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Speaker 1: This is Dana Perkins and you're listening to Switched on

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Speaker 1: the BNF podcast. Last year was tumultuous for the global

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Speaker 1: gas market. Russia's invasion of Ukraine led to disruption and

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Speaker 1: volatile prices as European nations rushed to find new sources

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Speaker 1: to replace established Russian supplies. This in turn resulted in

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Speaker 1: prices on the Dutch TTF benchmark hitting a record high

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Speaker 1: of nearly three hundred euros per megawatt hour in August

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Speaker 1: of twenty twenty two. Prices have since returned to some

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Speaker 1: sort of normality, albeit still elevated against historical averages. But

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Speaker 1: as we once again approach winter, just how full are

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Speaker 1: European gas stores and what is the global picture for

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Speaker 1: gas supply and demand? While on today's episode, I speak

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Speaker 1: with bn EF's head of European Gas, Irina Sarada, and

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Speaker 1: also the head of Global leg as well as apat

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Speaker 1: Gas for BNF Abhishek Rohatki. Today we discuss how full

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Speaker 1: gas inventories in Europe are and which countries are meeting

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Speaker 1: the demand and what's happening on the Asian continent where

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Speaker 1: we typically find the growth markets. We also go through

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Speaker 1: the potential impact of the weather on gas markets during

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Speaker 1: an El Nino year, and how climate change poses a

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Speaker 1: real challenge to forecasting. Lastly, we touch on how some

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Speaker 1: European countries are actually looking to store their gas in Ukraine,

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Speaker 1: as well as what new projects will be coming online

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Speaker 1: to increase global gas supply in twenty twenty four. If

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Speaker 1: you'd like to learn more, BNIF subscribers are going to

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Speaker 1: be able to access bnef's Global Winter Gas Outlook, which

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Speaker 1: this show is based on, and they can find it

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Speaker 1: on BNF dot com or at BNF go on the

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Speaker 1: Bloomberg terminal, or on BNF's mobile app. As always, if

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Speaker 1: you like this podcast, if you subscribe, you'll receive an

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Speaker 1: update when future episodes are published. And if you give

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Speaker 1: us a review or a rating on Apple Podcasts or Spotify,

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Speaker 1: you're going to make us more discoverable by others. Now,

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Speaker 1: let's jump into the conversation with Arena and Abashek about

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Speaker 1: the Winter Gas Outlook. Arena, thank you for joining us today.

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Speaker 1: Thank you, Ana and Abhishek, thank you for joining as well.

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Speaker 2: Thank you, Dana.

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Speaker 1: So we are here to talk about well the next

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Speaker 1: half year of what's going on in the global gas markets,

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Speaker 1: and we're going to talk about LNG. But this actually

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Speaker 1: is a show very much based on reports that we

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Speaker 1: put out twice a year, which are really important pieces

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Speaker 1: of research. We put a lot of effort into these.

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Speaker 1: We are here today to talk about what's happening with

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Speaker 1: the global gas markets. Last year, it made headlines all

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Speaker 1: over the world, and in particular from where I'm recording

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Speaker 1: in Europe, it was one of the things that everyday

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Speaker 1: people were talking about because of how much it impacted

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Speaker 1: our energy prices at home. Of course, those in the

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Speaker 1: gas space are looking at this every single year, every

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Speaker 1: single moment, every single day, and we put out two

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Speaker 1: reports a year, half yearly, one which is our Summer

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Speaker 1: Gas Outlook, and one that is our Winter Gas Outlook.

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Speaker 1: Can you explain to the lay person who's potentially listening

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Speaker 1: right now why we do these reports at half yearly

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Speaker 1: intervals and really who they're designed to target and who's

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Speaker 1: actually listening closely to what we're saying about the upcoming

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Speaker 1: half year in the gas market.

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Speaker 3: Thanks, Dana's that's a really good question. So usually we

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Speaker 3: put two outlooks just before the beginning of each season,

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Speaker 3: so our winter season in gas world starts in the

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Speaker 3: beginning of October and last till the end of March,

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Speaker 3: and our summer season starts in April and goes all

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Speaker 3: the way till the end of September. So that's why

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Speaker 3: we are producing our outlook just before those season to

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Speaker 3: give market players a bit of a perspective and share

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Speaker 3: our view of what's going to happen for the upcoming

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Speaker 3: whole gas year. So we are producing for two seasons ahead.

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Speaker 1: So let's talk a little bit about where we were

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Speaker 1: this time last year, what was the background, and essentially

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Speaker 1: why was LNG and the existing gas pipelines so much

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Speaker 1: at the front of everyone's thoughts in the twenty twenty

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Speaker 1: two twenty twenty three winter.

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Speaker 3: So last year, as Europe was heading into the winter season,

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Speaker 3: it lost around the third of it supply that was

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Speaker 3: previously coming from Russia, and as you can imagine, it's

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Speaker 3: been quite a shock for the market to balance, and

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Speaker 3: there's a response to that. Europe turned to LNG, so

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Speaker 3: that's liquefied natural gas, the one that comes on ships

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Speaker 3: or on vessels, and Europe turned in particular to the

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Speaker 3: Global flexible or spot LNG, so the one that is

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Speaker 3: not tied up into contracts, and the challenge with that

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Speaker 3: is that Europe has to go on a global market

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Speaker 3: and compete with other players in order to win that

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Speaker 3: share of LLERG. So that's triggered the push into gas

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Speaker 3: prices going to the record level high that we've seen

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Speaker 3: last year, and that's been a challenge for the market

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Speaker 3: players to see how it's going to unfold and how

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Speaker 3: to balance the market. So traders and other market players

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Speaker 3: were facing a lot of uncertainty on the market as

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Speaker 3: we were heading into the winter. Is it going to

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Speaker 3: be a cold winter or is it going to be

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Speaker 3: a warm winter? Do we have enough gas in storages

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Speaker 3: to survive that winter? So those were a big question

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Speaker 3: marks for the market players to handle on the demand side,

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Speaker 3: and then on the supply side, they were worried about

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Speaker 3: how much of that spot lergy Europe can bring into

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Speaker 3: the region. And back then, our guest team was forecasting

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Speaker 3: that Europe will survive the winter and will end the

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Speaker 3: winter with a reasonable amount of gas in storage and

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Speaker 3: indeed we'll have enough gas to go through the restocking

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Speaker 3: season during the summer period, And to be frank with you,

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Speaker 3: that was not an easy statement to make back then

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Speaker 3: when everyone was worried about the crisis and Europe not

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Speaker 3: surviving without the blackouts. But the reality is that Europe

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Speaker 3: ended winter season with storages being well about seasonal normal,

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Speaker 3: and now we are in the end of the summer

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Speaker 3: season and Europe is closed to reach one hundred percent

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Speaker 3: full of storage levels. So indeed, our guest team was

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Speaker 3: right and we predicted that it's going to happen and

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Speaker 3: Europe will go through the winter without facing the blackouts

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Speaker 3: and will have enough gas to go through the summer season.

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Speaker 1: What were the reasons last year, in addition to war

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Speaker 1: taking place Ukraine, what were the reasons that Europeans storage

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Speaker 1: of gas were solow headed into that period.

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Speaker 3: Yeah, So even the year leading to the twenty twenty

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Speaker 3: two when we see this crisis unfolding, Russia stopped sending

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Speaker 3: the regular amount of gas into Europe and that's why

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Speaker 3: the storage level has been even lower compared to the

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Speaker 3: seasonal normals. So everything was leading up to it.

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Speaker 1: So with the reduction in supply to Europe, the gas

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Speaker 1: had to go somewhere else, and there were buyers in

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Speaker 1: other parts of the world. Abashak, perhaps you could talk

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Speaker 1: a little bit about where other parts of the world

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Speaker 1: were essentially grabbing up some of this gas supply that

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Speaker 1: wasn't coming to Europe.

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Speaker 2: Yes, certainly. So we did see some of the Russian

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Speaker 2: cargoes that were previously coming to Europe, they were being

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Speaker 2: sent to the other markets around the world. So we

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Speaker 2: did see some of the cargoes going to China, going

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Speaker 2: to India. And one of the main reasons that cargoes

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Speaker 2: were coming to these markets is because a few of

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Speaker 2: these cargoes were available at a discounted price. So buyers

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Speaker 2: were quite willing to take the Russian energy at the

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Speaker 2: time when the global energy market is quite tight to

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Speaker 2: their shows.

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Speaker 1: And when you say at a discounted price, what are

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Speaker 1: we talking about.

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Speaker 2: So in terms of the prices, we usually do not

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Speaker 2: have very good data, but based on the reports that

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Speaker 2: we caught from the various media outlets and our own

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Speaker 2: interaction with the market, some of the cargoes that were

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Speaker 2: coming out from Russia, they were selling at least a

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Speaker 2: ten percent discoune to the market price.

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Speaker 1: And when you indicated earlier that there was one third

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Speaker 1: less supply coming to parts of Europe, which now has

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Speaker 1: found places elsewhere in the world at a discount. It

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Speaker 1: wasn't all of the Eastern European gas that got shut down,

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Speaker 1: it was a third. So that therefore and firs that

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Speaker 1: there are existing pipelines that have continued to flow. Can

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Speaker 1: you talk a little bit about where we currently stand

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Speaker 1: in terms of what is available and what is not

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Speaker 1: available and really where is Europe's gas coming from? Right now?

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Speaker 3: You're right that Europe is got in gas not only

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Speaker 3: from Russia, but there are others, for example, pipeline sources

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Speaker 3: that are sending gas into Europe. For example, Norway, after

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Speaker 3: LNG supply, is the second larger source of supply in

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Speaker 3: the European mix, and that's been very helpful. Europe has

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Speaker 3: been maximizing it production and sending quite a lot of

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Speaker 3: gas last year in particular, that was around if I

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Speaker 3: remember correctly, around ninety five bcm of gas in the

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Speaker 3: previous gas here, so that is a big share to cover.

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Speaker 3: And then apart from Norway, we have some r the

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Speaker 3: pipelines for example coming from North Africa that's supply in Europe.

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Speaker 3: And then there is also a pipeline coming from Azerbaijan

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Speaker 3: via Top pipeline. So those supply sources are covering some

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Speaker 3: share of the supply mix, but they are not as

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Speaker 3: significant as for example, ler G which is the number

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Speaker 3: one source in Norway, which is the number two source

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Speaker 3: of supply, So Norway and ALLERGI they are covering in

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Speaker 3: total roughly I would say, seventy percent of the total

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Speaker 3: supply mix, which is quite a big share.

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Speaker 1: So there's the supply sign. But then how about the

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Speaker 1: demand dynamics. There was a lot of conversation around last

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Speaker 1: year reducing the demand, and let's stay on Europe at

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Speaker 1: the moment. Europe responded by having different targets to reduce

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Speaker 1: their demand in a number of different measures across the content,

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Speaker 1: some differing from country to country. Do we see demand

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Speaker 1: staying suppressed this year or things going to bounce back

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Speaker 1: and essentially, do those same targets continue to exist or

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Speaker 1: you know, as you mentioned at the beginning, if we're

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Speaker 1: close to one hundred percent in storage as essentially that

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Speaker 1: concern over the demand side really reduced.

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Speaker 3: That's that's a very good question. So last year, indeed,

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Speaker 3: demand destruction or guest demand savings helped a lot to

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Speaker 3: balance the market. And what we expect in our seasonal

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Speaker 3: outlook that we just published on the eleventh of September.

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Speaker 3: We expect demand to be still weak, around twelve percent

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Speaker 3: below the five year average. And if we are looking

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Speaker 3: into European demand, that is split into US three sectors.

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Speaker 3: So the first one is residential and commercial demand, second

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Speaker 3: sector will be a guest to power demand, and then

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Speaker 3: there is also industrial demand. So I'll start with the

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Speaker 3: residential and commercial demand since it's the biggest share of

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Speaker 3: gas demand. Residential and commercial or as we call it

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Speaker 3: in gas world LDZ demand local distribution zone demand will

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Speaker 3: be unsurprisingly a key balanced item on the market as

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Speaker 3: during the winter time. For example, residential and commercial demand

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Speaker 3: accounts for about fifty five percent of the total demand,

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Speaker 3: so it's quite a big chunk of demand that we

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Speaker 3: are talking about. So in our forecast, we expect a

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Speaker 3: slight recovery in the residential and commercial demand, bringing about

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Speaker 3: six billion cubic meters of additional gas demand compared to

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Speaker 3: the last year. The reason for that that is because

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Speaker 3: we are seeing prices lower year and year, but they

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Speaker 3: are still historically high, so that recovery is going to

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Speaker 3: be limited and the wholesale lower wholesale prices will be

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Speaker 3: offset by the end of the subsidy schemes in some countries.

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Speaker 3: Another reason is why demand savings is going to be

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Speaker 3: persistent as we head into the next winter is because

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Speaker 3: there is also a share of the demand that has

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Speaker 3: been displaced permanently due to for example, electrification of the

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Speaker 3: heating demand or energy efficiency measures that customers implement it.

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Speaker 3: And then there is also we don't we need to

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Speaker 3: remember that there is a permanent shift in the consumer's

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Speaker 3: behavior that was encouraged by the media campaign that we've

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Speaker 3: seen last year. So those are the factors that are

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Speaker 3: limiting the recovery in the residential and commercial demand. Now

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Speaker 3: moving on to the industrial demand, we expect the similar

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Speaker 3: in a way similar situation that rebound in the industrial

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Speaker 3: gas demand is expected to be limited. Like I said,

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Speaker 3: gas prices a year and year they are lower, however

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Speaker 3: they are still historically higher, so that provides little incentive

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Speaker 3: for the industry to ramp up gas demand. And then

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Speaker 3: looking into the manufacturing demand, it is low and it

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Speaker 3: is weak and a broader economic landscape remains not promising

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Speaker 3: so far for the industry to ramp up the production.

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Speaker 3: Looking into for example, in some country is like Germany,

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Speaker 3: seeing the mark to decrease in the gas consumption in

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Speaker 3: the industrial sector, and that's because the most energy intensive industries,

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Speaker 3: they are seeing the reduction in their production output. And

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Speaker 3: then for example, if we're looking into the sectoral split,

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Speaker 3: then chemical sector was the one that saw a consistent

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Speaker 3: reduction in the output. So those are the factors that

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Speaker 3: are supporting the industrial demand to be persistently weak in

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Speaker 3: the upcoming winter and most probably summer season as well.

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Speaker 3: And finally, gas to power demand, we expect it to

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Speaker 3: be higher for the upcoming winter. That is supported by

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Speaker 3: the closure of lignite and nuclear plants in Germany. However,

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Speaker 3: for the summer season, we expect gas for power generation

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Speaker 3: to be near record low and that's supported with the

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Speaker 3: increased solar generation capacities, so that seasonal difference between winter

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Speaker 3: and summer is going to persist for the upcome in winter.

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Speaker 3: So yeah, that's the overall picture for the demand. I

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Speaker 3: know it's a long answer, but that's an important part

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Speaker 3: of the balance well.

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Speaker 1: And with liquefied natural gas, this is a truly global marketplace.

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Speaker 1: So Abishak, can you comment on other parts of the

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Speaker 1: world and what the demand is looking like there. Is

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Speaker 1: it growing, is it staying roughly flat from last year.

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Speaker 1: And I'm assuming, and maybe you can correct me on

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Speaker 1: this one, but I'm assuming that those prices that were

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Speaker 1: lower last year are perhaps less competitive this year. What's

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Speaker 1: going on with both prices and then therefore demand in

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Speaker 1: other parts of the world.

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Speaker 2: Yeah, certainly so. In terms of the prices as compared

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Speaker 2: to the last year, we are seeing lower prices. So

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Speaker 2: for example, we saw price tom back in August September

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Speaker 2: last year, but this year we haven't seen any big

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Speaker 2: change in the market or any big thing happening in

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Speaker 2: the market that can push the prices up. So prices

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Speaker 2: are lower than last year in general, and what this

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Speaker 2: means is that it is bringing.

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Speaker 1: Wait, the prices this year are lower than last year,

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Speaker 1: even given the last year visited to discount.

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Speaker 2: Yes, wow, So in general throughout this year we have

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Speaker 2: seen lower prices as are in an earlier mentioned that

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Speaker 2: we have seen in the beginning of the year, we

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Speaker 2: have seen mild winter. So what the mile winter did

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Speaker 2: is that it reduced the heating demand and Europe was

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Speaker 2: able to end the winter at a storage level which

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Speaker 2: was considered quite healthy, quite higher than even the five

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Speaker 2: year average levels. So what that did for the global

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Speaker 2: allergy prices is that eurof did not need to bring

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Speaker 2: in a lot of flexible cargoes to the various markets,

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Speaker 2: and that's why more lngs available to different markets, and

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Speaker 2: that's why the prices this year we have seen are

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Speaker 2: lower than last year.

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Speaker 1: Are there parts of Asia that you would consider to

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Speaker 1: be growth markets where demand is increasing given that you've

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Speaker 1: just established that prices are even lower this year than

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Speaker 1: last year.

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Speaker 2: Yes, So we expect demand to recover in South Asian

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Speaker 2: markets and in Southeast Asian markets as well compared to

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Speaker 2: the last year. And the main driver is the fact

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Speaker 2: that there is going to be an increase in contracted

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Speaker 2: allege deliveries and also comparatively higher sport purchases by various

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Speaker 2: buyers in India, for example, in bangla and in Thailand

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Speaker 2: because of the lower prices. So last winter, these economies

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Speaker 2: suffered a lot as prices were unaffordable and we saw

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Speaker 2: almost zero spot demand from India and Bangladesh in the

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Speaker 2: fourth quarter last year. But this year we are expecting

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Speaker 2: to see moderate level of spot buying from these countries

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Speaker 2: because of the lower prices. We also expect India to

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Speaker 2: get more contracted deliveries versus last winter when CEFE which

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Speaker 2: stands for Securing Energy for Europe, so that's an x

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Speaker 2: gas from unit which was taken over by German government

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Speaker 2: to protect its energy security interest. So SEFE had a

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Speaker 2: contract with India and due to non availability of cargoes,

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Speaker 2: safe stopped the cargo deliveries to India last winter. But

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Speaker 2: this year it has been able to restart the supply,

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Speaker 2: so we expect that India is likely to get more

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Speaker 2: contracted deliveries this year and this will result into higher

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Speaker 2: LNG imports to India. On the Southeast Asia side, we

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Speaker 2: think that Thailand's following production is likely to keep its

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Speaker 2: national oil and Gas company BTIT active in the spot market.

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Speaker 2: Other smaller markets such as Singapore is also going to

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Speaker 2: see new contracts starting which will raise the deliver freeze.

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Speaker 2: And we have also assumed higher demand in Indonesia because

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Speaker 2: of the commissioning of a new LERG train there which

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Speaker 2: will supply most of the LNG to the local market.

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Speaker 1: Now, the way that we're structured here at PNF, we

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Speaker 1: actually have someone covering each of these time zones, if

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Speaker 1: you will, So the Americas are covered by a gas

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Speaker 1: analyst and then we've got our European and then our

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Speaker 1: Asia focused gas analysts on the show today. Now, without

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Speaker 1: taking the words entirely out of your colleague, who cannot

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Speaker 1: be here's mouth, what were some of the key highlights

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Speaker 1: regarding what happened last year with LNG as it relates

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Speaker 1: to the US. And then on from that, how do

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Speaker 1: you expect the North American predominantly gas supply to impact

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Speaker 1: this year's dynamics in Europe and in Asia.

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Speaker 2: So last year what we saw is that a lot

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Speaker 2: of the US cargoes that were previously coming to the

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Speaker 2: North Asian markets. So when we see North Asia, we

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Speaker 2: mostly refer to Japan, China and South Korea. So a

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Speaker 2: lot of the US ALLERGI that was previously coming to

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Speaker 2: these markets back in twenty twenty one, it was shifted

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Speaker 2: towards zero. So there was a change in the global

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Speaker 2: allergy trade flows from Asia towards zuro for the flexible

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Speaker 2: allergy cargoes. So when we think about the US ALERGI,

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Speaker 2: one of the main things to highlight is the fact

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Speaker 2: that most of the US LNG is available on FOB basis,

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Speaker 2: which is free on board basis, and what that means

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Speaker 2: is that those cargoes are not restricted to go to

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Speaker 2: a particular destination under some contractual obligations, and this enables

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00:17:42,560 --> 00:17:46,520
Speaker 2: the portfolio players the suppliers to supply those cargoes based

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Speaker 2: on the end user or the end market prices. In

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Speaker 2: last year, when Europe was really struggling to get the gas,

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Speaker 2: prices in Europe were higher than Asia. So what happened

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Speaker 2: is that a lot of the US allgi it ended

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Speaker 2: up in Europe. And we have seen this trend continuing

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Speaker 2: this year because, as Arena mentioned earlier, LNG is still

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Speaker 2: one of the major gas sources to Europe this year

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Speaker 2: and is going to be so in the coming years

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Speaker 2: as well, So we do expect this will continue this

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Speaker 2: year in terms of the overall LNG supply growth. Also,

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Speaker 2: we are thinking that US is likely to lead the

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Speaker 2: supply growth because we have assumed one of the major

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Speaker 2: projects which was under outage last year is likely to

351
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Speaker 2: be operational this winter because of the incremental volumes coming

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Speaker 2: from that particular project, so that is a freeport project.

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Speaker 2: We are expecting US is likely to lead the overall

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Speaker 2: global LNGG supply.

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Speaker 1: As you look ahead to the next half year, how

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Speaker 1: closely are you watching the weather and essentially there could

357
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Speaker 1: be extremes on either end. And can you explain how

358
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Speaker 1: let's go with the extreme of a particularly cold weather

359
00:18:50,920 --> 00:18:53,800
Speaker 1: for the northern hemisphere over the course of this upcoming winter,

360
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Speaker 1: which sees much more of the natural gas that's currently

361
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Speaker 1: stored being used. What is the potential worst case scenario.

362
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Speaker 3: Yeah, So, as we are approach in the winter season,

363
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Speaker 3: we are looking into the weather and daily basis, and

364
00:19:07,480 --> 00:19:11,040
Speaker 3: that's quite an important risks for everyone to take into

365
00:19:11,119 --> 00:19:13,959
Speaker 3: account during the winter season. So far, what we are

366
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Speaker 3: seeing is that the predictions on the market is that

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Speaker 3: it's going to be a mild start into the winter season,

368
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Speaker 3: and we expect temperatures to be about normal throughout the

369
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Speaker 3: October months. And then as we are looking into the

370
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Speaker 3: entire winter again, the forecast is for this winter to

371
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Speaker 3: be milder and wetter compared to the average one. So

372
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Speaker 3: that gives some hope. But then if you're looking into,

373
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Speaker 3: for example, European gas price spreads over time, if we

374
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Speaker 3: are comparing front months with the first quarter of twenty

375
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Speaker 3: twenty four, the market is in contango, meaning that contracts

376
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Speaker 3: for later dates are more expensive compared to the spot

377
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Speaker 3: once so that means that the market is pricing in

378
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Speaker 3: those risks, and one of them could be a weather

379
00:19:56,080 --> 00:19:59,119
Speaker 3: related So if we're seeing a particularly cold winter, that

380
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Speaker 3: could displace quite a lot of gas from storages and

381
00:20:02,480 --> 00:20:05,359
Speaker 3: that will challenge Europe in terms of how to go

382
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Speaker 3: through the winter and then for the following summer how

383
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Speaker 3: to restore that storage inventories.

384
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Speaker 1: But as of right now, it's looking pretty mild. And

385
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Speaker 1: then another question, and as somebody who hails from California

386
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Speaker 1: and definitely knew when it was an El Nino year,

387
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Speaker 1: is it too early for us to decide whether or

388
00:20:21,240 --> 00:20:23,400
Speaker 1: not this is an El Nino year? And if it is,

389
00:20:23,640 --> 00:20:26,479
Speaker 1: what does El Nino do to well, first of all

390
00:20:26,520 --> 00:20:29,159
Speaker 1: the weather, but more importantly for this show natural Gas,

391
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Speaker 1: I think.

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Speaker 3: For this particular winter we are going to see in

393
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Speaker 3: Europe the impact from El Nino is it Europe is

394
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Speaker 3: going to be milder and wetter, which is a positive

395
00:20:38,720 --> 00:20:41,199
Speaker 3: sign for Europe, meaning that we will be able to

396
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Speaker 3: keep those storages at a reasonable level of fullness throught

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Speaker 3: the winter and throughout the summer.

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Speaker 1: And very simply put, El Nino is a warming of

399
00:20:50,160 --> 00:20:53,760
Speaker 1: the Pacific, which essentially does change the weather all over

400
00:20:53,840 --> 00:20:56,920
Speaker 1: the world, but it certainly impacts certain regions more than others.

401
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Speaker 1: So Abashak living in a part of the world that

402
00:20:59,600 --> 00:21:03,280
Speaker 1: actually it borders the Pacific Ocean, how does Anino impact

403
00:21:03,520 --> 00:21:05,800
Speaker 1: the gas market in your part of the world.

404
00:21:06,119 --> 00:21:08,960
Speaker 2: So in the North Asia, we have done some analysis

405
00:21:09,359 --> 00:21:12,240
Speaker 2: using over CAAs demand models, and what we observe is

406
00:21:12,280 --> 00:21:14,960
Speaker 2: that if we look at the historical data, if we

407
00:21:15,000 --> 00:21:17,720
Speaker 2: look at the Alino ears, the gas demand in those

408
00:21:17,760 --> 00:21:20,359
Speaker 2: particular years has been lower than the normal. So what

409
00:21:20,400 --> 00:21:23,320
Speaker 2: this means for the gas demand for the North Asian

410
00:21:23,359 --> 00:21:26,679
Speaker 2: markets is that if Alino happens this year, it is

411
00:21:26,840 --> 00:21:30,040
Speaker 2: likely that North Asia will also need less gas for

412
00:21:30,160 --> 00:21:32,600
Speaker 2: the power sector, for the city gas sector, and this

413
00:21:32,800 --> 00:21:36,440
Speaker 2: may actually help the overall market in terms of prices.

414
00:21:36,440 --> 00:21:38,520
Speaker 2: So it would be a good news for the europe

415
00:21:38,520 --> 00:21:41,080
Speaker 2: But other thing I wanted to highlight about Alino is

416
00:21:41,119 --> 00:21:44,600
Speaker 2: that besides North Asia, it also impacts other parts of

417
00:21:44,640 --> 00:21:47,200
Speaker 2: the world. So, for example, it can bring dry weather

418
00:21:47,400 --> 00:21:50,359
Speaker 2: in South America and this year we have observed low

419
00:21:50,400 --> 00:21:53,240
Speaker 2: water levels in the lake that feeds the Panama Canal,

420
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Speaker 2: and because of the low water levels, it has been

421
00:21:56,040 --> 00:21:59,000
Speaker 2: difficult for the ships to cross the Panama Canal. And

422
00:21:59,040 --> 00:22:01,680
Speaker 2: what this has done is that the ships which are

423
00:22:01,680 --> 00:22:04,240
Speaker 2: coming from US, let's say they needed to cross the

424
00:22:04,280 --> 00:22:07,159
Speaker 2: Panama Canal to go to let's say Japan or China,

425
00:22:07,320 --> 00:22:10,760
Speaker 2: they are taking a longer route via Swiss Canal or

426
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Speaker 2: another direct route. So that is creating bottleneck in terms

427
00:22:14,680 --> 00:22:18,680
Speaker 2: of the shipping lanes, and this may actually result into

428
00:22:18,800 --> 00:22:22,159
Speaker 2: price volatility. So Alino, we think, is a bag of

429
00:22:22,359 --> 00:22:25,400
Speaker 2: mixed news. It can reduce the customer, but it can

430
00:22:25,440 --> 00:22:29,560
Speaker 2: also increase the difficulties in bringing the cargoes to issue.

431
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Speaker 1: And Abishek you highlight that not only are you and

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Speaker 1: your team looking at current weather patterns, but you rely

433
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Speaker 1: a lot on historical weather patterns. My question really comes

434
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Speaker 1: to climate change and whether or not some of the

435
00:22:42,000 --> 00:22:45,080
Speaker 1: historical weather information that you rely upon, whether or not

436
00:22:45,119 --> 00:22:47,320
Speaker 1: you're looking at it differently as we're starting to see

437
00:22:47,359 --> 00:22:50,320
Speaker 1: some of the changes that are actually part of climate

438
00:22:50,400 --> 00:22:53,600
Speaker 1: change come to fruition now and how much that really well,

439
00:22:53,680 --> 00:22:55,160
Speaker 1: how difficult that makes your modeling.

440
00:22:55,520 --> 00:22:59,080
Speaker 2: That's a very good question. The short answer is it

441
00:22:59,160 --> 00:23:03,159
Speaker 2: makes the model being extremely difficult because in order to

442
00:23:03,200 --> 00:23:07,240
Speaker 2: analyze the impact of al Nino, for example, while accounting

443
00:23:07,280 --> 00:23:09,800
Speaker 2: for the global warming, we really need to be very

444
00:23:09,840 --> 00:23:13,000
Speaker 2: careful about the number of historical years that we are

445
00:23:13,160 --> 00:23:15,480
Speaker 2: taking into account in our model. So just to give

446
00:23:15,520 --> 00:23:18,800
Speaker 2: you an example, if we take into account last ten

447
00:23:18,920 --> 00:23:22,600
Speaker 2: years of weather data, Alino appears to be reducing the

448
00:23:22,640 --> 00:23:25,560
Speaker 2: cast demand, or if we take last thirty years of

449
00:23:25,600 --> 00:23:29,800
Speaker 2: father data, al Nino years also have higher gas demand

450
00:23:29,920 --> 00:23:31,919
Speaker 2: in some parts of the world. So what this means

451
00:23:31,960 --> 00:23:35,000
Speaker 2: is that moving from last thirty years to last ten years,

452
00:23:35,080 --> 00:23:38,280
Speaker 2: it is possible that global warming may be impacting the

453
00:23:38,359 --> 00:23:42,400
Speaker 2: cast demand in a more significant way as compared to Alnino.

454
00:23:42,560 --> 00:23:46,119
Speaker 2: So for us, identifying the impact of Alino versus global

455
00:23:46,200 --> 00:23:48,760
Speaker 2: arming is an extremely challenging task, and hence we have

456
00:23:48,840 --> 00:23:51,600
Speaker 2: to be really careful about the number of historical years

457
00:23:51,600 --> 00:23:52,640
Speaker 2: we take into account.

458
00:23:52,840 --> 00:23:55,879
Speaker 1: So just pivoting a bit back to well llenng in

459
00:23:55,960 --> 00:24:00,360
Speaker 1: this year specifically and actually onto geopolitics, Assuming that the

460
00:24:00,520 --> 00:24:04,359
Speaker 1: Russian invasion of Ukraine continues this year, what does that

461
00:24:04,480 --> 00:24:07,520
Speaker 1: mean for gas markets? And should things worsen, which I

462
00:24:07,560 --> 00:24:10,240
Speaker 1: certainly hope that they will not, what does that mean

463
00:24:10,480 --> 00:24:12,080
Speaker 1: for the global gas market.

464
00:24:12,359 --> 00:24:16,040
Speaker 3: So so far, Russian flows have been stable via Ukrainian

465
00:24:16,160 --> 00:24:19,000
Speaker 3: route and as we all know that Russian gas transit

466
00:24:19,080 --> 00:24:21,840
Speaker 3: contract with Ukraine is expiring in the end of twenty

467
00:24:21,920 --> 00:24:24,600
Speaker 3: twenty four, so I'm sure that will be an interesting

468
00:24:24,640 --> 00:24:27,720
Speaker 3: topic for the discussion on the market, despite the fact

469
00:24:27,720 --> 00:24:31,439
Speaker 3: that Russia is not supplying a significant amount of gas

470
00:24:31,520 --> 00:24:34,199
Speaker 3: as it used to do a year or two years ago. However,

471
00:24:34,240 --> 00:24:36,560
Speaker 3: as we are talking about the Ukrainian route, I think

472
00:24:36,560 --> 00:24:39,680
Speaker 3: it's important to bring in the fact that European companies

473
00:24:39,800 --> 00:24:43,719
Speaker 3: started sending gas into Ukrainian storages and so far what

474
00:24:43,800 --> 00:24:46,159
Speaker 3: we have seen is that they started sending it in

475
00:24:46,280 --> 00:24:49,239
Speaker 3: July and then ramping up in August. So far they

476
00:24:49,240 --> 00:24:53,640
Speaker 3: accumulated around two billion cubic meters of gas in Ukrainian

477
00:24:53,720 --> 00:24:57,520
Speaker 3: storages under so called customs ware house regime. So custom

478
00:24:57,560 --> 00:25:01,040
Speaker 3: ware house means that European companies can bring gas into

479
00:25:01,200 --> 00:25:04,119
Speaker 3: Ukraine and then store it for up to three years

480
00:25:04,119 --> 00:25:07,960
Speaker 3: without paying any customs or text duties and bring it

481
00:25:08,040 --> 00:25:11,520
Speaker 3: back to Europe. So having that two BCM in Ukrainian

482
00:25:11,640 --> 00:25:14,560
Speaker 3: storages gives us a bit of a proxy in terms

483
00:25:14,600 --> 00:25:18,679
Speaker 3: of how much European companies are utilizing Ukrainian gas and

484
00:25:18,760 --> 00:25:21,400
Speaker 3: how much of that gas can be used as a buffer,

485
00:25:21,440 --> 00:25:24,200
Speaker 3: for example, in the upcome in winter. If they decide

486
00:25:24,280 --> 00:25:27,360
Speaker 3: to bring that gas back into Europe. However, it's an

487
00:25:27,440 --> 00:25:30,000
Speaker 3: interesting question to see what's going to happen with that gas.

488
00:25:30,080 --> 00:25:32,240
Speaker 3: Is it going to be brought back into Europe or

489
00:25:32,280 --> 00:25:35,280
Speaker 3: it will be sold on the domestic market in Ukraine

490
00:25:35,320 --> 00:25:38,880
Speaker 3: as we've seen previously in the year twenty twenty one,

491
00:25:39,080 --> 00:25:41,440
Speaker 3: or is it going to be carried over for later

492
00:25:41,680 --> 00:25:43,560
Speaker 3: for maybe next winter season.

493
00:25:43,760 --> 00:25:45,600
Speaker 1: So you've established that there is a buffer, and one

494
00:25:45,640 --> 00:25:48,840
Speaker 1: of the lessons that I learned from last year is

495
00:25:48,880 --> 00:25:54,000
Speaker 1: an incredible amount of flexibility in the global LNG gas trade.

496
00:25:54,240 --> 00:25:57,479
Speaker 1: So how flexible would you say the LNG market is

497
00:25:57,520 --> 00:26:00,840
Speaker 1: in filling in any sort of issues that may arise

498
00:26:01,080 --> 00:26:02,280
Speaker 1: on the supply side.

499
00:26:02,359 --> 00:26:05,720
Speaker 3: That's a good question. So Europe, as I mentioned before,

500
00:26:05,840 --> 00:26:09,480
Speaker 3: is now dependent on spot llergy market and as we know,

501
00:26:09,640 --> 00:26:12,720
Speaker 3: it's not an unlimited supply, So there is a pool

502
00:26:12,720 --> 00:26:15,760
Speaker 3: of global energy supply that is not tied up into

503
00:26:15,760 --> 00:26:18,560
Speaker 3: a contract and Europe would need to compete with other

504
00:26:18,640 --> 00:26:21,480
Speaker 3: buyers to get or to win that gas. So far,

505
00:26:21,520 --> 00:26:25,880
Speaker 3: in our seasonal outlook, we expect Europe to attract around

506
00:26:25,960 --> 00:26:29,560
Speaker 3: fifty or fifty two percent of that global spot energy,

507
00:26:29,720 --> 00:26:32,479
Speaker 3: which is quite a big sure, we are talking about

508
00:26:32,640 --> 00:26:35,800
Speaker 3: in million metric tons, that will be around fifty five

509
00:26:35,880 --> 00:26:38,919
Speaker 3: million metric tons, which is quite a significant amount, and

510
00:26:38,960 --> 00:26:42,639
Speaker 3: that is about a quarter of the total supply mix

511
00:26:42,800 --> 00:26:45,040
Speaker 3: in Europe. So, as we can see, Europe is quite

512
00:26:45,080 --> 00:26:48,919
Speaker 3: dependent on that spot energy and obviously to attract that

513
00:26:49,320 --> 00:26:52,480
Speaker 3: gas it has to compete with Asia for example, so

514
00:26:52,520 --> 00:26:55,280
Speaker 3: we are expecting to see that Europe would need to

515
00:26:55,400 --> 00:26:58,760
Speaker 3: price accordingly to win that gas. So far as we

516
00:26:58,760 --> 00:27:03,280
Speaker 3: are looking into the differentials between Asia and Europe, Asia

517
00:27:03,359 --> 00:27:05,440
Speaker 3: is at premium. However, if we are looking into the

518
00:27:05,480 --> 00:27:08,680
Speaker 3: ship and differential, that premium might be eaten up by

519
00:27:08,720 --> 00:27:12,120
Speaker 3: those transportation costs. However, it would be interesting to see

520
00:27:12,119 --> 00:27:15,320
Speaker 3: how the situation is unfolding and depending on where the

521
00:27:15,440 --> 00:27:18,920
Speaker 3: prices are, who will get that spot allergy and.

522
00:27:18,880 --> 00:27:21,440
Speaker 1: You noted that this is not an infinite supply which

523
00:27:21,480 --> 00:27:24,359
Speaker 1: then leads me to wonder are there increases on the

524
00:27:24,359 --> 00:27:27,200
Speaker 1: supply side presently and are there new projects that we

525
00:27:27,240 --> 00:27:27,960
Speaker 1: should be aware of.

526
00:27:28,320 --> 00:27:31,640
Speaker 3: So, like I said, Europe is now energy spot dependent,

527
00:27:32,000 --> 00:27:36,200
Speaker 3: so it has to increase its regassification capacity, and looking

528
00:27:36,240 --> 00:27:40,600
Speaker 3: into the upcoming year, we expect the regasification capacity across

529
00:27:40,640 --> 00:27:44,040
Speaker 3: Europe to increase by around one hundred and ten mcm

530
00:27:44,119 --> 00:27:47,240
Speaker 3: million cubic meters per day, So that's compared to last

531
00:27:47,280 --> 00:27:49,720
Speaker 3: year we had in total four hundred Now it's going

532
00:27:49,760 --> 00:27:53,320
Speaker 3: to be around five hundred thirty million cubic meters per day.

533
00:27:53,440 --> 00:27:56,960
Speaker 3: The most growth is expected to come from Germany, followed

534
00:27:57,000 --> 00:28:00,760
Speaker 3: by Belgium, France and Italy. So Europe needs to increase

535
00:28:00,800 --> 00:28:04,560
Speaker 3: that capacity in order to attract a higher level or

536
00:28:04,680 --> 00:28:08,080
Speaker 3: higher share of that flexible Llerenchy and I'll pass on

537
00:28:08,119 --> 00:28:11,560
Speaker 3: to Abishak to comment on the global energy supply increase.

538
00:28:12,080 --> 00:28:15,159
Speaker 2: So in terms of the LNG supply, so besides the

539
00:28:15,200 --> 00:28:19,000
Speaker 2: growth coming from the US, we are expecting startup of

540
00:28:19,280 --> 00:28:23,320
Speaker 2: new facilities across the Atlantic basin and the Pacific basin.

541
00:28:23,520 --> 00:28:26,960
Speaker 2: Some of the projects, for example include Arctic Energy two

542
00:28:27,119 --> 00:28:31,800
Speaker 2: in Russia. We have Altamira fast Lergy in Mexico, tangu

543
00:28:31,880 --> 00:28:35,919
Speaker 2: Train three in Indonesia. Then we also have projects in Mauritiana,

544
00:28:36,119 --> 00:28:39,120
Speaker 2: Senegal and in the Republic of Congo. So all of

545
00:28:39,160 --> 00:28:42,480
Speaker 2: these projects are going to add new supply to the

546
00:28:42,480 --> 00:28:45,480
Speaker 2: global allergy balances. But I would also like to highlight

547
00:28:45,520 --> 00:28:48,360
Speaker 2: some of the possible risks to the growth of the supply.

548
00:28:48,560 --> 00:28:51,640
Speaker 2: We have seen a number of projects struggling with the

549
00:28:51,680 --> 00:28:55,000
Speaker 2: feedcare supply. So these are the operational projects in Nigeria

550
00:28:55,040 --> 00:28:58,200
Speaker 2: and Egypt. There could also be some risk from the

551
00:28:58,200 --> 00:29:02,040
Speaker 2: possible hurricanes in the US Gulf Coast where plant operation

552
00:29:02,360 --> 00:29:05,240
Speaker 2: may be impacted from bad weather. Besides this, one of

553
00:29:05,280 --> 00:29:08,720
Speaker 2: the key risks to the global energy balances next year

554
00:29:08,960 --> 00:29:13,400
Speaker 2: may come from continued sanctions or additional sanctions on arctical

555
00:29:13,400 --> 00:29:16,800
Speaker 2: Eergy two. So Optical Eergy two is adding quite a

556
00:29:16,880 --> 00:29:19,600
Speaker 2: lot of volumes to our balances. So this is the

557
00:29:19,640 --> 00:29:23,280
Speaker 2: project in Russia and this is going to commission its

558
00:29:23,400 --> 00:29:27,200
Speaker 2: first train by January next year if there are more

559
00:29:27,280 --> 00:29:29,960
Speaker 2: delays in the commissioning of this project, so this is

560
00:29:30,000 --> 00:29:32,800
Speaker 2: going to be a test for NOATECH whether they can

561
00:29:32,880 --> 00:29:35,960
Speaker 2: commission a new project and operate a new project. So

562
00:29:36,040 --> 00:29:39,200
Speaker 2: before the Western companies were involved in the project, they

563
00:29:39,280 --> 00:29:42,120
Speaker 2: used to help Russia in order to operate these projects.

564
00:29:42,120 --> 00:29:44,560
Speaker 2: But because of the sanctions, a lot of its Western

565
00:29:44,560 --> 00:29:48,440
Speaker 2: partners have left the project and so any delays in

566
00:29:48,480 --> 00:29:50,960
Speaker 2: the commissioning of up to two is going to impact

567
00:29:51,000 --> 00:29:54,240
Speaker 2: the global allerge balances in a very significant way next year.

568
00:29:54,840 --> 00:29:57,680
Speaker 1: So as someone who has to think about a title

569
00:29:57,920 --> 00:30:00,160
Speaker 1: for this show, I know you also need to think

570
00:30:00,160 --> 00:30:03,440
Speaker 1: about titles when you're writing your reports. So European Gas

571
00:30:03,440 --> 00:30:06,840
Speaker 1: Winter Outlook and Global Winter Outlook twenty twenty three to

572
00:30:06,880 --> 00:30:09,840
Speaker 1: twenty twenty four certainly tells everybody what they're reading when

573
00:30:09,840 --> 00:30:11,640
Speaker 1: they're looking in your research, but you give them a

574
00:30:11,720 --> 00:30:14,239
Speaker 1: little bit of a second title to kind of let

575
00:30:14,320 --> 00:30:16,800
Speaker 1: everybody know what. Well, I guess what the headline is.

576
00:30:17,080 --> 00:30:19,800
Speaker 1: So for the European Gas Winter Outlook it says healthy

577
00:30:20,000 --> 00:30:23,240
Speaker 1: but fragile, and for the Global LNG Winter Outlook, it

578
00:30:23,280 --> 00:30:27,600
Speaker 1: says caution amid supply risk. So it seems like we're

579
00:30:27,640 --> 00:30:31,480
Speaker 1: cautiously optimistic am by getting the right tone there, because

580
00:30:31,520 --> 00:30:34,080
Speaker 1: I can understand sitting down and not wanting to make

581
00:30:34,120 --> 00:30:36,640
Speaker 1: a headline that essentially says, hey, everybody, it's going to

582
00:30:36,680 --> 00:30:40,200
Speaker 1: be fine. But reading the subcontext, that does seem to

583
00:30:40,240 --> 00:30:42,719
Speaker 1: be where we're looking at next year. And so what

584
00:30:42,720 --> 00:30:44,640
Speaker 1: did you mean by these titles? What is healthy but

585
00:30:44,720 --> 00:30:48,000
Speaker 1: fragile and what is caution amid supply risk?

586
00:30:48,720 --> 00:30:51,360
Speaker 3: I can start with European one, so we called it

587
00:30:51,360 --> 00:30:55,760
Speaker 3: halsibat fragile because European gas balance now is looking housier.

588
00:30:56,160 --> 00:30:59,600
Speaker 3: European storage is ninety five percent full, which gives hope

589
00:30:59,640 --> 00:31:02,360
Speaker 3: for the week. However, as we've seen with the past

590
00:31:02,560 --> 00:31:06,400
Speaker 3: recent events that European gas market remains sensitive to any

591
00:31:06,440 --> 00:31:09,600
Speaker 3: supply risks. So for example, when there was talks around

592
00:31:09,680 --> 00:31:14,280
Speaker 3: Australian strikes, then the market responded with high prices. Extended

593
00:31:14,320 --> 00:31:18,040
Speaker 3: Norwegian maintenance also a triggered high gas prices. So that

594
00:31:18,160 --> 00:31:21,680
Speaker 3: shows us that despite the fact that gas balance looks healthy,

595
00:31:21,800 --> 00:31:25,240
Speaker 3: we have plenty of storage levels, Europe is still sensitive

596
00:31:25,320 --> 00:31:28,120
Speaker 3: to any risks of the supply disruption. So that's why

597
00:31:28,120 --> 00:31:29,680
Speaker 3: we called it halcy butt fragile.

598
00:31:30,000 --> 00:31:32,400
Speaker 1: And for anybody who's never written a title, I can

599
00:31:32,440 --> 00:31:35,040
Speaker 1: tell you it's quite difficult to try and figure out

600
00:31:35,120 --> 00:31:38,000
Speaker 1: the entire message you want to send in three to

601
00:31:38,080 --> 00:31:41,040
Speaker 1: four words. So abashak over to you on the Global

602
00:31:41,160 --> 00:31:44,680
Speaker 1: LNG Outlook title So caution emits supply risk. What was

603
00:31:44,720 --> 00:31:47,120
Speaker 1: it that you were thinking when you were selecting these

604
00:31:47,120 --> 00:31:50,440
Speaker 1: four words to really encapsulate your thoughts? Why did you

605
00:31:50,520 --> 00:31:51,040
Speaker 1: choose them?

606
00:31:51,120 --> 00:31:54,720
Speaker 2: So the recently chose the word caution is because we

607
00:31:54,800 --> 00:31:58,480
Speaker 2: do see lots of uncertainties in the North Asian markets

608
00:31:58,520 --> 00:32:01,240
Speaker 2: on the land supply side and also on the weather side.

609
00:32:01,360 --> 00:32:04,040
Speaker 2: So for example, in the case of China, if China

610
00:32:04,080 --> 00:32:08,120
Speaker 2: receives lower than expected pipeline imports from Central Asia, then

611
00:32:08,200 --> 00:32:11,520
Speaker 2: it can increase lenty demand from China. Other risk is

612
00:32:11,640 --> 00:32:14,840
Speaker 2: a stronger economic growth scenario for China and likewise for

613
00:32:14,960 --> 00:32:18,600
Speaker 2: Japan and South Korea. Lower than expected nuclear generation may

614
00:32:18,640 --> 00:32:22,280
Speaker 2: also increase the demand for spodcard. So in summary, we

615
00:32:22,400 --> 00:32:27,080
Speaker 2: do see a lot of uncertainties across the different markets

616
00:32:27,080 --> 00:32:29,440
Speaker 2: on the supply side and on the weather side, and

617
00:32:29,480 --> 00:32:32,160
Speaker 2: that's why we did one to say that we are

618
00:32:32,160 --> 00:32:33,640
Speaker 2: cautiously optimistic for.

619
00:32:33,680 --> 00:32:36,680
Speaker 1: The coming inter arena and Abishek thank you very much

620
00:32:36,680 --> 00:32:37,520
Speaker 1: for joining today.

621
00:32:37,800 --> 00:32:42,840
Speaker 3: Thank you, Dana, Thank you Dana.

622
00:32:48,240 --> 00:32:51,280
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00:32:51,400 --> 00:32:54,880
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00:32:54,880 --> 00:32:58,920
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