WEBVTT - Winter Gas Outlook: Cautious Optimism as LNG Steps Up 0:00:00.120 --> 0:00:02.480 This is Dana Perkins and you're listening to Switched on 0:00:02.720 --> 0:00:06.520 the BNF podcast. Last year was tumultuous for the global 0:00:06.559 --> 0:00:10.080 gas market. Russia's invasion of Ukraine led to disruption and 0:00:10.200 --> 0:00:14.080 volatile prices as European nations rushed to find new sources 0:00:14.160 --> 0:00:18.239 to replace established Russian supplies. This in turn resulted in 0:00:18.280 --> 0:00:21.840 prices on the Dutch TTF benchmark hitting a record high 0:00:22.000 --> 0:00:25.280 of nearly three hundred euros per megawatt hour in August 0:00:25.320 --> 0:00:28.520 of twenty twenty two. Prices have since returned to some 0:00:28.760 --> 0:00:33.159 sort of normality, albeit still elevated against historical averages. But 0:00:33.520 --> 0:00:36.680 as we once again approach winter, just how full are 0:00:36.720 --> 0:00:39.600 European gas stores and what is the global picture for 0:00:39.720 --> 0:00:43.000 gas supply and demand? While on today's episode, I speak 0:00:43.040 --> 0:00:46.920 with bn EF's head of European Gas, Irina Sarada, and 0:00:47.040 --> 0:00:50.040 also the head of Global leg as well as apat 0:00:50.080 --> 0:00:54.240 Gas for BNF Abhishek Rohatki. Today we discuss how full 0:00:54.400 --> 0:00:57.560 gas inventories in Europe are and which countries are meeting 0:00:57.600 --> 0:01:01.280 the demand and what's happening on the Asian continent where 0:01:01.360 --> 0:01:04.319 we typically find the growth markets. We also go through 0:01:04.360 --> 0:01:07.360 the potential impact of the weather on gas markets during 0:01:07.360 --> 0:01:10.040 an El Nino year, and how climate change poses a 0:01:10.080 --> 0:01:13.640 real challenge to forecasting. Lastly, we touch on how some 0:01:13.800 --> 0:01:17.640 European countries are actually looking to store their gas in Ukraine, 0:01:17.800 --> 0:01:20.399 as well as what new projects will be coming online 0:01:20.440 --> 0:01:23.759 to increase global gas supply in twenty twenty four. If 0:01:23.760 --> 0:01:26.280 you'd like to learn more, BNIF subscribers are going to 0:01:26.319 --> 0:01:29.640 be able to access bnef's Global Winter Gas Outlook, which 0:01:29.640 --> 0:01:31.720 this show is based on, and they can find it 0:01:31.840 --> 0:01:34.160 on BNF dot com or at BNF go on the 0:01:34.160 --> 0:01:37.480 Bloomberg terminal, or on BNF's mobile app. As always, if 0:01:37.520 --> 0:01:40.360 you like this podcast, if you subscribe, you'll receive an 0:01:40.400 --> 0:01:43.000 update when future episodes are published. And if you give 0:01:43.080 --> 0:01:45.959 us a review or a rating on Apple Podcasts or Spotify, 0:01:46.120 --> 0:01:48.760 you're going to make us more discoverable by others. Now, 0:01:48.840 --> 0:01:52.240 let's jump into the conversation with Arena and Abashek about 0:01:52.280 --> 0:02:05.480 the Winter Gas Outlook. Arena, thank you for joining us today. 0:02:05.680 --> 0:02:08.680 Thank you, Ana and Abhishek, thank you for joining as well. 0:02:08.919 --> 0:02:09.800 Thank you, Dana. 0:02:09.919 --> 0:02:12.560 So we are here to talk about well the next 0:02:12.600 --> 0:02:15.400 half year of what's going on in the global gas markets, 0:02:15.440 --> 0:02:17.800 and we're going to talk about LNG. But this actually 0:02:17.960 --> 0:02:20.520 is a show very much based on reports that we 0:02:20.560 --> 0:02:24.400 put out twice a year, which are really important pieces 0:02:24.480 --> 0:02:26.280 of research. We put a lot of effort into these. 0:02:26.480 --> 0:02:28.920 We are here today to talk about what's happening with 0:02:28.960 --> 0:02:32.440 the global gas markets. Last year, it made headlines all 0:02:32.440 --> 0:02:35.240 over the world, and in particular from where I'm recording 0:02:35.240 --> 0:02:37.560 in Europe, it was one of the things that everyday 0:02:37.600 --> 0:02:40.320 people were talking about because of how much it impacted 0:02:40.440 --> 0:02:43.520 our energy prices at home. Of course, those in the 0:02:43.600 --> 0:02:46.280 gas space are looking at this every single year, every 0:02:46.320 --> 0:02:49.119 single moment, every single day, and we put out two 0:02:49.160 --> 0:02:52.040 reports a year, half yearly, one which is our Summer 0:02:52.040 --> 0:02:54.880 Gas Outlook, and one that is our Winter Gas Outlook. 0:02:54.960 --> 0:02:58.440 Can you explain to the lay person who's potentially listening 0:02:58.560 --> 0:03:01.080 right now why we do these reports at half yearly 0:03:01.200 --> 0:03:04.359 intervals and really who they're designed to target and who's 0:03:04.400 --> 0:03:07.320 actually listening closely to what we're saying about the upcoming 0:03:07.360 --> 0:03:08.560 half year in the gas market. 0:03:09.120 --> 0:03:12.440 Thanks, Dana's that's a really good question. So usually we 0:03:12.600 --> 0:03:16.640 put two outlooks just before the beginning of each season, 0:03:16.720 --> 0:03:19.520 so our winter season in gas world starts in the 0:03:19.520 --> 0:03:22.040 beginning of October and last till the end of March, 0:03:22.080 --> 0:03:24.880 and our summer season starts in April and goes all 0:03:24.919 --> 0:03:27.160 the way till the end of September. So that's why 0:03:27.200 --> 0:03:30.640 we are producing our outlook just before those season to 0:03:30.680 --> 0:03:33.600 give market players a bit of a perspective and share 0:03:33.680 --> 0:03:36.360 our view of what's going to happen for the upcoming 0:03:36.720 --> 0:03:39.680 whole gas year. So we are producing for two seasons ahead. 0:03:39.840 --> 0:03:41.920 So let's talk a little bit about where we were 0:03:42.160 --> 0:03:45.520 this time last year, what was the background, and essentially 0:03:45.560 --> 0:03:50.600 why was LNG and the existing gas pipelines so much 0:03:50.640 --> 0:03:53.400 at the front of everyone's thoughts in the twenty twenty 0:03:53.400 --> 0:03:54.680 two twenty twenty three winter. 0:03:55.080 --> 0:03:58.280 So last year, as Europe was heading into the winter season, 0:03:58.400 --> 0:04:01.120 it lost around the third of it supply that was 0:04:01.160 --> 0:04:04.280 previously coming from Russia, and as you can imagine, it's 0:04:04.320 --> 0:04:07.240 been quite a shock for the market to balance, and 0:04:07.280 --> 0:04:10.640 there's a response to that. Europe turned to LNG, so 0:04:10.760 --> 0:04:13.760 that's liquefied natural gas, the one that comes on ships 0:04:13.840 --> 0:04:17.159 or on vessels, and Europe turned in particular to the 0:04:17.200 --> 0:04:20.360 Global flexible or spot LNG, so the one that is 0:04:20.400 --> 0:04:23.240 not tied up into contracts, and the challenge with that 0:04:23.480 --> 0:04:26.560 is that Europe has to go on a global market 0:04:26.680 --> 0:04:29.479 and compete with other players in order to win that 0:04:29.640 --> 0:04:33.160 share of LLERG. So that's triggered the push into gas 0:04:33.200 --> 0:04:35.880 prices going to the record level high that we've seen 0:04:35.960 --> 0:04:38.400 last year, and that's been a challenge for the market 0:04:38.440 --> 0:04:41.160 players to see how it's going to unfold and how 0:04:41.200 --> 0:04:44.799 to balance the market. So traders and other market players 0:04:44.880 --> 0:04:47.360 were facing a lot of uncertainty on the market as 0:04:47.360 --> 0:04:49.240 we were heading into the winter. Is it going to 0:04:49.279 --> 0:04:50.840 be a cold winter or is it going to be 0:04:50.880 --> 0:04:54.200 a warm winter? Do we have enough gas in storages 0:04:54.240 --> 0:04:57.680 to survive that winter? So those were a big question 0:04:57.839 --> 0:05:01.080 marks for the market players to handle on the demand side, 0:05:01.120 --> 0:05:03.520 and then on the supply side, they were worried about 0:05:03.600 --> 0:05:07.160 how much of that spot lergy Europe can bring into 0:05:07.240 --> 0:05:10.280 the region. And back then, our guest team was forecasting 0:05:10.360 --> 0:05:13.359 that Europe will survive the winter and will end the 0:05:13.400 --> 0:05:16.280 winter with a reasonable amount of gas in storage and 0:05:16.320 --> 0:05:20.120 indeed we'll have enough gas to go through the restocking 0:05:20.200 --> 0:05:23.320 season during the summer period, And to be frank with you, 0:05:23.400 --> 0:05:25.920 that was not an easy statement to make back then 0:05:26.000 --> 0:05:29.480 when everyone was worried about the crisis and Europe not 0:05:29.640 --> 0:05:33.440 surviving without the blackouts. But the reality is that Europe 0:05:33.520 --> 0:05:37.400 ended winter season with storages being well about seasonal normal, 0:05:37.520 --> 0:05:39.560 and now we are in the end of the summer 0:05:39.640 --> 0:05:42.560 season and Europe is closed to reach one hundred percent 0:05:42.720 --> 0:05:45.919 full of storage levels. So indeed, our guest team was 0:05:46.000 --> 0:05:49.040 right and we predicted that it's going to happen and 0:05:49.160 --> 0:05:52.400 Europe will go through the winter without facing the blackouts 0:05:52.400 --> 0:05:55.560 and will have enough gas to go through the summer season. 0:05:55.880 --> 0:05:59.279 What were the reasons last year, in addition to war 0:05:59.320 --> 0:06:03.360 taking place Ukraine, what were the reasons that Europeans storage 0:06:03.520 --> 0:06:06.560 of gas were solow headed into that period. 0:06:06.880 --> 0:06:10.440 Yeah, So even the year leading to the twenty twenty 0:06:10.440 --> 0:06:14.039 two when we see this crisis unfolding, Russia stopped sending 0:06:14.240 --> 0:06:17.320 the regular amount of gas into Europe and that's why 0:06:17.360 --> 0:06:20.760 the storage level has been even lower compared to the 0:06:20.800 --> 0:06:23.960 seasonal normals. So everything was leading up to it. 0:06:24.600 --> 0:06:27.320 So with the reduction in supply to Europe, the gas 0:06:27.360 --> 0:06:29.920 had to go somewhere else, and there were buyers in 0:06:29.960 --> 0:06:32.240 other parts of the world. Abashak, perhaps you could talk 0:06:32.240 --> 0:06:34.800 a little bit about where other parts of the world 0:06:35.040 --> 0:06:38.599 were essentially grabbing up some of this gas supply that 0:06:38.720 --> 0:06:39.760 wasn't coming to Europe. 0:06:40.040 --> 0:06:43.159 Yes, certainly. So we did see some of the Russian 0:06:43.200 --> 0:06:45.920 cargoes that were previously coming to Europe, they were being 0:06:45.960 --> 0:06:48.479 sent to the other markets around the world. So we 0:06:48.560 --> 0:06:51.480 did see some of the cargoes going to China, going 0:06:51.520 --> 0:06:54.800 to India. And one of the main reasons that cargoes 0:06:54.839 --> 0:06:57.120 were coming to these markets is because a few of 0:06:57.160 --> 0:07:00.719 these cargoes were available at a discounted price. So buyers 0:07:00.760 --> 0:07:03.719 were quite willing to take the Russian energy at the 0:07:03.760 --> 0:07:06.120 time when the global energy market is quite tight to 0:07:06.160 --> 0:07:06.760 their shows. 0:07:07.040 --> 0:07:08.800 And when you say at a discounted price, what are 0:07:08.800 --> 0:07:09.520 we talking about. 0:07:09.800 --> 0:07:13.200 So in terms of the prices, we usually do not 0:07:13.320 --> 0:07:16.160 have very good data, but based on the reports that 0:07:16.240 --> 0:07:19.400 we caught from the various media outlets and our own 0:07:19.440 --> 0:07:22.080 interaction with the market, some of the cargoes that were 0:07:22.080 --> 0:07:24.520 coming out from Russia, they were selling at least a 0:07:24.680 --> 0:07:26.480 ten percent discoune to the market price. 0:07:26.920 --> 0:07:30.160 And when you indicated earlier that there was one third 0:07:30.320 --> 0:07:32.960 less supply coming to parts of Europe, which now has 0:07:33.000 --> 0:07:35.800 found places elsewhere in the world at a discount. It 0:07:35.920 --> 0:07:39.560 wasn't all of the Eastern European gas that got shut down, 0:07:39.720 --> 0:07:42.400 it was a third. So that therefore and firs that 0:07:42.440 --> 0:07:45.560 there are existing pipelines that have continued to flow. Can 0:07:45.600 --> 0:07:47.840 you talk a little bit about where we currently stand 0:07:47.840 --> 0:07:50.160 in terms of what is available and what is not 0:07:50.280 --> 0:07:53.840 available and really where is Europe's gas coming from? Right now? 0:07:55.000 --> 0:07:57.440 You're right that Europe is got in gas not only 0:07:57.520 --> 0:08:01.080 from Russia, but there are others, for example, pipeline sources 0:08:01.080 --> 0:08:04.720 that are sending gas into Europe. For example, Norway, after 0:08:04.920 --> 0:08:08.320 LNG supply, is the second larger source of supply in 0:08:08.360 --> 0:08:12.240 the European mix, and that's been very helpful. Europe has 0:08:12.240 --> 0:08:15.240 been maximizing it production and sending quite a lot of 0:08:15.280 --> 0:08:18.760 gas last year in particular, that was around if I 0:08:18.760 --> 0:08:22.400 remember correctly, around ninety five bcm of gas in the 0:08:22.400 --> 0:08:25.080 previous gas here, so that is a big share to cover. 0:08:25.240 --> 0:08:27.760 And then apart from Norway, we have some r the 0:08:28.040 --> 0:08:32.080 pipelines for example coming from North Africa that's supply in Europe. 0:08:32.080 --> 0:08:35.360 And then there is also a pipeline coming from Azerbaijan 0:08:35.720 --> 0:08:39.720 via Top pipeline. So those supply sources are covering some 0:08:39.920 --> 0:08:42.120 share of the supply mix, but they are not as 0:08:42.160 --> 0:08:45.000 significant as for example, ler G which is the number 0:08:45.040 --> 0:08:47.480 one source in Norway, which is the number two source 0:08:47.559 --> 0:08:50.360 of supply, So Norway and ALLERGI they are covering in 0:08:50.400 --> 0:08:53.440 total roughly I would say, seventy percent of the total 0:08:53.480 --> 0:08:55.720 supply mix, which is quite a big share. 0:08:55.960 --> 0:08:58.080 So there's the supply sign. But then how about the 0:08:58.120 --> 0:09:01.080 demand dynamics. There was a lot of conversation around last 0:09:01.160 --> 0:09:04.080 year reducing the demand, and let's stay on Europe at 0:09:04.080 --> 0:09:08.040 the moment. Europe responded by having different targets to reduce 0:09:08.040 --> 0:09:10.720 their demand in a number of different measures across the content, 0:09:10.840 --> 0:09:13.840 some differing from country to country. Do we see demand 0:09:14.240 --> 0:09:17.760 staying suppressed this year or things going to bounce back 0:09:18.080 --> 0:09:21.719 and essentially, do those same targets continue to exist or 0:09:21.840 --> 0:09:24.480 you know, as you mentioned at the beginning, if we're 0:09:24.520 --> 0:09:27.199 close to one hundred percent in storage as essentially that 0:09:27.679 --> 0:09:29.920 concern over the demand side really reduced. 0:09:30.360 --> 0:09:33.840 That's that's a very good question. So last year, indeed, 0:09:34.040 --> 0:09:37.360 demand destruction or guest demand savings helped a lot to 0:09:37.440 --> 0:09:41.000 balance the market. And what we expect in our seasonal 0:09:41.040 --> 0:09:44.240 outlook that we just published on the eleventh of September. 0:09:44.280 --> 0:09:48.000 We expect demand to be still weak, around twelve percent 0:09:48.120 --> 0:09:50.600 below the five year average. And if we are looking 0:09:50.640 --> 0:09:54.000 into European demand, that is split into US three sectors. 0:09:54.040 --> 0:09:57.080 So the first one is residential and commercial demand, second 0:09:57.120 --> 0:09:59.559 sector will be a guest to power demand, and then 0:09:59.600 --> 0:10:02.360 there is also industrial demand. So I'll start with the 0:10:02.559 --> 0:10:06.200 residential and commercial demand since it's the biggest share of 0:10:06.280 --> 0:10:09.640 gas demand. Residential and commercial or as we call it 0:10:09.720 --> 0:10:13.800 in gas world LDZ demand local distribution zone demand will 0:10:14.040 --> 0:10:17.800 be unsurprisingly a key balanced item on the market as 0:10:18.080 --> 0:10:22.120 during the winter time. For example, residential and commercial demand 0:10:22.240 --> 0:10:25.120 accounts for about fifty five percent of the total demand, 0:10:25.200 --> 0:10:27.160 so it's quite a big chunk of demand that we 0:10:27.200 --> 0:10:30.080 are talking about. So in our forecast, we expect a 0:10:30.160 --> 0:10:34.040 slight recovery in the residential and commercial demand, bringing about 0:10:34.160 --> 0:10:37.640 six billion cubic meters of additional gas demand compared to 0:10:37.720 --> 0:10:40.600 the last year. The reason for that that is because 0:10:40.600 --> 0:10:43.560 we are seeing prices lower year and year, but they 0:10:43.600 --> 0:10:46.440 are still historically high, so that recovery is going to 0:10:46.480 --> 0:10:50.480 be limited and the wholesale lower wholesale prices will be 0:10:50.640 --> 0:10:54.240 offset by the end of the subsidy schemes in some countries. 0:10:54.400 --> 0:10:57.720 Another reason is why demand savings is going to be 0:10:57.920 --> 0:11:00.439 persistent as we head into the next winter is because 0:11:00.480 --> 0:11:03.280 there is also a share of the demand that has 0:11:03.320 --> 0:11:07.400 been displaced permanently due to for example, electrification of the 0:11:07.440 --> 0:11:11.600 heating demand or energy efficiency measures that customers implement it. 0:11:11.679 --> 0:11:14.600 And then there is also we don't we need to 0:11:14.840 --> 0:11:17.480 remember that there is a permanent shift in the consumer's 0:11:17.559 --> 0:11:20.600 behavior that was encouraged by the media campaign that we've 0:11:20.640 --> 0:11:22.839 seen last year. So those are the factors that are 0:11:22.840 --> 0:11:26.720 limiting the recovery in the residential and commercial demand. Now 0:11:26.760 --> 0:11:30.360 moving on to the industrial demand, we expect the similar 0:11:30.400 --> 0:11:33.520 in a way similar situation that rebound in the industrial 0:11:33.600 --> 0:11:36.360 gas demand is expected to be limited. Like I said, 0:11:36.360 --> 0:11:39.440 gas prices a year and year they are lower, however 0:11:39.640 --> 0:11:42.960 they are still historically higher, so that provides little incentive 0:11:43.000 --> 0:11:46.040 for the industry to ramp up gas demand. And then 0:11:46.120 --> 0:11:50.120 looking into the manufacturing demand, it is low and it 0:11:50.240 --> 0:11:54.720 is weak and a broader economic landscape remains not promising 0:11:54.840 --> 0:11:57.240 so far for the industry to ramp up the production. 0:11:57.520 --> 0:12:00.920 Looking into for example, in some country is like Germany, 0:12:01.200 --> 0:12:04.480 seeing the mark to decrease in the gas consumption in 0:12:04.520 --> 0:12:08.360 the industrial sector, and that's because the most energy intensive industries, 0:12:08.480 --> 0:12:11.520 they are seeing the reduction in their production output. And 0:12:11.559 --> 0:12:14.280 then for example, if we're looking into the sectoral split, 0:12:14.440 --> 0:12:17.840 then chemical sector was the one that saw a consistent 0:12:17.960 --> 0:12:20.680 reduction in the output. So those are the factors that 0:12:20.760 --> 0:12:25.040 are supporting the industrial demand to be persistently weak in 0:12:25.080 --> 0:12:28.959 the upcoming winter and most probably summer season as well. 0:12:29.080 --> 0:12:32.160 And finally, gas to power demand, we expect it to 0:12:32.240 --> 0:12:36.320 be higher for the upcoming winter. That is supported by 0:12:36.400 --> 0:12:40.840 the closure of lignite and nuclear plants in Germany. However, 0:12:40.880 --> 0:12:43.680 for the summer season, we expect gas for power generation 0:12:43.800 --> 0:12:46.240 to be near record low and that's supported with the 0:12:46.400 --> 0:12:51.280 increased solar generation capacities, so that seasonal difference between winter 0:12:51.320 --> 0:12:54.319 and summer is going to persist for the upcome in winter. 0:12:54.520 --> 0:12:57.080 So yeah, that's the overall picture for the demand. I 0:12:57.120 --> 0:12:59.880 know it's a long answer, but that's an important part 0:12:59.880 --> 0:13:01.040 of the balance well. 0:13:01.040 --> 0:13:04.679 And with liquefied natural gas, this is a truly global marketplace. 0:13:04.679 --> 0:13:07.360 So Abishak, can you comment on other parts of the 0:13:07.400 --> 0:13:10.319 world and what the demand is looking like there. Is 0:13:10.360 --> 0:13:13.080 it growing, is it staying roughly flat from last year. 0:13:13.280 --> 0:13:15.960 And I'm assuming, and maybe you can correct me on 0:13:16.000 --> 0:13:18.240 this one, but I'm assuming that those prices that were 0:13:18.320 --> 0:13:21.360 lower last year are perhaps less competitive this year. What's 0:13:21.400 --> 0:13:23.880 going on with both prices and then therefore demand in 0:13:23.920 --> 0:13:24.800 other parts of the world. 0:13:25.040 --> 0:13:28.160 Yeah, certainly so. In terms of the prices as compared 0:13:28.200 --> 0:13:31.040 to the last year, we are seeing lower prices. So 0:13:31.040 --> 0:13:34.320 for example, we saw price tom back in August September 0:13:34.400 --> 0:13:37.560 last year, but this year we haven't seen any big 0:13:37.679 --> 0:13:40.240 change in the market or any big thing happening in 0:13:40.280 --> 0:13:43.280 the market that can push the prices up. So prices 0:13:43.360 --> 0:13:46.120 are lower than last year in general, and what this 0:13:46.240 --> 0:13:47.880 means is that it is bringing. 0:13:47.640 --> 0:13:50.880 Wait, the prices this year are lower than last year, 0:13:50.920 --> 0:13:53.240 even given the last year visited to discount. 0:13:53.640 --> 0:13:56.960 Yes, wow, So in general throughout this year we have 0:13:57.040 --> 0:14:00.040 seen lower prices as are in an earlier mentioned that 0:14:00.080 --> 0:14:01.960 we have seen in the beginning of the year, we 0:14:02.000 --> 0:14:04.600 have seen mild winter. So what the mile winter did 0:14:04.720 --> 0:14:07.920 is that it reduced the heating demand and Europe was 0:14:07.920 --> 0:14:10.680 able to end the winter at a storage level which 0:14:10.800 --> 0:14:13.439 was considered quite healthy, quite higher than even the five 0:14:13.520 --> 0:14:16.640 year average levels. So what that did for the global 0:14:16.640 --> 0:14:20.160 allergy prices is that eurof did not need to bring 0:14:20.240 --> 0:14:23.600 in a lot of flexible cargoes to the various markets, 0:14:23.640 --> 0:14:28.080 and that's why more lngs available to different markets, and 0:14:28.120 --> 0:14:30.280 that's why the prices this year we have seen are 0:14:30.400 --> 0:14:31.560 lower than last year. 0:14:31.800 --> 0:14:33.760 Are there parts of Asia that you would consider to 0:14:33.760 --> 0:14:36.640 be growth markets where demand is increasing given that you've 0:14:36.680 --> 0:14:39.560 just established that prices are even lower this year than 0:14:39.600 --> 0:14:40.080 last year. 0:14:40.520 --> 0:14:43.440 Yes, So we expect demand to recover in South Asian 0:14:43.480 --> 0:14:46.720 markets and in Southeast Asian markets as well compared to 0:14:46.800 --> 0:14:49.480 the last year. And the main driver is the fact 0:14:49.560 --> 0:14:52.120 that there is going to be an increase in contracted 0:14:52.280 --> 0:14:57.560 allege deliveries and also comparatively higher sport purchases by various 0:14:57.640 --> 0:15:01.160 buyers in India, for example, in bangla and in Thailand 0:15:01.200 --> 0:15:05.080 because of the lower prices. So last winter, these economies 0:15:05.120 --> 0:15:08.800 suffered a lot as prices were unaffordable and we saw 0:15:08.880 --> 0:15:11.960 almost zero spot demand from India and Bangladesh in the 0:15:11.960 --> 0:15:14.600 fourth quarter last year. But this year we are expecting 0:15:14.640 --> 0:15:18.200 to see moderate level of spot buying from these countries 0:15:18.480 --> 0:15:21.560 because of the lower prices. We also expect India to 0:15:21.640 --> 0:15:26.840 get more contracted deliveries versus last winter when CEFE which 0:15:26.920 --> 0:15:31.000 stands for Securing Energy for Europe, so that's an x 0:15:31.240 --> 0:15:34.400 gas from unit which was taken over by German government 0:15:34.560 --> 0:15:38.200 to protect its energy security interest. So SEFE had a 0:15:38.240 --> 0:15:42.240 contract with India and due to non availability of cargoes, 0:15:42.360 --> 0:15:45.880 safe stopped the cargo deliveries to India last winter. But 0:15:45.960 --> 0:15:48.360 this year it has been able to restart the supply, 0:15:48.840 --> 0:15:51.280 so we expect that India is likely to get more 0:15:51.480 --> 0:15:55.000 contracted deliveries this year and this will result into higher 0:15:55.240 --> 0:15:59.560 LNG imports to India. On the Southeast Asia side, we 0:15:59.640 --> 0:16:03.200 think that Thailand's following production is likely to keep its 0:16:03.280 --> 0:16:07.240 national oil and Gas company BTIT active in the spot market. 0:16:07.440 --> 0:16:10.600 Other smaller markets such as Singapore is also going to 0:16:10.640 --> 0:16:14.320 see new contracts starting which will raise the deliver freeze. 0:16:14.360 --> 0:16:17.440 And we have also assumed higher demand in Indonesia because 0:16:17.480 --> 0:16:20.200 of the commissioning of a new LERG train there which 0:16:20.240 --> 0:16:23.280 will supply most of the LNG to the local market. 0:16:24.560 --> 0:16:26.400 Now, the way that we're structured here at PNF, we 0:16:26.480 --> 0:16:30.840 actually have someone covering each of these time zones, if 0:16:30.840 --> 0:16:33.440 you will, So the Americas are covered by a gas 0:16:33.480 --> 0:16:35.560 analyst and then we've got our European and then our 0:16:35.600 --> 0:16:38.400 Asia focused gas analysts on the show today. Now, without 0:16:38.480 --> 0:16:41.200 taking the words entirely out of your colleague, who cannot 0:16:41.240 --> 0:16:44.200 be here's mouth, what were some of the key highlights 0:16:44.200 --> 0:16:47.920 regarding what happened last year with LNG as it relates 0:16:47.960 --> 0:16:50.360 to the US. And then on from that, how do 0:16:50.440 --> 0:16:55.000 you expect the North American predominantly gas supply to impact 0:16:55.200 --> 0:16:58.880 this year's dynamics in Europe and in Asia. 0:16:58.960 --> 0:17:01.680 So last year what we saw is that a lot 0:17:01.720 --> 0:17:04.920 of the US cargoes that were previously coming to the 0:17:04.960 --> 0:17:07.320 North Asian markets. So when we see North Asia, we 0:17:07.359 --> 0:17:10.800 mostly refer to Japan, China and South Korea. So a 0:17:10.800 --> 0:17:13.359 lot of the US ALLERGI that was previously coming to 0:17:13.400 --> 0:17:16.720 these markets back in twenty twenty one, it was shifted 0:17:16.760 --> 0:17:19.440 towards zero. So there was a change in the global 0:17:19.480 --> 0:17:23.120 allergy trade flows from Asia towards zuro for the flexible 0:17:23.119 --> 0:17:25.880 allergy cargoes. So when we think about the US ALERGI, 0:17:26.160 --> 0:17:28.119 one of the main things to highlight is the fact 0:17:28.119 --> 0:17:31.640 that most of the US LNG is available on FOB basis, 0:17:31.680 --> 0:17:34.359 which is free on board basis, and what that means 0:17:34.400 --> 0:17:37.199 is that those cargoes are not restricted to go to 0:17:37.240 --> 0:17:42.440 a particular destination under some contractual obligations, and this enables 0:17:42.560 --> 0:17:46.520 the portfolio players the suppliers to supply those cargoes based 0:17:46.560 --> 0:17:50.359 on the end user or the end market prices. In 0:17:50.480 --> 0:17:54.440 last year, when Europe was really struggling to get the gas, 0:17:54.560 --> 0:17:57.960 prices in Europe were higher than Asia. So what happened 0:17:58.000 --> 0:17:59.840 is that a lot of the US allgi it ended 0:17:59.880 --> 0:18:02.960 up in Europe. And we have seen this trend continuing 0:18:03.000 --> 0:18:06.919 this year because, as Arena mentioned earlier, LNG is still 0:18:07.040 --> 0:18:09.880 one of the major gas sources to Europe this year 0:18:09.960 --> 0:18:12.080 and is going to be so in the coming years 0:18:12.119 --> 0:18:14.439 as well, So we do expect this will continue this 0:18:14.560 --> 0:18:18.119 year in terms of the overall LNG supply growth. Also, 0:18:18.200 --> 0:18:20.639 we are thinking that US is likely to lead the 0:18:20.640 --> 0:18:23.440 supply growth because we have assumed one of the major 0:18:23.520 --> 0:18:26.760 projects which was under outage last year is likely to 0:18:26.760 --> 0:18:30.880 be operational this winter because of the incremental volumes coming 0:18:30.880 --> 0:18:33.520 from that particular project, so that is a freeport project. 0:18:33.560 --> 0:18:36.360 We are expecting US is likely to lead the overall 0:18:36.359 --> 0:18:37.439 global LNGG supply. 0:18:38.000 --> 0:18:40.240 As you look ahead to the next half year, how 0:18:40.280 --> 0:18:43.680 closely are you watching the weather and essentially there could 0:18:43.720 --> 0:18:47.480 be extremes on either end. And can you explain how 0:18:47.920 --> 0:18:50.640 let's go with the extreme of a particularly cold weather 0:18:50.920 --> 0:18:53.800 for the northern hemisphere over the course of this upcoming winter, 0:18:54.040 --> 0:18:57.520 which sees much more of the natural gas that's currently 0:18:57.520 --> 0:19:01.120 stored being used. What is the potential worst case scenario. 0:19:01.640 --> 0:19:04.399 Yeah, So, as we are approach in the winter season, 0:19:04.480 --> 0:19:07.400 we are looking into the weather and daily basis, and 0:19:07.480 --> 0:19:11.040 that's quite an important risks for everyone to take into 0:19:11.119 --> 0:19:13.959 account during the winter season. So far, what we are 0:19:14.000 --> 0:19:16.760 seeing is that the predictions on the market is that 0:19:16.840 --> 0:19:19.639 it's going to be a mild start into the winter season, 0:19:19.720 --> 0:19:22.840 and we expect temperatures to be about normal throughout the 0:19:22.880 --> 0:19:25.960 October months. And then as we are looking into the 0:19:26.160 --> 0:19:29.199 entire winter again, the forecast is for this winter to 0:19:29.240 --> 0:19:32.520 be milder and wetter compared to the average one. So 0:19:32.600 --> 0:19:35.600 that gives some hope. But then if you're looking into, 0:19:35.880 --> 0:19:39.919 for example, European gas price spreads over time, if we 0:19:39.960 --> 0:19:43.119 are comparing front months with the first quarter of twenty 0:19:43.200 --> 0:19:47.000 twenty four, the market is in contango, meaning that contracts 0:19:47.040 --> 0:19:50.600 for later dates are more expensive compared to the spot 0:19:50.640 --> 0:19:53.360 once so that means that the market is pricing in 0:19:53.720 --> 0:19:55.920 those risks, and one of them could be a weather 0:19:56.080 --> 0:19:59.119 related So if we're seeing a particularly cold winter, that 0:19:59.160 --> 0:20:02.440 could displace quite a lot of gas from storages and 0:20:02.480 --> 0:20:05.359 that will challenge Europe in terms of how to go 0:20:05.480 --> 0:20:08.040 through the winter and then for the following summer how 0:20:08.080 --> 0:20:10.119 to restore that storage inventories. 0:20:10.320 --> 0:20:12.720 But as of right now, it's looking pretty mild. And 0:20:12.800 --> 0:20:15.600 then another question, and as somebody who hails from California 0:20:15.640 --> 0:20:18.120 and definitely knew when it was an El Nino year, 0:20:18.359 --> 0:20:21.200 is it too early for us to decide whether or 0:20:21.240 --> 0:20:23.400 not this is an El Nino year? And if it is, 0:20:23.640 --> 0:20:26.479 what does El Nino do to well, first of all 0:20:26.520 --> 0:20:29.159 the weather, but more importantly for this show natural Gas, 0:20:29.320 --> 0:20:29.920 I think. 0:20:29.720 --> 0:20:32.720 For this particular winter we are going to see in 0:20:32.800 --> 0:20:35.560 Europe the impact from El Nino is it Europe is 0:20:35.600 --> 0:20:38.680 going to be milder and wetter, which is a positive 0:20:38.720 --> 0:20:41.199 sign for Europe, meaning that we will be able to 0:20:41.320 --> 0:20:45.159 keep those storages at a reasonable level of fullness throught 0:20:45.200 --> 0:20:46.719 the winter and throughout the summer. 0:20:46.960 --> 0:20:50.119 And very simply put, El Nino is a warming of 0:20:50.160 --> 0:20:53.760 the Pacific, which essentially does change the weather all over 0:20:53.840 --> 0:20:56.920 the world, but it certainly impacts certain regions more than others. 0:20:57.160 --> 0:20:59.520