Speaker 1: Hi, this is Dana Perkins and you're listening to Switched
Speaker 1: on the BANNIF podcast. At B and EF we talk
Speaker 1: a lot about the energy transition, the pace of change,
Speaker 1: the drivers, what the future of an increasingly complex energy
Speaker 1: system could look like. And today we have the opportunity
Speaker 1: to hear firsthand from Martin Witsellar, the CEO of SEPSA,
Speaker 1: regarding what they're changing, what are their targets for decarbonizing,
Speaker 1: what are some of the things that they might be
Speaker 1: struggling with, and what could the future of their company
Speaker 1: look like now. For background, SEPSA first started over ninety
Speaker 1: years ago and they are the first private oil company
Speaker 1: in Spain. Today they're across five continents and historically their
Speaker 1: business activities have been focused on oil, gas and chemicals,
Speaker 1: so this is quite a pivot. With their announcement of
Speaker 1: their Positive Motion Plan, SEPSA is now investing sixty percent
Speaker 1: of their eight billion investment budget into sustainable business activities.
Speaker 1: By the end of the current decade, they want to
Speaker 1: see a fifty five percent emissions reduction when compared to
Speaker 1: twenty nineteen law. So how are they going to pull
Speaker 1: it off and what is their strategy? Well, BN EF's
Speaker 1: deputy CEO, Albert Chung, spoke with Martin about just that.
Speaker 1: They discussed topics including international competition between nations within the
Speaker 1: clean energy space, seps's to Gigawat and a Lucian hydrogen
Speaker 1: Valley project, and the new Green Corridor between Spain and
Speaker 1: the Netherlands. And they also talk about transportation and mobility
Speaker 1: customers and how SEPs is adapting to meet their needs,
Speaker 1: and of course SEPs as plans for their upstream business.
Speaker 1: If you like this podcast, make sure to subscribe to
Speaker 1: receive updates on future episodes on your device and possibly
Speaker 1: give us a review on Apple or Spotify. If you
Speaker 1: want to be alerted on Twitter, subscribe to the handle
Speaker 1: at podcasts and you'll hear about new episodes that come
Speaker 1: out of Switched On and also other Bloomberg podcasts. Please
Speaker 1: note that bn EF does not provide investment or strategy advice,
Speaker 1: and our full disclaimer can be found at the very
Speaker 1: end of the show. And now let's get to the
Speaker 1: conversation between Albert and Martin.
Speaker 2: Martin, it's great to have you on the show today.
Speaker 2: Thank you so much for joining us.
Speaker 3: Albert, good morning from Madrid. Delightful to be with you
Speaker 3: and discuss some fundamental topics today.
Speaker 2: Thanks Martin. I do want to get your thoughts on
Speaker 2: this current energy situation in Europe and the opportunities and
Speaker 2: challenges in the energy transition. But before we dive into
Speaker 2: all of that, I was hoping you could take a
Speaker 2: minute just to tell us a bit about your own
Speaker 2: journey and your career and how you came to be
Speaker 2: in the position you're in today. Would you mind telling
Speaker 2: us a bit about that.
Speaker 3: So I joined the energy industry almost thirty years ago,
Speaker 3: which is a somewhat scary data point. When I joined,
Speaker 3: I thought the people that joined thirty years ago should
Speaker 3: go and do something else. But here I am and
Speaker 3: still full of ambition and keen to make an impact.
Speaker 3: So joined in nineteen ninety five at Shell, the Anglo
Speaker 3: Dutch nowadays Anglo Major and pursue the career that took
Speaker 3: me through almost all the businesses. So I started in
Speaker 3: the downstream trading business, then in downstream trategy and marketing
Speaker 3: and finance, and moved into upstream and quickly from the
Speaker 3: upstream business, cut engaged on the gas business and that's
Speaker 3: where I probably spent the majority of my time in Shell.
Speaker 3: To basically grow consolidate the gas business and particularly the
Speaker 3: lerg business, which at the time was still i would
Speaker 3: say in the beginning a bit of a niche business. Nowadays,
Speaker 3: of course, is a global business in its own right,
Speaker 3: and certainly in Shehall it's one of the biggest businesses
Speaker 3: that the company has and I was privileged to lead
Speaker 3: that business for nine years, three years as an EVP.
Speaker 3: And then you may recall both BG Group former British Gas,
Speaker 3: who were also a significant energy company. We combined the
Speaker 3: businesses and I moved on to the executive committee of Shell,
Speaker 3: where I stayed for six years, running that gas business
Speaker 3: but also picking up the newly formed new energies business.
Speaker 3: In twenty sixteen, Shall switched on a new energies business
Speaker 3: which had before in the two thousands but basically closed
Speaker 3: down in two thousand and eight two thousand and nine,
Speaker 3: started up again in twenty sixteen, and so over the
Speaker 3: last six years, based in then Atherlans, I rent both
Speaker 3: the gas and energy business and the new energies business,
Speaker 3: which took Shell into offshore wind, into solar, but also
Speaker 3: into biofuels, hydrogen batteries, power training, power sales et cetera
Speaker 3: to customers, so setting up an integrated new energies business there,
Speaker 3: and then in the course of twenty twenty one, the
Speaker 3: opportunity to lead SEBSAT came along, and eventually I took it,
Speaker 3: not just because the amazing city that marid is, with
Speaker 3: its climate and it's the social life, it's position in
Speaker 3: the center of Spain, a bit more over because I
Speaker 3: saw an opportunity to lead a fundamental and very fast
Speaker 3: transformation of a company that has as a starting point
Speaker 3: and we can talk about it later, a quite traditional
Speaker 3: fossil fuel based integrated oil gas chemicals business, to lead
Speaker 3: a transition that would actually before the end of the decade,
Speaker 3: turned that into a leader in in clean energies, clean
Speaker 3: green molecules, and clean mobility or sustainable mobility. And that
Speaker 3: opportunity to me was irresistible. So I moved by the
Speaker 3: end of twenty twenty one, and I am now fourteen
Speaker 3: months into that adventure and very pleased with the progress
Speaker 3: and still at the same time quite in all of
Speaker 3: what still needs to be done to get to the endpoint.
Speaker 2: Thanks Martin, Thank you for sharing that. It's really interesting
Speaker 2: to hear how your own story has in some ways
Speaker 2: mirrored the transition itself in terms of the focus of
Speaker 2: what you've been working on. Now, as you say you've
Speaker 2: been at the Helm of Stepster for a little bit
Speaker 2: over a year, now, could you first maybe tell us
Speaker 2: a bit about the company first of all for those
Speaker 2: of our listeners who are less familiar, and then I'd
Speaker 2: also love to hear what you've learned since joining the company,
Speaker 2: anything that surprised you perhaps over that year, and a
Speaker 2: bit that you've been there now.
Speaker 3: Yeah. So, SEMSA is a company headquarter in Spain, but
Speaker 3: with a relatively global portfolio in some businesses. So it
Speaker 3: has an extreme business in the Middle East and in
Speaker 3: Latin America. It has a chemicals business that really is global.
Speaker 3: It is in all time zones in nine different countries.
Speaker 3: We produce chemicals and we sell them in many more countries.
Speaker 3: And then the size a downstream business that's quite focused
Speaker 3: on the Iberian Peninsula, so in Spain, Portugal, but also
Speaker 3: has a presence in Mexico and Morocco. In the downstream,
Speaker 3: the company owns the largest refinery in Spain and another
Speaker 3: big one both in the south of Spain and Ondalucia,
Speaker 3: and that's relevant when we start to talk about the transition,
Speaker 3: and we are eighteen hundred service stations and are significant
Speaker 3: players in aviation, in bunkering. In all that, let's say,
Speaker 3: the classic B two B and B two C businesses
Speaker 3: in the oil industry were less less of a player
Speaker 3: in meatural gas actually, although we do import the products.
Speaker 3: So it's company with between twenty eleven thousand employees last
Speaker 3: year three billion dollars of EBITA to give you a
Speaker 3: sense of the dimensions. And one of the things I've
Speaker 3: learned is you, of course when I joined, or before
Speaker 3: I joined, I talked as significantly to be shareholders about
Speaker 3: what they were hoping to achieve with how they saw
Speaker 3: the future, and they very much saw the future or
Speaker 3: were very interested in the future that will be a
Speaker 3: radical transformation into the transition data. Partly because they think
Speaker 3: that's the right thing to do, that the world needs
Speaker 3: an example of that, or multiple examples of that. But
Speaker 3: I would say also partly because attracted by the situation
Speaker 3: in the equity markets where companies with a predominantly fossil
Speaker 3: portfolio at the moment, certainly in Europe, attracked ebe down
Speaker 3: multiples of three and a half to four in evaluation,
Speaker 3: whereas companies that are predominantly sustainable and green attract double
Speaker 3: digit eb down multiples in evaluations. So if you apply
Speaker 3: that to let's say a three billion door EBITA, it's
Speaker 3: the difference between a ten billion dollar valuation and thirty
Speaker 3: billion dollar valuation. And since re private equity owned, there's
Speaker 3: an incentive to see can you get from A to
Speaker 3: B and can you do it this decade? So with
Speaker 3: that inside and with the chareholder Wiship, I certainly have
Speaker 3: studied the company ahead of joining and these I thought
Speaker 3: it was possible. But I think the lesson that I've
Speaker 3: learned is that strategy is really an art of making choices,
Speaker 3: and too many companies and I think that was also
Speaker 3: probably the case in thepside before, end up doing a
Speaker 3: bit more of everything. In our sector, companies with such
Speaker 3: a broad portfolio of chemicals, upstream gas, downstream renewables end
Speaker 3: up their strategy ends up being, well, let's grow everything
Speaker 3: a little bit. And what we've come up with is
Speaker 3: a strategy that really makes choices, that decides to ribble down,
Speaker 3: triple down on sustainability businesses. We've announced that we will
Speaker 3: invest more than sixty percent over our eight billion investment
Speaker 3: budget into sustainable businesses the rest of this decade, creating
Speaker 3: a company that's more than fifty percent sustainable income by
Speaker 3: the end of the decade, and therefore, as a result,
Speaker 3: shrink the classic business of fossil based businesses by essentially
Speaker 3: running them for maximum value rather than investing in them.
Speaker 3: And I think that having such a clear choice on
Speaker 3: the strategy has been important internally to make to align
Speaker 3: everybody and to give direction to the company. But it's
Speaker 3: also been hugely helpful excellently because it really creates a
Speaker 3: story about where we're going, and a story that is
Speaker 3: easier to understand and that can be explained by all
Speaker 3: the other thousand people in the company, but also can
Speaker 3: be easily understood by people who we deal with in government,
Speaker 3: in regulatory agencies, in the press, and in the general public.
Speaker 3: And having a story that is focused and that is exciting.
Speaker 3: I think we're reaping the benefits of that every day,
Speaker 3: even if we're only at the start of executing story.
Speaker 2: Yeah, And I think that's a really powerful insight on
Speaker 2: strategy being the art of making choices. I really like that.
Speaker 2: And I've always thought that if you say yes to everything,
Speaker 2: then it's not a real strategy. So yeah, half of
Speaker 2: strategy is knowing what to say no to. So I
Speaker 2: think that's a really powerful message. Now, I know you've
Speaker 2: already touched on this. Actually, SEPSO has announced a new
Speaker 2: strategy in the last year called Positive Motion, which is
Speaker 2: all about transforming to net zero. You've already started telling
Speaker 2: me a bit about that, but cauld ask you maybe
Speaker 2: just to map out some of the main pillars, the
Speaker 2: main components of that. What are the main pieces that
Speaker 2: make up that overall strategy over the next eight to
Speaker 2: ten years.
Speaker 3: At its core, it starts with understanding who our customers
Speaker 3: are and what they need from us, what they most
Speaker 3: need from us this decade. Also on the B to
Speaker 3: B and the B two C side, we want to
Speaker 3: retain those customers and in a way attract many new
Speaker 3: customers and offer them decarbonization solutions. The carbon footprint of
Speaker 3: a company like Stebsite is significant, but eighty five percent
Speaker 3: of that carbon footprint if you go scope one, Scope two,
Speaker 3: Scope three, so let's say life cycle carbon impact of
Speaker 3: our product, not just our own emissions but also our
Speaker 3: customer emissions, eighty five percent of the emissions take place
Speaker 3: when the customer use our products when they drive the car,
Speaker 3: and they use the gasoline over the plane flys and
Speaker 3: they use the curacy. So for us to have a
Speaker 3: meaningful and impactful impact on climate change and on the
Speaker 3: energy to tradition, decarbonizing our own facilities doesn't make much of
Speaker 3: a difference because it's only fifteen percent of our carbon footprint.
Speaker 3: We need to do that, of course, and we're doing it.
Speaker 3: But much more importantly is that we help our customers
Speaker 3: decarbonize their energy use, which will then decarbonize the life
Speaker 3: cycleed carbon footprint of our business. But starts with understanding
Speaker 3: what do our customers need to decarbonize, and it's actually
Speaker 3: a relatively simple story. We think that there are mobility
Speaker 3: customers which are at the B two C side. That
Speaker 3: starts with let's say the cars that fill up at
Speaker 3: one of our eighteen hundred stations will need green electrons,
Speaker 3: will need electric vehicle charging solutions because that's where light
Speaker 3: vehicles are going by and large, So on that segment,
Speaker 3: we are raining down all Liberia super fast chargers so
Speaker 3: people can can charge in fifteen twenty minutes to eighteen
Speaker 3: ninety percent of their battery and go on their live
Speaker 3: journey again with their ev charge staff. Of course, we
Speaker 3: continue to offer diesel and gasoline as we go, but
Speaker 3: becoming the leader in super fast charging in Iberia is
Speaker 3: our main B two C strategy. Alongside that strategy comes
Speaker 3: a convenience strategy, because, of course those customers will spend
Speaker 3: a bit more time in our stations, let's say twenty
Speaker 3: minutes on average, and therefore we want to give them
Speaker 3: options to make the most of those twenty minutes. Whether
Speaker 3: that's drinking coffee or doing some e commerce, or picking
Speaker 3: up a meal, or picking up groceries or having a
Speaker 3: meal are many, There are many options. But we will
Speaker 3: treat those stations not so much anymore as places where
Speaker 3: you have to go because you want to fill up
Speaker 3: your garmend casoline, but where you want to go because
Speaker 3: there are convenience locations that are offer many options whow
Speaker 3: you charge your vehicles. So on the B two C side,
Speaker 3: it's super fast charging plus convenience strategy. On the B
Speaker 3: to B side, what our customers need most from us
Speaker 3: is green molecules. And I mean with that is many
Speaker 3: sectors in the B to B business that we serve
Speaker 3: are very difficult to be electrifying. The ones that can
Speaker 3: electrify will do so because that's the easiest way to
Speaker 3: decarbonize your energy usage. But there are many sectors such
Speaker 3: as aviation, such as maritime trans or such as heavy industry,
Speaker 3: but also such a heavy transport big tracks driving long
Speaker 3: distance for whom it's or the fertilizer sector, the chemical sector,
Speaker 3: for whom it's very difficult to electrify. But they still
Speaker 3: need a decarbonization solution and for that they need green molecules.
Speaker 3: And we've elected so again a choice. We could try
Speaker 3: and serve the industry that electrifies, but we actually believe
Speaker 3: that we can be more distinct by developing green molecules.
Speaker 3: We've been in a molecule business for one hundred years.
Speaker 3: They've been hydrocarbon molecules. Now we will develop green molecules.
Speaker 3: And essentially there's two main families there. There are biofuels
Speaker 3: and gases, and there is the green hydrogen family. On biofuels,
Speaker 3: we want to become one of the main suppliers of
Speaker 3: sustainable aviation fuel in Europe and we will start making
Speaker 3: some substantial investments this year. We already produce sustainable aviation
Speaker 3: fuel and on green hydrogen. We will also become one
Speaker 3: of the major suppliers in Europe of green hydrogen and
Speaker 3: its derivatives green ammonia and pretend green methodol, and in
Speaker 3: that way we can decarbonize the carbon footprint of our
Speaker 3: industrial of our let's say B two B customers who
Speaker 3: need green molecules and our BDC customers that need green electrials.
Speaker 3: So that is broadly, let's say the growth strategy underpinned
Speaker 3: by a significant renewable energy investment, which we will do
Speaker 3: to sell green electrons to customers or so to end customers.
Speaker 3: We will do it for own use. We will do
Speaker 3: about seven gigabatts of renewable solar wind electricity then will
Speaker 3: go to feed the super fast charging for the B
Speaker 3: two C customers and then will be used to make
Speaker 3: to produce the green hydrogen and to produce the biofuels
Speaker 3: and biogases. And so it's an own use strategy. We
Speaker 3: will not significantly compete in the electricity market itself, not
Speaker 3: because we because it's a bad business, but again because
Speaker 3: strategy is about making choices. So that's that's the growth
Speaker 3: part of the agenda. And then we will de emphasize
Speaker 3: our extreme business. As you may have seen, we've recently
Speaker 3: announced the sale of our oil production business Adown. That's
Speaker 3: about half of our extreme and in the rest of
Speaker 3: our exstream positions, we are really not growing apart from
Speaker 3: making the investments in the fields that we already have
Speaker 3: that makes sense. We are running that business for maximum value,
Speaker 3: and you will see the relative weight of our extreme
Speaker 3: business decline in our portfolio as we grow the green
Speaker 3: side and as we run that business form maximum value
Speaker 3: going forward. Our chemicals business does have a green agenda,
Speaker 3: is able to decarbonize and become green at kind of
Speaker 3: the pace that our energy businesses, so we've decided to
Speaker 3: keep that alongside our business for now and go on
Speaker 3: also go on a pretty aggressive green strategy. Our main
Speaker 3: business is to make La b which goes into the
Speaker 3: surfactanins business, which eventually people use to wash their clothes
Speaker 3: or wash their hands, et cetera. And we believe that
Speaker 3: is a sector that will decarbonize early, where our green
Speaker 3: propositions will attract the preview.
Speaker 2: So maybe just to drill into some of the opportunity
Speaker 2: areas there that you see across immobility, across hydrogen and
Speaker 2: bio fuels and sustainably aviation fuels. How are you thinking
Speaker 2: about the relative size of those opportunities between now and
Speaker 2: twenty thirty? Are they different sizes and different values to you?
Speaker 2: Do they carry different risk profiles? How are you thinking
Speaker 2: about the balance of those different opportunities there?
Speaker 3: They are all different and indeed have kind of different
Speaker 3: sizes and risk profiles. If you look at electric vehicle charging,
Speaker 3: it is a business that where there's no question that
Speaker 3: will be there. The European Union will drive adoption of
Speaker 3: EV very very hard in the coming decade, and therefore
Speaker 3: the fleet will change to EV. There's no question. The
Speaker 3: question is a bit how fast you see very big
Speaker 3: differences in Europe Norway, I think eighty five percent of
Speaker 3: the cars are now EV's that are sold. Netherlands and
Speaker 3: Germany it's twenty five growing to thirty, and in Spain
Speaker 3: it's four. And so the big question how fast will
Speaker 3: that four grow to twenty to thirty, to fifty and
Speaker 3: eighty And it's a bit a noble but it certainly
Speaker 3: depends also on the amount of infrastructure available. So we
Speaker 3: want to be part of the solution, will investigate it,
Speaker 3: We will invest ahead of the growth of that EV park,
Speaker 3: which hopefully will in itself trigger growth of the EV park,
Speaker 3: because we believe it's a bit of a business of
Speaker 3: a land grap where it's better to be early than
Speaker 3: to than to be laid, and by creating an installed base,
Speaker 3: we can grad a much higher market share in the
Speaker 3: EV charging business, let's say up to twenty five percent
Speaker 3: that we have in the fossil the business, where we
Speaker 3: are somewhere somewhere apt to after thirteen percent. It's an
Speaker 3: opportunity for step change in our market share by going
Speaker 3: early on ev charging, but eventually the opportunity is limited
Speaker 3: by the size of the car park in Iberia and
Speaker 3: the size of our network, so you cannot grow that forever.
Speaker 3: On biofuels, particularly sustainable aviation fuel, the risk profile is
Speaker 3: an interesting one. It's not so much to demount because
Speaker 3: the aviation sector really has only one credible near to
Speaker 3: medium term to decarbonized, which is stainable aviation fuels, and
Speaker 3: again in Europe will be forced by the European Union
Speaker 3: to adopt. Many companies want to adopt, but even those
Speaker 3: who don't want to will be forced by regulation to
Speaker 3: start buying the stainable aviation fuel. So in a way,
Speaker 3: the demand in that sector is kind of de risked.
Speaker 3: It will be there and it will grow. The risk
Speaker 3: profile in the biofuel's business much from the supply side.
Speaker 3: Can you find enough second generation feedstock that is genuinely
Speaker 3: sustainable and not food based but waste based. Can you
Speaker 3: find enough speedstock to grow your business? And so we
Speaker 3: are very very strongly focused at being allocating substantial resource
Speaker 3: to find a to originate in feedstock supply into the
Speaker 3: South of Spain so we can be a leader in
Speaker 3: producing biofields of stainable aviation fuel. The main risks on
Speaker 3: the supply the feedstock supply side, on the green hydro
Speaker 3: side is the other way around. Feedstock is not a problem.
Speaker 3: You just need water and reheuble electricity and where we
Speaker 3: are in the South of Spain is the best place
Speaker 3: in Europe for reneble electricity. We have the best combination
Speaker 3: of sun wind and space. And what I mean by
Speaker 3: space is the opportunity to build world class solar wind
Speaker 3: parks because there's quite a those space in the Midleland
Speaker 3: and South of Spain that that's usable. It's the population
Speaker 3: density is quite low. All of a sudden, the winter
Speaker 3: you get very two renewable electricity and the other component
Speaker 3: you need is water and you don't need so much
Speaker 3: of it. And actually by reducing our own use in
Speaker 3: the refinery is we can free up enough water to
Speaker 3: grow a very very large hygien business. So there is
Speaker 3: no constraint on the feedstock side on hygien. The constraint
Speaker 3: there at the market is to actually develop customers who
Speaker 3: want to buy hydrogen and that so that's a very
Speaker 3: different risk profile. But the good thing is these three
Speaker 3: businesses all have their own different risk profiles, and so
Speaker 3: by growing all three of them, you can actually you
Speaker 3: get diversification. You don't just depend on one single one
Speaker 3: of them working out. One of them might work out
Speaker 3: better than the others. But by growing all three into
Speaker 3: a leadership position, we're pretty comfortable with the decarbonization drive
Speaker 3: that we have in Europe, with the advantage position that
Speaker 3: we have in the South of Spain in terms of
Speaker 3: clean power being the cheapest in Europe, we will have
Speaker 3: a strong clean energy portfolio in the course of this decade.
Speaker 2: Maybe just to spend another minute on hydrogen, I noticed
Speaker 2: your very exciting announcement that you've made around this two
Speaker 2: gigawats project. I believe it's called the Andalusian Green Hydrogen
Speaker 2: Valley if I recall correctly. We have a coalition of
Speaker 2: partners including Furtive Barrier, the fertilizer company, which clearly will
Speaker 2: have a use for hydrogen. So my question first of
Speaker 2: all is what did it take to get that project
Speaker 2: up and running. Clearly having that anchor customer is critical.
Speaker 2: And then where do you then see that hydrogen flowing?
Speaker 2: More broadly, I presume there'll be other applications for that
Speaker 2: hydrogen coming out of this two gigawort project, So where
Speaker 2: do you see it going into? Which industries and which geographies.
Speaker 3: It's a very exciting projects. It's ten times the size
Speaker 3: of the largest hydro project in Europe being constructed at
Speaker 3: the moment, which is in Rotterdam built BCHEL Mega. What
Speaker 3: is a is a major chef change in the industry,
Speaker 3: and we are we are fortunate we have a number
Speaker 3: of things in place. As I said, very cheap renewable
Speaker 3: power and electricity is about eighty percent of the court
Speaker 3: of green hydrogen. So when you have the cheapest renewable
Speaker 3: power and you're likely to have the cheapest green hydroen
Speaker 3: so that's one key element. But the second key element, indeed,
Speaker 3: is that we have local demands that we can use
Speaker 3: as a way to get going. We have the alliance
Speaker 3: with thirty BA. We ourselves, with our two refineries, are
Speaker 3: significant hydrogen users and we will consume our own green hydroen.
Speaker 3: And then we have a number of other customers more
Speaker 3: in the aluminium and steel side around our energy parks
Speaker 3: in the south of Spain that our potential and I
Speaker 3: would say likely customers that we are having discussion. So clearly,
Speaker 3: if you're going to build a hydroen valley, the first
Speaker 3: step is to serve local demand, and we have quite
Speaker 3: a bit of local demand. But then the second step
Speaker 3: is to start to serve demand in other areas. And
Speaker 3: for that you need to transport the product. And that's
Speaker 3: totally trivial when it comes to hydroen because it typically
Speaker 3: can't use existing gas by bine systems and although you
Speaker 3: can blend them with a network that it doesn't derive
Speaker 3: as hydro with the customer. So there is a plan
Speaker 3: in Europe, a very detail plan in Europe that the
Speaker 3: European Union is committed to to build a hydrid pipeline
Speaker 3: system in Europe. That will eventually solve that issue, but
Speaker 3: that's going to take time. The EU says by twenty
Speaker 3: thirty that will be very fast, could be in the
Speaker 3: cause of the thirty so we can't wait for that
Speaker 3: to go and so for us to second. After having
Speaker 3: served local demand, we see the best opportunity in turning
Speaker 3: green hydroen into green ammonia, which is easily shippable, and
Speaker 3: then we have a number of destinations for that, so
Speaker 3: we will produce green ammonia. We've done a deal with
Speaker 3: the port of Rotterdam where we create a green ammoniac
Speaker 3: corridor between a Caceras which is the second part in
Speaker 3: Europe and Rotterdam, which is the first port in Europe.
Speaker 3: There's a big ammonia market in Rotterdam for fertilizer for
Speaker 3: other uses that we can supply into from all caesiras
Speaker 3: and we are sponsoring the construction of the infrastructure we
Speaker 3: need in Rotterdam to do so. But we are also
Speaker 3: developing a business of selling ammonia into ships. The maritime
Speaker 3: sector will need to de carbonize and the two available
Speaker 3: pathways are methanol and green ammonia, both made using green hydrogen.
Speaker 3: So over time, we also expect to be selling into
Speaker 3: ships or to sell into other markets. Japan is a
Speaker 3: market that is very keen to bigreen ammonia, and so
Speaker 3: that will be the second level of customer that we
Speaker 3: will serve, the shipping industry and the ammonia market globally.
Speaker 3: And then eventually, as we think of scaling that well
Speaker 3: beyond the two gigabots, we would start to count on
Speaker 3: the pipeline system to take the hydrogen to the north
Speaker 3: of Europe. So there are a number of layers. The
Speaker 3: last layer, I would say is developing a trucking market.
Speaker 3: We do see that for a long distance heavy trucking,
Speaker 3: hydroen is the logical alternative, and we have a plan
Speaker 3: to start constructing hygen stations in Spain and then link
Speaker 3: into hydrogen distribution facilities in the rest of Europe to
Speaker 3: start sending HydroD to drugs, which is a also shepherd
Speaker 3: as otherwise very very difficult to decarbodize. So we see
Speaker 3: a large market opportunity in front of us, but we
Speaker 3: need to develop it step by step.
Speaker 2: It's a really interesting concept to start with the local demand,
Speaker 2: but then ultimately to think about transforming Spain's inexpensive green
Speaker 2: electrons into molecules that can then supply the rest of Europe.
Speaker 2: I think that's a really exciting, really exciting concept. Maybe
Speaker 2: just to zoom out, Martin, just think about the oil
Speaker 2: and gas sector and the opportunities in the energy transition
Speaker 2: more broadly. I remember when you were in your previous role.
Speaker 2: You were at Shell at the time, and you join
Speaker 2: me on stage at our BNF New York summit. It
Speaker 2: must have been four or five years ago. I remember
Speaker 2: you explaining with quite some conviction that you felt that
Speaker 2: oil and gas companies can and must play a leading
Speaker 2: role in the energy transition. Now, I assume and I
Speaker 2: can tell that that's still your conviction. But now that
Speaker 2: you're at SEPSO, which is still quite a large company,
Speaker 2: but somewhat smaller and different in structure, different in focus,
Speaker 2: do you feel that SEPSA has a different set of
Speaker 2: advantages or or different challenges than other players in the
Speaker 2: industry and how do you see that playing into your strategy.
Speaker 3: Yeah, we talk about the size of steps. We always
Speaker 3: say it's it's big enough to matter, but small enough
Speaker 3: to change fast. And I think that is that is
Speaker 3: very true, But that's not the only distinct position that
Speaker 3: we have. I do absolutely believe that our position in
Speaker 3: the south of Spain and we are the only company
Speaker 3: with energy parks and with logistics assets, et cetera. The
Speaker 3: only energy player with a position in the south of Space,
Speaker 3: so it's not that easy to copy. Is an advantage
Speaker 3: that we have and that helps helps us be pioneers
Speaker 3: in this area or the early movers. But I think
Speaker 3: there's another issue at play Albert, which is ownership structure.
Speaker 3: I have two private equity owners, Mubadla and Carla, who
Speaker 3: are convinced that this is the right strategy for steps
Speaker 3: to follow and put their money and governance behind it
Speaker 3: and allow us to execute very fast and quite medical
Speaker 3: transformation of the portfolio and the business. I think what
Speaker 3: we've seen in public equity markets is that they're very
Speaker 3: hard to read, and if anything, they've been going the
Speaker 3: other way. I think the most recent proof point would
Speaker 3: be when VP announced that they were going to reverse
Speaker 3: to some extent their commitment to reduce their oil and
Speaker 3: gas production. Their share price went up by twenty percent,
Speaker 3: so the promised to produce more oil and gas than
Speaker 3: plant and their shurprise went up substantially, so I think
Speaker 3: the public equity markets at the moment are a bit
Speaker 3: I would say polarized. There is a large but shrinking
Speaker 3: part of the public acuity market that simply wants oil
Speaker 3: and gas production and oil and gas exposure. And then
Speaker 3: there's an even larger part of the public equity markets
Speaker 3: that wants to invest in EG compliant or related shares.
Speaker 3: The problem that these integrated oil and gas companies have
Speaker 3: is that whenever they announced their going let's say, from
Speaker 3: five percent renewables to ten percent or five to fifty,
Speaker 3: then the part of the equity market that wants oil
Speaker 3: and gas exposure divests because that's not what they are
Speaker 3: looking for. They want oil and gas exposure. They either
Speaker 3: don't want these companies to invest in the energy tradition
Speaker 3: or they don't believe in the energy tradition, but they're
Speaker 3: looking for oil and gas exposurem So they divest or
Speaker 3: in these apportion divest But the ESG part of the
Speaker 3: or the equity market, that's a very powerful part of
Speaker 3: the equity market, doesn't yet invest because it only wants
Speaker 3: to invest if these companies achieve forty or fifty percent
Speaker 3: green energy penetration. So it's a very hard journey to make.
Speaker 3: So at the moment, I would say the public equity
Speaker 3: markets reward pure place. You're either in oil and gas
Speaker 3: and you develop it and then you get share price appreciation,
Speaker 3: or you are a green company and you develop that.
Speaker 3: But there are very few public equity investors that want
Speaker 3: to invest in the journey. My private equity investors don't
Speaker 3: want anything else but to invest in the journey. I
Speaker 3: think there's a real tension there where for the large
Speaker 3: companies in the industry, it is hard to find the
Speaker 3: trajectory to lead in the carbonization if the equity markets
Speaker 3: are not willing to buy into that.
Speaker 2: It's a really interesting and insightful point, and I agree
Speaker 2: there's something about stability and clarity that's provided by some
Speaker 2: insulation from the public markets. I want to expand the
Speaker 2: lens of this conversation just talk a bit about the
Speaker 2: situation here in Europe, where you and I both live,
Speaker 2: and also more broadly about the global decoupling and the
Speaker 2: growth of international competition. But maybe just starting here in
Speaker 2: Europe and the energy crisis. Do you see that the
Speaker 2: worst is now behind us in terms of this energy crisis.
Speaker 2: We now have this oil price cap that seems to
Speaker 2: be doing its job. We have gas stories that seems
Speaker 2: like it's at a reasonable level after winter. What's your
Speaker 2: thought on kind of the prognosis and do you think
Speaker 2: we've weathered the worst of the storm.
Speaker 3: So a few points, the situation is clearly a lot
Speaker 3: calmer than it was in twenty twenty two after the
Speaker 3: war started, in particularly summer, when things got really quite stress,
Speaker 3: particularly in decasuallytricity markets. I would make a distinction between
Speaker 3: liquids and gas. I think the oil and oil products
Speaker 3: markets have settled more or less with the Russian ancients
Speaker 3: in place, the oil and products keep flowing. The logistics
Speaker 3: are a bit more difficult, are all kinds of issues
Speaker 3: with the quality of ships that bring the Russian cruder
Speaker 3: products to their new end customers, et cetera. So so
Speaker 3: I wouldn't say it's it's completely normal, but it's kind
Speaker 3: of settled. And so to me, the liquid markets will
Speaker 3: simply going forward again be driven by supplying demand, and
Speaker 3: we do believe supply has been underinvested, so oil prices
Speaker 3: likely to be relatively strong going forward. But that market
Speaker 3: has kind of settled, and I wouldn't expect there to
Speaker 3: be any panic moments left. I think on the gas market,
Speaker 3: Europe has been successful and lucky. It's been successful in
Speaker 3: attracting supply from other sources and in suppressing demand. But
Speaker 3: it's also been very lucky that the winter was one
Speaker 3: of the warmest winters on record, and therefore the heating
Speaker 3: demand was so much lower than average, and those two
Speaker 3: factors have led now to quite a calm situation in
Speaker 3: the gas market. I think that it's too early to
Speaker 3: declare victory on that. If we get resurging China demand,
Speaker 3: Asian demand for gas, which was also quite suppressed last
Speaker 3: year because of COVID and other reasons, if it all
Speaker 3: comes back into the market and we have a very
Speaker 3: cold twenty three to twenty four winter, and the gas
Speaker 3: situation could still be tied. But we still have to
Speaker 3: get through one or two winters on the gas before
Speaker 3: we can really say that that situation is also settled.
Speaker 3: So we'll see how it goes next winter. But I
Speaker 3: think the models now in place to respond to are
Speaker 3: a lot better than nowhere a year ago, so I
Speaker 3: don't think we'll get to the very extremes that we
Speaker 3: saw last year anymore, but could still be tense, but
Speaker 3: one of the important structural points is that Europe will
Speaker 3: never again go back to depending so much on Russia
Speaker 3: when it comes to gas, and therefore it will become
Speaker 3: a structural energy importer and that will impact the long term.
Speaker 3: Gas price in Europe will go as a result, because
Speaker 3: energy prices will be higher than the Russian sply used
Speaker 3: to be, and that will have impact on the gas market,
Speaker 3: the electricity market, and the competitiveness of Europe for industry,
Speaker 3: et cetera.
Speaker 2: That's really interesting and I think that's not too dissimilar
Speaker 2: to the view that our team has over the next year,
Speaker 2: this question of the rebound in Asia and in China
Speaker 2: and offset against the potential weather for Europe for the
Speaker 2: coming year. It's interesting as well to think about how
Speaker 2: climate change has already impacted that balance by giving us
Speaker 2: a warm winter, which we're thankful for, but also limiting
Speaker 2: hydro output last year, which we're less thankful for.
Speaker 3: And let's not forget that warm summers also mean a
Speaker 3: lot of air conditioning demand in many places that burn
Speaker 3: gas repout, So it's not a climate change a way
Speaker 3: a lot of one way.
Speaker 2: Street indeed, right, that's right. And then of course you
Speaker 2: know the European response, or one of the elements of
Speaker 2: the European response to this crisis has been to increase
Speaker 2: its ambition and accelerate the energy transition and try to
Speaker 2: remove more of the blockers. How do you see that
Speaker 2: now that we're more than a year into this crisis,
Speaker 2: do you think we're starting to see the impact of
Speaker 2: that acceleration, that that ambition can be delivered or do
Speaker 2: you still see plenty of challenges ahead.
Speaker 3: So I'd say that the rebouwer EU ambitions by and
Speaker 3: large are the correct response to the crisis. I think
Speaker 3: it is to me, for anybody who takes energy transitions,
Speaker 3: here is obvious that the thing to do is to
Speaker 3: mix out on growing green energy in Europe, both electricity
Speaker 3: and green molecules, and then if that doesn't provide all
Speaker 3: the answer to the energy crisis, then to develop more
Speaker 3: fossil supply into Europe, either energy or pipeline from neighboring countries,
Speaker 3: et cetera, and embedance system in that way. So I
Speaker 3: think the ambition and the targets are the right ones.
Speaker 3: What I haven't seen enough of is turning that into practice.
Speaker 3: I would have wanted and expected more of a wartime
Speaker 3: effort to kickstart the biofuels and green hydrogen industries, to
Speaker 3: already be constructing large projects, to already be breaking ground
Speaker 3: on pipelines, et cetera, to really change the approach and
Speaker 3: remove some of the permitting blockers, but also other blockers
Speaker 3: that stand in the way of you're moving so much
Speaker 3: more quickly to that new energy system. All those ideas
Speaker 3: exist in results about permitting zones and go to areas
Speaker 3: they call them, about moving faster by lines and only
Speaker 3: electrolyizers and on biofields, but it's taken quite a lot
Speaker 3: of time for them to be agreed at the European
Speaker 3: level and then for them to find their way down
Speaker 3: to local legislation, et cetera, in order for implementation to
Speaker 3: be able to start. So I think most of the
Speaker 3: right ideas, correct ideas, are around, but driving them into
Speaker 3: implementation is slower than necessary in my view, and certainly
Speaker 3: slower than what Europe needs, and that still needs work.
Speaker 3: In the meantime, of course, we've had the IRA in
Speaker 3: the US, which gives very significant supply incentives to the
Speaker 3: market there, and that's certainly a wake up call for
Speaker 3: Europe is trying to respond within its own limits, score
Speaker 3: of tools that the European Union has and the countries
Speaker 3: are allowed to have. My sense is that that could
Speaker 3: still end up in the right place because where Europe
Speaker 3: at the moment is struggling a bit to copy the
Speaker 3: IRA supply site incentives and will need to step up further.
Speaker 3: It has very significant demand side incentives, and there's the
Speaker 3: etes the price on carbon in terms of the framework
Speaker 3: for adopting sustainable aviation fuel and hopefully maritime is sustainable
Speaker 3: maritime fuels, and that's missing in the US. The US
Speaker 3: has very significant supply side incentives and l the IRA
Speaker 3: is very clear, simple piece of legislation, well done, but
Speaker 3: it still needs demand side incentives such as carbon prices
Speaker 3: or other ways to stimulate demand. So I think the
Speaker 3: race is still on between Europe and US internal who
Speaker 3: will actually be the quickest to develop a green energy
Speaker 3: transition industry.
Speaker 2: I think that's a really fascinating point. And I was
Speaker 2: actually going to ask you that exact question, to what
Speaker 2: extent do you think this narrative around the green investment
Speaker 2: case in Europe being undermined by the US is really true?
Speaker 2: But maybe a follow on question to that, I think
Speaker 2: one of the observations is that there's now more of
Speaker 2: a race around the green manufacturing jobs, the industrial production
Speaker 2: jobs of the technology for the energy transition. So I'd
Speaker 2: be curious to know if you have a view on
Speaker 2: how important that piece is versus just getting on with
Speaker 2: deploying projects at the downstream. I don't know if you
Speaker 2: ever thought on how important those green manufacturing jobs really are.
Speaker 3: Yeah, I think it is seem to see how we've
Speaker 3: always seen the energy transition and get into one point
Speaker 3: five degrees as a collaborative global effort, or an effort
Speaker 3: that had to that in order to succeed, had to
Speaker 3: be collaborative. What we now see it is actually becoming
Speaker 3: more competitive between the Europe and the US, between China,
Speaker 3: Europe and US, the energy tangition is becoming more of
Speaker 3: a competition than a collaboration. We hope it's both, but
Speaker 3: I actually think that's probably not a bad thing because
Speaker 3: competition in general has brought many good things to society,
Speaker 3: and it can bring progress on energy transition, then then
Speaker 3: bring it up. I think the focus on manufacturing jobs
Speaker 3: is if you take a purely ecomomist few is actually
Speaker 3: not so helpful. You want to create those jobs in
Speaker 3: the places where they are most efficient and then globally optimized.
Speaker 3: But politically it is very very important that we keep
Speaker 3: the population in Europe and the propulation in the US
Speaker 3: and elsewhere, so keep their support of the energy transition.
Speaker 3: So I think in country that tend to lose a
Speaker 3: lot of jobs because of the energy tangition, where for example,
Speaker 3: the car manufacturing industry is a very big employer and
Speaker 3: it is in Spain and it isn't in Germany, the
Speaker 3: notion that driving that energy transition hart will create a
Speaker 3: lot of unemployment could actually cause political support for anty
Speaker 3: tgition to fall away. And so, from a political point
Speaker 3: of view and from a political acceptance point of view,
Speaker 3: being able to sell the energy transition acceleration as something
Speaker 3: that will also bring jobs to the local economy and
Speaker 3: there will also be manufacturing activity and prosperity, et cetera,
Speaker 3: it's probably not actually such a bad idea if that
Speaker 3: accelerates the energy tangition, and if accelerates popular support for it,
Speaker 3: then I think the economic symp optimization of having manufacturing
Speaker 3: jobs in what you might economically call the wrong place
Speaker 3: may actually be worth that acceleration, or worth that public support,
Speaker 3: so I'm I'm not too unhappy about it. I think
Speaker 3: it is one of the biggest biss to energy tangition
Speaker 3: is if it loses popular support, that people start to
Speaker 3: feel that the only thing that does for them is
Speaker 3: make energy more expensive and export jobs, and then I
Speaker 3: don't think we'll be able to get it done anywhere
Speaker 3: near in time. So I'm actually quite sympathetic to efforts
Speaker 3: to continue to raise popular support for the energy transition,
Speaker 3: even if it is economically perhaps not the optimal thing
Speaker 3: to do.
Speaker 2: So I'd like to just drill into that point about
Speaker 2: international competition really, because I think we're entering this era,
Speaker 2: you know, first of all, the marginalization of Russia as
Speaker 2: an energy exporter, which you talked about, and this broader
Speaker 2: rivalry between China and the US, China and the West,
Speaker 2: and concerns about supply chain resilience for the energy transition.
Speaker 2: And I think I detected from your earlier remarks actually
Speaker 2: a sense of optimism that against that backdrop, we can
Speaker 2: still accelerate the energy transition. Is that how you feel
Speaker 2: that even during these complex times, that we can continue
Speaker 2: to push and continue to move faster on that journey.
Speaker 3: I think it's absolutely possible. I think my sense, for example,
Speaker 3: as the IRA may not have existed and read power
Speaker 3: EU may not have existed, is the current conflict in
Speaker 3: Ukraine wasn't there, But I think it has sparked and
Speaker 3: however totally terrible. That is, it has sparked a number
Speaker 3: of important accelerators for the energy tradition that I think
Speaker 3: could have a very very lasting impact on the speed
Speaker 3: and direction of the energy system. It is. It is
Speaker 3: not all easy going, of course, because if you if
Speaker 3: you summarize Europe's approach as becoming lesser even totally independent
Speaker 3: of Russian from an energy perspective, by driving the energy
Speaker 3: tradition hard, then then of course you exchange dependence on
Speaker 3: let's say, fossil fuels to dependence on materials, because the
Speaker 3: energy tradition, the solar panels, the hydrogen plants, et cetera,
Speaker 3: to biofuels are all about materials, and these many of
Speaker 3: these materials you created dependence on China and other parts
Speaker 3: of the world. So if you in a way you
Speaker 3: exchange one dependence for the other, and will need to
Speaker 3: work through the impacts of that, and so so it
Speaker 3: isn't all clear. Sailing but I'm optimistic that the system,
Speaker 3: let's say the EU US China system, will will come
Speaker 3: to an equal equilibrium that allows those materials to flow
Speaker 3: and it allows that energy tradition acceleration to to take place.
Speaker 3: It has been what has been clear to me is
Speaker 3: that energy security is also in Europe very very political
Speaker 3: and sensitivision. It's been quite remarkable last year to see
Speaker 3: that when energy price has got high, Europe was willing
Speaker 3: to spend hundreds of billions subsidizing fossil fuel consumption in
Speaker 3: order to keep its citizens content. And of course the
Speaker 3: European argument for a long time has been that nobody
Speaker 3: should subsidize fossil fuel consumption. And yet when when the
Speaker 3: going got tough last year, European countries together spend hundreds
Speaker 3: of billions on it, and they also switched some co
Speaker 3: fire power plants. So that to me has been an
Speaker 3: extremely important insight last year. Although we all believe in
Speaker 3: energy tradition, and certainly in Europe and US politicians will
Speaker 3: will say that when the going gets tough, energy security
Speaker 3: and affordability quickly come into perhaps or trumpet an agenda,
Speaker 3: but certainly going side with it. And that comes to
Speaker 3: the necessity to increase our efforts to make sure that
Speaker 3: there's not just greener energy, but there's also plentyful and
Speaker 3: affordable energy as we drive the energy transition. I don't
Speaker 3: think that was as clearly on the radar screen as before.
Speaker 3: To me, it just emphasizes the need to scale up
Speaker 3: fast than we have been doing, and indeed about the
Speaker 3: wartime approach to creating clean energy in abundance affordability doesn't
Speaker 3: drive us back into the wrong place.
Speaker 2: Thank you, Martin. I think that's a great place to
Speaker 2: end the conversation, and I agree the challenge we have
Speaker 2: in front of us is to keep accelerating the transition
Speaker 2: but making sure that we're managing and ensuring energy security
Speaker 2: at the same time. Martin, I always learned so much
Speaker 2: when I get to talk to you, so thank you
Speaker 2: very much for sharing your thoughts with all of our
Speaker 2: listeners out there, and I hope we'll get to have
Speaker 2: you back on the show or on stage at one
Speaker 2: of us summit's very soon. Thank you, no thanks.
Speaker 3: I'll be keen to report on our promise. We are
Speaker 3: undergoing probably the fastest transformation of any energy company in
Speaker 3: the world, and if we can prove that it can
Speaker 3: be done, as I'm sure we will. I hope many
Speaker 3: others will follow, and we can look back over a
Speaker 3: decade of progress eventually, rather than a decade of trouble.
Speaker 3: But thanks for your time. Then over there for the
Speaker 3: opportunity to be with you.
Speaker 2: Thank you very much.
Speaker 1: Bloomberg n EF is a service provided by Bloomberg Finance
Speaker 1: LP and its affiliates. This recording does not constitute, nor
Speaker 1: should it be construed, as investment advice, investment recommendations, or
Speaker 1: a recommendation as to an investment or other strategy. Bloomberg
Speaker 1: n EF should not be considered as information sufficient upon
Speaker 1: which to base an investment decision. Neither Bloomberg Finance LP
Speaker 1: nor any of its affiliates makes any representation or warranty
Speaker 1: as to the accuracy or completeness of the information contained
Speaker 1: in this recording, and any liability as a result of
Speaker 1: this recording is expressly disclaimed.