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Speaker 1: This is Dana Perkins and you're listening to Switch It

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Speaker 1: on the b n F podcast. Today, we're going to

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Speaker 1: talk about natural gas. To be honest, when we set

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Speaker 1: out to record this podcast, it was initially intended as

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Speaker 1: more of a natural gas primer, but we quickly got

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Speaker 1: into recent volatility and high prices and what we might

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Speaker 1: expect in the future, because, let's be honest, that is

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Speaker 1: what people are talking about regarding natural gas right now.

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Speaker 1: High natural gas prices are one of the factors that

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Speaker 1: are leading to higher utility bills for residential users this year,

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Speaker 1: part of the reasons some utilities in the UK have

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Speaker 1: actually gone bankrupt, as well as resulting in canceled orders

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Speaker 1: from manufacturing facilities in China. What was once a regional

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Speaker 1: commodity is now a truly global part of the energy mix.

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Speaker 1: And one thing we will discuss today in the podcast

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Speaker 1: is that at least when it comes to natural gas,

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Speaker 1: we'd better hope that the northern hemisphere has a bit

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Speaker 1: of a warm winter this year. Today I interview my

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Speaker 1: colleague Fausia Marzuki, Global head of natural Gas for b

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Speaker 1: a F. She recently wrote a research note titled four

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Speaker 1: Ways to Think about the future of natural gas, and

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Speaker 1: subscribers can read it on benof go on the Bloomberg terminal,

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Speaker 1: or at benof dot com. A quick reminder, we do

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Speaker 1: not provide investment or strategy advice and have a complete

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Speaker 1: disclaimer at the end of the show. And now let's

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Speaker 1: speak with Fausia about what's happening with natural gas. Fousia,

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Speaker 1: thank you for joining today, Thanks Dana for having me,

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Speaker 1: and we are going to talk about natural gas. Liquefied

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Speaker 1: natural gas will be a big part of it, but

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Speaker 1: natural gas in all of its forms, and really it's

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Speaker 1: a very important topic at the moment for many industries

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Speaker 1: in ways that I think maybe they hadn't considered before.

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Speaker 1: So let's get into natural gas to begin with, is

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Speaker 1: it clean or not? This may be the most basic

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Speaker 1: of questions. Some people are saying it burns clean, it's

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Speaker 1: a clean fuel, and others are saying that, actually, no,

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Speaker 1: we're going to have to remove this from the energy

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Speaker 1: system and as soon as a deck aid because it's

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Speaker 1: not the cleanest fuel. So where do you stand on it? Well,

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Speaker 1: so in most of these things, both answers are correct

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Speaker 1: to us, that's an extent. So natural gas is the

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Speaker 1: cleanest burning fossil fuel or cleanest burning hydrocarbon. Now that's

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Speaker 1: because natural gas is primarily methane. Now that is a

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Speaker 1: c H four compound. So the amount of carbon dioxide

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Speaker 1: that is actually emitted when a fuel is burned is

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Speaker 1: directly related to how much carbon there is in the molecule.

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Speaker 1: So natural gas only has one carbon molecule, as opposed to,

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Speaker 1: for example, oil that has eight carbon molecules. I don't

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Speaker 1: know if you want to take a step at how

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Speaker 1: many carbon molecules there are in coal hundred and thirty

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Speaker 1: two to about two hundred and forty. That's embarrassing. How

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Speaker 1: did I not know that? So hence why natural gas

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Speaker 1: when it burns, it is a clean nerve emissions fuel. However,

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Speaker 1: the problem with natural gas is that it is not

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Speaker 1: a net zero fuel. It is a lower carbon fuel,

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Speaker 1: it is not a net zero one. And this is

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Speaker 1: why we're getting this increased pressure on the natural gas

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Speaker 1: industry questioning its role in the future energy transition. Before

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Speaker 1: we can talk about the future, let's talk about the past.

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Speaker 1: Where has it historically sat within the power sector, for example,

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Speaker 1: or just in the general wider energy max So at

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Speaker 1: the very very very beginning, natural gas was largely just

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Speaker 1: found with oil, which is what was called associated gas production,

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Speaker 1: and a lot of times we just flared, so it

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Speaker 1: was just sort of released into the atmosphere. Eventually, the

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Speaker 1: use cases and commercialization if it started and it started

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Speaker 1: being adopted in the power sector, in industry to heat

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Speaker 1: your homes for cooking, sooner or later it started in

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Speaker 1: the trans sports sector, and all of these are the

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Speaker 1: use cases. So now natural gas actually has a very

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Speaker 1: wide breath in terms of its use cases across various sectors.

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Speaker 1: Where oil is predominantly used in the transport set to

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Speaker 1: and coal is used predominantly in power generation, gas is

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Speaker 1: a lot more variable. It's everywhere, and hence why it

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Speaker 1: has also been growing in its share of the overall

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Speaker 1: energy mix. Well, so then let's dig into that. Within

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Speaker 1: the energy mix, where is it being used? And now

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Speaker 1: I know I have a gas boiler in my house,

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Speaker 1: and I know that there are some European countries looking

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Speaker 1: to phase that out, but as of today, that is

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Speaker 1: where my heating and hot water comes from. Is residential

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Speaker 1: demand a big part of the pie? If not? Where

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Speaker 1: else is it? Residential demand is a big thing because

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Speaker 1: you needive to heat your home, right, So it's a

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Speaker 1: big thing in the cold countries or where you have cold,

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Speaker 1: harsh winters, So that's a big thing. But it is

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Speaker 1: increasingly growing in the power sector, and one of the

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Speaker 1: reasons why it's been growing recently is that it actually complements.

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Speaker 1: So the idea is that it does actually complement what

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Speaker 1: we call intermittency and renewable energy. So when sun doesn't shine,

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Speaker 1: wind doesn't blow, gas can come in to help give

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Speaker 1: power when you come come home from work and you

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Speaker 1: turn on your kettle and turn on your telly. That's

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Speaker 1: kind of where gas plays a big role. It is

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Speaker 1: also being used very much to phase out dirty your

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Speaker 1: coal bio generation, so Ansastick. We'll talk about coal to

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Speaker 1: gas fuel switching in a minute. But when we're thinking

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Speaker 1: about the increased use of gas and the fact that

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Speaker 1: it is really playing a bigger role in the energy

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Speaker 1: mix and also in primary energy, what void is it filling?

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Speaker 1: Is it really stealing let's say, market share from other

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Speaker 1: commodities like coal and other sources of energy, or is

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Speaker 1: it filling in the demand associated with growth, Because invariably

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Speaker 1: we are seeing energy demand growth as well. Something is

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Speaker 1: going to have to meet that. This is a really

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Speaker 1: good question because a couple of years ago I would

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Speaker 1: have given one on sower, but now I'm going to

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Speaker 1: give a slightly different answer. So hold to gas. Switching

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Speaker 1: has just been a thing that's growing, and this is

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Speaker 1: one of the main driving forces for natural gas consumption rising.

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Speaker 1: Many countries are enacting policies or funding new projects to

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Speaker 1: deliberately phase out coal power plants in favor of gas.

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Speaker 1: Most recently, especially in Emerging Asia and emerging markets, it's

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Speaker 1: l en G specifically to power. It has also actually

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Speaker 1: been used to phase up oil, like very old oil

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Speaker 1: fired generation. So that's what's been happening here. However, what

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Speaker 1: you're talking about the mix and is it filling a void.

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Speaker 1: So there is an element that it is taking the

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Speaker 1: market share from coal, which is great because we don't

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Speaker 1: like the emissions from coal, right, so we rather have

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Speaker 1: lower emissions with gas. And however, with the growth in

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Speaker 1: renewable energy, as many of us know at BNF, renewables

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Speaker 1: are catching up and they're actually taking a lot of

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Speaker 1: that increased fundamental demand upside. So gas has been growing

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Speaker 1: very much, eating into coal, but there is now very

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Speaker 1: fierce competition from other energy sources much cleaner net series

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Speaker 1: energy sources, and gas provides the source of flexible supply,

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Speaker 1: which I think plays an integral role in the clean

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Speaker 1: energy sector as this kind of bridge. Right, it lives,

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Speaker 1: as we discussed at the beginning, is it clean, is

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Speaker 1: it not clean? It sort of lives between the two worlds.

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Speaker 1: Let's come back to that, because we already brought it up,

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Speaker 1: the cold of gas switching that is transpiring. You said

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Speaker 1: it was in a lot of developing economies, and is

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Speaker 1: it not also happening very evidently in China and India.

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Speaker 1: Are those the biggest places in the world where you're

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Speaker 1: seeing this switch or is it something that we're also

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Speaker 1: experiencing in Europe and North America? For example, switched has

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Speaker 1: happened a lot in Europe. So right now, the world,

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Speaker 1: or at least the gas industry is very much looking

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Speaker 1: to the Asian economies. So China and India are going

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Speaker 1: through their own coal to gas switching right now, and

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Speaker 1: a lot of it has to do with just cleaning

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Speaker 1: the air, cleaning air pollution. So there was a huge

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Speaker 1: initiative in China to just clean the air. They literally

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Speaker 1: called it the blue Sky. An issue and they phased

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Speaker 1: out all of these coal boilers that were affiliated with

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Speaker 1: industry production and power and even heating. That now there's

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Speaker 1: been this huge surge in natural gas consumption coming out

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Speaker 1: of Asia, and you would have seen the headlines about,

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Speaker 1: you know, some of the energy crisis going on right now.

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Speaker 1: A part of that actually also has to do with

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Speaker 1: a lot of China's up and coming gas consumption. Is

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Speaker 1: it fair to say that the gas market used to

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Speaker 1: be more regional and that now it is an extremely

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Speaker 1: global marketplace? Absolutely, when I first got into this industry,

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Speaker 1: I only needed to know about full markets in Asia.

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Speaker 1: So I sit here in Singapore and most of my

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Speaker 1: experience in the gas market has been the Asian market.

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Speaker 1: I now need to know about Brazil, I need to

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Speaker 1: know about Turkey, and I need to know about US

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Speaker 1: shale drilling. So it absolutely is a global market. Now

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Speaker 1: it is a global gas market, but there are still

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Speaker 1: very much localized fundamentals and dynamics for each of the market.

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Speaker 1: But all of that danta. So what we once regional

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Speaker 1: gas markets are now being interlinked with the rise of

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Speaker 1: global llengy trade. You mentioned that in the beginning llengy.

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Speaker 1: This is what's fueling the growth of natural gas, which

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Speaker 1: then brings me to another question regarding physical pipelines. So

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Speaker 1: I'm sitting here in London, which is in Europe, and

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Speaker 1: week in our natural gas by pipelines that are extending

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Speaker 1: largely from eastern Europe. What has that meant for pipelines

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Speaker 1: with this rise of llen G llengs beating pipelines now, so,

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Speaker 1: the global international trade of natural gas was dominated by

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Speaker 1: very big, long pipelines from places where there was a

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Speaker 1: lot more gas sending it to markets that needed the gas.

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Speaker 1: Now llen G for last year it finally overtook pipeline gas.

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Speaker 1: There's more international liquefied natural gas being traded today and

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Speaker 1: we can attribute that to a whole bunch more supply

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Speaker 1: coming out of the US on the back of the

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Speaker 1: big West Shield gas boom. Do we see that continuing

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Speaker 1: this rise of lergy into the future. Does that leave

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Speaker 1: the pipelines essentially not in use and in theory available

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Speaker 1: for hydrogen because there has also been a lot of

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Speaker 1: talk in the hydrogen space about repurposing existing natural gas infrastructure.

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Speaker 1: Are we able to have both at least in the

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Speaker 1: their term. So with regards to the growth in lergy supply.

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Speaker 1: A little bit more to unpack here. So, like many commodities,

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Speaker 1: the lergy market is cyclical with regards to its build out.

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Speaker 1: A lot of people will start approving a lot of

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Speaker 1: supply projects and then suddenly the market will see that

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Speaker 1: there's an oversupply and they'll stop building for a little

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Speaker 1: bit and they get a little lull and then you realize, oh,

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Speaker 1: we're short of supply, and then we'll stop building again.

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Speaker 1: So there is that cyclicality. So we just had a

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Speaker 1: huge round of what we call final investment decision approvals

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Speaker 1: for big llergy projects. So there's a lot of llergy

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Speaker 1: supply coming on the horizon DANTA and that's going to

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Speaker 1: start as early as we are going to see huge

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Speaker 1: mega developments coming out of Canada, British Columbia, Canada, out

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Speaker 1: of Mozambique. We're going to see more llergy coming out

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Speaker 1: of Cutster and many other places. So lleng supply is

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Speaker 1: still coming, a lot of lergy supplies coming, and it's

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Speaker 1: going to meet a projected increase in natural gas demand.

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Speaker 1: There's natural gas demand is coming from many different places.

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Speaker 1: A lot of it's still coming from Asia. It's it's China.

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Speaker 1: It's also other markets here in Asia that used to

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Speaker 1: have their own gas production that's now coming down, so

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Speaker 1: they need to supplement it with important energy. So supply

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Speaker 1: is coming, definitely coming. The big question right now that

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Speaker 1: investors in the markets are looking for is when is

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Speaker 1: that next gap going to be? Because we have so

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Speaker 1: because market sees that's gonna be a whole bunch of

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Speaker 1: supply coming in in about twenty when's that next gap

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Speaker 1: Because it takes about five years to build an energy plant.

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Speaker 1: Rights usually five years to build an energy plant, so

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Speaker 1: you've got to plan that for whenever you see that

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Speaker 1: next gap in the market. You're talking about the pipelines. Lergy,

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Speaker 1: in my opinion very much is going to keep overtaking

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Speaker 1: the natural gas pipeline trade only because it's so inflexible.

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Speaker 1: Once you lay down a pipeline, you can't do anything

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Speaker 1: else with it. It takes gas from point A to

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Speaker 1: point B and you can't move it, can't do anything

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Speaker 1: with it. But as you mentioned, you could consider repurposing

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Speaker 1: it for hydrogen. This is still a new thing, and

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Speaker 1: that's what I want to stress. The industry is still

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Speaker 1: studying it hydrogen. At the end of the day is

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Speaker 1: still a gas, but it is not the same as

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Speaker 1: natural gas. So at this stage in the market, you

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Speaker 1: can blend so mix hydrogen with natural gas in order

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Speaker 1: to reduce its carbon intensity, but we can't just swamp

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Speaker 1: an actual gas pipeline today for a hydrogen one. There

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Speaker 1: are a number of pipeline integrity issues that come with that,

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Speaker 1: like that the compound is fundamentally different. You'll have grossion,

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Speaker 1: you have all sorts of potential issues that come out

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Speaker 1: of this. So it's still being studied, but it's definitely

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Speaker 1: something that the natural gas industry is really really looking

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Speaker 1: at in order to make sure that we can still

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Speaker 1: use and repurpose and really salvage all of this investment

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Speaker 1: that has been coming in into the natural gas industry.

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Speaker 1: Now for a very short break, stay with us. So

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Speaker 1: I love that you actually mentioned a couple of years

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Speaker 1: in the future where we are going to see increase

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Speaker 1: in supply. Now at the moment, I think it's not

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Speaker 1: surprising to anybody who's probably listening that natural gas prices

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Speaker 1: have been quite high, and this has had different impacts

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Speaker 1: in different countries, but we're all experiencing some degree of

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Speaker 1: high gas prices, either having an impact on manufacturing of goods,

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Speaker 1: whether they're and being manufactured in China, know where natural

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Speaker 1: gases are currently being rationed and given only to certain

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Speaker 1: industries based on some pretty tight controls there, or just

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Speaker 1: the prices that we're experiencing is in consumers and what

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Speaker 1: that's actually doing the utilities. You're seeing a real shrinkage

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Speaker 1: of the overall utility market in the United Kingdom in

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Speaker 1: many respects in regard to these high prices. So this

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Speaker 1: increase in supply that we see in the future, is

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Speaker 1: that going to level things out and will these prices

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Speaker 1: come into line with something that is a little more

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Speaker 1: consistent like we've seen in the past. Nobody likes the

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Speaker 1: prices right now, even the gas people. We don't like

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Speaker 1: these prices right now. It's not good for us. It

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Speaker 1: really isn't good for us for our market. Granted, there

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Speaker 1: are some in the industry who are probably making an

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Speaker 1: absolute killing on margins right now selling at these gas prices,

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Speaker 1: but it doesn't do the industry, the gas industry, any

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Speaker 1: good to see such high prices because as a gas supplier,

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Speaker 1: if your customer is upset that you know they're paying

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Speaker 1: that much for gas prices you're upset because your customer

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Speaker 1: is upset. So not good for anybody, quite frankly, However, regrettably,

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Speaker 1: what happens in the natural gas market is every year

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Speaker 1: we always have a balancing issue because the gas, a

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Speaker 1: lot of it is being used for heating. Most big

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Speaker 1: markets need more gas during the winter. We don't need

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Speaker 1: it during the summer. So in all the major gas

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Speaker 1: consuming markets, so North America, Europe, and North Asia, they

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Speaker 1: go through this season of storage in the summer, they

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Speaker 1: stop power all their gas for the winter. The problem

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Speaker 1: that we see today and what has caused this crazy

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Speaker 1: gas prices is this imbalance. And what I tell people,

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Speaker 1: it's just that the gas market is used to this dynamic.

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Speaker 1: It's when this very delicate dynamic gets thrown off, market

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Speaker 1: goes crazy. So what's happened with us here in the

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Speaker 1: market data is that you know, we're supposed to stop

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Speaker 1: pile like all these big markets, was supposed to stop

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Speaker 1: pile all of this nice gas in time for winter,

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Speaker 1: and it just wasn't enough to go around. Because what

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Speaker 1: happened is that we had a post COVID gas demon

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Speaker 1: recovery being met with post COVID supply maintenance there was

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Speaker 1: so much maintenance that was supposed to go on in

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Speaker 1: but we couldn't for health and safety reasons for people,

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Speaker 1: we couldn't do many of these things. Oh, that's really interesting.

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Speaker 1: When lockdowns first started happening, I remember I spoke with

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Speaker 1: our chief analysts that covers the nuclear industry and I mentioned,

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Speaker 1: is there anything that's going to happen on that side,

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Speaker 1: and he said, absolutely not. You have to maintain nuclear facilities.

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Speaker 1: They will show up to work regardless. So this is

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Speaker 1: an industry where, even though it is a critical part

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Speaker 1: of the infrastructure that we all interact with, there was

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Speaker 1: some cutback in terms of what people were able to do.

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Speaker 1: And we're still making up for that time now very

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Speaker 1: much so. So you still had manning to the air

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Speaker 1: minimum just to get things going. But usually what the

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Speaker 1: gas industry does slightly bigger maintenance to improve efficiency, improve production, etcetera, etcetera.

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Speaker 1: So basically what happened during the COVID time, at least

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Speaker 1: twenty time, is that a lot of this maintenance was

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Speaker 1: reduced to a bare minimum, absolute minimum that they couldn't

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Speaker 1: do for health and safety reasons. So many places actually

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Speaker 1: did it this year, did it this summer. This was

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Speaker 1: in Norway, this was in many big lergy production facilities.

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Speaker 1: Things that were delayed all came back this year. Now, granted,

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Speaker 1: there was a whole bunch of other stuff as well

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Speaker 1: that impacted this imbalance. It was very hot in Brazil.

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Speaker 1: It didn't rain there, so Brazil took a whole lot

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Speaker 1: more energy than it usually does, which took it away

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Speaker 1: from Europe. China was really hot too, so it took

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Speaker 1: away a lot more energy. So a whole host of

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Speaker 1: things that I could spend another hour talking about data.

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Speaker 1: But the idea is that there's always a funda mental

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Speaker 1: imbalance in the market, in the gas market, but we

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Speaker 1: try to correct that with storage and with prices to

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Speaker 1: make things flow. Gas supply and lergy cargoes to flow

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Speaker 1: wherever it needs to go, wherever storage needs to be filled,

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Speaker 1: they'll price that and they'll try to get that supply.

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Speaker 1: But where it's really been rotten, luck really really been

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Speaker 1: one luck that we've not been able to do that. Now,

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Speaker 1: depending on who you speak to in the industry, some

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Speaker 1: people will say it is an actual structural shortage of gas.

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Speaker 1: Some might just say it's a really bad imbalance. So

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Speaker 1: it really depends on who you speak to. I think

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Speaker 1: it's a really bad imbalance, and we've potentially underestimated how

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Speaker 1: much gas demand there truly is coming out of all

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Speaker 1: this culti gas switching initiatives that we've been talking about

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Speaker 1: in these big markets. One thing to know is that

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Speaker 1: what happens in the European power sector is that there's

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Speaker 1: an economic dynamics between coal and gass. You know, using

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Speaker 1: a cobbon price generates us you know which one they

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Speaker 1: rather they rather use, you know, whether they rather turn

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Speaker 1: on the gas, they turn on coal, depending on prices

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Speaker 1: in some other markets. So you take China for example,

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Speaker 1: when they switched all their coal to gas, they don't

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Speaker 1: have the switch back button. They changed boilers to gas,

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Speaker 1: they don't have that ability to switch back because the

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Speaker 1: gas consumption the gas market in China is less about

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Speaker 1: power and more about heating and actually for industrial heat processes,

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Speaker 1: so part of production lines, you know, gloss manufacturing, we

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Speaker 1: talk about sort of factories, all these all require gas

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Speaker 1: for their production lines for power and heating. So didn't

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Speaker 1: have another option. You had all the gas demon and

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Speaker 1: then we've almost caught the market off guard. Really, so

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Speaker 1: that's really interesting because you're saying that we have seen

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Speaker 1: some in other parts of the world, we have seen

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Speaker 1: some gas to coal switching because of the high prices.

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Speaker 1: But the point that you're may ing is that's only

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Speaker 1: in a very limited number of use cases. So would

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Speaker 1: you say that that's greater than of the use cases

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Speaker 1: or is it really quite on the margins and you're

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Speaker 1: only seeing it in some countries like the UK or

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Speaker 1: Germany that are you know, quite isolated. So the only

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Speaker 1: places where you can have like an actual commercial switch

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Speaker 1: in economic switch, so this is called just for what

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Speaker 1: we call just fuel switching. You need a carbon price.

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Speaker 1: This is the only way you can get those kind

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Speaker 1: of dynamics to work in the power sector. In other

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Speaker 1: places where you don't have this, it's just a fundamental switch,

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Speaker 1: like you're literally changing stuff. There's no flexibility, not switching back.

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Speaker 1: Because a lot of this coll to guests switching was

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Speaker 1: policy induced. People literally physically changed boilers, you know, in homes,

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Speaker 1: et cetera. So it was a very different kind of move,

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Speaker 1: if you like. But you've already mentioned that we're going

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Speaker 1: to see an increase in supply, not this year, not

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Speaker 1: next year, but potentially the year after that or the

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Speaker 1: or the year after that, So it's coming down the

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Speaker 1: pipe and that will create a very different dynamic. And

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Speaker 1: I think that's why in our research, actually when we

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Speaker 1: look at our long term forecast up we actually don't

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Speaker 1: see the short term imbalances in the gas market is

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Speaker 1: fundamentally changing our long term for example, new energy outlook.

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Speaker 1: But if we are now looking a couple of years

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Speaker 1: into the future, there is this question around gas. We

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Speaker 1: recognize that it plays a very critical role in creating

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Speaker 1: flexibility in the near term in the energy transition. However,

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Speaker 1: if you are financing this project, and you're looking at

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Speaker 1: this project that may not even have really economically viable

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Speaker 1: supply until and then the long term projections show a

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Speaker 1: potential phase out of natural gas because of the fact that,

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Speaker 1: as you addressed at the beginning, it's not a completely

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Speaker 1: clean fuel. Do you think that these new gas fired

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Speaker 1: power stations are really going to get built if there's

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Speaker 1: some concern around not being able to have the full

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Speaker 1: life expectancy required to get a return on your investment,

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Speaker 1: so us next couple of years. One thing I would

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Speaker 1: say about gas prices, because I'm sure perhaps some people

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Speaker 1: listening get really scared when I say the supply isn't

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Speaker 1: coming until what does that mean for my you know

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Speaker 1: from from my gas prices, I'm paid for my home.

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Speaker 1: But no, so when I'd say for the immediate term,

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Speaker 1: in terms of how the market is going to potentially

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Speaker 1: recalibrate itself. As a gas analyst, we try to not

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Speaker 1: make two May forecast data because everything is dependent on

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Speaker 1: the weather. Because if we end up having a relatively

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Speaker 1: warm winter i e. Not so cold, everything's fine by

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Speaker 1: the summer, I really by by our biennia projections. If

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Speaker 1: it's particularly warm, we're good. We're absolutely good. If it's cold, yeah, no,

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Speaker 1: that's not going to be fantastic. So it's really going

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Speaker 1: to depend on how the weather plays out in various

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Speaker 1: different markets, and that will determine the extent to which

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Speaker 1: the market is able to recalibrate head of next winter.

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Speaker 1: It could be that we've got to go through a

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Speaker 1: couple more painful winters before some of the energy supply

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Speaker 1: comes back in, But only whether will tell for that

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Speaker 1: now with regards to future of gas investments. So this

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Speaker 1: is the critical point right now. As I mentioned, it

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Speaker 1: takes about five years for a major gas development to

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Speaker 1: actually become operational. So investors today, if they're looking at

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Speaker 1: financing any kind of gas supply project, they're looking at

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Speaker 1: and whether you need that gas supply right now, depending

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Speaker 1: on whose projection you see, that's still in question. The bigger,

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Speaker 1: bigger question mark really is that twenty thirty time frame.

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Speaker 1: That time frame is the point at which the natural

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Speaker 1: gas industry may truly be at its turning point. So

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Speaker 1: b anys new Energy Outlook report fantastic report for those

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Speaker 1: of you who haven't seen it. That report has actually

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Speaker 1: laid out a number of net zero scenarios, and all

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Speaker 1: those net zero scenarios taken to account what happens to

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Speaker 1: natural gas demon to get to net zero very in

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Speaker 1: different technologies. But one thing that was common with all

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Speaker 1: those scenarios is that the turning point is because by

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Speaker 1: the time you get if the world really wants to

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Speaker 1: make its net zero targets, new clean gas technologies need

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Speaker 1: to be deployed at scale in big, big, big quantities

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Speaker 1: in order for us to get to a net zero goal.

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Speaker 1: So when investors and the industry is looking at future

433
00:24:29,880 --> 00:24:34,359
Speaker 1: gas power plants and stuff, it's really what their view

434
00:24:34,480 --> 00:24:36,800
Speaker 1: is going to be like in that twenty thirty time frame.

435
00:24:36,920 --> 00:24:38,879
Speaker 1: So if we talk about the demands side, so gas

436
00:24:38,880 --> 00:24:42,920
Speaker 1: power plants, you know, I like to introduce this concept

437
00:24:42,920 --> 00:24:46,880
Speaker 1: of being transition ready. Okay, so there's still a big

438
00:24:46,920 --> 00:24:49,840
Speaker 1: question mark about the role of gas and its role

439
00:24:49,880 --> 00:24:53,720
Speaker 1: in the transition, but nevertheless, you can have natural gas

440
00:24:53,760 --> 00:24:58,920
Speaker 1: assets be potentially transition ready. This could be something like,

441
00:24:59,240 --> 00:25:02,399
Speaker 1: if I'm build a gas power plant today, if I

442
00:25:02,560 --> 00:25:07,520
Speaker 1: fit it with only gas turbines GA gas of fuel turbines,

443
00:25:08,520 --> 00:25:11,560
Speaker 1: maybe if natural gas isn't a thing in twenty more years,

444
00:25:11,720 --> 00:25:14,800
Speaker 1: I can't use that power plants anymore. However, if I

445
00:25:14,880 --> 00:25:19,000
Speaker 1: fit it today with turbines, let run on gas today,

446
00:25:19,040 --> 00:25:24,240
Speaker 1: but could actually run on hydrogen in ten years time. Wow,

447
00:25:24,400 --> 00:25:28,040
Speaker 1: Suddenly that gas power plant can actually now live for

448
00:25:28,119 --> 00:25:30,680
Speaker 1: a lot longer because of this transition. So hence why

449
00:25:30,920 --> 00:25:36,560
Speaker 1: I bring up this notion of gas assets being transition ready,

450
00:25:37,080 --> 00:25:41,040
Speaker 1: making that deliberate effort today to try to get your

451
00:25:41,119 --> 00:25:44,600
Speaker 1: gas system ready for the transition. And this comes right

452
00:25:44,640 --> 00:25:48,080
Speaker 1: back to the gas network upgrades and pivoting that we

453
00:25:48,080 --> 00:25:52,439
Speaker 1: were talking about earlier. Data about studying the possibility of

454
00:25:52,560 --> 00:25:58,199
Speaker 1: converting gas networks or anything gas related to be able

455
00:25:58,400 --> 00:26:03,639
Speaker 1: to help bring up about this hydrogen economy transition that

456
00:26:03,720 --> 00:26:06,920
Speaker 1: people are actually you know, banking lots on. So this

457
00:26:07,040 --> 00:26:10,880
Speaker 1: is the most basic of commodities and trade flow questions.

458
00:26:11,400 --> 00:26:14,120
Speaker 1: But if we're thinking in the very near term, you're

459
00:26:14,119 --> 00:26:16,360
Speaker 1: talking about the timelines it takes to build new gas

460
00:26:16,400 --> 00:26:20,240
Speaker 1: fired power station in order to utilize what is a

461
00:26:20,359 --> 00:26:24,160
Speaker 1: very logical increase in supply and global trade flows. There's

462
00:26:24,200 --> 00:26:28,280
Speaker 1: another solution in here in terms of meeting some parts

463
00:26:28,320 --> 00:26:31,000
Speaker 1: of demand. And obviously it depends on which part of

464
00:26:31,000 --> 00:26:33,560
Speaker 1: the industry we're looking at. But if we're looking at

465
00:26:33,640 --> 00:26:36,920
Speaker 1: you know, some power demand, residential electricity, things like that,

466
00:26:37,440 --> 00:26:40,639
Speaker 1: do you think that the renewables industry, so solar and

467
00:26:40,680 --> 00:26:45,600
Speaker 1: wind specifically, and to maybe another extent, biofuels are also

468
00:26:45,640 --> 00:26:48,239
Speaker 1: saying these volatile prices right now, we are a big

469
00:26:48,320 --> 00:26:51,639
Speaker 1: part of the solution, and in a couple of years time,

470
00:26:51,920 --> 00:26:55,080
Speaker 1: we're going to have many, many projects that are potentially

471
00:26:55,119 --> 00:26:59,159
Speaker 1: taking off all around the same time. I would like

472
00:26:59,359 --> 00:27:04,199
Speaker 1: to make the answer that with this idea of the

473
00:27:04,400 --> 00:27:08,360
Speaker 1: transition to cleaner technologies and cleaner fuels, I think one

474
00:27:08,359 --> 00:27:12,480
Speaker 1: thing about the energy transition is not about the transition

475
00:27:12,880 --> 00:27:17,679
Speaker 1: of one particular fuel to another. I see the energy

476
00:27:17,760 --> 00:27:23,480
Speaker 1: transition as a move that is going to incorporate many,

477
00:27:23,640 --> 00:27:29,879
Speaker 1: many different types of technologies. Gas can potentially have a

478
00:27:30,040 --> 00:27:33,560
Speaker 1: role in all of this. Though it's not a net

479
00:27:33,640 --> 00:27:38,159
Speaker 1: zero fuel, it could still have that role. Be it

480
00:27:38,240 --> 00:27:42,639
Speaker 1: to complement renewables, be it to actually just help to

481
00:27:42,760 --> 00:27:46,679
Speaker 1: phase out some of the really really difficult cold markets

482
00:27:46,800 --> 00:27:49,720
Speaker 1: or so or actually just in some of it's inherent

483
00:27:50,200 --> 00:27:54,120
Speaker 1: use cases. You know, there are certain things where electrification

484
00:27:54,359 --> 00:27:57,040
Speaker 1: can only do so much. Right, So something like in

485
00:27:57,040 --> 00:28:03,560
Speaker 1: a industry high temperature heat processing, you need to burn something.

486
00:28:03,680 --> 00:28:05,760
Speaker 1: You need to burn a physical mole like you to

487
00:28:05,800 --> 00:28:07,560
Speaker 1: get those kind of you need to get that kind

488
00:28:07,560 --> 00:28:10,520
Speaker 1: of heat temperature. So gas may still potentially be a

489
00:28:10,720 --> 00:28:13,400
Speaker 1: role for that. This is a likely smaller use case

490
00:28:13,440 --> 00:28:16,280
Speaker 1: for for gas, but some in the transport sector. There

491
00:28:16,280 --> 00:28:21,240
Speaker 1: are some particularly hard to abate parts of the transport sector,

492
00:28:21,440 --> 00:28:26,600
Speaker 1: like shipping or even long haul trucking that until we

493
00:28:26,600 --> 00:28:30,159
Speaker 1: can get batteries to work for really really long journeys,

494
00:28:31,119 --> 00:28:35,480
Speaker 1: a fuel that you can burn must still needs to

495
00:28:35,520 --> 00:28:38,080
Speaker 1: be happened, and energy can be that role. So it's

496
00:28:38,120 --> 00:28:41,920
Speaker 1: all about different technologies all working together. One thing that's

497
00:28:41,960 --> 00:28:45,120
Speaker 1: actually interesting that's that's cropped up in the sector data

498
00:28:45,160 --> 00:28:47,000
Speaker 1: and I would like to share it is that, um,

499
00:28:47,520 --> 00:28:51,480
Speaker 1: you know, I think people this energy crisis has actually

500
00:28:51,560 --> 00:28:55,920
Speaker 1: shown people just how much gas is a part of

501
00:28:55,920 --> 00:29:00,040
Speaker 1: their lives and that they didn't know of because you know,

502
00:29:00,160 --> 00:29:02,720
Speaker 1: I think we talk about solo, we talk about when

503
00:29:03,360 --> 00:29:05,760
Speaker 1: so much of that actually comes out of China's actually

504
00:29:05,760 --> 00:29:08,720
Speaker 1: getting produced out of China, the turbines, panels, et cetera.

505
00:29:08,960 --> 00:29:12,200
Speaker 1: And China just had to do power rashtion in to

506
00:29:12,520 --> 00:29:15,120
Speaker 1: some of these industries because it didn't have enough gas.

507
00:29:15,240 --> 00:29:18,160
Speaker 1: There's almost a link between these things that people perhaps

508
00:29:18,240 --> 00:29:22,520
Speaker 1: didn't originally appreciate, but now slowly they might once it

509
00:29:22,600 --> 00:29:25,520
Speaker 1: does settled with this energy crisis and everybody does their

510
00:29:25,520 --> 00:29:29,280
Speaker 1: case studies about it. In the new year, we will

511
00:29:29,320 --> 00:29:32,920
Speaker 1: see that for all of the issues that come with gas,

512
00:29:33,440 --> 00:29:36,960
Speaker 1: while we figure things out, it still has a role

513
00:29:37,040 --> 00:29:38,880
Speaker 1: to play, you know, because one of the things that

514
00:29:38,920 --> 00:29:42,000
Speaker 1: we paid to see is that if we push away

515
00:29:42,080 --> 00:29:45,400
Speaker 1: gas too soon, we retreat back to coal. You know.

516
00:29:45,520 --> 00:29:47,760
Speaker 1: And this is another thing sort of like when when

517
00:29:47,800 --> 00:29:51,960
Speaker 1: people start talking about ccs. CCS is something that ever

518
00:29:52,000 --> 00:29:54,600
Speaker 1: since I joined the organ gas industry many years ago

519
00:29:54,680 --> 00:29:57,800
Speaker 1: we've been talking about CCS that actually that was going

520
00:29:57,840 --> 00:30:00,560
Speaker 1: to be the final question. No, let's talk about that

521
00:30:00,600 --> 00:30:04,640
Speaker 1: so CCS, carbon capture and storage. How important is it

522
00:30:04,680 --> 00:30:07,440
Speaker 1: that we make advancements technical advancements that we don't yet

523
00:30:07,480 --> 00:30:09,600
Speaker 1: really fully have in terms of bringing the economics of

524
00:30:09,680 --> 00:30:12,480
Speaker 1: this down. How important is carbon capture and storage to

525
00:30:13,360 --> 00:30:19,600
Speaker 1: a gas place in the market beyond beyond you need it?

526
00:30:19,840 --> 00:30:22,760
Speaker 1: If not, gas doesn't have a role to play in

527
00:30:22,800 --> 00:30:25,640
Speaker 1: in at zero worlds. In in that zero world you

528
00:30:25,720 --> 00:30:28,800
Speaker 1: need carbon capture and storage. One thing to mention though,

529
00:30:28,840 --> 00:30:31,360
Speaker 1: is that a lot of people associate CCS, the current

530
00:30:31,440 --> 00:30:33,880
Speaker 1: use of CCS with the oil and gas industry, But

531
00:30:34,000 --> 00:30:38,240
Speaker 1: for natural gas, only about a third of the emissions

532
00:30:38,320 --> 00:30:40,800
Speaker 1: come from the what we call the upstream side of

533
00:30:40,840 --> 00:30:44,080
Speaker 1: the value chain. Most of the emissions actually come from

534
00:30:44,160 --> 00:30:48,000
Speaker 1: the actual combustion and end use of the gas. So

535
00:30:48,080 --> 00:30:54,240
Speaker 1: cc US is actually much more important on the downstream side,

536
00:30:54,240 --> 00:30:57,240
Speaker 1: so actually at the consuming market side rather than the

537
00:30:57,240 --> 00:31:01,640
Speaker 1: producing side. However, where it's taken off and the industry

538
00:31:01,720 --> 00:31:05,120
Speaker 1: that has actually been able to develop CCS technology has

539
00:31:05,240 --> 00:31:08,200
Speaker 1: largely today been the oil and gas sector, and that's

540
00:31:08,240 --> 00:31:10,720
Speaker 1: what started really with it being used and what we

541
00:31:10,800 --> 00:31:14,520
Speaker 1: call enhanced world recovery. So the oil and gas industry

542
00:31:14,720 --> 00:31:16,840
Speaker 1: has been developing the technology, but it's meant to be

543
00:31:16,960 --> 00:31:19,800
Speaker 1: used for the actual use of natural gas later. This

544
00:31:19,920 --> 00:31:22,280
Speaker 1: brings me to something that I might want to actually

545
00:31:22,280 --> 00:31:27,320
Speaker 1: just end on Dana, is that the oil and gas industry,

546
00:31:27,400 --> 00:31:30,320
Speaker 1: for all of its issues and it's a questionable role

547
00:31:30,360 --> 00:31:34,080
Speaker 1: in the energy transition, it does have a role to play.

548
00:31:34,160 --> 00:31:36,840
Speaker 1: The rebranded energy companies that used to be oil and

549
00:31:36,840 --> 00:31:42,440
Speaker 1: gas companies, they have over the years become the best

550
00:31:43,240 --> 00:31:47,720
Speaker 1: energy project managers. They know how to execute billions and

551
00:31:47,840 --> 00:31:54,240
Speaker 1: billions and dollars worth of major infrastructure energy projects. There

552
00:31:54,360 --> 00:32:00,160
Speaker 1: is legion and battalion of scientists, engineers, technicians who's sort

553
00:32:00,160 --> 00:32:03,840
Speaker 1: of have built the energy system over the years. One

554
00:32:04,080 --> 00:32:07,000
Speaker 1: thing I always like to stress to people, it's just like, yes,

555
00:32:07,040 --> 00:32:11,080
Speaker 1: we talk about transitioning assets and resources, business models companies,

556
00:32:11,360 --> 00:32:15,520
Speaker 1: but there's also an element of people. People will from

557
00:32:15,560 --> 00:32:19,880
Speaker 1: the oil and gas industry can support this transition. And

558
00:32:19,920 --> 00:32:21,960
Speaker 1: I think that's one of the things that the gas

559
00:32:22,000 --> 00:32:25,880
Speaker 1: industry in particular sort of this year's but very much

560
00:32:25,920 --> 00:32:28,760
Speaker 1: been a year of reckoning where all of the gas

561
00:32:28,760 --> 00:32:32,960
Speaker 1: industry executives and professionals and leaders have really thoughts about

562
00:32:33,080 --> 00:32:37,200
Speaker 1: how they are actually going to help make this transition work.

563
00:32:37,240 --> 00:32:39,760
Speaker 1: Because we all agree that we want to make this

564
00:32:39,920 --> 00:32:45,320
Speaker 1: transition work. What comes out of the current industry is

565
00:32:45,480 --> 00:32:48,800
Speaker 1: how do we make sure that is done in a

566
00:32:48,960 --> 00:32:53,840
Speaker 1: rational and most cost effective way that is least disruptive

567
00:32:54,240 --> 00:32:56,880
Speaker 1: to people like yourself data so you don't have to

568
00:32:56,880 --> 00:32:59,320
Speaker 1: pay high gas prices where you where you're heating this

569
00:32:59,440 --> 00:33:04,520
Speaker 1: winter ends up being cold. All right, Well, that was

570
00:33:04,880 --> 00:33:06,880
Speaker 1: really interesting and I think you did a great job

571
00:33:06,920 --> 00:33:10,000
Speaker 1: at kind of explaining where we are now in the

572
00:33:10,000 --> 00:33:11,760
Speaker 1: near term and where we might be in the future

573
00:33:11,800 --> 00:33:14,280
Speaker 1: with natural gas. I will continue to watch the weather

574
00:33:14,320 --> 00:33:17,160
Speaker 1: reports and seeing how cold it is in various places

575
00:33:17,160 --> 00:33:19,560
Speaker 1: in the northern hemisphere around the world this winter and

576
00:33:19,680 --> 00:33:22,640
Speaker 1: see what that might do to where we end up

577
00:33:23,080 --> 00:33:25,960
Speaker 1: next year in this discussion. Thank you for joining today.

578
00:33:26,160 --> 00:33:36,760
Speaker 1: Thank you, Dana. Today's episode of Switched On was edited

579
00:33:36,760 --> 00:33:39,600
Speaker 1: by Rex Warner with Great Stoke Media. Bloomberguin e F

580
00:33:39,800 --> 00:33:42,720
Speaker 1: is a service provided by Bloomberg Finance LP and its affiliates.

581
00:33:42,720 --> 00:33:45,400
Speaker 1: This recording does not constitute, nor should it be construed

582
00:33:45,440 --> 00:33:49,200
Speaker 1: as investment advice investment recommendations, or a recommendation as to

583
00:33:49,440 --> 00:33:52,040
Speaker 1: an investment or other strategy bloomberguin e F should not

584
00:33:52,040 --> 00:33:54,760
Speaker 1: be considered as information sufficient upon which to base an

585
00:33:54,760 --> 00:33:58,280
Speaker 1: investment decision. Neither Bloomberg Finance LP nor any of its

586
00:33:58,280 --> 00:34:01,120
Speaker 1: affiliates makes any represent asian or warranty as to the

587
00:34:01,160 --> 00:34:04,400
Speaker 1: accuracy or completeness of the information contained in this recording,

588
00:34:04,480 --> 00:34:06,760
Speaker 1: and any liability as a result of this recording is

589
00:34:06,800 --> 00:34:07,720
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