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💬 "What the Frack Is Happening With Natural Gas?"

The Interchange

Photo by American Public Power Association / Unsplash

Host: Shayle Kann
Guest: Leslie Palti-Guzman | President | Gas Vista
Category: 💬 Opinion

Podcast’s Essential Bites:

[3:52] “What's very interesting to me is that […] in Europe, in the US gas has become a dirty word. And the only thing that policymakers want to talk about is hydrogen and green deals. And gas is coming back with a revenge with very high prices and unheard of […] especially in Europe and in Asia. […] Last year, during the worst of COVID-19 […] gas prices were at record low [of] $4 permanent BTU and now the spot price in Europe and in Asia [is] above $30 permanent BTU. So it requires a little bit of nuance, because those are spot prices and they only represent one off transactions here and there. It's not the majority of the transactions, far from there. But it's indicative of how far we've been in terms of have changes in the markets.”

[7:31] “The gas market is still very regional. And we have very different situations, whether we're in the US or in Europe, or in Asia. So [in] Europe […] the shift has been very progressive and gradual towards more flexible […] supply. […] We're at the point where it's probably only 30% of contracts of supply that [are] still long term contracts, so based on more oil indexation, and the rest is more spot and flexible. In Asia, it's the reverse. It's still […] 80% or 70% contracted and indexed to oil versus 20 or 30% spot indexed. So the the impact varies a lot depending on the region, but in winter, because gas is still a very seasonal play and weather has a huge impact, if some countries wanted to make up the difference with their contracted volumes, and go to the spot market, […] especially emerging markets cannot afford those high prices.”

[9:40] “One of the first impacts that has emerged is fuel switching. Because when gas goes up, some users may try to find a more affordable fuel. So in power generation, some plants still have the possibility to switch to diesel, fuel oil or coal. And we've seen that in Europe [and] in Asia. However, this year, what's interesting is that there has been also a coal shortage. So […] the preference in several countries has been to switch to diesel. And like the bad consequence is that it's dirtier even than gas. […] Another consequence has been the power outages and […] electricity rationing.

[18:41] “Why is the US the only supplier that over the past two years basically has increased supply? […] You'll hear a very mixed message from Russia saying one day that they can supply more to Europe, other times you're here no. […] I think in the short term, we may see large LNG suppliers or smaller LNG suppliers that had so far not exerted their flexible supply, ramping up if they can. But […] another problem on the LNG supplier side is that many historical suppliers have declining output like Trinidad, Algeria. Those ones are not going to be able to ramp up just because they have feed gas issues, and they have other technical issues. […] I think there would be two schools of thought between suppliers. The one that wants to manage output because they have an eye on the level of prices and the other one that just want[s] to grab market share and high prices as fast as possible.”

[23:15] “[Is] the takeaway from this crisis […] going to be to double down on renewables or to double down on gas? […] I think we need both actually. […] Many countries would want to reduce their vulnerability to fluctuation of commodity prices, and be more independent and have their own renewable production and eyes on hydrogen and other fuels, or even […] rethink the phasing out of nuclear in some countries and reviving nuclear plants. But I think [it’s] also apparent to go into more gas, because after all we need it for the energy transition, and we need a backup to intermittent renewable, but we need it to be green. So I think it's going to be potentially new investments, but into leak free, reduced methane, low carbon gas that would flow into the market.”

[24:55] “I think this crisis is going to prove [to] maybe policymakers that we need diversity, even in the power mix. And that it will be a country by country approach. […] For Pakistan, which is already a gas based economy, it makes sense to import LNG. For a country in Sub-Saharan Africa that has not yet been exposed to gas at all, it may make sense to look at other fuels. […] And that will bring resilience and reliability. […] You need at one point a fuel that is flexible and that can also be low carbon. […] If we manage to bring online those new technologies such as carbon capture, air capture, […] mixes of gases, so hydrogen and gas or biogas and gas, […] gas is still going to be part of the mix.”

Rating: ⚡⚡

🎙️ Full Episode: Apple | Spotify
🕰️ 30 min | 🗓️ 10/23/2021
✅ Time saved: 28 min