# Fuel for Thought: Rising Tide of LNG May Become a Glut

An episode of [Switched On](https://invisiblenetwork.ai/podcast/1469286286), 21 Aug 2024, 36 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/01a10738-3608-4dec-883c-ae3c00026b36/947d2dab-8f17-4e9e-a57d-b1d3008290ef/audio.mp3?utm_source=Podcast&in_playlist=6d114f63-833d-4b78-bbf5-ae3c00026b44

A wave of new liquefied natural gas projects are due to be commissioned by the end of the decade. Yet a sharp increase in supply runs the risk of creating a glut, and with the rise of this transportable commodity, what impacts one market could have a ripple effect around the world. Today’s show addresses the interplay between global and regional gas markets, with co-hosts Dana Perkins and Tom Rowlands-Rees joined by Fauziah Marzuki, Global Head of Gas Markets at BNEF. Together, they discuss the role of the US and China in how LNG moves around the globe, how shifting policies and net-zero goals are impacting the outlook for natural gas, and the ‘shadow fleet’ that recently departed sanctioned LNG terminals in Russia. The show draws upon BNEF research including Global LNG Market Outlook 2030: Focus on Supply Risks and Global LNG Supply Outlook 2030: Second US Wave Incoming. Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal or on bnef.com Links to research notes from this episode: Global LNG Market Outlook 2030: Focus on Supply Risks - https://www.bnef.com/insights/34357/view Global LNG Supply Outlook 2030: Second US Wave Incoming - https://www.bnef.com/insights/34307/view LNG Trade Weekly - https://www.bnef.com/insights/34651 See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: This is Dana Perkins and you're listening to Switched on
[0:03] Speaker 1: the B and EF podcast. When we think about commodities
[0:06] Speaker 1: like liquefied natural gas, we often immediately go to the
[0:10] Speaker 1: near term and we think about prices and trading. Now,
[0:13] Speaker 1: there's certainly plenty to watch in this space. Right now,
[0:16] Speaker 1: the world is keeping an eye on recent developments with
[0:19] Speaker 1: dark fleets containing LNG from sanctioned terminals, and in the
[0:23] Speaker 1: recent past, there have been fluctuations in energy prices over
[0:26] Speaker 1: the past few years as the world has responded very
[0:29] Speaker 1: quickly to changes in supply. But let's also take a
[0:32] Speaker 1: moment to look out a little further to twenty thirty.
[0:35] Speaker 1: With LNG tankers out in our oceans ready to be
[0:38] Speaker 1: responsive to demand around the world. This increasingly global marketplace
[0:43] Speaker 1: is an integral part of the energy system that shows
[0:46] Speaker 1: no signs of slowing down, or at least not this decade.
[0:48] Speaker 1: From the list of new terminals poised to be added
[0:51] Speaker 1: in the US to how China plans to meet their demand,
[0:54] Speaker 1: our show today is going to take you around the world.
[0:57] Speaker 1: Today we draw from two pieces of research. Bnaf's Global
[1:01] Speaker 1: LNG Market Outlook twenty thirty focus on supply risks as
[1:05] Speaker 1: well as the global LNG supply outlook second US wave coming.
[1:09] Speaker 1: Our guest is Fausio Marzuki, global head of Gas Markets
[1:13] Speaker 1: at BNF, and she is based in the shipping hub
[1:15] Speaker 1: of Singapore. I'm also joined today by co host Tom
[1:19] Speaker 1: Rowlands Reese from our New York office and I join
[1:21] Speaker 1: you as always from London. If you like our show
[1:24] Speaker 1: and you want other people to be able to find it,
[1:26] Speaker 1: give us a review or download it wherever you get
[1:28] Speaker 1: your podcasts. B and EF subscribers will be able to
[1:31] Speaker 1: find the two research notes I referenced at bn EF
[1:34] Speaker 1: go on the Bloomberg terminal or at BNF dot com.
[1:37] Speaker 1: But right now, let's jump into our conversation about what
[1:40] Speaker 1: to expect in the world of LNG with Fowls. Fowls,
[1:54] Speaker 1: thank you so much for joining as a guest on
[1:55] Speaker 1: the show today.
[1:57] Speaker 2: Thanks for having me, Dana.
[1:58] Speaker 1: And we've got Tom the other as our co host,
[2:01] Speaker 1: Thanks Diana. So we're going to talk about what's happening
[2:05] Speaker 1: in the global gas markets. And this is really off
[2:07] Speaker 1: the back of a report that we put out that
[2:09] Speaker 1: is a global gas Outlook out to twenty thirty and
[2:12] Speaker 1: I am going to just before we get into what's
[2:15] Speaker 1: actually inside that report, pretending like I don't know what's
[2:17] Speaker 1: in there. I'm going to challenge the fundamental premise of
[2:20] Speaker 1: a global gas outlook, because really my understanding of gas
[2:24] Speaker 1: has been that it's a lot of kind of very
[2:27] Speaker 1: regional markets.
[2:28] Speaker 2: Right.
[2:28] Speaker 1: These are physical pipelines connecting gas supply to gas demand.
[2:32] Speaker 1: And you know, I'm sitting here in Europe, Fousier in Singapore.
[2:36] Speaker 1: These are physical terminals. And I know we're increasingly seeing
[2:40] Speaker 1: ships carrying LNG across the world, But how much has
[2:43] Speaker 1: that made for a more global versus historically regional market
[2:48] Speaker 1: and how is that maybe changing? And is it even
[2:51] Speaker 1: possible to do a global gas outlook?
[2:52] Speaker 3: Well, Jean did it, and I'm really proud of this,
[2:55] Speaker 3: so we can do a global gas outlook. The thing
[2:57] Speaker 3: about the global gas markets or any lowobal market, what
[3:01] Speaker 3: market really is truly global if it's just not a
[3:04] Speaker 3: bunch of regional markets that are pieced together.
[3:07] Speaker 2: It's just more.
[3:08] Speaker 3: About how interconnected they are. And look of why natural
[3:11] Speaker 3: gas has been doing that over the years. Yes, previously
[3:14] Speaker 3: a European gas analyst didn't need to know a thing
[3:18] Speaker 3: about Japanese nuclear restart timelines.
[3:21] Speaker 2: It just wasn't a thing, But now global energy.
[3:24] Speaker 3: Is absolutely piecing one of that together. Whether a true
[3:28] Speaker 3: global gas market exists, eh, a number of very interconnected
[3:34] Speaker 3: regional gas markets with LNG does in fact exist.
[3:40] Speaker 4: Can I just ask you mentioned that you didn't say
[3:44] Speaker 4: that the analyst in Europe didn't need to worry about
[3:47] Speaker 4: Japanese nuclear restart times. So for those of us not
[3:50] Speaker 4: familiar with this market, well, what has changed since then?
[3:52] Speaker 3: Lots and lots of LNG coming to Europe and also
[3:57] Speaker 3: the fact that with what happened in the crisis is
[4:00] Speaker 3: that we're finding ourselves in a situation where the gas
[4:03] Speaker 3: markets are hyper sensitive to anything, any supply disruption, anything
[4:08] Speaker 3: that can change the flow of gas globally. We're getting
[4:12] Speaker 3: a lot of knee jerk reactions things that don't even
[4:15] Speaker 3: have anything to do with the European gas market. Say
[4:19] Speaker 3: a plant outage in the middle of Borneo, suddenly European
[4:24] Speaker 3: gas prices move. I can assure you it's got nothing
[4:26] Speaker 3: to do with Malaysian LNG output.
[4:29] Speaker 2: But because of.
[4:31] Speaker 3: The interconnectivity of all of these markets now through LNG,
[4:35] Speaker 3: because it's so commoditized, because it moves so freely now
[4:38] Speaker 3: and so quickly it actually.
[4:39] Speaker 2: Has those impacts.
[4:40] Speaker 3: So today that is why a lot of times when
[4:44] Speaker 3: the European gas traders are talking to the analysts and APEC,
[4:48] Speaker 3: that's exactly what they want to know. They want to
[4:50] Speaker 3: know nuclear restart timelines. And it's a really different gas
[4:53] Speaker 3: market that we're dealing with today.
[4:55] Speaker 4: That's interesting because I had a slightly different understanding, which
[4:58] Speaker 4: that it was just more to do with like physical
[5:00] Speaker 4: capacity to import and export from different countries had increased.
[5:04] Speaker 4: But what you're saying is actually the real crystallization is
[5:06] Speaker 4: the sort of the change in the politics it is.
[5:10] Speaker 3: But yes, absolutely so, there is more LNG in the
[5:14] Speaker 3: world today. There is more import capacity, there is more
[5:17] Speaker 3: supply capacity, so there's a lot more lengy going around.
[5:20] Speaker 3: So everybody is starting to get impacted by LNG to
[5:24] Speaker 3: a certain extent. So that's why more and more regions,
[5:29] Speaker 3: more and more gas markets are being hyper sensitive to
[5:32] Speaker 3: the LNG market. Now. The situation that we're finding ourselves
[5:35] Speaker 3: in today is sort of at the crux of it all,
[5:38] Speaker 3: just the change in Europe's situation that it is now
[5:42] Speaker 3: taking in more LNG than it used to, and that's
[5:46] Speaker 3: changing the dynamics a little bit, but there are other
[5:49] Speaker 3: things changing that dynamics too. I'll take a Brazil for example.
[5:53] Speaker 3: When it's hot, there's a drought, you have less hydropower.
[5:57] Speaker 2: The first thing they go.
[5:59] Speaker 3: For is local fininatural gas. You look at emerging Asian
[6:02] Speaker 3: markets like Thailand, Pakistan, Bangladesh. These are countries that have
[6:08] Speaker 3: built their entire economies built on domestic gas resources that
[6:13] Speaker 3: they produce locally cheaply consumed internally. They are now in
[6:17] Speaker 3: a phase of growth that they've run out of that
[6:20] Speaker 3: gas and they need to import.
[6:22] Speaker 2: Now.
[6:23] Speaker 3: These countries are now increasingly being exposed to the international
[6:27] Speaker 3: LNG market, and hence.
[6:28] Speaker 2: Why there's just sort of a lot more.
[6:31] Speaker 3: People in this market now, and hence why lots of
[6:35] Speaker 3: things can actually change prices, change trade flows, and change
[6:39] Speaker 3: the way things know, the way things move.
[6:41] Speaker 1: And it's absolute simplest sense. LERNG means that we're able
[6:44] Speaker 1: to actually put natural gas on chips and get it
[6:47] Speaker 1: to other parts of the world. And the question really
[6:50] Speaker 1: lies in how quickly we can actually change the supply
[6:53] Speaker 1: to parts of the world in order to meet changes
[6:56] Speaker 1: in demand or change fluctuations in prices. How quickly I
[6:59] Speaker 1: know you're saying that the prices move almost instantaneously, But
[7:03] Speaker 1: how quickly is the market able to then rectify that balance, Call.
[7:07] Speaker 3: A captain of the ship and tell them to turnaround.
[7:09] Speaker 3: That's how quick it moves. The l and Gury community,
[7:13] Speaker 3: believe it or not, is actually still quite a tight
[7:16] Speaker 3: knit community, especially sort of really big players in terms
[7:20] Speaker 3: of who really moves a lot of the volumes and
[7:22] Speaker 3: who's actually got those sort of nimble fleets and flexibility
[7:26] Speaker 3: of supply that can actually meet this sort of really
[7:29] Speaker 3: quick demand turnaround. So in terms of rewiring trade flows,
[7:33] Speaker 3: that can actually happen pretty quickly. Where we look at
[7:37] Speaker 3: what's been going on in the Middle East where cuts
[7:39] Speaker 3: are used to use the Suez Canal to basically send
[7:42] Speaker 3: everything to Europe very easily, I mean, perhaps more costiclying
[7:48] Speaker 3: overnight can reroute just around Africa to get to Europe,
[7:53] Speaker 3: and that trade flow changes as soon as the market
[7:56] Speaker 3: needs it to, and it can respond quickly in that.
[8:00] Speaker 2: Now, of course it.
[8:00] Speaker 3: Impacts margins and probitability timing, et cetera, et cetera, but
[8:04] Speaker 3: the market carry acts very quickly. Now, prices will react
[8:07] Speaker 3: usually faster, but it is a highly liquid and commoditized
[8:13] Speaker 3: market now that it can actually supply.
[8:15] Speaker 2: To where you know, whenever there's a demand or fall
[8:19] Speaker 2: like that.
[8:20] Speaker 4: So this is why short term gas traders always have
[8:23] Speaker 4: like a map on their screen with loads of pictures
[8:26] Speaker 4: of boats going around. It's not just because it looks cool.
[8:28] Speaker 2: It's like, I don't like it when you say boats, tom.
[8:31] Speaker 1: Okay, ships, tankers?
[8:34] Speaker 2: What is the favorite word goods?
[8:37] Speaker 3: Yes at that ships is acceptable, ships is acceptible.
[8:43] Speaker 2: Okay.
[8:43] Speaker 1: So some of the gas that is very much not
[8:46] Speaker 1: on a ship or a tanker are these physical pipelines
[8:49] Speaker 1: that are here in Europe. And speaking from my context,
[8:54] Speaker 1: I'm very much thinking about the energy crisis and what
[8:56] Speaker 1: happened with prices in Europe not that long ago. So
[8:59] Speaker 1: a couple of years ago, when the war in Ukraine
[9:02] Speaker 1: initially started, there were sanctions that were then placed on
[9:05] Speaker 1: Russian leng and that changed the prices pretty dramatically, not
[9:08] Speaker 1: just here in Europe but around the world. And these
[9:11] Speaker 1: tankers did then start to reroute. And we're finding out
[9:15] Speaker 1: now that there is talk of possibly further sanctions on
[9:17] Speaker 1: Russian energy. What impact would this have And given that
[9:22] Speaker 1: we're now in some respects seeing this coming is it
[9:24] Speaker 1: going to have. Is it going to cause less disruption
[9:27] Speaker 1: or is it really when you shut down the access
[9:30] Speaker 1: to some of that gas, is that actually just it's
[9:33] Speaker 1: inevitable that it's going to have a global impact.
[9:35] Speaker 3: Absolutely, So that's a really interesting question, Dana. And would
[9:40] Speaker 3: it interest anybody to know that Russian leg is still
[9:44] Speaker 3: the second largest source of LNG into Western Europe.
[9:48] Speaker 2: It still is.
[9:49] Speaker 3: That actually has not changed changed, So it's interesting dynamics here,
[9:55] Speaker 3: and I want to talk about the LNG plant sanctioned
[9:58] Speaker 3: story here. Russia energy is still coming into the European system,
[10:04] Speaker 3: that is, and actually we even saw an increase of
[10:07] Speaker 3: it happening in the last couple of months. Interestingly enough,
[10:11] Speaker 3: it's still coming into the system. That's very very unlikely
[10:15] Speaker 3: to change because it is such a fundamental supply source
[10:19] Speaker 3: into Europe right now. So some of the discussion has
[10:23] Speaker 3: been around, okay, well, how to be curbed some of that.
[10:25] Speaker 3: So there's been talks and sort of implementations of a
[10:28] Speaker 3: sanctioning parts of the operations. So what used to happen
[10:33] Speaker 3: a lot with Russian energy, and this is from the
[10:35] Speaker 3: Arctic and Yama projects.
[10:36] Speaker 2: They used to come down to Europe.
[10:38] Speaker 3: They used to either come to either a Belgian or
[10:40] Speaker 3: a French termin Now they used to offload their cargo
[10:44] Speaker 3: and transfer it into another ship, and that other ship
[10:46] Speaker 3: would just actually go somewhere else.
[10:48] Speaker 2: They curbed that. They're like, okay, well you can't.
[10:50] Speaker 3: Use our facilities to transfer it to other markets now,
[10:54] Speaker 3: so they stop that, But they haven't actually stopped getting
[10:57] Speaker 3: Russian energy into the European system. It is very unlikely
[11:01] Speaker 3: to change, just because there's just too much dependency on
[11:05] Speaker 3: that Russian leg. In the event, Europe says I do
[11:10] Speaker 3: not want to take a single drop of Russian gas,
[11:12] Speaker 3: be it in pipeline form or LNG. Ever again, yep,
[11:15] Speaker 3: sure that Russian supply could be diverted to other markets
[11:20] Speaker 3: that are willing to take it and who would feel
[11:23] Speaker 3: the void in Europe. A lot can the Qataris can
[11:27] Speaker 3: fill that. West Africa can fill that. At a future
[11:31] Speaker 3: point in time. East Africa can fill that.
[11:35] Speaker 2: A little bit of Mexico a little bit.
[11:37] Speaker 3: You know, it will take longer, but things that usually
[11:39] Speaker 3: go to Asia could go there all.
[11:41] Speaker 2: Quite frankly, you will.
[11:43] Speaker 3: Just actually by that point have a lot of guest
[11:44] Speaker 3: demand destructing that they might not need the LERG anymore.
[11:47] Speaker 3: But so where might that Russian llergy go. It's been
[11:51] Speaker 3: really interesting to see what's emerged in the market is
[11:56] Speaker 3: the shadow fleet for Russian LERG. So what's happened is
[12:00] Speaker 3: there's been one LNG project that is subject sanctions and
[12:05] Speaker 3: two ships have actually loaded this plant. And our colleagues
[12:09] Speaker 3: a bloom Book News have done a fantastic job of
[12:11] Speaker 3: reporting on this. I know for a fact, you know
[12:13] Speaker 3: pour some of them they're on holiday while they're try
[12:16] Speaker 3: to break this story. But so the world is watching
[12:19] Speaker 3: where these shipments, where these tankers actually might end up,
[12:23] Speaker 3: and who's willing to actually buy this supply given the
[12:28] Speaker 3: same shows on them.
[12:29] Speaker 1: So when it comes to this shadow fleet, these tankers
[12:31] Speaker 1: are out there with LNG. You can see them on
[12:34] Speaker 1: the map that people are watching on their screens. You know,
[12:36] Speaker 1: the traders that Tom had referenced at the point of
[12:40] Speaker 1: recording this show. We don't know where they're headed, but
[12:42] Speaker 1: where are they now?
[12:44] Speaker 3: So the two shadow LNG vessels that have actually presumably
[12:47] Speaker 3: loaded at the Arctic LNG two plant. The station plants
[12:50] Speaker 3: are the Pioneer and the US Energy. And for those
[12:54] Speaker 3: of you Bloomberg terminal uses, you can actually see that
[12:58] Speaker 3: in IMO and just go to map. So let's see
[13:01] Speaker 3: just such a curiosity day nuts from seeing where those
[13:05] Speaker 3: ships are actually now. So but the problem is the
[13:08] Speaker 3: thing about a shadow fleet, the thing about a dart
[13:11] Speaker 3: is just that they will spoof their location, right. It's
[13:15] Speaker 3: because they know the whole world's watching. So this is
[13:18] Speaker 3: actually sort of like tinkering with the transponder or just
[13:21] Speaker 3: turning it off to actually sort of give false locations.
[13:24] Speaker 3: And the only way that our report is and sort
[13:27] Speaker 3: of the market was able to actually realize where these
[13:32] Speaker 3: ships were and what these ships were doing was actually
[13:35] Speaker 3: through proper satellite imagery and actually sort of matching the
[13:39] Speaker 3: view of that ship, like what that ship looked like
[13:42] Speaker 3: looking at databases, because you know, they're painting over the numbers,
[13:45] Speaker 3: they're changing the name, they're changing the color, they're doing
[13:48] Speaker 3: all of that just to kind of bypass all of this.
[13:51] Speaker 3: So they were, you know, they was still look like
[13:55] Speaker 3: they were around Europe. But it seems like they're probably
[14:00] Speaker 3: going to find an Asian buyer. I think it's going
[14:03] Speaker 3: to be really unlikely that a European buyer would be
[14:06] Speaker 3: willing to risk something like that. They're probably going to
[14:09] Speaker 3: come out east, They're probably going to take a really
[14:11] Speaker 3: long journey around that and quite frankly, it might even
[14:13] Speaker 3: it might even be they might not even officially dock
[14:16] Speaker 3: that car. But there's a lots of things can actually happen.
[14:18] Speaker 3: And sorry, we're getting into the We're getting into.
[14:21] Speaker 2: The dark side. It is fascinating.
[14:24] Speaker 4: I'm gonna say that the scope of things, I mean
[14:26] Speaker 4: that you've already talked about, like drought in Brazil and
[14:29] Speaker 4: then Russian ships painting over there thing.
[14:32] Speaker 1: And I'm just picturing James Bond being very much involved
[14:34] Speaker 1: in this right now. Not relevant to these specific ships.
[14:38] Speaker 1: Can you talk a little bit about where the largest
[14:40] Speaker 1: source of demand is at this point time and as
[14:42] Speaker 1: we look into the future in this global out to
[14:45] Speaker 1: twenty thirty market outlook that we've done, you know, where
[14:48] Speaker 1: are we seeing really growing demand on what country is
[14:50] Speaker 1: really really taking gas on board as a part of
[14:53] Speaker 1: their energy system.
[14:55] Speaker 3: China trying to tread is anything not a China answer? No,
[15:02] Speaker 3: So China, we're looking at the biggest energy market now
[15:05] Speaker 3: taking the ground away from Japan.
[15:06] Speaker 2: Europe book is really really.
[15:10] Speaker 3: Stepping up in terms of how much energy as a
[15:13] Speaker 3: block pulling now so in the immediate couple years, you're
[15:19] Speaker 3: going to see Europe taking a lot more energy because
[15:22] Speaker 3: of this sort of displacement of Russian pipeline gas. But
[15:26] Speaker 3: you know that's getting replaced by Norwegian contracts to come
[15:29] Speaker 3: into the continent and a number of other things, and
[15:31] Speaker 3: sort of industries switching away from gas trying to curb
[15:35] Speaker 3: that demand, and of course sort of the energy transition
[15:37] Speaker 3: more broadly. But the thing about Europe is just that
[15:40] Speaker 3: a lot of it is coming from just the turned
[15:44] Speaker 3: down of call or retirements of retirements of nucleus of
[15:48] Speaker 3: gas is really just kind of coming into the system
[15:50] Speaker 3: in order to fill that void until other cleaner sources
[15:54] Speaker 3: of energy come into the mix. And it's a similar
[15:56] Speaker 3: story really in a number of other in a number
[15:59] Speaker 3: of other market So you're looking at China where they
[16:02] Speaker 3: are doing a lot of coal to gas switching in
[16:05] Speaker 3: the industry sector. With more urbanization, the grids and transmission
[16:12] Speaker 3: distribution lines are expanding further more people are consuming gas
[16:17] Speaker 3: for heating to a smaller degree. Power In China, it's
[16:21] Speaker 3: less of it, it's less of a story there just
[16:23] Speaker 3: because coal fire generation and renewable energy is just so
[16:26] Speaker 3: much cheaper then of course buying LNG sometimes and a
[16:29] Speaker 3: lot of the domestic gas production that was already being
[16:32] Speaker 3: used in China has already been used by their industrial heartland.
[16:36] Speaker 3: And let's not also forget that Russia does send pipeline
[16:38] Speaker 3: gas to China as well. So energy is actually what
[16:41] Speaker 3: we call a balancer in China's gas system. Let's call
[16:46] Speaker 3: it a bit of a pecking order. China will always
[16:48] Speaker 3: use its domestic production first, they'll use the pipeline gas
[16:51] Speaker 3: imports first from Central Asia and Russia, and then only it.
[16:55] Speaker 2: Takes in the air lergy.
[16:57] Speaker 3: So any variation in demand, you've got that that's going
[17:01] Speaker 3: to actually impact LNG. So when we think about Chinese
[17:05] Speaker 3: economy and fluctuation demand, whether sensitive demand, et cetera, et cetera, that.
[17:11] Speaker 2: Hits LNG more than anything.
[17:13] Speaker 3: Really not that different from sort of the big consuming
[17:15] Speaker 3: markets I grew up as well.
[17:18] Speaker 4: This is really interesting and because obviously when we come
[17:21] Speaker 4: to international energy trade there's always like a geopolitical dimension
[17:25] Speaker 4: to it, and so China's taking a lot of pipeline
[17:29] Speaker 4: gas from Russia and then it's also importing a lot
[17:31] Speaker 4: of LNG. And of course the US has just emerged
[17:35] Speaker 4: as globally the largest exporter of LNG, so I know
[17:38] Speaker 4: it's not the only exporter, but you know, you've got
[17:40] Speaker 4: gas coming from Russia, gas coming from the US. Good
[17:43] Speaker 4: to get just a sense of what is the volume
[17:46] Speaker 4: of gas coming from Russia compared to the volume of
[17:49] Speaker 4: LNG being imported into China. How dependent is China on
[17:53] Speaker 4: what Russia does versus what the US does.
[17:56] Speaker 3: So if we start thinking about proportionality and shares and
[18:01] Speaker 3: import dependency on particular countries, trade partners or a supply sources,
[18:08] Speaker 3: if you're like Europe was far more dependent on Russian
[18:13] Speaker 3: pipeline imports, then China is on imports. More broadly, domestic
[18:22] Speaker 3: production in China is still one hundred percent the line's
[18:27] Speaker 3: share of gas consumption in the country. It is still
[18:31] Speaker 3: the biggest portion. It meets the largest portion of demand.
[18:34] Speaker 3: So that is safe right that you know they have
[18:38] Speaker 3: state national oil companies that ensure domestic supply is at
[18:45] Speaker 3: the top levels and can sort of you're you're pushing
[18:47] Speaker 3: out as much in producing as much as you possibly
[18:50] Speaker 3: can to meet domestic consumption, and only then will they
[18:52] Speaker 3: go out into the internet off your markets for LNG
[18:55] Speaker 3: imports so in terms of a dependency, China is more
[19:00] Speaker 3: self sufficient and that's it. Europe is also an older
[19:03] Speaker 3: gas market. A lot of the natural resources in continential
[19:08] Speaker 3: Europe are depleted. You have less domestic gas in Europe itself,
[19:13] Speaker 3: and hence why it's had to rely on it.
[19:14] Speaker 4: What's so if I understand correctly what you're saying, because
[19:19] Speaker 4: I'm not so much asking about Europe because we know
[19:22] Speaker 4: what happened there, but China. You're saying the bulk of
[19:26] Speaker 4: gas consumed in China is produced domestically, and the amount
[19:30] Speaker 4: coming from Russia and the amount being imported as leng
[19:33] Speaker 4: is relatively little in the big scheme of things, So
[19:36] Speaker 4: they are somewhat in terms of gas resilient to whether
[19:41] Speaker 4: it's what Russia is doing or whether it's what the
[19:44] Speaker 4: US is doing.
[19:45] Speaker 3: They have options, yes, yes, and China, and China has
[19:48] Speaker 3: options absolutely because they also have a whole bunch of
[19:52] Speaker 3: Pacific leg that they rely on to got it.
[19:56] Speaker 4: And because you know, whenever we talk about China, we
[19:58] Speaker 4: have to also factor in the expected amount of growth.
[20:02] Speaker 4: Do you think growth in gas demand in China could
[20:05] Speaker 4: lead to more dependence on imported gas or is there
[20:09] Speaker 4: the capacity to scale up domestic production in China as well.
[20:12] Speaker 3: Less capacity to scale up domestic domestic production without getting
[20:17] Speaker 3: too expensive where you might as well go out and
[20:19] Speaker 3: buy LNG. So we are projecting growth and this is
[20:22] Speaker 3: coming from really all parts of all sectors. So a
[20:26] Speaker 3: little bit more empower, not as a guests by power
[20:28] Speaker 3: capacity is being built to especially in the industrial areas
[20:32] Speaker 3: I mentioned industrial coals gas switching. We're also looking at
[20:37] Speaker 3: more gas in the transport sector. This is coming from
[20:39] Speaker 3: heavy duty vehicles actually running on LNG instead of diesel
[20:43] Speaker 3: chemical sector as a feedstock. So sort of all parts
[20:48] Speaker 3: are contributing to China's growth in gas and LNG demand
[20:52] Speaker 3: more broadly. And again, though domestic production makes up most
[20:56] Speaker 3: of the share in China's supply stack today, that um
[21:00] Speaker 3: for growth is not as big as potential growth that
[21:06] Speaker 3: can come with LNG supply. And China's actually got more
[21:10] Speaker 3: than enough. Is building more than enough import capacity to
[21:13] Speaker 3: take in a lot of LNG well in access is
[21:17] Speaker 3: probably what it needs.
[21:18] Speaker 4: So we can see China's dependence on global LNG markets
[21:22] Speaker 4: growing in the future.
[21:23] Speaker 1: Yes, so now, as US is the largest supplier in
[21:27] Speaker 1: the world, let's change our focus then, to talk about
[21:31] Speaker 1: that country and some developments on that side. Now, I
[21:33] Speaker 1: know everybody's watching the US elections around the world trying
[21:36] Speaker 1: to know what's going to happen in November, and I
[21:38] Speaker 1: don't think anybody can predict that one. But when it
[21:40] Speaker 1: comes to gas in the US, this is an area
[21:44] Speaker 1: of growth. What does the future look like for the
[21:47] Speaker 1: US gas market irrespective of the outcome of the future elections.
[21:52] Speaker 1: Is this something that seems to be growing or has
[21:55] Speaker 1: the Inflation Reduction Act really put a damper on the
[21:58] Speaker 1: gas industry and la they did some other industries by comparison.
[22:02] Speaker 3: I'm going to tackle the LNG part versa, and then
[22:07] Speaker 3: we talk more broadly about sort of the domestic gas landscape,
[22:11] Speaker 3: and I'd love Tom's view on it as well. So
[22:15] Speaker 3: with regards to LNG exports from the US, so yes,
[22:19] Speaker 3: they're the largest now and they have been exponentially growing.
[22:23] Speaker 3: One of the things that I'm looking at, regardless of
[22:27] Speaker 3: who wins the election, is what's going to happen to
[22:31] Speaker 3: the existing queue of LNG projects that are waiting to
[22:35] Speaker 3: be developed. So these are projects under construction, these are
[22:40] Speaker 3: projects waiting for their permits, and you know they're ready
[22:44] Speaker 3: to go, and so they're ready to start building it.
[22:46] Speaker 3: They've got the customers, they got the demand for it,
[22:48] Speaker 3: So there's some legitimate business case to build these plants.
[22:51] Speaker 3: So now whether they're actually stopped from actually commissioning these projects,
[22:58] Speaker 3: I think is less likely. And I think the results
[23:01] Speaker 3: of the elections are probably not going to change that
[23:04] Speaker 3: immediate outlook. But what the results of the elections might
[23:07] Speaker 3: do is just impact the pace at which some of
[23:11] Speaker 3: these things move. For example, what I'm currently thinking about
[23:15] Speaker 3: it was called Biden Freeze basically, and basically the administration saying, hey,
[23:20] Speaker 3: we're not going to give any LNG permits anymore just yet.
[23:23] Speaker 3: Well we kind of figure some stuff out. Everybody got
[23:26] Speaker 3: really concerned about that. And I would take at least
[23:29] Speaker 3: b anyf our take is just that, you know, it's
[23:31] Speaker 3: all of that can just change after November, right or not. Right,
[23:35] Speaker 3: It could still be in place, your vanilla statements right.
[23:38] Speaker 2: At election time.
[23:39] Speaker 3: That after election those vanilla statements start getting a bit stronger,
[23:43] Speaker 3: also took a little bit more targeted, or if you're
[23:46] Speaker 3: going into election with more targeted statements, after the election,
[23:50] Speaker 3: those targeted statements start getting all downloads of it so
[23:52] Speaker 3: that the change in dynamics, I don't see that fundamentally
[23:56] Speaker 3: moving the needle.
[23:56] Speaker 2: What I do see is the timing.
[23:58] Speaker 3: I think many of these projects will indeed get developed
[24:02] Speaker 3: in the coming years. It's just that there's a whole
[24:05] Speaker 3: stack of probably filings at the DOE Office right now
[24:09] Speaker 3: just sitting there regarding LNG permits, and they just don't
[24:14] Speaker 3: want to do anything right now with that for a while,
[24:17] Speaker 3: right and you know that stack's just going to get
[24:20] Speaker 3: bigger and bigger and bigger when people start reading more
[24:23] Speaker 3: of you know, bn EX market outlooks and all the
[24:25] Speaker 3: other market looks out there which say we're going to
[24:28] Speaker 3: have the short for we're going to have a tight
[24:31] Speaker 3: LNG market situation in the next few years, and they
[24:35] Speaker 3: want to start, you know, they want to get those
[24:37] Speaker 3: projects up. They want to try to capitalize on this
[24:39] Speaker 3: on this growing market because I guess who knows what
[24:42] Speaker 3: will happen to gas in twenty fifty. But yeah, you know,
[24:45] Speaker 3: money now is better. Drill it now, people are under
[24:48] Speaker 3: ground now, you'll be about to make some money out
[24:50] Speaker 3: of it in the in the near term. So yeah,
[24:52] Speaker 3: with regards to how the US LNG landscape might change,
[24:57] Speaker 3: with the election.
[24:58] Speaker 2: I don't think it's going to fundamentally change.
[25:00] Speaker 3: I think it's either just going to delay something or
[25:02] Speaker 3: expedite something that is probably going to happen still at
[25:06] Speaker 3: least in there in the next five years. So again
[25:09] Speaker 3: there's that whole long stack of permits waiting in the
[25:11] Speaker 3: doo week.
[25:12] Speaker 2: If all of this comes.
[25:13] Speaker 3: To fruition, we're going to have way too much energy
[25:17] Speaker 3: than the world needs. Quite frankly, we actually already might
[25:21] Speaker 3: have too much LNG in a couple of years time.
[25:23] Speaker 3: There's a whole bunch of lergy projects currently under construction.
[25:28] Speaker 3: It's just that they've been a bit delayed. So we're
[25:30] Speaker 3: talking projects in Mozambique. We've got some projects we didn't
[25:34] Speaker 3: start up in Canada. We've got this sanctioned Russian LNG
[25:38] Speaker 3: plant that we were talking about. Actually, when all of
[25:40] Speaker 3: these come into the market, be any of it's actually
[25:44] Speaker 3: projecting a glutz in the market. Now, this might spur
[25:47] Speaker 3: demand and it might actually change the dynamics of how
[25:50] Speaker 3: buyers and people perceive their use of natural gas. But
[25:54] Speaker 3: we're talking that at some point in time you're going
[25:57] Speaker 3: to have a full bunch of LERG in the market
[25:59] Speaker 3: and gas price is all going to get cheap again,
[26:02] Speaker 3: And I think the question that I think about a
[26:04] Speaker 3: lot is is that going to actually bring back demand.
[26:08] Speaker 2: When something's cheap, you kind of don't mind.
[26:13] Speaker 3: Using it, especially when it's an energy source that is
[26:16] Speaker 3: readily available and easy easy to put into your system.
[26:21] Speaker 1: Barring international policy on climate.
[26:23] Speaker 3: Barring international policy on climate exactly.
[26:26] Speaker 1: And then positioning it against the Inflation Reduction Act. Is
[26:29] Speaker 1: that potentially a naive question because I think when we
[26:32] Speaker 1: talk about the US and so much of the work
[26:34] Speaker 1: that we do, it's been a game changer for the
[26:36] Speaker 1: US in terms of some of the other markets that
[26:39] Speaker 1: you maybe existing alongside energy, such as hydrogen. So has
[26:43] Speaker 1: it had an impact on energy or do you see
[26:45] Speaker 1: it having an impact on energy?
[26:48] Speaker 2: Now?
[26:48] Speaker 3: It's a completely unrelated If I'm speaking to an US
[26:53] Speaker 3: LNG producer or somebody in the US L and D
[26:55] Speaker 3: value chain, if they have not asked me about the
[26:57] Speaker 3: inflation reduction that it shows that they're not concerned about it, right,
[27:02] Speaker 3: I Mean, that's kind of my gauge. No one's asked
[27:04] Speaker 3: me about it from the immediate LNG industry because fundamentally
[27:11] Speaker 3: they're still signing customers, right, be that in Asia, be
[27:14] Speaker 3: that in Europe, be that in Emerging Asia, Middle East
[27:18] Speaker 3: and elsewhere. They're still finding customers if banks are still
[27:22] Speaker 3: you know, depending on sort of credit word ess of
[27:25] Speaker 3: the developer, the customers and everything else about the project,
[27:28] Speaker 3: banks are still willing to finance it. And they're still
[27:31] Speaker 3: you know, they still have the contractors, they still have
[27:33] Speaker 3: the backing, they still have shareholders who are willing to
[27:37] Speaker 3: back the project. There's nothing stopping them aside from ambiguity
[27:43] Speaker 3: and uncertainty in the political landscape about what might just
[27:46] Speaker 3: happen with their permitting. So this is where it's a
[27:49] Speaker 3: way and see what happens that big stack of documents
[27:53] Speaker 3: waiting in the.
[27:54] Speaker 4: D Can I add my two cents here because one
[27:56] Speaker 4: of the hats I wear is I sort of tie
[27:59] Speaker 4: to get a lot of the analysis we do on
[28:01] Speaker 4: the US and in particular things like the Inflation Reduction
[28:04] Speaker 4: Act when it comes to LNG. I think that the
[28:07] Speaker 4: US is very relevant in how it can affect the
[28:11] Speaker 4: global market and how what the administration decides to do
[28:15] Speaker 4: or encourage in terms of export capacity that can have
[28:18] Speaker 4: an effect on the global market. But what happens domestically
[28:21] Speaker 4: in the US is relatively unaffected by LNG because there's
[28:25] Speaker 4: this constraining factor, which is the capacity to export LNG.
[28:30] Speaker 4: So it's almost like the US can affect the global
[28:32] Speaker 4: LNG market, but the global LNG market does not affect
[28:37] Speaker 4: what happens in the domestically in the US that much.
[28:40] Speaker 4: It's somewhat insulated from it. And a lot of what's
[28:42] Speaker 4: happening in the Inflation Reduction Act is a domestic US
[28:45] Speaker 4: energy transition and developing US supply chains for clean technology,
[28:49] Speaker 4: which will affect maybe the domestic gas market in the US,
[28:53] Speaker 4: but it won't actually translate into affecting the global LNG market,
[28:57] Speaker 4: and the global LNG market doesn't impact that. So is
[29:00] Speaker 4: this like paradox. The US is incredibly important for leg
[29:03] Speaker 4: and there are some people who make a lot of
[29:05] Speaker 4: money from LG in the US, the people who own
[29:07] Speaker 4: the export terminals, but apart from that, energy does not
[29:10] Speaker 4: impact the US in such a meaningful way. I don't know, Foles,
[29:13] Speaker 4: would you agree with that take?
[29:15] Speaker 2: I would agree.
[29:16] Speaker 3: I mean, the only way it really does impact is
[29:19] Speaker 3: just that if you start exporting a whole bunch more gas,
[29:22] Speaker 3: sure you're going to have a knock on impact on
[29:24] Speaker 3: prices domestically, right, right.
[29:27] Speaker 4: So if export capacity increases much more than it it
[29:31] Speaker 4: currently is at, then that coupling will become a lot
[29:34] Speaker 4: more real. But it's somewhat limited at the moment.
[29:36] Speaker 3: It is somewhat limited at the moment. And Tom, you know,
[29:39] Speaker 3: so I completely agree with what you said. So the
[29:42] Speaker 3: inflation reduction that was supposed to help the domestic ecosystem,
[29:47] Speaker 3: the BLNG story, that is a that is an export business,
[29:51] Speaker 3: right that that is a and you know, when you
[29:54] Speaker 3: think about it, especially from the US perspective, it is
[29:57] Speaker 3: something that from a from a sale and commodity perspective,
[30:01] Speaker 3: the US has an incredibly strong position in perhaps a
[30:05] Speaker 3: position that they've you know, not had in a number
[30:08] Speaker 3: of other exposiblitys. As the US has very much become
[30:11] Speaker 3: a consumer of global goods, and this is one of
[30:15] Speaker 3: those things that they are just a really big exporter
[30:18] Speaker 3: a commonly used good.
[30:20] Speaker 1: So, as we started the show challenging the premise of
[30:23] Speaker 1: whether or not there could be a truly global gas
[30:25] Speaker 1: outlook and establishing of course that there can, I want
[30:28] Speaker 1: to finish by actually talking a bit about how natural
[30:33] Speaker 1: gas is perceived globally. So rewind five plus years. There
[30:37] Speaker 1: was certainly a point in time where we we're talking
[30:39] Speaker 1: about it as a bridge fuel or is you know,
[30:42] Speaker 1: this discussion of something that would inevitably be transitioned out
[30:46] Speaker 1: of the energy economy. And you know, my perception is
[30:49] Speaker 1: that that has in some respects really changed more recently
[30:52] Speaker 1: and that it has this very firm place in our
[30:56] Speaker 1: discussions around what the global energy mix looks like. That's
[30:59] Speaker 1: really evident when we actually look at what happened at
[31:02] Speaker 1: COP twenty eight in Dubai and how the discussion in
[31:05] Speaker 1: that stage where it was very much focused on decarbonization
[31:09] Speaker 1: and tackling the climate change issue, that it was referred
[31:12] Speaker 1: to as a transitional fuel that could play a role
[31:14] Speaker 1: in facilitating the energy transition while ensuring energy security.
[31:18] Speaker 2: Those were the terms that were used.
[31:20] Speaker 1: So how would you say, very much in a more
[31:23] Speaker 1: anecdotal sense, but how would you say that natural gas
[31:26] Speaker 1: and energy are perceived globally right now and the role
[31:30] Speaker 1: that it plays in decarbonization.
[31:33] Speaker 3: I've spent many years in the oil and gas community,
[31:36] Speaker 3: but I never say, yeah, gases in net zero fuel.
[31:40] Speaker 2: It don't.
[31:41] Speaker 3: It's not just is not, but yes, it is a
[31:46] Speaker 3: lower carbon fuel that can support the energy transition.
[31:53] Speaker 2: And I think what's happened with gas over the years.
[31:56] Speaker 3: It's oil used to dominate, still dominates to and extent.
[32:01] Speaker 3: Gas was sort of waiting in the wings, waiting for
[32:04] Speaker 3: its time to shine and be the fuel of the future,
[32:10] Speaker 3: the dawn of gas, Global age of gas.
[32:12] Speaker 2: You know, these are things we used to say years ago.
[32:14] Speaker 3: And when the energy transition started to accelerate, I think
[32:18] Speaker 3: that you very much changed and you had a gas
[32:22] Speaker 3: industry that was like way.
[32:23] Speaker 2: Where were ware we were supposed to have our time,
[32:25] Speaker 2: what's going on?
[32:27] Speaker 3: And then you know, you started seeing investments drop and
[32:31] Speaker 3: you started to see a little bit being you know,
[32:34] Speaker 3: you started to see that villainization of fossil fuels, oil
[32:37] Speaker 3: and gas. We saw that, you know, gas was being weaponized,
[32:41] Speaker 3: and people get scared of that. So when people get
[32:44] Speaker 3: scared that their lives depend so much on something, you
[32:48] Speaker 3: start to change your mindset and you start to adjust
[32:50] Speaker 3: your life to actually manage this particular risk. So what
[32:54] Speaker 3: we saw in Europe, for example, from a business perspective,
[32:58] Speaker 3: we saw a lot of the industry saying, yeah, no,
[33:00] Speaker 3: I like this is not cool. Yeah, we're changing, we
[33:04] Speaker 3: are diversifying away from gas like this is too volatile.
[33:07] Speaker 3: We saw people actually turn down their thermicids during winter
[33:12] Speaker 3: just to consume less gas as a demand change.
[33:15] Speaker 2: That happened. But what happens.
[33:18] Speaker 3: When gas is abundant and gas becomes dirt cheap? Are
[33:22] Speaker 3: the industries going to turn back on There are businesses
[33:25] Speaker 3: at the end.
[33:26] Speaker 2: Of the day, if they're.
[33:27] Speaker 3: Alternative there's currently more expensive than natural gas.
[33:30] Speaker 2: Are they going to switch back? Cook?
[33:31] Speaker 3: For me?
[33:32] Speaker 2: I think it's a question mark.
[33:33] Speaker 3: I think gas will still have a very prominent role
[33:38] Speaker 3: in the energy system unless there is a lot longer
[33:43] Speaker 3: policy against the use of it, and right now I
[33:46] Speaker 3: think that's probably unlikely to happen given that it impacts
[33:51] Speaker 3: so many things. It also impacts the ability for a
[33:54] Speaker 3: lot of countries in the global cell to actually grow
[33:57] Speaker 3: their economies. They're having increases empowered you know, they need
[34:02] Speaker 3: power sources and gas has been the easiest thing for them.
[34:07] Speaker 3: You have economies that have built the industries and economies
[34:12] Speaker 3: on domestic gas and they still need it to grow
[34:16] Speaker 3: and to function.
[34:18] Speaker 1: Very simply put, this is a global market with regional
[34:22] Speaker 1: markets that have an impact on the rest of the
[34:25] Speaker 1: world and policy whether it is well Essentially, it's international
[34:29] Speaker 1: policy that plays into the energy transition that is so
[34:33] Speaker 1: critically important. So when we think about the economics of
[34:36] Speaker 1: our energy system, we're definitely also thinking about policy and
[34:41] Speaker 1: politics around the world. And thank you for shedding light
[34:43] Speaker 1: on that and some of just some of the many
[34:47] Speaker 1: things that are happening in gas markets around the world
[34:50] Speaker 1: on today's show. Thank you Faus for joining us.
[34:53] Speaker 2: Thanks Dana, it was pleasure to be here.
[34:55] Speaker 4: Thanks everyone.
[35:05] Speaker 1: Today's episode of Switched On was produced by Cam Gray
[35:08] Speaker 1: with production assistance from Kamala Shelling. Bloomberg NEIF is a
[35:12] Speaker 1: service provided by Bloomberg Finance LP and its affiliates. This
[35:15] Speaker 1: recording does not constitute, nor should it be construed as
[35:18] Speaker 1: investment advice, investment recommendations, or a recommendation as to an
[35:21] Speaker 1: investment or other strategy. Bloomberg A NEIF should not be
[35:24] Speaker 1: considered as information sufficient upon which to base an investment decision.
[35:28] Speaker 1: Neither Bloomberg Finance LP nor any of its affiliates makes
[35:31] Speaker 1: any representation or warranty as to the accuracy or completeness
[35:35] Speaker 1: of the information contained in this recording, and any liability
[35:38] Speaker 1: as a result of this recording is expressly disclaimed,

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