WEBVTT - War in Iran Is Redrawing the Map for Natural Gas 0:00:02.720 --> 0:00:15.480 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.079 --> 0:00:21.599 Hello and welcome to another episode of the Odd Lots podcast. 0:00:21.680 --> 0:00:23.320 I'm Joe Wisenthal. 0:00:22.880 --> 0:00:23.959 And I'm Tracy Alloway. 0:00:24.239 --> 0:00:27.000 So, Tracy, you know, the war in Iran is primarily, 0:00:27.200 --> 0:00:30.159 at least from a commodity standpoint, being understood is like 0:00:30.160 --> 0:00:32.360 an oil shock. That's the number that most people are 0:00:32.440 --> 0:00:35.279 paying attentions the headline. Sure, but as we know from 0:00:35.400 --> 0:00:39.120 multiple episodes we've already done, it's not just an oil region. 0:00:39.159 --> 0:00:41.599 And of course we've been talking about fertilizer in one 0:00:41.600 --> 0:00:44.200 of our episodes. We did the episode on other sort 0:00:44.200 --> 0:00:47.120 of dry ball commodity shipping that's affected by the closure 0:00:47.320 --> 0:00:50.360 or the almost closure of the Strait of for Moves. 0:00:50.640 --> 0:00:52.800 There's plenty there. It's not just an oil story. 0:00:53.000 --> 0:00:56.120 Yeah. The one silver lining of all of this, I guess, 0:00:56.200 --> 0:01:00.120 is that we're all becoming commodities ex supply chain commodity 0:01:00.320 --> 0:01:03.120 experts and petrochemicals as well. I should just say we're 0:01:03.120 --> 0:01:06.399 recording this on March seventeenth, because who knows what's going 0:01:06.480 --> 0:01:08.319 to happen by the time this episode comes out. But 0:01:08.840 --> 0:01:11.600 one of the big headlines today is that Iran has 0:01:11.680 --> 0:01:15.040 just struck one of the big gas fields in the UAE, yes, 0:01:15.200 --> 0:01:18.160 which is the Shaw Field in the sort of empty 0:01:18.240 --> 0:01:23.600 quarter area, and it's on fire, so pretty dramatic footage, 0:01:23.680 --> 0:01:26.959 which definitely does tend to concentrate your mind on one 0:01:27.000 --> 0:01:28.720 particular commodity, which is gas. 0:01:28.840 --> 0:01:31.240 Well, there's sort of like two dimensions of the supply 0:01:31.360 --> 0:01:34.040 chain destruction, isn't there, Because there is the fact that 0:01:34.120 --> 0:01:36.039 for the most part, there are very few vessels going 0:01:36.080 --> 0:01:39.240 through the straight and Horn moves and people are sort 0:01:39.240 --> 0:01:41.000 of wondering when will that open again? 0:01:41.080 --> 0:01:41.240 Right? 0:01:41.520 --> 0:01:44.120 But then there's the other question of, as you just mentioned, 0:01:44.200 --> 0:01:47.280 there's a lot of damage to core infrastructure of various 0:01:47.360 --> 0:01:51.320 swords and so setting aside when the strait opens, how 0:01:51.360 --> 0:01:54.640 badly will the production infrastructure be impaired and how long 0:01:54.680 --> 0:01:57.240 will that go on? That's a sort of separate dimension 0:01:57.520 --> 0:01:59.640 besides just the passing of the ships, right, And. 0:01:59.600 --> 0:02:02.040 I think that gas in particular have these sort of 0:02:02.120 --> 0:02:05.720 geopolitical connotations. Even before the war with Iran, we're all 0:02:05.800 --> 0:02:09.280 used to thinking about, you know, big strategic pipelines, yeah, 0:02:09.320 --> 0:02:13.040 and thinking about potential disruptions to those. Back when Russia 0:02:13.080 --> 0:02:16.960 invaded Ukraine, there was obviously a European gas crisis, and 0:02:17.040 --> 0:02:20.600 so everyone's kind of worried about Europe once again. Yes, 0:02:20.800 --> 0:02:22.640 there's a lot to discuss totally. 0:02:22.680 --> 0:02:25.880 I saw a headline today also on the train here 0:02:25.960 --> 0:02:29.360 talk about how like Pakistan is very serious, like they 0:02:29.400 --> 0:02:32.000 have like a month of NED gas right now and 0:02:32.000 --> 0:02:35.600 they're heavily dependent on gas from the region. Of course, 0:02:35.639 --> 0:02:40.680 the fertilizer story, as we learned uria downstream from NED gas, etcetera. Anyway, 0:02:41.080 --> 0:02:43.760 last year, we did our live episode with one of 0:02:43.760 --> 0:02:48.560 our favorite commodities guests, Bob Racket, and I recall as 0:02:48.600 --> 0:02:51.320 we were walking out of the theater, I was like, Bob, 0:02:51.320 --> 0:02:53.280 we got to have you back on just for like 0:02:53.320 --> 0:02:56.200 an episode. Let's pick a commodity, and he said, let's 0:02:56.200 --> 0:02:58.720 talk about next time I'm on, let's talk about NED gas. 0:02:58.800 --> 0:02:59.000 Yeah. 0:02:59.000 --> 0:02:59.600 I was like, all right. 0:03:00.120 --> 0:03:03.840 And so so it turns out that now is the perfect. 0:03:03.480 --> 0:03:06.440 Time, the perfect time for the perfect guess. We are 0:03:06.440 --> 0:03:08.880 going to be speaking with Bob Brackett, Managing Director and 0:03:08.960 --> 0:03:12.680 senior research analyst covering North American oil and gas exploration 0:03:12.840 --> 0:03:17.360 and production and global metals and mining at Bernstein Research. So, Bob, 0:03:17.639 --> 0:03:19.959 thank you so much for coming back on a Law. 0:03:20.080 --> 0:03:22.120 Thanks for having me, Joe, thanks for having me. Tracy. 0:03:22.360 --> 0:03:24.520 When I said we should do an episode on one 0:03:24.560 --> 0:03:27.960 commodity at that time, why do your mind immediately go 0:03:28.000 --> 0:03:30.640 to ned gas? Was that the big story in your mind? 0:03:30.680 --> 0:03:34.320 So one, And I've told clients this, I am most 0:03:34.440 --> 0:03:38.760 useful when I am least loved. The problem with being 0:03:38.800 --> 0:03:41.960 a cyclical commodity analyst is everyone will ask me about 0:03:41.960 --> 0:03:45.160 whatever is the highest on the screen. Yeah, that's the 0:03:45.240 --> 0:03:47.480 thing that's going to be revert lower. The money has 0:03:47.520 --> 0:03:50.400 already been made there, and therefore you should be looking 0:03:50.440 --> 0:03:52.760 at the things that no one's really talking about. So 0:03:52.800 --> 0:03:57.080 I would argue today Henry Hubb us natural gas, not 0:03:57.160 --> 0:04:00.880 the LNG stuff that's shut in, not other commodity. Henry 0:04:00.960 --> 0:04:04.840 hub is unloved, okay, sitting at three dollars in MCF, 0:04:05.200 --> 0:04:08.000 while we have all of these underlying demand drivers in 0:04:08.040 --> 0:04:10.720 the US. So it's the forgotten molecule today. 0:04:10.600 --> 0:04:14.440 Forgot the forgotten line. But just broadly though, you were 0:04:14.480 --> 0:04:17.040 pretty spot on when it came to natgas, because I 0:04:17.080 --> 0:04:21.680 remember last year you turned bullish after like fifteen years 0:04:21.720 --> 0:04:24.640 of being bearished something like that. So I know you're 0:04:24.680 --> 0:04:27.000 too modest to say that you got that call correct, 0:04:27.000 --> 0:04:29.360 but directionally things seem to be going your way. 0:04:30.040 --> 0:04:30.320 Yeah. 0:04:30.400 --> 0:04:33.039 So I've been Bernstein covering the energy space, you know, 0:04:33.200 --> 0:04:37.840 nyon fifteen sixteen years, and for most of that time 0:04:37.880 --> 0:04:40.680 we've had these giant disruptions. First, we had shale gas, 0:04:41.120 --> 0:04:44.560 where the entire oil and gas complex was drilling and 0:04:44.680 --> 0:04:47.320 learning curves of how do you frack gas? How do 0:04:47.320 --> 0:04:50.120 you get it out? We drove the cost of shale 0:04:50.160 --> 0:04:53.200 gas out of three point fifty at mcf. And then 0:04:53.279 --> 0:04:56.280 shale oil comes along the way and just hands out, 0:04:56.440 --> 0:04:59.920 you know, gives away the associated gas from oil directed drilling, 0:05:00.400 --> 0:05:02.719 and so you've had a big chunk of the cost 0:05:02.800 --> 0:05:06.400 curve that doesn't really care what the price of gas is. 0:05:06.480 --> 0:05:09.640 It's a byproduct. Waha. Gas prices go negative at time 0:05:09.640 --> 0:05:11.919 to time, it doesn't slow down the oil drilling. And 0:05:11.960 --> 0:05:15.560 then finally you're starting to see the light where in 0:05:15.600 --> 0:05:18.240 the same way that the shale oil industry became well 0:05:18.240 --> 0:05:21.520 behaved kind of a twenty eighteen, the shale gas industry, 0:05:21.560 --> 0:05:24.159 and especially the Hainesville shale sitting down there on the 0:05:24.160 --> 0:05:28.040 border of Louisiana and Texas, starts to behave itself and 0:05:28.080 --> 0:05:30.800 in a world where you have these really strong structural 0:05:30.839 --> 0:05:34.279 demand drivers to the upside and you have discipline on 0:05:34.279 --> 0:05:36.840 the supply side. That's a nice time to come into 0:05:36.880 --> 0:05:37.320 a sector. 0:05:37.640 --> 0:05:41.400 Amazing perfect setup. One more sort of setup question. I 0:05:41.440 --> 0:05:43.240 was sort of thinking about this on the way in, 0:05:43.360 --> 0:05:46.000 Like when I think about oil, you know, there's various 0:05:46.000 --> 0:05:50.960 grades of oil, and there's various prices, but basically there's 0:05:51.040 --> 0:05:53.640 one global price of oil, and everything trades it a 0:05:53.640 --> 0:05:55.680 little bit of a spread to that, depending a little 0:05:55.680 --> 0:05:58.760 bit on geography, and depending a little bit on grade 0:05:58.800 --> 0:06:02.640 and light, sweet and heavy tower whatever it is my impression, 0:06:02.720 --> 0:06:04.839 and tell me if I'm wrong. Is that with gas, 0:06:05.080 --> 0:06:08.080 the story is like there's one type of gas, but 0:06:08.160 --> 0:06:12.000 there is absolutely not one global market because the exact 0:06:12.040 --> 0:06:14.680 flip side of oil, the supply chain is just so 0:06:14.800 --> 0:06:15.719 radically fractured. 0:06:16.160 --> 0:06:19.720 Yeah, if you think about it, VLCC, very large crude carrier, 0:06:19.880 --> 0:06:24.480 holds two million barrels of oil, and oil today's hundred 0:06:24.520 --> 0:06:26.760 bucks a barrel. I couldn't have said that three four 0:06:26.760 --> 0:06:30.360 weeks ago, and the movement, the cost of moving that 0:06:30.560 --> 0:06:33.400 halfway across the world a few bucks of barrel. So 0:06:33.600 --> 0:06:36.840 for a couple percent, I can take my product delivered 0:06:36.880 --> 0:06:39.479 to you wherever you want, anywhere you go to LNG. 0:06:40.320 --> 0:06:43.680 The cost of getting shale gas out of the Marcellus 0:06:44.000 --> 0:06:46.719 from two miles down and two miles out through the 0:06:46.800 --> 0:06:50.440 fractures is less than a dollar. Then it's a couple 0:06:50.560 --> 0:06:53.599 bucks to get it to market Henry Hub through pipelines. 0:06:53.960 --> 0:06:56.120 If I want to ship it, cost me two and 0:06:56.160 --> 0:06:59.480 a half bucks to liquefy it, another buck and a 0:06:59.520 --> 0:07:01.719 half to put it on a vessel, send it somewhere 0:07:01.720 --> 0:07:04.839 and then regas it. And so eighty ninety percent of 0:07:04.880 --> 0:07:07.359 the cost of gas is in the movement. Wow. And 0:07:07.400 --> 0:07:09.520 so in that world, all right, you've got a law 0:07:09.560 --> 0:07:13.120 of one price for oil, right because the relative value 0:07:13.120 --> 0:07:15.880 of the cargo versus the shipping's trivial. With gas, it's 0:07:15.920 --> 0:07:19.200 all the game of distance and markets, and therefore there 0:07:19.240 --> 0:07:20.160 is no one price. 0:07:21.200 --> 0:07:24.720 So can you maybe just situate us on Iran's place 0:07:24.840 --> 0:07:27.600 in the sort of I guess gas complex of the world, 0:07:27.680 --> 0:07:30.360 because you know, we think about it as a commodities player, 0:07:30.440 --> 0:07:34.240 but a sort of unreliable commodities player in some respects. 0:07:34.320 --> 0:07:36.600 You never know what's going to get sanctioned. And NAT gas, 0:07:36.600 --> 0:07:38.560 as we all know, tends to be kind of volatile 0:07:39.000 --> 0:07:42.160 in and of itself. So what exactly is Iran's role 0:07:42.360 --> 0:07:43.720 in this particular complex. 0:07:44.280 --> 0:07:48.520 So we're looking at the largest gas field on the 0:07:48.600 --> 0:07:53.120 planet and the Qataris call it Northfield, and that extends 0:07:53.160 --> 0:07:56.040 into Iranian territory where it's kind of parts. But you've 0:07:56.040 --> 0:07:59.320 got something that the numbers get huge, but we think 0:07:59.360 --> 0:08:01.360 about it. T CF of gas is a huge amount 0:08:01.360 --> 0:08:06.680 of gas AF So think of a LNG vessel can 0:08:06.760 --> 0:08:09.640 hold somewhere the big ones the q max is coming 0:08:09.640 --> 0:08:12.960 out Katar could be six bcf billion cubic feet to 0:08:13.120 --> 0:08:16.240 medium one would be four bcf, got it, And so 0:08:16.320 --> 0:08:17.320 a TCF would be. 0:08:17.320 --> 0:08:22.960 Two hundred four bcf. Would be a really good boy band. Nay, yeah, sorry, 0:08:23.080 --> 0:08:24.200 go ahead, I interrupted. 0:08:25.320 --> 0:08:28.400 I wouldn't have gone there, but yes, BCF. 0:08:29.840 --> 0:08:33.079 Right, good Haynesville, Well, a good marcellis well might produce 0:08:33.120 --> 0:08:36.280 over its life twenty BCF. It could load for four 0:08:36.320 --> 0:08:40.000 five cargoes of LNG. So take that times one thousand, 0:08:40.400 --> 0:08:44.080 and that's the scale of the field of Northfield. And 0:08:44.120 --> 0:08:46.559 it's a gas field that also produces a lot of 0:08:46.760 --> 0:08:51.600 condensate associated and so it's a massive money maker. It 0:08:51.720 --> 0:08:55.480 sits west of the straight before Moose right, and so 0:08:56.000 --> 0:08:58.760 all of the LNG coming out of the Gulf except 0:08:58.800 --> 0:09:02.320 Oman is sort of trapped west of the Strait of Hormus. 0:09:02.400 --> 0:09:06.000 Wait, just to be clear, that field is Qatar and 0:09:06.240 --> 0:09:07.480 Oronic goes into both. 0:09:07.640 --> 0:09:10.400 Its giant structure, largest gas structure on the planet, and 0:09:10.559 --> 0:09:14.240 it's shared geologically, it's shared operationally. It's absolutely not shared, 0:09:14.360 --> 0:09:18.000 but yes, operationally, it's all operationally. The North Field, what 0:09:18.040 --> 0:09:21.040 the Kataris are called Northfield, comes back to Qatar, gets 0:09:21.040 --> 0:09:25.440 liquefied there, loaded ships east out through the Strait of 0:09:25.440 --> 0:09:27.360 horm moves typically goes to Asia. 0:09:27.480 --> 0:09:29.679 This is what I was gonna ask, so again, because 0:09:29.720 --> 0:09:33.200 it's so fractured, where is it all Asia? Like, where's 0:09:33.200 --> 0:09:36.440 that gas going? And who's it competing with? What's that market? 0:09:36.520 --> 0:09:40.439 So the global LNG market's about five hundred million tons 0:09:40.480 --> 0:09:43.200 per animal, and the units that will kill you, we're 0:09:43.200 --> 0:09:46.560 going to be converting between a million. It's the minute 0:09:46.600 --> 0:09:48.840 it gets on a vessel and becomes a ton for 0:09:48.880 --> 0:09:51.960 whatever reason. Huh. And so out of that, you know Qatar. 0:09:52.280 --> 0:09:56.400 The three powerhouses of l and G are Qatar, the US, 0:09:56.440 --> 0:10:00.360 and Australia. The Qataris have the lowest cost field. The 0:10:00.520 --> 0:10:03.079 condensate pays for the field they could get. They're never 0:10:03.120 --> 0:10:05.079 going to they could give away the gas, and they 0:10:05.120 --> 0:10:08.480 sign these really long term contracts you know, around the world, 0:10:08.559 --> 0:10:12.280 but a lot into Asia. The US is the other powerhouse. 0:10:12.760 --> 0:10:16.000 It doesn't sign long term contracts. So if you went 0:10:16.040 --> 0:10:19.079 back in time, and let's say you're a Japanese utility 0:10:19.080 --> 0:10:21.760 and you're sitting on an island and you need something 0:10:21.800 --> 0:10:26.359 to burn to spinnatervine and generate electricity, you're sort of indifferent. 0:10:26.679 --> 0:10:29.000 I got to bring a vessel in, I could bring 0:10:29.040 --> 0:10:31.960 a cargo of crude, bring the fuel oil, some diesel 0:10:32.160 --> 0:10:35.000 or gas, and so I'm sort of indifferent. I'll pay 0:10:35.240 --> 0:10:37.560 roughly the same price for all of those. And so 0:10:37.760 --> 0:10:41.520 for half a century we've always had oil linked contracts 0:10:41.520 --> 0:10:44.040 for LG. So when we think about JKM, they're often 0:10:44.120 --> 0:10:48.600 linked to a crude cocktail price in Japan. The US 0:10:48.720 --> 0:10:51.400 comes along and breaks that and says, you know what, 0:10:52.080 --> 0:10:56.840 just pay me TTF. I'll take Henry Hub. I'll buy 0:10:56.880 --> 0:11:00.200 Henry Hub off of this flooded market in the US, 0:11:00.640 --> 0:11:03.360 liquefy it on the Gulf coast. Mostly, I'll send it 0:11:03.360 --> 0:11:05.720 to where you want, and a bunch of merchants will 0:11:05.760 --> 0:11:08.720 capture that arm and so it's a completely different pricing. 0:11:09.160 --> 0:11:13.160 It's much more of a spot market than these big, 0:11:13.320 --> 0:11:16.880 heavily contracted Katari volumes. And so now you know, Asia 0:11:16.920 --> 0:11:20.360 is running around saying I got forced majeur out of Katar. 0:11:20.800 --> 0:11:24.280 I don't have this. I gotta go burn something else 0:11:24.520 --> 0:11:27.120 and maybe I'll burn somebody else's LNG. But if not, 0:11:27.280 --> 0:11:30.959 I'll burn coal, I'll burn fuel, oil, diesel. I need electrons. 0:11:31.440 --> 0:11:34.439 So speaking of arbing the price, So with so many 0:11:34.440 --> 0:11:37.960 different pricing benchmarks and now this dislocation, are you seeing 0:11:38.040 --> 0:11:42.560 any weird like price movements that people are starting to 0:11:42.600 --> 0:11:43.880 look at and take advantage of. 0:11:44.320 --> 0:11:48.800 We're still well under what happened when Russia invaded Ukraine? 0:11:48.920 --> 0:11:52.200 Huh So, certainly europe prices and we could call them 0:11:52.559 --> 0:11:56.200 another alphabet soup TTF or MVP, but TTF so a 0:11:56.240 --> 0:11:59.160 price into the Netherlands has not gotten to nearly the 0:11:59.200 --> 0:12:02.600 levels it did in Russia Ukraine. Some of that is 0:12:02.880 --> 0:12:06.000 it always felt. I remember in the end of twenty 0:12:06.040 --> 0:12:09.280 twenty one, people were wondering why europe gas prices were 0:12:09.320 --> 0:12:11.679 so high, and they're like, oh, those Russians are terrible. 0:12:11.840 --> 0:12:14.560 They don't know how to maintain production. In fact, they 0:12:14.559 --> 0:12:17.840 were just sort of slowly dialing down the gas in 0:12:17.960 --> 0:12:20.200 order to tighten the market. And then you invade in 0:12:20.280 --> 0:12:24.120 winter February peak demand. You know, now we're entering the 0:12:24.160 --> 0:12:27.240 shoulder season in the spring and in the fall, it's 0:12:27.280 --> 0:12:30.200 beautiful outside in the northern hemisphere, and people don't need 0:12:30.240 --> 0:12:32.959 that same amount of gas, and so shoulder season is 0:12:33.000 --> 0:12:35.560 normally a terrible price for gas. So that sort of helps. 0:12:36.200 --> 0:12:39.280 And what also helps is, you know, to a certain degree, 0:12:39.360 --> 0:12:41.920 Europe has weaned itself off Russian gas and it feels 0:12:41.920 --> 0:12:44.880 like it has more options. We'll see how the things 0:12:44.920 --> 0:12:46.280 turn when we get toward the summer. 0:12:46.960 --> 0:12:49.880 Let's talk about you know, one of the stories in 0:12:49.920 --> 0:12:53.120 the US has been the rise of LG exports. Obviously 0:12:53.200 --> 0:12:57.000 the export terminals, Like how much has that scaled up? 0:12:57.040 --> 0:13:00.200 But you know, today in twenty twenty six, how much 0:13:00.200 --> 0:13:03.439 more are we exporting versus what we were in say 0:13:03.480 --> 0:13:06.880 twenty sixteen or twenty twenty one, prior to the invasion 0:13:06.920 --> 0:13:10.320 of Ukraine. And what is the how much capacity is 0:13:10.360 --> 0:13:12.200 going to come online in the coming years. 0:13:12.679 --> 0:13:15.439 Yeah, so if we wound back the clock. There's an 0:13:15.440 --> 0:13:19.679 interesting historic anecdote that's coming soon. So right now Qatar 0:13:19.960 --> 0:13:24.560 is not selling LNG. However, there is an LNG terminal 0:13:24.600 --> 0:13:28.600 called Golden Pass. It's thirty percent x on seventy percent Katar. 0:13:29.040 --> 0:13:33.840 It sits in Texas, it's loading now, and so in 0:13:33.960 --> 0:13:36.720 March it might be that the next cargo that Qatar 0:13:36.840 --> 0:13:41.760 sells is a Texas cargo, not a Qatari cargo. And 0:13:41.800 --> 0:13:46.840 that's because this Golden Pass terminal was an import terminal. Right, 0:13:46.880 --> 0:13:50.120 so if you go back far enough before shale gas, 0:13:50.640 --> 0:13:53.280 the strategy in the US was the US is going 0:13:53.320 --> 0:13:55.720 to run out of gas. It's going to get priced 0:13:55.920 --> 0:13:59.160 off of the price of diesel. Right, I'm going to 0:13:59.240 --> 0:14:01.360 run out of gas, have to need electricity, I'm going 0:14:01.400 --> 0:14:04.439 to go burn diesel. And so everyone had their favorite strategy. 0:14:04.880 --> 0:14:07.480 I'm going to build an import terminal and I'll bring 0:14:07.480 --> 0:14:11.120 in Katari gas or choose your favorite gas and that'll 0:14:11.120 --> 0:14:14.720 save my energy bill. And then Shelle Gas completely destroyed 0:14:14.720 --> 0:14:18.080 that strategy. But along the way, Excellent Mobile and Katar 0:14:18.640 --> 0:14:21.040 had this import terminal and they just flipped the switch 0:14:21.120 --> 0:14:24.040 and said, well, instead of being a regas terminal, let's 0:14:24.040 --> 0:14:27.520 make it an LNG terminal, and so that is loading 0:14:27.560 --> 0:14:30.640 as we speak. It'll start to sell cargoes as early 0:14:30.680 --> 0:14:33.680 as this month and right now that's Katar gas is 0:14:33.760 --> 0:14:36.080 only source of revenue until things get fixed in the 0:14:36.080 --> 0:14:36.640 Middle East. 0:14:37.000 --> 0:14:41.240 So, speaking of shale, one of the legacies of the 0:14:41.280 --> 0:14:44.760 shale boom is that a lot of energy companies got 0:14:44.880 --> 0:14:48.760 very nervous about over expansion and ramping up supply. In 0:14:48.800 --> 0:14:52.080 a situation like this, what's your gut check on how 0:14:52.240 --> 0:14:56.119 fast LNG producers can really ramp things up, both logistically 0:14:56.200 --> 0:14:58.920 and then just in terms of their sheer willingness and 0:14:59.280 --> 0:15:01.640 I guess in the face of their shareholders. 0:15:02.240 --> 0:15:06.160 So the gestation period of a shale gas well, if 0:15:06.200 --> 0:15:09.760 you're super quick, might be two three quarters. Realistically, the 0:15:09.840 --> 0:15:12.840 gestation period and of course these aren't gestational periods of 0:15:12.880 --> 0:15:15.840 an LNG facility is four years. Wow. So if we 0:15:15.880 --> 0:15:19.760 anniversary what happened four years ago? Russia invades Ukraine? What 0:15:20.080 --> 0:15:22.920 was the theme that started this year? Oh, there's going 0:15:22.960 --> 0:15:25.720 to be an energy glut in twenty twenty six and 0:15:25.760 --> 0:15:29.640 twenty twenty seven, and many an incorrect analyst hand raised 0:15:29.800 --> 0:15:32.840 you know, I was written about the approaching ler g glut. Right, 0:15:33.040 --> 0:15:36.800 this event has changed that logic. And so the reason 0:15:36.840 --> 0:15:38.680 there was a glut this year is because four years 0:15:38.680 --> 0:15:41.440 ago everyone ran out and said, I need LNG, I 0:15:41.520 --> 0:15:44.360 need the cavalry. Quick call the cavalry. How long is 0:15:44.400 --> 0:15:47.040 it going to take? Right? Four years? And so the 0:15:47.080 --> 0:15:52.080 answer is LNG facilities, once built, run full. Right, there's 0:15:52.080 --> 0:15:54.920 an ability to de bottleneck and run above nameplate. But 0:15:55.000 --> 0:15:58.880 basically there is no spare capacity. To a certain degree, 0:15:58.920 --> 0:16:01.600 we had Opek with a bit of spare capacity that 0:16:01.640 --> 0:16:04.560 they released in the first second week of the war. 0:16:05.000 --> 0:16:08.280 There is no equivalent on energy. Every cargo would have 0:16:08.320 --> 0:16:11.680 gotten delivered anyway. So there's no flex in the system 0:16:11.760 --> 0:16:13.320 and the system takes two years to fix. 0:16:29.840 --> 0:16:33.160 So one of the stories that after Russia's invasion of 0:16:33.240 --> 0:16:35.040 Ukraine was that, well, this is going to be a 0:16:35.040 --> 0:16:37.200 boon to US gas and we're going to ship them. 0:16:37.280 --> 0:16:39.280 Are we shipping a lot more energy to Europe than that? 0:16:39.680 --> 0:16:41.640 And so we go back to this phase where Golden 0:16:41.680 --> 0:16:43.880 Pass was an import terminal. Yeah, and then we got 0:16:43.920 --> 0:16:47.960 to about and so think of US overall gas supply 0:16:48.040 --> 0:16:50.320 demand as about one hundred and twenty bcf a day. 0:16:50.320 --> 0:16:52.520 A couple of years ago, ten percent of that would 0:16:52.520 --> 0:16:55.920 have been lergy exports. Okay, today we just were getting 0:16:55.960 --> 0:16:58.840 close to twenty b it'll be twenty percent, and so 0:16:59.280 --> 0:17:02.520 over the next out to twenty thirty will just be 0:17:02.560 --> 0:17:05.239 adding multiple bcf a day, and so it is the 0:17:05.359 --> 0:17:08.320 fastest growing part of US gas demand. 0:17:08.680 --> 0:17:11.480 One of the controversies with export terminals, as you mentioned, 0:17:11.800 --> 0:17:14.719 not that long ago, we're absolutely swimming in free gas, 0:17:14.960 --> 0:17:17.359 and it was this concern that, well, if you start 0:17:17.359 --> 0:17:20.000 exporting it, it raises the domestic price because then you 0:17:20.040 --> 0:17:23.080 don't have these gluts anymore. Has the rise of LNG 0:17:23.320 --> 0:17:26.600 exports meaningfully raised the price of domestic gas consumption? 0:17:26.840 --> 0:17:31.359 I wish that's the EENP investor. That's the dream of 0:17:31.400 --> 0:17:34.280 all the MP investors. You know, we're sitting here entering 0:17:34.280 --> 0:17:36.920 the shoulder season in Henry hubs three dollars, it got 0:17:36.920 --> 0:17:40.040 to five, It got to six during the winter where 0:17:40.080 --> 0:17:42.560 the seasonal dam and end was the highest. There is 0:17:42.640 --> 0:17:45.919 no strong evidence that that extra ten going to twenty 0:17:45.960 --> 0:17:50.479 percent of the demand wedge has changed price. Right, What 0:17:50.680 --> 0:17:55.000 changes price is where supply equals demand, And up until now, 0:17:55.040 --> 0:17:57.719 the supply side has been perfectly willing to hand the 0:17:57.760 --> 0:18:00.920 market as much gas as the world wants the US 0:18:01.000 --> 0:18:03.920 once it's three point fifty. I think we think that's changed. 0:18:03.960 --> 0:18:07.200 I think that's changed. I think you know, ultimately, certainly 0:18:07.200 --> 0:18:12.880 on shale oil, we're approaching a world where oil, your 0:18:13.040 --> 0:18:15.800 shale oil inventory five to ten years from now looks 0:18:15.840 --> 0:18:19.760 pretty lean. You're starting to see oil and gas companies say, well, 0:18:19.760 --> 0:18:22.480 what do we do in a post shale world? Shale 0:18:22.520 --> 0:18:23.280 oil world? 0:18:24.040 --> 0:18:24.520 What can we do? 0:18:24.600 --> 0:18:26.959 We can go international, right, so you've got you can 0:18:27.000 --> 0:18:28.800 go to the Middle East, and certainly there are people 0:18:28.880 --> 0:18:31.840 there looking for shale oil and were conventional oil like 0:18:32.320 --> 0:18:35.359 the Shaw gas field. Today people are looking at M 0:18:35.400 --> 0:18:37.840 and A, I'll just acquire my partners. Some people are 0:18:37.840 --> 0:18:39.960 looking at gas. But yeah, there is a sense that 0:18:40.160 --> 0:18:43.439 it is a It's always been a finite resource. It 0:18:43.480 --> 0:18:46.159 had been a growing resource, and one where this learning 0:18:46.200 --> 0:18:49.439 curve had taken cost out every year. You know, that 0:18:49.600 --> 0:18:51.920 chapter has kind of passed, and now it's a world 0:18:52.040 --> 0:18:53.840 if you're in a planning cycle of five to ten 0:18:53.880 --> 0:18:55.639 years and you look out five to ten years, you've 0:18:55.640 --> 0:18:56.840 got to go replace that stuff. 0:18:57.840 --> 0:19:01.720 How elastic is demand for something like nat gas? Because 0:19:01.760 --> 0:19:03.879 I'm used to thinking about it as someone with a 0:19:03.920 --> 0:19:06.679 house in the northeast and something that I have to 0:19:06.720 --> 0:19:09.679 buy every year unless I actually get really good at 0:19:09.720 --> 0:19:13.000 chopping firewood or something like that. But I imagine there 0:19:13.040 --> 0:19:16.080 must be some marginal source of demand that actually depends 0:19:16.119 --> 0:19:16.560 on the price. 0:19:17.280 --> 0:19:20.600 So there's the demand for that which gas gives you, 0:19:20.640 --> 0:19:24.560 which electricity, and so there's substitution. So one thing to 0:19:24.640 --> 0:19:29.000 watch is bubbling behind the scenes. Global thermal coal prices 0:19:29.000 --> 0:19:31.240 are starting to take off. They're up thirty percent year 0:19:31.280 --> 0:19:36.280 to date. What happened when Russian invaded Ukraine, Europe bought 0:19:36.359 --> 0:19:39.800 every LNG cargo they could, sucked it all the way 0:19:40.080 --> 0:19:44.080 into Europe. Asia was left saying, well, we're short electricity, 0:19:44.760 --> 0:19:48.400 let's go burn some more coal, let's consume more. And 0:19:48.440 --> 0:19:52.040 so thermal coal price is back in Russia Ukraine three 0:19:52.160 --> 0:19:54.560 hundred bucks a ton. I started the year a one 0:19:54.640 --> 0:19:56.399 hundred bucks a ton. We're up to one thirty. And 0:19:56.480 --> 0:19:59.240 so there's always going to be there's some demand destruction. 0:20:00.040 --> 0:20:03.080 But you know, people really like electricity, air conditioning and 0:20:03.119 --> 0:20:04.919 the things that it gives, and so the answer is 0:20:04.920 --> 0:20:08.200 you'll start to look for certainly coal is an obvious place, 0:20:08.359 --> 0:20:11.760 and then eventually some demand destruction, but that's a kind 0:20:11.800 --> 0:20:12.679 of much higher levels. 0:20:13.119 --> 0:20:16.119 Do you have a read on Tracy is mentioned in 0:20:16.160 --> 0:20:18.479 the beginning setting Outside the straight and hoorm move, it's 0:20:18.480 --> 0:20:21.320 just pure infrastructure destruction. Do you have a read on 0:20:21.720 --> 0:20:25.280 how much Katari production is going to be impaired? And 0:20:25.320 --> 0:20:26.840 the medium to long term here. 0:20:27.119 --> 0:20:30.800 So we know LNG terminals have a bit of momentum 0:20:30.840 --> 0:20:33.040 associated with them, and we've got pretty good experience on 0:20:33.080 --> 0:20:35.280 the Gulf coast where hurricanes come through, you bring down 0:20:35.320 --> 0:20:38.040 your LNG facility and you bring it back up. Same 0:20:38.080 --> 0:20:42.320 with oil platforms in the Gulf of America, Gulf of Mexico. 0:20:42.560 --> 0:20:45.120 Hurricane comes through, you shut in, you come back. And 0:20:45.200 --> 0:20:49.480 so in general, oil and gas assets are built. They're 0:20:49.520 --> 0:20:52.359 built for turnarounds, right, They're built to go down and 0:20:52.400 --> 0:20:55.399 come back up, especially when you can plan ahead. So 0:20:55.480 --> 0:20:59.199 you'll get whipsaws on the order of weeks. And so 0:20:59.320 --> 0:21:01.919 if this is over in weeks, right, we'll kind of 0:21:01.960 --> 0:21:04.760 have a big wedge of a month of chaos that'll 0:21:04.760 --> 0:21:07.280 filter through the economy. And if it goes on for 0:21:07.359 --> 0:21:10.920 months and months, it's something like if we talk about 0:21:10.960 --> 0:21:14.120 the Big three L and G, the US kutar in Australia. 0:21:14.160 --> 0:21:16.040 They're kind of each a fifth of fifth a fifth 0:21:16.119 --> 0:21:18.680 of global supply, So something like twenty percent of the 0:21:18.800 --> 0:21:22.760