WEBVTT - Natural Gas Is Wishing for a Warm Winter 0:00:00.160 --> 0:00:02.520 This is Dana Perkins and you're listening to Switch It 0:00:02.560 --> 0:00:05.400 on the b n F podcast. Today, we're going to 0:00:05.480 --> 0:00:08.160 talk about natural gas. To be honest, when we set 0:00:08.160 --> 0:00:10.960 out to record this podcast, it was initially intended as 0:00:11.000 --> 0:00:13.600 more of a natural gas primer, but we quickly got 0:00:13.600 --> 0:00:16.600 into recent volatility and high prices and what we might 0:00:16.640 --> 0:00:19.599 expect in the future, because, let's be honest, that is 0:00:19.600 --> 0:00:22.520 what people are talking about regarding natural gas right now. 0:00:22.800 --> 0:00:25.119 High natural gas prices are one of the factors that 0:00:25.160 --> 0:00:28.440 are leading to higher utility bills for residential users this year, 0:00:28.880 --> 0:00:31.040 part of the reasons some utilities in the UK have 0:00:31.120 --> 0:00:34.520 actually gone bankrupt, as well as resulting in canceled orders 0:00:34.520 --> 0:00:38.000 from manufacturing facilities in China. What was once a regional 0:00:38.040 --> 0:00:41.400 commodity is now a truly global part of the energy mix. 0:00:41.880 --> 0:00:44.360 And one thing we will discuss today in the podcast 0:00:44.560 --> 0:00:46.839 is that at least when it comes to natural gas, 0:00:47.159 --> 0:00:49.559 we'd better hope that the northern hemisphere has a bit 0:00:49.600 --> 0:00:52.360 of a warm winter this year. Today I interview my 0:00:52.400 --> 0:00:56.000 colleague Fausia Marzuki, Global head of natural Gas for b 0:00:56.120 --> 0:00:59.280 a F. She recently wrote a research note titled four 0:00:59.320 --> 0:01:02.240 Ways to Think about the future of natural gas, and 0:01:02.280 --> 0:01:05.360 subscribers can read it on benof go on the Bloomberg terminal, 0:01:05.640 --> 0:01:08.319 or at benof dot com. A quick reminder, we do 0:01:08.400 --> 0:01:11.120 not provide investment or strategy advice and have a complete 0:01:11.160 --> 0:01:13.920 disclaimer at the end of the show. And now let's 0:01:13.920 --> 0:01:26.880 speak with Fausia about what's happening with natural gas. Fousia, 0:01:27.040 --> 0:01:29.959 thank you for joining today, Thanks Dana for having me, 0:01:30.280 --> 0:01:33.959 and we are going to talk about natural gas. Liquefied 0:01:34.000 --> 0:01:35.440 natural gas will be a big part of it, but 0:01:35.520 --> 0:01:37.959 natural gas in all of its forms, and really it's 0:01:38.000 --> 0:01:41.120 a very important topic at the moment for many industries 0:01:41.120 --> 0:01:44.039 in ways that I think maybe they hadn't considered before. 0:01:44.280 --> 0:01:47.680 So let's get into natural gas to begin with, is 0:01:47.720 --> 0:01:49.840 it clean or not? This may be the most basic 0:01:49.880 --> 0:01:53.360 of questions. Some people are saying it burns clean, it's 0:01:53.400 --> 0:01:56.360 a clean fuel, and others are saying that, actually, no, 0:01:56.480 --> 0:01:58.440 we're going to have to remove this from the energy 0:01:58.440 --> 0:02:00.720 system and as soon as a deck aid because it's 0:02:00.760 --> 0:02:04.400 not the cleanest fuel. So where do you stand on it? Well, 0:02:04.480 --> 0:02:08.400 so in most of these things, both answers are correct 0:02:08.480 --> 0:02:11.960 to us, that's an extent. So natural gas is the 0:02:12.000 --> 0:02:16.919 cleanest burning fossil fuel or cleanest burning hydrocarbon. Now that's 0:02:16.919 --> 0:02:20.160 because natural gas is primarily methane. Now that is a 0:02:20.160 --> 0:02:23.800 c H four compound. So the amount of carbon dioxide 0:02:23.800 --> 0:02:26.880 that is actually emitted when a fuel is burned is 0:02:26.919 --> 0:02:30.160 directly related to how much carbon there is in the molecule. 0:02:30.200 --> 0:02:33.880 So natural gas only has one carbon molecule, as opposed to, 0:02:33.960 --> 0:02:37.120 for example, oil that has eight carbon molecules. I don't 0:02:37.160 --> 0:02:38.240 know if you want to take a step at how 0:02:38.280 --> 0:02:43.080 many carbon molecules there are in coal hundred and thirty 0:02:43.160 --> 0:02:47.040 two to about two hundred and forty. That's embarrassing. How 0:02:47.040 --> 0:02:50.600 did I not know that? So hence why natural gas 0:02:50.600 --> 0:02:55.480 when it burns, it is a clean nerve emissions fuel. However, 0:02:55.639 --> 0:02:58.520 the problem with natural gas is that it is not 0:02:58.720 --> 0:03:03.280 a net zero fuel. It is a lower carbon fuel, 0:03:03.360 --> 0:03:05.720 it is not a net zero one. And this is 0:03:05.760 --> 0:03:08.960 why we're getting this increased pressure on the natural gas 0:03:09.000 --> 0:03:13.720 industry questioning its role in the future energy transition. Before 0:03:13.760 --> 0:03:16.120 we can talk about the future, let's talk about the past. 0:03:16.160 --> 0:03:20.400 Where has it historically sat within the power sector, for example, 0:03:20.440 --> 0:03:24.120 or just in the general wider energy max So at 0:03:24.120 --> 0:03:27.240 the very very very beginning, natural gas was largely just 0:03:27.320 --> 0:03:30.959 found with oil, which is what was called associated gas production, 0:03:31.320 --> 0:03:32.880 and a lot of times we just flared, so it 0:03:32.960 --> 0:03:35.880 was just sort of released into the atmosphere. Eventually, the 0:03:36.040 --> 0:03:39.560 use cases and commercialization if it started and it started 0:03:39.640 --> 0:03:43.880 being adopted in the power sector, in industry to heat 0:03:43.920 --> 0:03:47.000 your homes for cooking, sooner or later it started in 0:03:47.000 --> 0:03:48.840 the trans sports sector, and all of these are the 0:03:48.920 --> 0:03:52.320 use cases. So now natural gas actually has a very 0:03:52.520 --> 0:03:57.080 wide breath in terms of its use cases across various sectors. 0:03:57.080 --> 0:04:00.160 Where oil is predominantly used in the transport set to 0:04:00.360 --> 0:04:03.920 and coal is used predominantly in power generation, gas is 0:04:03.920 --> 0:04:07.080 a lot more variable. It's everywhere, and hence why it 0:04:07.560 --> 0:04:10.600 has also been growing in its share of the overall 0:04:10.720 --> 0:04:13.920 energy mix. Well, so then let's dig into that. Within 0:04:14.000 --> 0:04:17.400 the energy mix, where is it being used? And now 0:04:17.440 --> 0:04:19.520 I know I have a gas boiler in my house, 0:04:19.600 --> 0:04:21.800 and I know that there are some European countries looking 0:04:21.800 --> 0:04:23.840 to phase that out, but as of today, that is 0:04:23.839 --> 0:04:26.520 where my heating and hot water comes from. Is residential 0:04:26.560 --> 0:04:29.320 demand a big part of the pie? If not? Where 0:04:29.320 --> 0:04:31.479 else is it? Residential demand is a big thing because 0:04:31.520 --> 0:04:33.640 you needive to heat your home, right, So it's a 0:04:33.640 --> 0:04:36.200 big thing in the cold countries or where you have cold, 0:04:36.200 --> 0:04:38.560 harsh winters, So that's a big thing. But it is 0:04:38.680 --> 0:04:42.400 increasingly growing in the power sector, and one of the 0:04:42.440 --> 0:04:46.440 reasons why it's been growing recently is that it actually complements. 0:04:46.480 --> 0:04:49.320 So the idea is that it does actually complement what 0:04:49.440 --> 0:04:54.159 we call intermittency and renewable energy. So when sun doesn't shine, 0:04:54.320 --> 0:04:58.599 wind doesn't blow, gas can come in to help give 0:04:58.720 --> 0:05:01.159 power when you come come home from work and you 0:05:01.240 --> 0:05:03.840 turn on your kettle and turn on your telly. That's 0:05:03.920 --> 0:05:05.920 kind of where gas plays a big role. It is 0:05:06.000 --> 0:05:09.200 also being used very much to phase out dirty your 0:05:09.279 --> 0:05:12.800 coal bio generation, so Ansastick. We'll talk about coal to 0:05:12.880 --> 0:05:15.239 gas fuel switching in a minute. But when we're thinking 0:05:15.279 --> 0:05:19.479 about the increased use of gas and the fact that 0:05:19.520 --> 0:05:21.920 it is really playing a bigger role in the energy 0:05:21.960 --> 0:05:25.800 mix and also in primary energy, what void is it filling? 0:05:25.920 --> 0:05:29.279 Is it really stealing let's say, market share from other 0:05:29.320 --> 0:05:32.279 commodities like coal and other sources of energy, or is 0:05:32.279 --> 0:05:36.320 it filling in the demand associated with growth, Because invariably 0:05:36.320 --> 0:05:38.880 we are seeing energy demand growth as well. Something is 0:05:38.880 --> 0:05:40.640 going to have to meet that. This is a really 0:05:40.720 --> 0:05:43.600 good question because a couple of years ago I would 0:05:43.600 --> 0:05:44.880 have given one on sower, but now I'm going to 0:05:44.920 --> 0:05:48.080 give a slightly different answer. So hold to gas. Switching 0:05:48.240 --> 0:05:50.480 has just been a thing that's growing, and this is 0:05:50.720 --> 0:05:55.279 one of the main driving forces for natural gas consumption rising. 0:05:55.839 --> 0:06:01.040 Many countries are enacting policies or funding new projects to 0:06:01.240 --> 0:06:05.240 deliberately phase out coal power plants in favor of gas. 0:06:05.520 --> 0:06:09.280 Most recently, especially in Emerging Asia and emerging markets, it's 0:06:09.520 --> 0:06:12.880 l en G specifically to power. It has also actually 0:06:12.960 --> 0:06:16.600 been used to phase up oil, like very old oil 0:06:16.680 --> 0:06:21.159 fired generation. So that's what's been happening here. However, what 0:06:21.240 --> 0:06:23.800 you're talking about the mix and is it filling a void. 0:06:24.080 --> 0:06:26.360 So there is an element that it is taking the 0:06:26.400 --> 0:06:29.240 market share from coal, which is great because we don't 0:06:29.240 --> 0:06:31.120 like the emissions from coal, right, so we rather have 0:06:31.279 --> 0:06:35.719 lower emissions with gas. And however, with the growth in 0:06:35.800 --> 0:06:40.960 renewable energy, as many of us know at BNF, renewables 0:06:40.960 --> 0:06:44.640 are catching up and they're actually taking a lot of 0:06:44.800 --> 0:06:50.600 that increased fundamental demand upside. So gas has been growing 0:06:50.960 --> 0:06:55.000 very much, eating into coal, but there is now very 0:06:55.080 --> 0:06:59.960 fierce competition from other energy sources much cleaner net series 0:07:00.440 --> 0:07:04.960 energy sources, and gas provides the source of flexible supply, 0:07:05.279 --> 0:07:08.279 which I think plays an integral role in the clean 0:07:08.360 --> 0:07:11.679 energy sector as this kind of bridge. Right, it lives, 0:07:11.720 --> 0:07:13.520 as we discussed at the beginning, is it clean, is 0:07:13.520 --> 0:07:16.040 it not clean? It sort of lives between the two worlds. 0:07:16.360 --> 0:07:17.960 Let's come back to that, because we already brought it up, 0:07:18.000 --> 0:07:21.680 the cold of gas switching that is transpiring. You said 0:07:21.680 --> 0:07:23.560 it was in a lot of developing economies, and is 0:07:23.560 --> 0:07:27.640 it not also happening very evidently in China and India. 0:07:28.400 --> 0:07:30.680 Are those the biggest places in the world where you're 0:07:30.720 --> 0:07:33.440 seeing this switch or is it something that we're also 0:07:33.440 --> 0:07:37.119 experiencing in Europe and North America? For example, switched has 0:07:37.240 --> 0:07:41.080 happened a lot in Europe. So right now, the world, 0:07:41.200 --> 0:07:43.520 or at least the gas industry is very much looking 0:07:43.600 --> 0:07:47.080 to the Asian economies. So China and India are going 0:07:47.080 --> 0:07:49.520 through their own coal to gas switching right now, and 0:07:49.560 --> 0:07:51.600 a lot of it has to do with just cleaning 0:07:51.600 --> 0:07:54.119 the air, cleaning air pollution. So there was a huge 0:07:54.160 --> 0:07:58.239 initiative in China to just clean the air. They literally 0:07:58.320 --> 0:08:01.360 called it the blue Sky. An issue and they phased 0:08:01.400 --> 0:08:04.760 out all of these coal boilers that were affiliated with 0:08:04.880 --> 0:08:08.880 industry production and power and even heating. That now there's 0:08:08.920 --> 0:08:12.720 been this huge surge in natural gas consumption coming out 0:08:12.760 --> 0:08:15.200 of Asia, and you would have seen the headlines about, 0:08:15.320 --> 0:08:17.800 you know, some of the energy crisis going on right now. 0:08:18.160 --> 0:08:20.920 A part of that actually also has to do with 0:08:20.960 --> 0:08:25.840 a lot of China's up and coming gas consumption. Is 0:08:25.880 --> 0:08:28.880 it fair to say that the gas market used to 0:08:28.920 --> 0:08:31.960 be more regional and that now it is an extremely 0:08:32.160 --> 0:08:36.040 global marketplace? Absolutely, when I first got into this industry, 0:08:36.080 --> 0:08:39.280 I only needed to know about full markets in Asia. 0:08:39.800 --> 0:08:41.960 So I sit here in Singapore and most of my 0:08:42.000 --> 0:08:44.360 experience in the gas market has been the Asian market. 0:08:44.679 --> 0:08:46.760 I now need to know about Brazil, I need to 0:08:46.760 --> 0:08:48.920 know about Turkey, and I need to know about US 0:08:48.960 --> 0:08:52.880 shale drilling. So it absolutely is a global market. Now 0:08:53.200 --> 0:08:56.120 it is a global gas market, but there are still 0:08:56.400 --> 0:09:00.920 very much localized fundamentals and dynamics for each of the market. 0:09:01.120 --> 0:09:04.920 But all of that danta. So what we once regional 0:09:05.000 --> 0:09:09.559 gas markets are now being interlinked with the rise of 0:09:09.600 --> 0:09:13.439 global llengy trade. You mentioned that in the beginning llengy. 0:09:13.480 --> 0:09:17.160 This is what's fueling the growth of natural gas, which 0:09:17.160 --> 0:09:20.240 then brings me to another question regarding physical pipelines. So 0:09:20.360 --> 0:09:23.000 I'm sitting here in London, which is in Europe, and 0:09:23.040 --> 0:09:25.440 week in our natural gas by pipelines that are extending 0:09:25.559 --> 0:09:28.800 largely from eastern Europe. What has that meant for pipelines 0:09:28.960 --> 0:09:34.400 with this rise of llen G llengs beating pipelines now, so, 0:09:34.559 --> 0:09:38.960 the global international trade of natural gas was dominated by 0:09:39.440 --> 0:09:43.240 very big, long pipelines from places where there was a 0:09:43.280 --> 0:09:47.480 lot more gas sending it to markets that needed the gas. 0:09:47.520 --> 0:09:52.079 Now llen G for last year it finally overtook pipeline gas. 0:09:52.120 --> 0:09:56.600 There's more international liquefied natural gas being traded today and 0:09:56.720 --> 0:09:59.080 we can attribute that to a whole bunch more supply 0:09:59.640 --> 0:10:02.080 coming out of the US on the back of the 0:10:02.120 --> 0:10:05.360 big West Shield gas boom. Do we see that continuing 0:10:05.400 --> 0:10:08.960 this rise of lergy into the future. Does that leave 0:10:09.000 --> 0:10:12.800 the pipelines essentially not in use and in theory available 0:10:12.880 --> 0:10:14.920 for hydrogen because there has also been a lot of 0:10:14.920 --> 0:10:19.840 talk in the hydrogen space about repurposing existing natural gas infrastructure. 0:10:20.400 --> 0:10:23.000 Are we able to have both at least in the 0:10:23.000 --> 0:10:26.760 their term. So with regards to the growth in lergy supply. 0:10:27.000 --> 0:10:31.160 A little bit more to unpack here. So, like many commodities, 0:10:31.280 --> 0:10:34.840 the lergy market is cyclical with regards to its build out. 0:10:35.040 --> 0:10:36.760 A lot of people will start approving a lot of 0:10:36.800 --> 0:10:39.600 supply projects and then suddenly the market will see that 0:10:39.640 --> 0:10:42.120 there's an oversupply and they'll stop building for a little 0:10:42.120 --> 0:10:44.320 bit and they get a little lull and then you realize, oh, 0:10:44.360 --> 0:10:46.600 we're short of supply, and then we'll stop building again. 0:10:46.640 --> 0:10:50.320 So there is that cyclicality. So we just had a 0:10:50.440 --> 0:10:54.960 huge round of what we call final investment decision approvals 0:10:55.040 --> 0:10:59.000 for big llergy projects. So there's a lot of llergy 0:10:59.240 --> 0:11:03.280 supply coming on the horizon DANTA and that's going to 0:11:03.440 --> 0:11:08.360 start as early as we are going to see huge 0:11:08.840 --> 0:11:13.079 mega developments coming out of Canada, British Columbia, Canada, out 0:11:13.120 --> 0:11:16.280 of Mozambique. We're going to see more llergy coming out 0:11:16.280 --> 0:11:20.000 of Cutster and many other places. So lleng supply is 0:11:20.040 --> 0:11:23.320 still coming, a lot of lergy supplies coming, and it's 0:11:23.360 --> 0:11:27.640 going to meet a projected increase in natural gas demand. 0:11:27.960 --> 0:11:31.840 There's natural gas demand is coming from many different places. 0:11:31.880 --> 0:11:35.480 A lot of it's still coming from Asia. It's it's China. 0:11:35.880 --> 0:11:39.400 It's also other markets here in Asia that used to 0:11:39.440 --> 0:11:42.760 have their own gas production that's now coming down, so 0:11:42.840 --> 0:11:46.280 they need to supplement it with important energy. So supply 0:11:46.440 --> 0:11:49.960 is coming, definitely coming. The big question right now that 0:11:50.040 --> 0:11:53.040 investors in the markets are looking for is when is 0:11:53.080 --> 0:11:56.000 that next gap going to be? Because we have so 0:11:56.080 --> 0:11:58.280 because market sees that's gonna be a whole bunch of 0:11:58.280 --> 0:12:02.440 supply coming in in about twenty when's that next gap 0:12:02.640 --> 0:12:05.240 Because it takes about five years to build an energy plant. 0:12:05.640 --> 0:12:08.480 Rights usually five years to build an energy plant, so 0:12:08.520 --> 0:12:10.600 you've got to plan that for whenever you see that 0:12:10.679 --> 0:12:14.319 next gap in the market. You're talking about the pipelines. Lergy, 0:12:14.679 --> 0:12:18.200 in my opinion very much is going to keep overtaking 0:12:18.320 --> 0:12:22.120 the natural gas pipeline trade only because it's so inflexible. 0:12:22.400 --> 0:12:24.720 Once you lay down a pipeline, you can't do anything 0:12:24.720 --> 0:12:27.600 else with it. It takes gas from point A to 0:12:27.679 --> 0:12:29.840 point B and you can't move it, can't do anything 0:12:29.840 --> 0:12:33.840 with it. But as you mentioned, you could consider repurposing 0:12:33.840 --> 0:12:36.720 it for hydrogen. This is still a new thing, and 0:12:36.760 --> 0:12:39.320 that's what I want to stress. The industry is still 0:12:39.320 --> 0:12:41.880 studying it hydrogen. At the end of the day is 0:12:41.920 --> 0:12:45.640 still a gas, but it is not the same as 0:12:45.800 --> 0:12:49.320 natural gas. So at this stage in the market, you 0:12:49.360 --> 0:12:54.200 can blend so mix hydrogen with natural gas in order 0:12:54.280 --> 0:12:59.199 to reduce its carbon intensity, but we can't just swamp 0:12:59.720 --> 0:13:03.440 an actual gas pipeline today for a hydrogen one. There 0:13:03.480 --> 0:13:06.960 are a number of pipeline integrity issues that come with that, 0:13:07.040 --> 0:13:10.120 like that the compound is fundamentally different. You'll have grossion, 0:13:10.160 --> 0:13:12.600 you have all sorts of potential issues that come out 0:13:12.640 --> 0:13:15.280 of this. So it's still being studied, but it's definitely 0:13:15.400 --> 0:13:18.920 something that the natural gas industry is really really looking 0:13:18.960 --> 0:13:22.640 at in order to make sure that we can still 0:13:23.240 --> 0:13:27.160 use and repurpose and really salvage all of this investment 0:13:27.200 --> 0:13:29.920 that has been coming in into the natural gas industry. 0:13:30.120 --> 0:13:36.520 Now for a very short break, stay with us. So 0:13:36.640 --> 0:13:38.880 I love that you actually mentioned a couple of years 0:13:38.920 --> 0:13:41.360 in the future where we are going to see increase 0:13:41.480 --> 0:13:44.160 in supply. Now at the moment, I think it's not 0:13:44.200 --> 0:13:47.280 surprising to anybody who's probably listening that natural gas prices 0:13:47.320 --> 0:13:50.880 have been quite high, and this has had different impacts 0:13:50.880 --> 0:13:54.240 in different countries, but we're all experiencing some degree of 0:13:54.320 --> 0:13:57.959 high gas prices, either having an impact on manufacturing of goods, 0:13:58.000 --> 0:14:00.760 whether they're and being manufactured in China, know where natural 0:14:00.800 --> 0:14:03.640 gases are currently being rationed and given only to certain 0:14:03.679 --> 0:14:07.120 industries based on some pretty tight controls there, or just 0:14:07.320 --> 0:14:09.800 the prices that we're experiencing is in consumers and what 0:14:09.880 --> 0:14:12.880 that's actually doing the utilities. You're seeing a real shrinkage 0:14:13.000 --> 0:14:16.600 of the overall utility market in the United Kingdom in 0:14:16.640 --> 0:14:20.760 many respects in regard to these high prices. So this 0:14:21.000 --> 0:14:23.200 increase in supply that we see in the future, is 0:14:23.240 --> 0:14:26.560 that going to level things out and will these prices 0:14:27.240 --> 0:14:29.600 come into line with something that is a little more 0:14:29.640 --> 0:14:32.600 consistent like we've seen in the past. Nobody likes the 0:14:32.640 --> 0:14:35.680 prices right now, even the gas people. We don't like 0:14:35.800 --> 0:14:38.440 these prices right now. It's not good for us. It 0:14:38.520 --> 0:14:41.880 really isn't good for us for our market. Granted, there 0:14:41.880 --> 0:14:44.320 are some in the industry who are probably making an 0:14:44.320 --> 0:14:48.520 absolute killing on margins right now selling at these gas prices, 0:14:48.800 --> 0:14:52.280 but it doesn't do the industry, the gas industry, any 0:14:52.280 --> 0:14:56.440 good to see such high prices because as a gas supplier, 0:14:56.760 --> 0:14:59.240 if your customer is upset that you know they're paying 0:14:59.240 --> 0:15:02.040 that much for gas prices you're upset because your customer 0:15:02.080 --> 0:15:06.960 is upset. So not good for anybody, quite frankly, However, regrettably, 0:15:07.280 --> 0:15:10.880 what happens in the natural gas market is every year 0:15:11.280 --> 0:15:16.520 we always have a balancing issue because the gas, a 0:15:16.560 --> 0:15:19.760 lot of it is being used for heating. Most big 0:15:19.800 --> 0:15:23.200 markets need more gas during the winter. We don't need 0:15:23.240 --> 0:15:26.440 it during the summer. So in all the major gas 0:15:26.480 --> 0:15:30.440 consuming markets, so North America, Europe, and North Asia, they 0:15:30.520 --> 0:15:33.720 go through this season of storage in the summer, they 0:15:33.760 --> 0:15:36.960 stop power all their gas for the winter. The problem 0:15:37.040 --> 0:15:40.520 that we see today and what has caused this crazy 0:15:40.520 --> 0:15:44.680 gas prices is this imbalance. And what I tell people, 0:15:44.800 --> 0:15:49.240 it's just that the gas market is used to this dynamic. 0:15:49.480 --> 0:15:54.640 It's when this very delicate dynamic gets thrown off, market 0:15:54.680 --> 0:15:58.480 goes crazy. So what's happened with us here in the 0:15:58.480 --> 0:16:01.040 market data is that you know, we're supposed to stop 0:16:01.120 --> 0:16:03.360 pile like all these big markets, was supposed to stop 0:16:03.440 --> 0:16:06.600 pile all of this nice gas in time for winter, 0:16:06.960 --> 0:16:09.240 and it just wasn't enough to go around. Because what 0:16:09.360 --> 0:16:13.080 happened is that we had a post COVID gas demon 0:16:13.280 --> 0:16:19.960 recovery being met with post COVID supply maintenance there was 0:16:20.040 --> 0:16:22.760 so much maintenance that was supposed to go on in 0:16:24.240 --> 0:16:27.040 but we couldn't for health and safety reasons for people, 0:16:27.160 --> 0:16:30.920 we couldn't do many of these things. Oh, that's really interesting. 0:16:31.080 --> 0:16:34.000 When lockdowns first started happening, I remember I spoke with 0:16:34.040 --> 0:16:37.800 our chief analysts that covers the nuclear industry and I mentioned, 0:16:38.200 --> 0:16:39.960 is there anything that's going to happen on that side, 0:16:40.000 --> 0:16:44.120 and he said, absolutely not. You have to maintain nuclear facilities. 0:16:44.200 --> 0:16:46.760 They will show up to work regardless. So this is 0:16:46.800 --> 0:16:49.280 an industry where, even though it is a critical part 0:16:49.280 --> 0:16:52.080 of the infrastructure that we all interact with, there was 0:16:52.200 --> 0:16:54.640 some cutback in terms of what people were able to do. 0:16:54.840 --> 0:16:57.200 And we're still making up for that time now very 0:16:57.280 --> 0:17:00.120 much so. So you still had manning to the air 0:17:00.200 --> 0:17:03.760 minimum just to get things going. But usually what the 0:17:03.920 --> 0:17:11.000 gas industry does slightly bigger maintenance to improve efficiency, improve production, etcetera, etcetera. 0:17:11.080 --> 0:17:14.120 So basically what happened during the COVID time, at least 0:17:14.200 --> 0:17:17.000 twenty time, is that a lot of this maintenance was 0:17:17.160 --> 0:17:20.680 reduced to a bare minimum, absolute minimum that they couldn't 0:17:20.680 --> 0:17:24.800 do for health and safety reasons. So many places actually 0:17:24.840 --> 0:17:27.800 did it this year, did it this summer. This was 0:17:27.880 --> 0:17:31.919 in Norway, this was in many big lergy production facilities. 0:17:31.960 --> 0:17:35.200 Things that were delayed all came back this year. Now, granted, 0:17:35.200 --> 0:17:37.000 there was a whole bunch of other stuff as well 0:17:37.080 --> 0:17:41.440 that impacted this imbalance. It was very hot in Brazil. 0:17:41.640 --> 0:17:44.880 It didn't rain there, so Brazil took a whole lot 0:17:44.920 --> 0:17:48.280 more energy than it usually does, which took it away 0:17:48.320 --> 0:17:52.400 from Europe. China was really hot too, so it took 0:17:52.400 --> 0:17:55.320 away a lot more energy. So a whole host of 0:17:55.359 --> 0:17:57.440 things that I could spend another hour talking about data. 0:17:57.480 --> 0:18:00.600 But the idea is that there's always a funda mental 0:18:00.760 --> 0:18:03.639 imbalance in the market, in the gas market, but we 0:18:03.760 --> 0:18:06.960 try to correct that with storage and with prices to 0:18:07.040 --> 0:18:10.560 make things flow. Gas supply and lergy cargoes to flow 0:18:10.600 --> 0:18:13.560 wherever it needs to go, wherever storage needs to be filled, 0:18:13.800 --> 0:18:16.159 they'll price that and they'll try to get that supply. 0:18:17.080 --> 0:18:22.480 But where it's really been rotten, luck really really been 0:18:22.640 --> 0:18:26.480 one luck that we've not been able to do that. Now, 0:18:26.720 --> 0:18:29.400 depending on who you speak to in the industry, some 0:18:29.440 --> 0:18:33.800 people will say it is an actual structural shortage of gas. 0:18:33.840 --> 0:18:37.640 Some might just say it's a really bad imbalance. So 0:18:37.680 --> 0:18:40.359 it really depends on who you speak to. I think 0:18:40.400 --> 0:18:46.240 it's a really bad imbalance, and we've potentially underestimated how 0:18:46.320 --> 0:18:49.560 much gas demand there truly is coming out of all 0:18:49.560 --> 0:18:52.359 this culti gas switching initiatives that we've been talking about 0:18:52.520 --> 0:18:55.280 in these big markets. One thing to know is that 0:18:55.359 --> 0:18:57.640 what happens in the European power sector is that there's 0:18:57.640 --> 0:19:01.400 an economic dynamics between coal and gass. You know, using 0:19:01.400 --> 0:19:04.639 a cobbon price generates us you know which one they 0:19:04.760 --> 0:19:07.000 rather they rather use, you know, whether they rather turn 0:19:07.040 --> 0:19:09.560 on the gas, they turn on coal, depending on prices 0:19:09.600 --> 0:19:12.680 in some other markets. So you take China for example, 0:19:12.720 --> 0:19:16.440 when they switched all their coal to gas, they don't 0:19:16.480 --> 0:19:20.959 have the switch back button. They changed boilers to gas, 0:19:21.000 --> 0:19:24.840 they don't have that ability to switch back because the 0:19:24.880 --> 0:19:28.399 gas consumption the gas market in China is less about 0:19:28.440 --> 0:19:33.440 power and more about heating and actually for industrial heat processes, 0:19:33.520 --> 0:19:37.040 so part of production lines, you know, gloss manufacturing, we 0:19:37.320 --> 0:19:40.359 talk about sort of factories, all these all require gas 0:19:40.359 --> 0:19:43.840 for their production lines for power and heating. So didn't 0:19:43.880 --> 0:19:46.159 have another option. You had all the gas demon and 0:19:46.200 --> 0:19:49.600 then we've almost caught the market off guard. Really, so 0:19:49.720 --> 0:19:53.040 that's really interesting because you're saying that we have seen 0:19:53.200 --> 0:19:55.480 some in other parts of the world, we have seen 0:19:55.560 --> 0:19:58.840 some gas to coal switching because of the high prices. 0:19:58.920 --> 0:20:00.720 But the point that you're may ing is that's only 0:20:00.760 --> 0:20:03.440 in a very limited number of use cases. So would 0:20:03.480 --> 0:20:07.000 you say that that's greater than of the use cases 0:20:07.080 --> 0:20:09.280 or is it really quite on the margins and you're 0:20:09.320 --> 0:20:11.359 only seeing it in some countries like the UK or 0:20:11.359 --> 0:20:14.359 Germany that are you know, quite isolated. So the only 0:20:14.400 --> 0:20:17.280 places where you can have like an actual commercial switch 0:20:17.320 --> 0:20:19.639 in economic switch, so this is called just for what 0:20:19.680 --> 0:20:22.240 we call just fuel switching. You need a carbon price. 0:20:22.480 --> 0:20:24.280 This is the only way you can get those kind 0:20:24.320 --> 0:20:26.920 of dynamics to work in the power sector. In other 0:20:26.960 --> 0:20:29.920 places where you don't have this, it's just a fundamental switch, 0:20:30.000 --> 0:20:33.520 like you're literally changing stuff. There's no flexibility, not switching back. 0:20:33.680 --> 0:20:36.359 Because a lot of this coll to guests switching was 0:20:36.640 --> 0:20:42.840 policy induced. People literally physically changed boilers, you know, in homes, 0:20:42.920 --> 0:20:45.400 et cetera. So it was a very different kind of move, 0:20:45.480 --> 0:20:48.960 if you like. But you've already mentioned that we're going 0:20:49.000 --> 0:20:52.119 to see an increase in supply, not this year, not 0:20:52.240 --> 0:20:54.399 next year, but potentially the year after that or the 0:20:54.560 --> 0:20:56.359 or the year after that, So it's coming down the 0:20:56.359 --> 0:20:58.840 pipe and that will create a very different dynamic. And 0:20:58.880 --> 0:21:01.520 I think that's why in our research, actually when we 0:21:01.560 --> 0:21:05.720 look at our long term forecast up we actually don't 0:21:05.720 --> 0:21:08.760 see the short term imbalances in the gas market is 0:21:08.800 --> 0:21:12.280 fundamentally changing our long term for example, new energy outlook. 0:21:12.720 --> 0:21:15.600 But if we are now looking a couple of years 0:21:15.600 --> 0:21:18.920 into the future, there is this question around gas. We 0:21:19.040 --> 0:21:23.040 recognize that it plays a very critical role in creating 0:21:23.040 --> 0:21:26.680 flexibility in the near term in the energy transition. However, 0:21:27.080 --> 0:21:30.080 if you are financing this project, and you're looking at 0:21:30.080 --> 0:21:34.119 this project that may not even have really economically viable 0:21:34.160 --> 0:21:38.800 supply until and then the long term projections show a 0:21:38.840 --> 0:21:42.639 potential phase out of natural gas because of the fact that, 0:21:42.720 --> 0:21:44.840 as you addressed at the beginning, it's not a completely 0:21:44.840 --> 0:21:48.280 clean fuel. Do you think that these new gas fired 0:21:48.280 --> 0:21:52.080 power stations are really going to get built if there's 0:21:52.119 --> 0:21:55.480 some concern around not being able to have the full 0:21:55.560 --> 0:21:59.000 life expectancy required to get a return on your investment, 0:21:59.560 --> 0:22:02.600 so us next couple of years. One thing I would 0:22:02.600 --> 0:22:05.399 say about gas prices, because I'm sure perhaps some people 0:22:05.480 --> 0:22:07.800 listening get really scared when I say the supply isn't 0:22:07.800 --> 0:22:12.399 coming until what does that mean for my you know 0:22:12.520 --> 0:22:15.600 from from my gas prices, I'm paid for my home. 0:22:15.800 --> 0:22:18.800 But no, so when I'd say for the immediate term, 0:22:18.880 --> 0:22:21.040 in terms of how the market is going to potentially 0:22:21.080 --> 0:22:24.600 recalibrate itself. As a gas analyst, we try to not 0:22:24.680 --> 0:22:27.879 make two May forecast data because everything is dependent on 0:22:27.920 --> 0:22:32.119 the weather. Because if we end up having a relatively 0:22:32.280 --> 0:22:36.880