:01:13.959 he's at Columbia Center on Global Energy Policy. 22 00:01:14.319 --> 00:01:15.480 Well, let's bring them on the show. 23 00:01:15.719 --> 00:01:17.079 Ira, welcome to the show. 24 00:01:17.280 --> 00:01:19.680 Thank you, Lora, so nice to be here. I'm excited 25 00:01:19.719 --> 00:01:22.000 to talk about this. It's even today, It's been quite 26 00:01:22.000 --> 00:01:22.280 a day. 27 00:01:22.519 --> 00:01:24.560 No, I listen every day there's something new. Just can't 28 00:01:24.640 --> 00:01:26.000 keep up about that crazy. 29 00:01:25.799 --> 00:01:28.959 Yeah, I want to go back a bit how it 30 00:01:29.079 --> 00:01:32.560 started and talking about the general sculpture of the energy market. 31 00:01:33.040 --> 00:01:36.400 So Ira, can you explain a bit what's the energy market? 32 00:01:37.079 --> 00:01:39.719 Well before two weeks ago, the LERG market was in 33 00:01:39.760 --> 00:01:41.640 a very sort of clear place. It was going to 34 00:01:42.319 --> 00:01:45.519 expand by fifty percent over the next five years in 35 00:01:45.599 --> 00:01:48.319 terms of supply, and that was kind of everyone who's 36 00:01:48.560 --> 00:01:52.640 anticipating that coming and whether the question wasn't whether there 37 00:01:52.719 --> 00:01:54.959 was going to be a glot of LERG, the question 38 00:01:55.159 --> 00:01:57.159 was when sort of the glot was going to apply. 39 00:01:57.200 --> 00:02:01.000 And basically what was happening was that the US was 40 00:02:01.040 --> 00:02:03.079 going to produce a lot more energy, Qatar was going 41 00:02:03.120 --> 00:02:04.959 to produce a lot more ENERG, and then there were 42 00:02:04.959 --> 00:02:07.319 going to be bits and bobs elsewhere around the world 43 00:02:07.400 --> 00:02:09.479 of other countries that were going to produce more LNG. 44 00:02:10.080 --> 00:02:12.800 It guess us this fifty percent increase in a five 45 00:02:12.879 --> 00:02:15.719 year period, that was sort of what was going to happen. 46 00:02:15.759 --> 00:02:18.439 And obviously, when you increase the size of a market 47 00:02:18.439 --> 00:02:20.639 that quickly and sh such a short period of time, 48 00:02:21.039 --> 00:02:23.840 the question seemed to be about what the implications that 49 00:02:23.879 --> 00:02:25.960 would be for price, because it's very hard to grow 50 00:02:26.000 --> 00:02:28.840 demand that fast, and how is the market going to 51 00:02:28.879 --> 00:02:31.639 balance that much supply coming to the market fast forward 52 00:02:31.639 --> 00:02:33.560 to I don't know, let's say we're two weeks ago, 53 00:02:33.599 --> 00:02:35.759 a little over two weeks ago. We're in a totally 54 00:02:35.759 --> 00:02:39.599 different situation now because for the second time in less 55 00:02:39.639 --> 00:02:43.280 than four years, one of the largest LNG slash gas 56 00:02:43.280 --> 00:02:47.080 exporters in the world is basically off the market. It 57 00:02:47.120 --> 00:02:49.759 completely rewrites the script, just as it did in twenty 58 00:02:49.879 --> 00:02:53.360 twenty two, and it brings us here today. You know 59 00:02:53.400 --> 00:02:56.280 where we are where Qatar, which is one of the 60 00:02:56.360 --> 00:02:59.319 largest LG exporters in the world as seventy seven million 61 00:02:59.360 --> 00:03:01.919 tons was going to be expanding tow one hundred and 62 00:03:01.960 --> 00:03:05.039 forty five million tons by the early next decade, are 63 00:03:05.080 --> 00:03:07.879 completely offline. We have no idea when they're going to 64 00:03:07.919 --> 00:03:10.800 come back. And this could last for a while if, 65 00:03:10.919 --> 00:03:13.719 particularly after what happened today, you know, I would sort 66 00:03:13.759 --> 00:03:15.759 of lean more on the side of it lasting a 67 00:03:15.759 --> 00:03:18.639 little bit longer than I had been before I woke 68 00:03:18.719 --> 00:03:22.280 up this morning because the attack on the South far 69 00:03:22.319 --> 00:03:24.360 As gas field, which Lauran, as you know, is the 70 00:03:24.400 --> 00:03:27.120 same thing as the northfield in Qatar, has really put 71 00:03:27.400 --> 00:03:29.919 not just Ros Lafon into play in Qatar, but also 72 00:03:30.439 --> 00:03:34.599 the dozen or so production platform gas and condensate production 73 00:03:34.680 --> 00:03:37.159 platforms and Qatar. And it's over two hundred wells that 74 00:03:37.199 --> 00:03:40.080 have been drilled and that we're producing until recently on 75 00:03:40.120 --> 00:03:44.439 the Qatari side, So that situation is obviously in a 76 00:03:44.439 --> 00:03:47.680 state of flux. Iran has even announced in the past 77 00:03:47.719 --> 00:03:50.120 few minutes while we were sitting here that they've cut 78 00:03:50.159 --> 00:03:53.159 their gas exports to Iraq. If they haven't cut their 79 00:03:53.199 --> 00:03:56.240 gas exports to Turkey, which are about eight pscm a year, 80 00:03:56.280 --> 00:03:59.639 so that's around twenty two mmcm a day, they're gone. Also, 81 00:04:00.439 --> 00:04:02.360 we're in a situation where we don't know what's going 82 00:04:02.439 --> 00:04:05.240 to happen. Thought prices at least in Asia and in 83 00:04:05.280 --> 00:04:08.879 Europe are pushing twenty dollars per million BTU, while in 84 00:04:08.960 --> 00:04:11.520 the US, because it's really constrained on how much it 85 00:04:11.560 --> 00:04:14.680 can export via LNG, are still around three dollars per 86 00:04:14.719 --> 00:04:18.519 million BTU, so we have this incredibly widespread, this incredible 87 00:04:18.560 --> 00:04:22.720 incentive for obviously US LNG producers to export and really 88 00:04:22.759 --> 00:04:25.560 cash in here. Whoever is lifting that cargo's fob is 89 00:04:25.600 --> 00:04:27.879 going to do really well. As I like to say, 90 00:04:27.920 --> 00:04:29.639 sometimes people are going to make more money in the 91 00:04:29.720 --> 00:04:32.079 year than they had expected to make probably in the decade. 92 00:04:32.160 --> 00:04:35.839 So depending on how long this lasts. Obviously very bullish. 93 00:04:35.879 --> 00:04:38.040 If you can produce lerg right now and it's it's 94 00:04:38.079 --> 00:04:40.279 not if you can't produce lerg right now. 95 00:04:40.519 --> 00:04:44.199 Well what an introduction. Probably take a bit of a 96 00:04:44.240 --> 00:04:48.279 step back and explain to our listener, which are not 97 00:04:49.040 --> 00:04:51.439 expert as you are, and you're going to you know, 98 00:04:51.519 --> 00:04:54.240 you talk about MBTU, you talk about turn we are 99 00:04:54.319 --> 00:04:56.720 BCF and I know that that's really how the guest 100 00:04:56.800 --> 00:05:03.040 market works. But explain the pricing mechanism around the hubs 101 00:05:03.560 --> 00:05:08.879 because we have LNG regions, and of course that as 102 00:05:08.920 --> 00:05:11.920 an impact if you are an exporter, if you are 103 00:05:11.959 --> 00:05:15.560 an importer, and then we could go into details of 104 00:05:15.839 --> 00:05:18.600 really from the importing country, because I understand that the 105 00:05:18.680 --> 00:05:21.240 one who websur plus they're going to make a fortune, 106 00:05:21.279 --> 00:05:24.519 but the one who needs to import might find themselves 107 00:05:24.560 --> 00:05:26.720 in a really dire position, very. 108 00:05:26.560 --> 00:05:29.720 Very soon, That's right. So I guess the equation that 109 00:05:29.759 --> 00:05:31.519 we have to figure out here is if we've lost 110 00:05:31.560 --> 00:05:35.480 seventy seven million tons per year of Katari LNG, we 111 00:05:35.560 --> 00:05:37.720 have to figure out how to lose seventy seven million 112 00:05:37.759 --> 00:05:40.439 tons of demand going forward. So let's just start with 113 00:05:40.519 --> 00:05:43.439 price and then we'll get into how that balances. There 114 00:05:43.439 --> 00:05:46.360 are three important gas bot prices in the world right now. 115 00:05:46.360 --> 00:05:48.800 There's the price of Henry Hub, which is a pipeline 116 00:05:49.040 --> 00:05:52.160 gas price in the US, and that price is used 117 00:05:52.160 --> 00:05:56.319 in Louisiana as an indexation for how US gas is 118 00:05:56.319 --> 00:05:58.800 turned into LERG and how LLERNG is exported to the 119 00:05:58.879 --> 00:06:01.279 rest of the world. Even though it's a pipeline price, 120 00:06:01.319 --> 00:06:04.040 it's to use basically as the benchmark at least for 121 00:06:04.160 --> 00:06:06.839 now for LNG cargoes that leave the US Gulf Coast 122 00:06:06.879 --> 00:06:08.879 and even leave the East Coast of the United States 123 00:06:08.920 --> 00:06:12.199 as well. Men there's the other two markets, which are 124 00:06:12.199 --> 00:06:14.920 in Europe and Asia, which are the net importing markets 125 00:06:14.920 --> 00:06:18.279 for the LNG. Europe imports LNG, and most of that 126 00:06:18.480 --> 00:06:21.600 LNG is index to a price called TTF, which is 127 00:06:21.680 --> 00:06:25.439 a title transfer facility, not an unfortunately bad name, which 128 00:06:25.480 --> 00:06:28.519 is basically the Dutch spot market price, and the Dutch 129 00:06:28.519 --> 00:06:31.759 spot market price is essentially the benchmark price for Europe. 130 00:06:31.839 --> 00:06:34.879 Right now, LNG cargoes that are sold from the US 131 00:06:34.959 --> 00:06:37.680 are anywhere into Europe, most of them, a vast majority 132 00:06:37.720 --> 00:06:39.959 of them. There are still some oil index contracts we'll 133 00:06:39.959 --> 00:06:42.079 get to that in a second that go into Europe, 134 00:06:42.079 --> 00:06:44.199 but a vast majority of them are index to this 135 00:06:44.279 --> 00:06:47.920 TTF price. And then finally, in Asia, there's this other 136 00:06:47.959 --> 00:06:51.759 price called the Japan Korea Marker or JKM price, which 137 00:06:51.800 --> 00:06:56.199 is a spot price for Asian LNG markets. Asia. While 138 00:06:56.319 --> 00:07:00.000 individual countries have pipeline markets and there is some cross 139 00:07:00.040 --> 00:07:03.040 border pipelines, it's not nothing like North America. It's basically 140 00:07:03.439 --> 00:07:06.600 a very very large LNG market and that price is, 141 00:07:06.639 --> 00:07:09.040 as I said, the benchmark for Asia, and that is 142 00:07:09.079 --> 00:07:11.279 also what we would call a spot price, where there 143 00:07:11.279 --> 00:07:14.160 are bidden asks every day and cargoes are traded at 144 00:07:14.160 --> 00:07:17.199 hand every day. Now, the interesting thing about the LNG 145 00:07:17.360 --> 00:07:19.720 market is that the origins of the LNG market had 146 00:07:19.759 --> 00:07:23.959 none of these prices, and before these prices existed, most 147 00:07:24.000 --> 00:07:25.759 of the LNG going all the way back to the 148 00:07:25.879 --> 00:07:28.519 nineteen sixties was indexed to oil. At first, it was 149 00:07:28.639 --> 00:07:32.319 indexed off of Oman in Dubai crude prices, and more 150 00:07:32.439 --> 00:07:35.480 or less most of anybody who's indexing oil off of 151 00:07:35.480 --> 00:07:38.439 oil anymore, which is largely the Qataris and some other 152 00:07:38.519 --> 00:07:41.879 producers as well, they use the price of Brent crude 153 00:07:41.920 --> 00:07:45.000 to index to oil. And how that pricing works is 154 00:07:45.040 --> 00:07:48.240 you have a Brent price any day and then what's 155 00:07:48.279 --> 00:07:50.879 called a slope is applied to it, which is basically 156 00:07:50.920 --> 00:07:54.800 a percentage of Brent, which does two things. It discounts 157 00:07:54.879 --> 00:07:58.560 the gas relative to oil, and it also converts the 158 00:07:58.639 --> 00:08:01.560 equation from dollars per bare to dollars per million b 159 00:08:01.639 --> 00:08:05.720 to you. Typically an LNG oil index price with a slope. 160 00:08:05.759 --> 00:08:07.959 At the high end it'll be like fourteen and a 161 00:08:07.959 --> 00:08:10.519 half to fifteen percent of brand, and at the low 162 00:08:10.600 --> 00:08:12.720 end it'll be at nine to ten percent of brand. 163 00:08:13.519 --> 00:08:17.279 So the slope the calculation is the following. If the 164 00:08:17.360 --> 00:08:20.199 barining of oil is at one hundred and it takes 165 00:08:20.240 --> 00:08:23.199 a twelve percent slope, then you will get your LNG 166 00:08:23.519 --> 00:08:28.879 at twelve dollars p MMBBCU plus probably the liquefation cost 167 00:08:28.920 --> 00:08:30.720 and the transportation cost. 168 00:08:31.439 --> 00:08:33.559 No, no, no, that would be the delivered price of 169 00:08:33.600 --> 00:08:35.840 the LNG. If you were to do an FOB price, 170 00:08:35.879 --> 00:08:38.919 you'd have to net out the transportation, and then if 171 00:08:38.960 --> 00:08:40.960 you wanted to net out the liquefaction you could do 172 00:08:41.000 --> 00:08:43.639 that too, although on a short run marginal cost basis, 173 00:08:43.679 --> 00:08:47.120 nobody would really do that. It's basically the price either 174 00:08:47.159 --> 00:08:49.440 minus the freight or plus the freight, depending on where 175 00:08:49.440 --> 00:08:52.360 you're lifting the cargo. But yes, one hundred dollars barrel 176 00:08:52.360 --> 00:08:56.120 oil is twelve dollars per million BTU gas. Sometimes people 177 00:08:56.159 --> 00:08:58.799 added what's called a constant to that price. That can 178 00:08:58.799 --> 00:09:01.919 be anywhere from fifty descents to whenever you want it 179 00:09:01.919 --> 00:09:04.039 to be to make some price adjustment. 180 00:09:04.080 --> 00:09:08.440 Today the twelve dollars, that is if you have well, first, 181 00:09:08.440 --> 00:09:11.200 if you can get the category gas. But if we 182 00:09:11.320 --> 00:09:14.720 see that the spot is at right now eighteen or nineteen. 183 00:09:15.320 --> 00:09:17.000 Now we have people in Europe they say, I don't 184 00:09:17.080 --> 00:09:20.480 understand what you say eighteen nineteen. It is because in 185 00:09:20.480 --> 00:09:23.840 Europe we trade in mega what I are. So you 186 00:09:23.919 --> 00:09:26.440 need to convert your to dollar and then you need 187 00:09:26.480 --> 00:09:29.320 to divide by three point four. But let's remove the 188 00:09:29.399 --> 00:09:31.720 mega what our price. Otherwise you better are going to 189 00:09:31.759 --> 00:09:35.480 be even more confused, very ex so right now, it 190 00:09:35.519 --> 00:09:39.799 means the spot market is even higher than those formulas. 191 00:09:40.039 --> 00:09:42.399 That's exactly right. The spot price is around nineteen to 192 00:09:42.440 --> 00:09:46.279 twenty dollars, oil index prices around twelve dollars. Promilily bto 193 00:09:46.960 --> 00:09:49.799 the question is going forward? You know what is the price? 194 00:09:50.080 --> 00:09:52.240 Is it the oil index price, is it the spot price? 195 00:09:52.799 --> 00:09:55.120 And what's something in the business we call the central 196 00:09:55.120 --> 00:09:57.559 tendency price, like what is the true price here? Is 197 00:09:57.559 --> 00:09:59.919 it the Katari price? And the spot price is reacting 198 00:10:00.039 --> 00:10:02.840 to the Kuitari price or the Katari price is going 199 00:10:02.840 --> 00:10:04.720 to react to the spot price. But that's a bigger 200 00:10:04.759 --> 00:10:07.440 sort of structural issue when things go back a little 201 00:10:07.480 --> 00:10:08.879 bit more than normal in the future. 202 00:10:09.320 --> 00:10:11.200 Can I just say, just for me just looking at it, 203 00:10:11.240 --> 00:10:14.320 but I'm going to compare it to the Ukrainian situation 204 00:10:14.679 --> 00:10:18.399 from a Europeans perspective, what we saw the Ukrainian situation 205 00:10:18.639 --> 00:10:21.039 was again in terms of mega what our prices, because 206 00:10:21.039 --> 00:10:23.159 that's the way we buy it. We were like at 207 00:10:23.200 --> 00:10:26.879 twenty five euros and megawat we went up to three hundred. 208 00:10:27.120 --> 00:10:29.919 So a present like we're at fifty five euros and 209 00:10:29.960 --> 00:10:33.879 what's interesting for me in all of that is storage 210 00:10:33.919 --> 00:10:38.000 is very very low, so the markets are present, So 211 00:10:38.080 --> 00:10:40.679 the gas markets are definitely not sort of feeling this 212 00:10:41.080 --> 00:10:43.879 possible stress that might come in the future, right, And 213 00:10:43.919 --> 00:10:47.559 I think i'd agree. The longer list goes on, it's 214 00:10:47.559 --> 00:10:50.960 not just gas, it's oil, it's you name it. We're 215 00:10:50.960 --> 00:10:52.600 in trouble basically full stop. 216 00:10:53.480 --> 00:10:53.759 Yeah. 217 00:10:54.039 --> 00:10:56.039 It should also point out that guitars the world's low 218 00:10:56.039 --> 00:10:58.519 cost LND producer as well. I mean they produce with 219 00:10:58.600 --> 00:11:02.240 it seven hundred thousand conon say, they have a GTL 220 00:11:02.639 --> 00:11:04.639 that bround one hundred to one hundred and fifty thousand 221 00:11:04.759 --> 00:11:07.519 gas to liquids production. So the gas is not the 222 00:11:07.759 --> 00:11:09.720 actually the real money maker for them. It's really these 223 00:11:09.759 --> 00:11:13.080 other areas within the oil market itself that are pretty significant. 224 00:11:13.360 --> 00:11:16.039 But like you said, these are high prices, and the 225 00:11:16.120 --> 00:11:18.840 question is is will Europe consume the same amount of 226 00:11:18.879 --> 00:11:21.799 gas at these higher prices. Now, this month, we've already 227 00:11:21.799 --> 00:11:25.320 seen demand go down probably about five percent, so it 228 00:11:25.360 --> 00:11:27.480 hasn't gone down that much, but I do expect it 229 00:11:27.519 --> 00:11:30.039 to go down more as we get into the lower 230 00:11:30.080 --> 00:11:33.799 seasonal areas of demand. Typically European gas demand peaks in 231 00:11:33.799 --> 00:11:36.600 the second week of February and then on a seasonal basis, 232 00:11:36.679 --> 00:11:39.639 drops all the way through the second week of September, 233 00:11:40.320 --> 00:11:42.559 and in that period of time, as you point out, Jarred, 234 00:11:42.720 --> 00:11:45.159 there's a lot of gas that will go into storage. 235 00:11:45.480 --> 00:11:48.159 This year, Europe will acquire a record amount of gas 236 00:11:48.200 --> 00:11:51.240 to go into storage because so little has been drawn 237 00:11:51.279 --> 00:11:54.080 in March so far. The amount that's going to be 238 00:11:54.120 --> 00:11:56.240 need to be injected is a little smaller than maybe 239 00:11:56.240 --> 00:11:58.279 we thought, maybe even two weeks ago, but is still 240 00:11:58.320 --> 00:12:00.840 It's going to be around seventy billion que meters of gas, 241 00:12:00.879 --> 00:12:04.279 let's say, injected into story and that is very much 242 00:12:04.279 --> 00:12:06.159 at the high end of what is typically needed to 243 00:12:06.200 --> 00:12:09.759 inject in order to get to ninety percent of utilization 244 00:12:09.879 --> 00:12:12.600 capacity in Europe. So I guess the question really is 245 00:12:12.720 --> 00:12:15.240 will we get to ninety percent utilization? And that seems 246 00:12:15.799 --> 00:12:18.039 somewhat unlikely to me by the end of October. 247 00:12:19.039 --> 00:12:22.240 So Europe is not in a great position. But I 248 00:12:22.240 --> 00:12:24.519 guess there are some countries in Asia it's even worse, 249 00:12:24.960 --> 00:12:30.159 you know, absolutely in Korea, Taiwan, India. Tell me who 250 00:12:30.200 --> 00:12:31.919 do you feel is the most at risk? 251 00:12:32.039 --> 00:12:32.279 Now? 252 00:12:33.200 --> 00:12:35.200 I would say the most at risk are countries in 253 00:12:35.240 --> 00:12:40.399 Southeast Asia, which are Pakistan, Bangladesh, Thailand, not poor countries, 254 00:12:40.440 --> 00:12:43.799 but poorer countries than certainly China, Japan and Taiwan, who 255 00:12:43.799 --> 00:12:45.879 can really sort of bid up LNG if they really 256 00:12:45.919 --> 00:12:48.799 need it. These countries, as you probably read in the news, 257 00:12:48.840 --> 00:12:53.480 already are already cutting back on potential gas demand, either 258 00:12:53.519 --> 00:12:57.120 by shutting schools, curbing use at factories. There's all kinds 259 00:12:57.120 --> 00:12:59.360 of cuts that are going on because, as I said here, 260 00:12:59.399 --> 00:13:01.120 the magic number here is to get rid of that 261 00:13:01.200 --> 00:13:04.440 seventy seven million tons a year of katari lerg on 262 00:13:04.480 --> 00:13:07.240 the demand side. I just sort of paper on this 263 00:13:07.320 --> 00:13:09.960 for the Center that's freely available on the Center on 264 00:13:09.960 --> 00:13:12.879 Global and Energy Policy website, where I laid out around 265 00:13:12.919 --> 00:13:15.480 the world where cuts would come from, and I would 266 00:13:15.480 --> 00:13:18.879 say it's roughly follows this sort of methodology is that 267 00:13:18.960 --> 00:13:21.919 a third will come from China because China has a 268 00:13:21.960 --> 00:13:25.399 lot of flexibility in its ability to buy LNG, because 269 00:13:25.440 --> 00:13:28.799 it has a lot of fuel switching capability towards coal 270 00:13:28.879 --> 00:13:31.720 and renewables at this point, and they could probably take 271 00:13:31.759 --> 00:13:34.159 off about a third of the KATARI loss. They're also 272 00:13:34.240 --> 00:13:37.039 the biggest contracted buyer of katari lerg in the world, 273 00:13:37.120 --> 00:13:39.200 so they really have to cut the most. Then I 274 00:13:39.200 --> 00:13:41.399 would say another third is going to come from South 275 00:13:41.440 --> 00:13:44.919 Asia and Southeast Asia, as I mentioned, because the prices 276 00:13:44.919 --> 00:13:48.679 are simply too high for the governments to afford subsidized imports, 277 00:13:49.120 --> 00:13:51.879 and that will lead to cutbacks again in those countries 278 00:13:51.919 --> 00:13:54.360 as well. You do have a bit more coal capacity 279 00:13:54.399 --> 00:13:58.120 that could be run, and probably this will accelerate pickup 280 00:13:58.120 --> 00:14:01.120 in renewables, but obviously that doesn't happen and instantaneously. That 281 00:14:01.200 --> 00:14:03.720 takes some time to do. And the last third will 282 00:14:03.759 --> 00:14:07.360 probably come from Europe and South America, where christ will 283 00:14:07.480 --> 00:14:11.159 continue to destroy demand as it's been destroying demand in 284 00:14:11.200 --> 00:14:14.200 Europe for the past five years, and actually arguably it's 285 00:14:14.399 --> 00:14:18.080 European demand as you know, Laurent has been actually falling, 286 00:14:18.440 --> 00:14:20.600 not on a steady basis, but pretty much on a 287 00:14:20.679 --> 00:14:23.840 peak back in two thousand and four. So demand is falling, 288 00:14:24.080 --> 00:14:26.960 and when Europe needs gas hits because it's replacing gas 289 00:14:26.960 --> 00:14:30.000 that it was getting from other places, namely Russia and 290 00:14:30.000 --> 00:14:33.200 then more historically from the UK and the Netherlands. That's 291 00:14:33.200 --> 00:14:35.840 where I see cuts coming from. The last third probably 292 00:14:35.879 --> 00:14:38.480 coming from Europe and a little bit from South America 293 00:14:38.480 --> 00:14:40.080 as well, and that's how we get rid of those 294 00:14:40.279 --> 00:14:43.759 the entire Katari volume. If this keeps going on for 295 00:14:43.799 --> 00:14:44.960 an extended period of time. 296 00:14:46.679 --> 00:14:50.879 Let's look about scenarios now. And I see two scenarios, 297 00:14:51.240 --> 00:14:54.519 one coming from the White House and the other coming 298 00:14:54.639 --> 00:14:58.240 from Jeff Curry with the head of Committee Research at 299 00:14:58.360 --> 00:15:01.200 Carlisle First and are you. I call it the little glitch. 300 00:15:02.039 --> 00:15:05.320 And the second scenario I call it force measure. So 301 00:15:05.399 --> 00:15:08.679 the little glitch, I'm just reading a tweet from President 302 00:15:08.759 --> 00:15:12.600 Trump today. As soon as that war is over, which 303 00:15:12.720 --> 00:15:16.840 will be soon, Capital will your prices are gonna drop 304 00:15:17.200 --> 00:15:21.200 like a rock, Capital like a rock. So that's one. 305 00:15:22.159 --> 00:15:26.159 And Jeff Curry and James Gutman that will have very much. 306 00:15:26.399 --> 00:15:30.480 Last week publish a report called you Can't Print Molecule, 307 00:15:31.320 --> 00:15:34.559 which is built around physical supply chalk and they say 308 00:15:34.639 --> 00:15:37.559 somehow it's a COVID in reverse. Okay, we face a 309 00:15:37.559 --> 00:15:40.840 global collapse and process are going to go to the moon. 310 00:15:41.639 --> 00:15:45.279 A one means the respective bomb being fizzled out within 311 00:15:45.559 --> 00:15:49.919 two or three weeks. Scenario two is the gott a 312 00:15:50.039 --> 00:15:57.440 damn Cargis bomb, Sasparsis bomb like today, Samari raslavan or 313 00:15:57.519 --> 00:16:01.000 muse his mind used to be hundred chips, Pudena was 314 00:16:01.080 --> 00:16:04.200 less than five, very poor one. So what's your current 315 00:16:04.240 --> 00:16:08.120 assumption of I mean, where'd you stand right now and 316 00:16:08.559 --> 00:16:11.840 when we'll be back to normal if normal means anything. 317 00:16:12.639 --> 00:16:15.279 Well, as you're saying, it's gas here anyway, But if 318 00:16:15.279 --> 00:16:17.679 I had a gas I would say that because soft 319 00:16:17.759 --> 00:16:21.440 Pars was bombed this morning, which is the Iranian side 320 00:16:21.440 --> 00:16:24.240 of the same field that Quitar produces gas from, I 321 00:16:24.240 --> 00:16:27.360 would say that our retaliation is coming, and that the 322 00:16:27.440 --> 00:16:31.120 upstream part of Qatar's LNG production is very vulnerable. It's 323 00:16:31.200 --> 00:16:34.080 right there in the Persian Gulf, and Ras Lafon itself, 324 00:16:34.120 --> 00:16:37.320 where the gas is turned into LNG is somewhat more fortified, 325 00:16:37.320 --> 00:16:40.440 but is also very vulnerable as well. My assumption right 326 00:16:40.480 --> 00:16:43.000 now is not no Qatari LNG for at least another 327 00:16:43.080 --> 00:16:45.840 three months. Just the startup process is going to take 328 00:16:45.840 --> 00:16:48.120 at least a month, and I don't see that we're 329 00:16:48.120 --> 00:16:51.200 anywhere near the end of this because whether or not 330 00:16:51.240 --> 00:16:54.039 the US administration wants to stop what's going on now, 331 00:16:54.159 --> 00:16:57.960 the Qataris are feeling somewhat emboldened and empowered to choose 332 00:16:57.960 --> 00:17:00.960 when they want to stop as well, and doesn't require 333 00:17:01.240 --> 00:17:04.000 in a world where drones can be flown into anything, 334 00:17:04.440 --> 00:17:07.240 it's very very hard to stop the bleeding here once 335 00:17:07.279 --> 00:17:11.680 the bleeding starts, So that scenario I don't see necessarily 336 00:17:12.079 --> 00:17:14.960 even if the US were to walk away this stopping 337 00:17:15.079 --> 00:17:18.200 sort of right away. Now, that is more of a problem. 338 00:17:18.240 --> 00:17:21.640 Eighty five percent of Katari's LNG last year went to 339 00:17:21.680 --> 00:17:24.119 Asia and the other fifteen percent went to Europe and 340 00:17:24.200 --> 00:17:27.960 South America. It's really a bigger problem for Asian markets 341 00:17:28.000 --> 00:17:31.759 than it is, although given LNG as a global market, 342 00:17:32.160 --> 00:17:34.200 a problem for one is a problem for many if 343 00:17:34.240 --> 00:17:36.480 you're a buyer out there. So I do think we're 344 00:17:36.480 --> 00:17:38.599 going to see a considerable amount of demand loss out 345 00:17:38.640 --> 00:17:42.279 there having to do with christ And to paraphrase JR. Curry, 346 00:17:42.799 --> 00:17:45.960 you can't make up new volume of LNG. Now. There 347 00:17:46.000 --> 00:17:47.640 is more LERG going to be produced out of the 348 00:17:47.759 --> 00:17:50.400 US this year, we should talk about that, but nowhere 349 00:17:50.400 --> 00:17:52.119 near the amount to make up for the loss of 350 00:17:52.160 --> 00:17:54.720 what's coming out of Katar in the unicons. 351 00:17:55.359 --> 00:17:57.160 I just go back to the prices. Though again, if 352 00:17:57.200 --> 00:17:58.759 I look at the prices, and I'm going to say 353 00:17:58.920 --> 00:18:01.559 that second scenario doesn't seem to be in the prices 354 00:18:01.599 --> 00:18:04.680 Now I'm not disagreeing, and I think I'd probably go 355 00:18:04.759 --> 00:18:06.920 along with your view that that probably is what's going 356 00:18:06.960 --> 00:18:09.160 to happen, because again, if you look at the oil 357 00:18:09.200 --> 00:18:11.920 price and stuff like that, you would say, again, based 358 00:18:11.920 --> 00:18:14.559 in the second scenario, while the prices are going to 359 00:18:14.640 --> 00:18:17.839 hit all time high if that scenario happens. Now, the 360 00:18:17.880 --> 00:18:21.319 thing that concerns me is I don't see an off 361 00:18:21.440 --> 00:18:24.720 ramp for Trump. That's the concerning thing. I don't know 362 00:18:24.799 --> 00:18:26.640 if you see one, or if I'm missing something. 363 00:18:26.640 --> 00:18:29.960 You know, I do not, because even if he declares victory, 364 00:18:30.519 --> 00:18:33.359 it's not going to stop the other side from engaging 365 00:18:33.400 --> 00:18:35.880 in the kind of whatever they choose to do. They're 366 00:18:35.920 --> 00:18:38.680 in a strong position here. We've gone from closing the 367 00:18:38.720 --> 00:18:41.880 straits of our moves to be this that theoretical construct 368 00:18:41.880 --> 00:18:44.400 that I've been worried about throughout my entire thirty five 369 00:18:44.480 --> 00:18:48.079 year career, to it actually happening in a way that, frankly, 370 00:18:48.200 --> 00:18:50.319 I don't think anybody really expected. It was always like, 371 00:18:50.400 --> 00:18:54.279 the Iranians could potentially shut the straits for worst, but 372 00:18:54.279 --> 00:18:56.279 would they really do it? Would they cut off their 373 00:18:56.279 --> 00:19:00.039 nose to spite themselves? And that didn't seem real and 374 00:19:00.039 --> 00:19:03.079 they've clearly become empowered in a way because of what's 375 00:19:03.119 --> 00:19:06.000 gone on to have a different level of leverage here 376 00:19:06.039 --> 00:19:08.400 than they had before. So I still think it will 377 00:19:08.440 --> 00:19:10.519 get worked out. And I still think, like I said 378 00:19:10.920 --> 00:19:14.240 in Laurent's scenarios, I would take the shorter scenario. Those 379 00:19:14.319 --> 00:19:16.759 are the shortest star than the longer scenario. The world 380 00:19:16.799 --> 00:19:19.359 can't burn twenty dollars familiar b to you gas, it's 381 00:19:19.400 --> 00:19:22.759 just too expensive. You will lose massive amounts of demand 382 00:19:22.799 --> 00:19:25.680 that way, which is not just a short term horrible 383 00:19:25.720 --> 00:19:28.240 story for gas and LNG, it's a horrible long term 384 00:19:28.279 --> 00:19:32.000 story too. If you're trying to export LNG to another country, 385 00:19:32.039 --> 00:19:34.359 it's a very bad story for you. And you know 386 00:19:34.400 --> 00:19:37.480 we can talk through that scenario that's sort of structurally 387 00:19:37.519 --> 00:19:40.400 how this can really permanently change the LNG market as well. 388 00:19:41.000 --> 00:19:46.440 Yes, let's pivot towards five years. Okay, because the idea 389 00:19:46.440 --> 00:19:49.599 of bringing you on the show when you said energy 390 00:19:49.680 --> 00:19:54.079 used to be expensive but reliable and now it's very 391 00:19:54.119 --> 00:19:56.640 expensive and unreliable. 392 00:19:56.400 --> 00:19:57.680 Well where did I say that? 393 00:19:59.039 --> 00:20:01.279 You said that like week ago, and I said that 394 00:20:01.279 --> 00:20:05.880 that's prettiant, So thank you. The all narrative about guys, 395 00:20:05.920 --> 00:20:08.480 A bridging fuel and song is just collapsing in front 396 00:20:08.480 --> 00:20:11.960 of our eyes. So how do you see the stretion 397 00:20:12.119 --> 00:20:13.160 in five years. 398 00:20:13.680 --> 00:20:17.079 There's two sort of not paradoxical, but there's two things 399 00:20:17.079 --> 00:20:19.079 that I think could happen at the same time, which 400 00:20:19.119 --> 00:20:22.799 would be pretty bearish if you're an LNG producer. One 401 00:20:22.960 --> 00:20:26.240