WEBVTT 1 00:00:04.719 --> 00:00:08.279 With Laurent segle And from London and Gerard Reed from Berlin. 2 00:00:08.800 --> 00:00:13.039 This is redefining energy today. On Redefining Energy, we're going 3 00:00:13.119 --> 00:00:17.160 to talk about the future of a liquefied natural gas 4 00:00:17.480 --> 00:00:18.559 energy leron. 5 00:00:18.960 --> 00:00:22.359 And it's extremely important because the old global dynamics of 6 00:00:22.399 --> 00:00:25.760 the energy market creates a lot of hope on one 7 00:00:25.839 --> 00:00:31.320 side and a lot of challenges and it's really nexus 8 00:00:31.359 --> 00:00:34.840 for fixing the price of energy around the world. 9 00:00:35.240 --> 00:00:38.600 Yeah, when you talk about energy Laurn particularly, I would 10 00:00:38.640 --> 00:00:42.039 say the power market persutely when we have these so 11 00:00:42.159 --> 00:00:45.719 called Dunkel flouter days. You know, the last power station 12 00:00:45.840 --> 00:00:48.759 on tends to be an old natural gas power station 13 00:00:48.799 --> 00:00:49.920 and it's pretty expensive. 14 00:00:51.640 --> 00:00:56.079 We have decided to invite one of the top experts 15 00:00:56.119 --> 00:00:58.640 in the gas market, and I can name because I 16 00:00:58.759 --> 00:01:02.479 follow a lot of intelligent people. But those four i'm 17 00:01:02.520 --> 00:01:07.879 gonna name are the best. So I ride Joseph John Kemp, 18 00:01:08.400 --> 00:01:12.799 Greg Molnar, Tom marsek Menza. But the fifth one on 19 00:01:12.879 --> 00:01:18.159 our guest is in our opinion, the best. It's Ginnady. 20 00:01:18.719 --> 00:01:20.760 For those of you who don't know. Sebbi is the 21 00:01:20.879 --> 00:01:22.920 editor of Energy Flux. 22 00:01:22.719 --> 00:01:27.000 Which is an extraordinary market news data let's bring another show. 23 00:01:27.760 --> 00:01:29.120 Seb Welcome to the show. 24 00:01:29.359 --> 00:01:30.079 Thanks for having me. 25 00:01:30.280 --> 00:01:33.640 What's what we're going to do today is talk about gas, 26 00:01:34.200 --> 00:01:37.560 natural gas and a particular LNG, but I'd like to 27 00:01:37.640 --> 00:01:40.439 kick it off really and just talking about the macro level, 28 00:01:40.439 --> 00:01:43.760 about what's going on in natural gas across the world 29 00:01:43.920 --> 00:01:45.400 and how you see that going forward. 30 00:01:45.879 --> 00:01:50.680 Global gas markets have been through a real rollercoaster half decade. 31 00:01:51.400 --> 00:01:57.920 We've had essentially five major phases in five years. So 32 00:01:58.120 --> 00:02:03.640 since twenty twenty. We had the COVID crash when demand 33 00:02:04.000 --> 00:02:07.760 was severely depressed by lockdowns and prices tanked all over 34 00:02:07.799 --> 00:02:12.000 the world. And then we had the post COVID inflationary 35 00:02:12.319 --> 00:02:18.120 pre Ukraine period when all commodities rallied gas and LNG included. 36 00:02:18.639 --> 00:02:20.759 And then we had the invasion in twenty twenty two, 37 00:02:21.319 --> 00:02:24.960 and that's when gas markets stepped up to a whole 38 00:02:25.199 --> 00:02:28.840 new gear. We had price spikes sort of ten times 39 00:02:28.919 --> 00:02:33.039 the historical average in Europe and Asia was not far behind, 40 00:02:33.080 --> 00:02:36.199 with LNG spot prices rising really fast. 41 00:02:36.000 --> 00:02:36.840 Really high. 42 00:02:37.080 --> 00:02:41.879 And then after the destruction of the Norsetream two pipelines 43 00:02:41.960 --> 00:02:45.719 under the Baltic Sea, then that sort of led to 44 00:02:45.960 --> 00:02:50.879 a period of extreme demand destruction as the pricing just 45 00:02:51.159 --> 00:02:55.800 completely corrected off these extreme highs, and Europe and other 46 00:02:56.039 --> 00:02:59.960 gas consuming regions they really adjusted to the new price 47 00:03:00.039 --> 00:03:03.120 in paradigm and we saw demand go to a structurally 48 00:03:03.159 --> 00:03:06.719 lower level, which brought prices back down, and that continued 49 00:03:06.719 --> 00:03:10.360 into twenty twenty four. We saw prices dip almost as 50 00:03:10.400 --> 00:03:14.039 low as kind of historical pre invasion averages, and then 51 00:03:14.039 --> 00:03:16.879 we started a new phase from sort of February March 52 00:03:17.039 --> 00:03:20.199 twenty twenty four when we saw demand recovery coming back 53 00:03:20.199 --> 00:03:24.240 into the European segment of the gas market, and we 54 00:03:24.280 --> 00:03:27.280 saw quite a strong bull run in prices throughout twenty 55 00:03:27.319 --> 00:03:29.719 twenty four, and a lot of that was predicated on 56 00:03:29.879 --> 00:03:33.319 the fear of the loss of Russian pipeline gas through 57 00:03:33.639 --> 00:03:37.000 the remaining entry routes through Ukraine and those There's a 58 00:03:37.000 --> 00:03:39.199 lot of speculation about whether or not Europe would lose 59 00:03:39.719 --> 00:03:43.120 Russian gas through Ukraine, and eventually it did, so you know, 60 00:03:43.159 --> 00:03:45.879 Russian gas no longer flows through Ukraine into Eastern Europe 61 00:03:46.000 --> 00:03:49.680 and those flows halted on Year's Day this year, and 62 00:03:49.800 --> 00:03:53.000 that could possibly mark the start of yet another chapter 63 00:03:53.319 --> 00:03:56.439 in the European and global gas markets because it is 64 00:03:56.520 --> 00:04:00.840 a profound and dramatic change to the constructual supply base 65 00:04:00.879 --> 00:04:03.800 of gas in Europe. And because Europe's turned to LNG 66 00:04:04.360 --> 00:04:06.639 to fill the gap from the loss of Russian gas, 67 00:04:06.639 --> 00:04:10.000 then it's also a potentially new chapter for the global 68 00:04:10.080 --> 00:04:10.919 energy market too. 69 00:04:11.520 --> 00:04:13.479 And maybe you could just talk about that, right, So 70 00:04:13.719 --> 00:04:16.040 what you're saying is, listen, we're not getting Russian gas 71 00:04:16.040 --> 00:04:16.720 true plapeline. 72 00:04:16.759 --> 00:04:18.879 That means you have to get it somewhere. 73 00:04:19.120 --> 00:04:20.839 So what we're doing is we're taking it. 74 00:04:20.759 --> 00:04:22.959 In by ship that's more expensive. 75 00:04:23.040 --> 00:04:25.920 So that has huge repercautions, sirly for Europe going forward 76 00:04:25.959 --> 00:04:28.240 in terms of competitiveness and let's. 77 00:04:28.040 --> 00:04:30.439 Say energy security. Right, yeah, it does. 78 00:04:30.920 --> 00:04:33.279 Just look at the price differentials because people talk about 79 00:04:33.279 --> 00:04:36.079 the global gas market the global LNG market. Really the 80 00:04:36.360 --> 00:04:39.680 gas market is not fully global. There's not a single 81 00:04:39.680 --> 00:04:43.199 price for gas. You have regional prices. So the TTF, 82 00:04:43.240 --> 00:04:47.199 which is the kind of benchmark for northwest Europe, that's 83 00:04:47.279 --> 00:04:52.399 trading at four times or maybe more five times the 84 00:04:52.439 --> 00:04:55.439 price that you get in the United States. So in 85 00:04:55.519 --> 00:04:59.519 Henry Hub, which is the US benchmark, gas costs like 86 00:04:59.519 --> 00:05:01.639 like one quarter or one fifth of what we pay 87 00:05:01.639 --> 00:05:05.439 in Europe. And that differential creates a trading opportunity. So 88 00:05:05.480 --> 00:05:08.360 if you can get your hands on Henry Hubb priced 89 00:05:08.759 --> 00:05:11.959 gas in the Gulf of Mexico, ship it across the Atlantic, 90 00:05:12.040 --> 00:05:15.839 and unload into an energy terminal at Northwest Europe, then 91 00:05:16.120 --> 00:05:18.720 the margins are pretty phenomenal. Now you can make about 92 00:05:18.959 --> 00:05:23.879 thirty million dollars ISH on a single LNG cargo, which 93 00:05:23.920 --> 00:05:24.720 is phenomenal. 94 00:05:25.240 --> 00:05:27.240 I suppose it begs the questions why we're even doing 95 00:05:27.240 --> 00:05:29.879 this podcast We should be becoming an LNG trader as right. 96 00:05:30.480 --> 00:05:33.199 Yeah, it's a good question. I mean who actually keeps 97 00:05:33.199 --> 00:05:35.720 that margin? I mean if there's like twenty or thirty 98 00:05:35.759 --> 00:05:39.040 million dollars and just to say, like during the price 99 00:05:39.120 --> 00:05:41.000 bikes of twenty twenty two, then we were seeing like 100 00:05:41.040 --> 00:05:43.639 ten times that the netbacks well that's what they call 101 00:05:43.680 --> 00:05:45.759 the profits on each cargo, what you pay for your 102 00:05:45.800 --> 00:05:47.480 cost of shipping and cost of production. 103 00:05:47.560 --> 00:05:48.480 They were like up. 104 00:05:48.319 --> 00:05:52.279 Into two one hundred or more million dollars per cargo. 105 00:05:52.720 --> 00:05:54.759 So we've come down a lot since then, but there's 106 00:05:54.759 --> 00:05:57.360 still a big margin on the table. Who gets to 107 00:05:57.439 --> 00:06:00.519 keep that and it's basically anybody who's taking ice risk. 108 00:06:01.120 --> 00:06:03.120 So if you're taking price risk, on a cargo, then 109 00:06:03.199 --> 00:06:06.199 you've also got the upside, whereas if you have like 110 00:06:06.240 --> 00:06:09.120 a kind of protection from that, then you're leaving that 111 00:06:09.199 --> 00:06:10.000 value on the table. 112 00:06:10.519 --> 00:06:13.800 But if we take a stake back, the whole universe 113 00:06:13.839 --> 00:06:18.040 of gas has been totally appended by the rise of 114 00:06:18.160 --> 00:06:21.120 not only shale gas, but it's the whole story of 115 00:06:21.360 --> 00:06:25.240 Shivsuki and Shanier. He was the first guy fifteen years 116 00:06:25.240 --> 00:06:29.360 ago to realize that there was a crazy tsunami of 117 00:06:29.399 --> 00:06:32.279 gas coming on the market and it would be much cheaper. 118 00:06:32.759 --> 00:06:35.319 Because until I say, twenty years ago, the US thought 119 00:06:35.319 --> 00:06:38.120 that they would need to import gas, and now they 120 00:06:38.120 --> 00:06:42.639 are the biggest exporter. All the changes who are seeing 121 00:06:42.680 --> 00:06:45.439 in the world. ELLERGI market which used to be a 122 00:06:45.480 --> 00:06:49.560 bit of a niche around Qatar, a bit of Australia 123 00:06:49.680 --> 00:06:53.199 and Asian play. There was not really Atlantic play. This 124 00:06:53.319 --> 00:06:56.680 has totally changed the past ten years. Maybe you'll talk 125 00:06:56.680 --> 00:06:59.759 a bit about Qatar expansion because Qatar is above the 126 00:06:59.759 --> 00:07:03.160 big gas feeding the world, whereas Australia seems to have 127 00:07:03.279 --> 00:07:06.000 maxed out. But you know, the US is absolutely crazy. 128 00:07:06.240 --> 00:07:08.879 Can you explain a bit the development of the LNG 129 00:07:09.079 --> 00:07:10.399 export industry in America? 130 00:07:11.040 --> 00:07:14.000 Yeah, you're right, the US flipped from being a net 131 00:07:14.240 --> 00:07:17.439 importer of gas into being a net exporter. That's when 132 00:07:17.560 --> 00:07:21.959 LNG exports began in twenty sixteen, and the ramp up 133 00:07:21.959 --> 00:07:24.759 has been absolutely phenomenal. So the US went from a 134 00:07:24.800 --> 00:07:30.360 standing start to becoming the world's number one LNG exporter 135 00:07:30.519 --> 00:07:34.199 in the world in a space of five years or so, 136 00:07:34.920 --> 00:07:39.240 and they're not stopping there. The growth outlook for US 137 00:07:39.399 --> 00:07:43.439 LNG is phenomenal. We're going to see another fifty percent 138 00:07:43.600 --> 00:07:48.920 growth spurt in liquefaction capacity this decade, and that's going 139 00:07:48.959 --> 00:07:52.800 to fundamentally change the kind of supply demand balance in 140 00:07:52.839 --> 00:07:57.199 global markets. And simultaneously, you're right, Katar, which was always 141 00:07:57.199 --> 00:07:59.759 the world's number one supply, was overtaken by the US. 142 00:08:00.199 --> 00:08:03.360 But they're also expanding massively. I think they've got about 143 00:08:03.399 --> 00:08:07.439 a kind of forty percent capacity increase coming between now 144 00:08:07.439 --> 00:08:11.680 and twenty thirty, and that's going to exacerbate the kind 145 00:08:11.680 --> 00:08:15.519 of structural oversupply that we'll see hitting the market maybe 146 00:08:15.759 --> 00:08:19.360 from twenty twenty seven onwards. And so you've got to 147 00:08:19.399 --> 00:08:21.480 ask the question, like where is all this lergy going 148 00:08:21.519 --> 00:08:21.680 to go? 149 00:08:22.519 --> 00:08:27.160 Right now, the US exports what fifteen percent of its 150 00:08:27.199 --> 00:08:31.639 gas production, and you started in US consumer instead of complaining. 151 00:08:32.240 --> 00:08:35.120 If the plan is to export thirty percent of their gas, 152 00:08:35.120 --> 00:08:36.879 maybe the price in the US is going to go out. 153 00:08:36.919 --> 00:08:41.080 Because make no mistake, at what two three do are mbtu, 154 00:08:41.440 --> 00:08:45.279 which is how we calculate on the unrehearb. You multiplied 155 00:08:45.320 --> 00:08:48.679 by six to get the oil equivalent. It's a battle 156 00:08:48.720 --> 00:08:52.679 of eighteen per barrel. I mean it's it's the cheapest 157 00:08:52.799 --> 00:08:57.840 ENLGA we've seen in his story history. One mbtu is 158 00:08:58.320 --> 00:09:02.120 one d casule. So so you know dot gizule even 159 00:09:02.200 --> 00:09:05.000 dout twenty years ago when we're at five dollar gigazul, 160 00:09:05.000 --> 00:09:07.639 it was cheap energy. So now the prices of gas 161 00:09:07.679 --> 00:09:10.039 in the US is so damn cheap, So everybody wants 162 00:09:10.039 --> 00:09:13.399 a part of the action. So the question is does 163 00:09:13.440 --> 00:09:16.120 the US have enough gas to be able to not 164 00:09:16.240 --> 00:09:20.639 only fuel their data centers and everything, and also expot 165 00:09:20.679 --> 00:09:22.559 the represent of it. How do you see it? 166 00:09:23.080 --> 00:09:28.320 There's a very lively debate about the upstream risks associated 167 00:09:28.399 --> 00:09:32.759 with US lergy export expansion. I'm not a geologist, so 168 00:09:32.799 --> 00:09:34.639 I'm not going to call it either way, but I 169 00:09:34.679 --> 00:09:38.000 can describe what's what people are saying. So some people 170 00:09:38.039 --> 00:09:40.279 are saying that the shale fields in the Permium are 171 00:09:40.279 --> 00:09:43.440 past their peak, that the decline rates are accelerating on 172 00:09:43.519 --> 00:09:46.080 new wells, that the best acreage has been maxed out, 173 00:09:46.519 --> 00:09:50.000 and that the kind of assumption that this kind of 174 00:09:50.039 --> 00:09:53.879 gargantuan shale gas supply base would always be there is 175 00:09:54.360 --> 00:09:57.639 not one hundred percent robust. At the same time, the 176 00:09:57.679 --> 00:10:00.519 fact that we have this enormous gas supply base is 177 00:10:00.600 --> 00:10:05.240 testament to human innovation, technological innovation, and to kind of 178 00:10:05.279 --> 00:10:09.240 discount the possibility of innovation in the future is kind 179 00:10:09.240 --> 00:10:12.320 of betting against human nature in a sense, and people 180 00:10:12.320 --> 00:10:14.600 have been stung by that in the past. Make the 181 00:10:14.600 --> 00:10:18.080 fact that the US flipped from importer to net export 182 00:10:18.120 --> 00:10:21.360 have required a visionary take on what was happening in 183 00:10:21.399 --> 00:10:24.960 gas markets and what's happening in particularly the US upstream patch. 184 00:10:25.519 --> 00:10:28.320 So it's interesting like the Trump administration has to deal 185 00:10:28.399 --> 00:10:31.799 with this question. They want to maximize energy exports and 186 00:10:31.919 --> 00:10:35.840 they want to capitalize on global gas demand growth. But 187 00:10:35.919 --> 00:10:41.320 you're right, like opening liquefaction capacity, opening export capacity increases 188 00:10:41.440 --> 00:10:45.799 the potential for the US domestic gas markets to import 189 00:10:45.799 --> 00:10:49.360 those really really high global prices that we see in Asia, 190 00:10:50.120 --> 00:10:54.240 and there is the possibility of a risk emerging where 191 00:10:54.559 --> 00:10:56.559 there are like domestic price spikes which are kind of 192 00:10:56.600 --> 00:11:01.279 exacerbated by this kind of open gates policy towards USL 193 00:11:01.320 --> 00:11:05.000 and G. And if that manifests on consumer bills, if 194 00:11:05.000 --> 00:11:07.240 it manifests in the industrial sector where you see a 195 00:11:07.240 --> 00:11:10.080 bit of a slowdown and job creation taking a hit, 196 00:11:10.759 --> 00:11:13.960 then there's the possibility of there being some sort of 197 00:11:13.960 --> 00:11:17.720 political consequences, maybe even a kind of small backlash against 198 00:11:17.720 --> 00:11:20.440 this policy of LNG. And we have seen like when 199 00:11:20.519 --> 00:11:24.279 we've had periods of extreme pricing in Europe, then Henry 200 00:11:24.320 --> 00:11:27.360 Hub does rise. It has risen as high as sort 201 00:11:27.399 --> 00:11:30.679 of eight or ten dollars, like kind of two or 202 00:11:30.679 --> 00:11:32.000 three times where it is today. 203 00:11:32.159 --> 00:11:33.600 And we do see there's like a. 204 00:11:33.559 --> 00:11:39.000 Small cabal of industrial manufacturers and large industrial consumers who 205 00:11:39.240 --> 00:11:41.879 who do have a lobbying presence in Washington saying hey, look, 206 00:11:41.919 --> 00:11:45.200 this LERG thing is a problem. The Biden administration just 207 00:11:45.200 --> 00:11:48.639 published it's a long awaited study on the impacts of 208 00:11:48.960 --> 00:11:51.159 USL ANDNG exports to kind of assess whether they're in 209 00:11:51.200 --> 00:11:53.919 the public interest or not. The report was kind of 210 00:11:53.919 --> 00:11:56.000 spun in a way which made it sound as if 211 00:11:56.240 --> 00:11:59.440 they are, but when you dig into the data then 212 00:11:59.759 --> 00:12:02.679 it doesn't really tell that story. So it's kind of 213 00:12:02.720 --> 00:12:05.120 quite hard to read that report and say that the 214 00:12:05.240 --> 00:12:08.919 USL and J exports are categorically not in the public 215 00:12:08.960 --> 00:12:12.720 interest and will cause big price spikes. But what is 216 00:12:12.799 --> 00:12:16.279 kind of indisputable is that during periods of market tightness, 217 00:12:16.320 --> 00:12:19.879 so when you have like cold snaps, well had freeze offs, 218 00:12:20.240 --> 00:12:23.279 and you have this kind of open gates USL and 219 00:12:23.360 --> 00:12:25.720 J export policy, then the energy is only going to 220 00:12:25.759 --> 00:12:28.399 exacerbate those spikes. It might not mean that price is 221 00:12:28.440 --> 00:12:32.159 a structurally higher for US consumers year round, but it 222 00:12:32.240 --> 00:12:35.360 does create this kind of risk of extreme scenarios arising 223 00:12:35.399 --> 00:12:36.399 that you don't currently have. 224 00:12:37.120 --> 00:12:38.600 Two things I'd like to ask. 225 00:12:39.120 --> 00:12:41.840 One is we're talking about the US, but that's really 226 00:12:41.840 --> 00:12:45.360 really clear. We haven't seen shale go across the world. 227 00:12:45.720 --> 00:12:47.879 If you take the case of for example, just Australia, 228 00:12:47.960 --> 00:12:51.120 they've huge share resources and at some point in time 229 00:12:51.200 --> 00:12:53.720 they're going to be taken out, and I'd be very 230 00:12:53.720 --> 00:12:54.559 interested to hear. 231 00:12:54.600 --> 00:12:55.559 You you on that. 232 00:12:55.919 --> 00:12:58.600 In other words, do we see other massive amounts of 233 00:12:58.679 --> 00:13:01.759 energy coming out from other regions? And so even if 234 00:13:01.960 --> 00:13:05.360 US gas production peaks. So what we've got all this 235 00:13:05.360 --> 00:13:06.799 all that stuff coming online. 236 00:13:06.519 --> 00:13:10.759 Right, well, do we there are undeveloped resources around the world. 237 00:13:10.960 --> 00:13:13.600 The next big opportunity that people have started talking about 238 00:13:13.639 --> 00:13:18.360 is Guyana extoll Mobil has started producing vast amounts of 239 00:13:18.559 --> 00:13:21.080 crude from the Guyana offshore oil fields and they're talking 240 00:13:21.080 --> 00:13:24.320 about there being a lot of associated gas at the 241 00:13:24.320 --> 00:13:29.320 potential to potentially export that. Argentina has an enormous shale 242 00:13:29.360 --> 00:13:32.919 patch in the Vakon Wetter Formation. Yeah, Argentina's pushing hard 243 00:13:33.000 --> 00:13:36.080 to build a big onshore liquefaction plants to start exporting 244 00:13:36.120 --> 00:13:39.799 from there. You have the East coast of Africa. Tanzania 245 00:13:39.879 --> 00:13:43.200 has enormous gas resources and a lot of the Western 246 00:13:43.200 --> 00:13:45.720 oil majors are sitting on development rights of those and 247 00:13:45.720 --> 00:13:50.480 they want to produce a Tanzanian LNG export industry. Mozambique 248 00:13:50.639 --> 00:13:55.039 is actually starting LNG exports from a little floating liquefaction plant. 249 00:13:55.080 --> 00:13:57.200 And there's also like a much bigger onshore development where 250 00:13:57.200 --> 00:14:00.200 again you've got Western oil majors involved, and that's being 251 00:14:00.279 --> 00:14:04.919 kind of mired in pretty horrific humanitarian terror related setbacks 252 00:14:04.919 --> 00:14:07.720 and delays, and it's not moving forwards as quickly as 253 00:14:07.720 --> 00:14:09.879 many people hope. But that's often the story with that 254 00:14:10.000 --> 00:14:15.399 big LNG infrastructure projects. They are mammoth capital projects which 255 00:14:15.480 --> 00:14:19.639 require enormous amounts of finance. They need their confidence to 256 00:14:19.639 --> 00:14:21.840 be short up in the investment, and you've got to 257 00:14:21.840 --> 00:14:24.480 ask yourself, like, where does that confidence come from? 258 00:14:24.519 --> 00:14:26.240 If you're investing fifty. 259 00:14:25.919 --> 00:14:31.159 Billion dollar LNG plants in an emerging market, how can 260 00:14:31.200 --> 00:14:33.080 you be confident that you're going to actually see a 261 00:14:33.120 --> 00:14:34.720 return on investment. And the only way to do that 262 00:14:34.759 --> 00:14:37.320 is to pre sell the LNG at a given price 263 00:14:37.639 --> 00:14:39.840 for a long term period. So you know, you need 264 00:14:39.960 --> 00:14:43.720 like credit worthy buyers that are going to commit and 265 00:14:43.840 --> 00:14:46.840 have the financial wherewithal to make a meaningful commitment to 266 00:14:46.960 --> 00:14:51.080 lift vast amounts of energy for fifteen twenty years and 267 00:14:51.159 --> 00:14:54.960 to carry the can on those payments. And that's actually 268 00:14:55.039 --> 00:14:57.919 quite a hard thing to do because the energy transition 269 00:14:58.279 --> 00:15:00.480 is casting all sorts of question marks over long term 270 00:15:00.480 --> 00:15:03.000 gas demand, particularly in Europe. You know, there's a reason 271 00:15:03.000 --> 00:15:06.320 Europe's not signing long term LLNG deals is because the 272 00:15:06.360 --> 00:15:09.480 companies involved they're not really sure about what their demand 273 00:15:09.519 --> 00:15:11.440 profile is going to look like in the twenty thirties 274 00:15:11.720 --> 00:15:13.720 plus the EU, of course, is there's a rule that 275 00:15:13.759 --> 00:15:16.720 says you can't have long term fossil fuel purchase contracts 276 00:15:16.759 --> 00:15:19.399 beyond twenty fifty if I'm not mistaken. So if you're 277 00:15:19.399 --> 00:15:22.279 looking at like a kind of twenty five year LNG 278 00:15:22.960 --> 00:15:25.399 sales and purchase agreements, you've got to sign it the 279 00:15:25.399 --> 00:15:27.480 first of January just gone. Otherwise you're going to be 280 00:15:27.559 --> 00:15:30.120 running into that twenty fifty deadline, right can I? 281 00:15:30.159 --> 00:15:31.799 Then I just follow on from that, it's back to 282 00:15:31.879 --> 00:15:34.600 Laurent Ce early Iran. Ultimately, what we've got in the 283 00:15:34.759 --> 00:15:38.519 US is you take three dollars for a gas in 284 00:15:38.799 --> 00:15:42.639 oil equivalent terms, that's eighteen dollars a barrel, and oils 285 00:15:42.639 --> 00:15:46.679 are sixty. So surely what that means is is that 286 00:15:46.720 --> 00:15:49.480 what we're going to just see is a huge shift 287 00:15:49.720 --> 00:15:51.159 from oil into gas. 288 00:15:51.679 --> 00:15:53.159 I know what I mean by that is I'm talking 289 00:15:53.200 --> 00:15:54.519 about transport. 290 00:15:54.039 --> 00:15:58.440 Here, not just putting gas into power stations for data centers, 291 00:15:58.440 --> 00:16:01.440 but surely transport's going to shift as well. And if 292 00:16:01.480 --> 00:16:03.919 I'm right, is that going to be a global trend 293 00:16:04.320 --> 00:16:05.279 or how do you see it? 294 00:16:05.919 --> 00:16:09.879 Gas demand in the transportation sector does have growth potential, 295 00:16:10.039 --> 00:16:14.559 and LNG particularly because it's already liquefied, which means that 296 00:16:14.600 --> 00:16:17.799 it occupies like one tiny fraction of the space that 297 00:16:18.000 --> 00:16:21.360 the gaseous gas occupies. So it's good for transportation. That's 298 00:16:21.360 --> 00:16:23.519 why they liquefy. It makes it easy to transport, and 299 00:16:23.559 --> 00:16:25.840 once it's in liquid fuel form, you can then use 300 00:16:25.879 --> 00:16:29.039 it as bunker fuel. So in the maritime transportation sector 301 00:16:29.080 --> 00:16:32.919 then LNG is growing. But I'd say that the major 302 00:16:33.399 --> 00:16:38.000 constraints against LNG as a transportation fuel is the same 303 00:16:38.200 --> 00:16:42.799 constraint against LNG demand more generally, which is the pricing 304 00:16:42.840 --> 00:16:45.919 structures just do not lend themselves for kind of break 305 00:16:45.960 --> 00:16:49.360 bulk mass consumption. What do I mean by that, Well, 306 00:16:49.879 --> 00:16:52.200 it's like you need these kind of big credit worthy 307 00:16:52.200 --> 00:16:55.720 off takers, and you also need a stable price and 308 00:16:55.919 --> 00:16:58.320 those big five phases of the last five years I 309 00:16:58.399 --> 00:17:01.759 described that is just tonight for demand growth and for 310 00:17:01.799 --> 00:17:04.839 confidence in price levels. I'd say the biggest constraint on 311 00:17:05.079 --> 00:17:08.279 LERG demand growth in Asia particularly is that LNG has 312 00:17:08.279 --> 00:17:13.160 a kind of tarnished reputation for a reliable, stable fuel source. 313 00:17:13.720 --> 00:17:16.000 And if you look at people who are developing that 314 00:17:16.119 --> 00:17:19.759 hybrid systems or looking to get break bulk LERG into 315 00:17:20.359 --> 00:17:24.720 remote communities. They find it really really difficult. You know, 316 00:17:24.759 --> 00:17:28.880 you need a PhD to understand price risk, but guys 317 00:17:28.880 --> 00:17:30.960 they don't want to have to do that. They want 318 00:17:31.000 --> 00:17:34.240 like a simple what's the single price? What's it going 319 00:17:34.240 --> 00:17:37.240 to be in five ten years? Can I invest in 320 00:17:37.440 --> 00:17:39.680 the infrastructure to supply and break that down and get 321 00:17:39.680 --> 00:17:40.440 it to consumers? 322 00:17:40.839 --> 00:17:42.400 And energy just doesn't lend itself to that. 323 00:17:42.480 --> 00:17:45.599 Everyone's kind of worried because LNG essentially prices off Europe 324 00:17:45.599 --> 00:17:47.920 now because of this European reliance. 325 00:17:47.640 --> 00:17:48.119 Or an LNG. 326 00:17:48.720 --> 00:17:51.200 People say, oh, you know, europe it now has to 327 00:17:51.200 --> 00:17:53.680 rely on volatile LNG. I'd say it the other way around. 328 00:17:53.720 --> 00:17:57.720 It's like LNG now has to price off volatile European 329 00:17:57.799 --> 00:18:00.920 sentiment in European gas hub pricing. And if you're like 330 00:18:00.960 --> 00:18:04.160 a big emerging economy in Asia, do you really want 331 00:18:04.200 --> 00:18:07.559 to tell your economic fortunes to the vagaries of what 332 00:18:07.640 --> 00:18:09.960 the European gas ups are going to do in the 333 00:18:09.960 --> 00:18:13.680 next few days because they're very febrile, and it's just 334 00:18:13.880 --> 00:18:17.359 it makes kind of importing a very kind of risky business. 335 00:18:17.720 --> 00:18:19.799 So that's kind of what impinges the kind of whole 336 00:18:19.799 --> 00:18:20.880 demand growth story. 337 00:18:21.400 --> 00:18:24.400 Well, I don't have a PhD myself, but twenty five 338 00:18:24.480 --> 00:18:28.079 years ago had a very interesting session with an on 339 00:18:28.640 --> 00:18:32.319 gas traders, and one of those guys, an old timer. 340 00:18:32.920 --> 00:18:36.119 He said, law, in gas and cold things that are 341 00:18:36.200 --> 00:18:40.519 very simple. Biro six dollars and in BT you everybody's 342 00:18:40.519 --> 00:18:43.880 going to switch to gas. Above six dollars, everybody's going 343 00:18:43.920 --> 00:18:46.559 to switch back to call. And of course in Asia 344 00:18:46.640 --> 00:18:47.519 it's double digit. 345 00:18:47.640 --> 00:18:47.839 Now. 346 00:18:47.880 --> 00:18:51.519 Maybe Japan and Koreak can allow it, but I'm sure 347 00:18:51.599 --> 00:18:57.920 that India, Bangladesh, Pakistan, Vietnam, they can't afford double digit 348 00:18:58.000 --> 00:19:02.400 price ever, and so there's always that upper limiting tom 349 00:19:02.480 --> 00:19:05.680 of volume where just people are going to switch back 350 00:19:05.799 --> 00:19:10.400 to oil or cool or whatever, Whereas I'm sure the 351 00:19:10.440 --> 00:19:15.000 market that below six are up meet you is much bigger. 352 00:19:15.440 --> 00:19:19.279 So the producers will always have to do the arbitrash 353 00:19:19.319 --> 00:19:23.079 between price and volume, and that's not simple. You share 354 00:19:23.079 --> 00:19:25.799 the seminarisis about price versus volume. 355 00:19:26.599 --> 00:19:29.680 Well, you're right about the price ceiling for Asian consumers 356 00:19:29.759 --> 00:19:33.480 Asian importing nations. We've seen that in the price rollercoaster 357 00:19:33.519 --> 00:19:35.839 that we've had over the last few years. When LNG 358 00:19:36.119 --> 00:19:39.720 goes above sort of ten eleven dollars from a BTU 359 00:19:39.880 --> 00:19:42.319 which is actually below where it is now, then you 360 00:19:42.359 --> 00:19:44.000 do see procurement drops off. 361 00:19:44.359 --> 00:19:45.079 It's just a fact. 362 00:19:45.480 --> 00:19:49.880 Asian lng importers are opportunistic on the most part. I mean, 363 00:19:49.880 --> 00:19:53.960 they all want to have access to stable, long term 364 00:19:54.119 --> 00:19:56.880 priced contracts, but they just can't get them, so they'll 365 00:19:56.880 --> 00:20:01.039 buy opportunistically in the market. And this big glut that 366 00:20:01.240 --> 00:20:04.519 we're probably going to see around about twenty seven onwards, 367 00:20:05.000 --> 00:20:07.920 then it will have a demand response. The energy market 368 00:20:07.960 --> 00:20:11.920 always it always settles, right, it always balances out. The 369 00:20:12.000 --> 00:20:15.200 question is at what price does it balance out? So, yeah, 370 00:20:15.240 --> 00:20:18.440 you're going to see that kind of six seven dollars 371 00:20:19.119 --> 00:20:23.119 for mbtu like half of today's price reflected in wholesale 372 00:20:23.119 --> 00:20:26.000 prices both in Europe and Asia from sort of twenty 373 00:20:26.039 --> 00:20:30.039 twenty seven onwards. But for the Asian importans in particular, 374 00:20:30.240 --> 00:20:33.039 then you've got to think that well, like who in 375 00:20:33.119 --> 00:20:35.599 an emerging market, like where do you get the credit 376 00:20:35.640 --> 00:20:38.839 worthy buyer from? Who is really big enough has a 377 00:20:38.839 --> 00:20:41.599 deep enough pockets to take on the commitment to do 378 00:20:41.680 --> 00:20:45.200 these procurement exercises, And it's always kind of government backed dentities, 379 00:20:45.200 --> 00:20:48.480 state backed entities, and particularly that rests that tends to 380 00:20:48.480 --> 00:20:51.759 rest with the finance ministry. And so the concern for 381 00:20:51.799 --> 00:20:54.920 these buyers is that, you know, when you have these 382 00:20:55.000 --> 00:20:59.039 inflationary commodity cycles, which inevitably happen and which we've seen 383 00:20:59.119 --> 00:21:01.880 like in twenty twenty two, then you know you've got 384 00:21:01.880 --> 00:21:05.079 this double whammy because not only the commodity itself becomes 385 00:21:05.119 --> 00:21:09.559 more expensive, possibly like multiples of today's price is more expensive, 386 00:21:10.000 --> 00:21:13.920 but you also have a devaluation of emerging market currencies 387 00:21:14.119 --> 00:21:18.400 and that makes buying dollar denominated fuels even more expensive 388 00:21:18.400 --> 00:21:20.720 than they already are. And they're really wary of this. 389 00:21:20.759 --> 00:21:22.880 They don't want to be kind of on the hook 390 00:21:22.960 --> 00:21:25.440 for that. They don't want to, you know, sign up 391 00:21:25.480 --> 00:21:27.240 a kind of a ten or fifteen year deal and 392 00:21:27.279 --> 00:21:29.720 take all that price risk and then be obligated to 393 00:21:29.720 --> 00:21:32.759 take volumes of LERG that their economy simply can't absorb. 394 00:21:33.279 --> 00:21:35.799 So can I ask you just if you look at 395 00:21:35.839 --> 00:21:38.240 the going forward right, I want to talk about the 396 00:21:38.240 --> 00:21:41.000 pricing of gas, because again, if I'm going to switch 397 00:21:41.039 --> 00:21:43.240 from oil to gas or whatever it is, I need 398 00:21:43.279 --> 00:21:45.480 to have some mechanism that neighbles to do it. And 399 00:21:45.519 --> 00:21:47.880 it used to be the gas price was tied to 400 00:21:47.920 --> 00:21:48.559 the oil price. 401 00:21:49.039 --> 00:21:50.400