Gas – how low can prices go?

The Montel energy podcast – market insights from people in the know. In this week’s episode, we discuss the latest developments in Europe’s gas market and the outlook for prices for the rest of the year. How low can prices go? 

Hosts:

• Richard Sverrisson, News Editor, Montel, 
• Anna Siwecka, freelance journalist/podcaster. 

Guests:

• Wayne Bryan, senior energy and commodity analyst, Alfa Energy,
• Chris Eales, Editor France, Montel. 

Transcript

Richard Sverrisson, News Editor, Montel: 0:03

Hello listeners and welcome to the Montel Weekly podcast, bringing you energy matters in an informal setting. I'm Richardson. And I'm Anna Siwecka. Today we're back in London and joined by Wayne Bryant and Chris Seals. Wayne is an energy analyst at Alpha Energy, a gas expert who is a regular speaker at conferences around Europe, including our own Welcome, Wayne.

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 0:23

Thank you.

Richard Sverrisson, News Editor, Montel: 0:23

Also joining us our very own Chris Eels, Montel's French Bureau Chief. A warm welcome to you, Chris.

Chris Eales, Editor France, Montel: 0:28

Hello, Richard.

Richard Sverrisson, News Editor, Montel: 0:29

I see you're only wearing single denim today, not double denim. That's very, that's, that's positive.

Chris Eales, Editor France, Montel: 0:38

That's a nice way to start the pod, I think. Yeah. Yeah. We, we, yeah, we, we'll get onto fashion a bit later. Yeah. Okay. And 'cause you are, you are looking very interesting today. Lovely cut of that. Uh, that reminds me of my uncle of J from, uh, 1950s. I think It was very classic. It was very close. Uncle. Is it second

Richard Sverrisson, News Editor, Montel: 0:54

hand? Anyway. Thank you. Thank you, Chris. And listeners, we apologize for a lot of drilling, uh, noise that's going outside of our window. They're trying to keep pace with the, the, the, with us on the pod, but I, I don't think they quite managed it building a wall, aren't it? Oh, oh yeah. Exactly. It's quite popular now. Today we're focusing on European gas issues, and we'll be tapping into Wayne's superior knowledge on these matters. Let's start where you know where gas prices are now, Wayne. I mean, they're at historic, also not historic, but multi-year lows. So why, what, what's happening? What's going on? And is this good news?

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 1:34

Well, in terms of the good news, it's, it's good news if you're an end user. If you're a producer, uh, maybe it's not so much good news with prices at these levels. Uh, however, after last year, uh, when the market was in completely the opposite state in terms of pricing, I think they can live with that for the time being. Um, in terms of the prices where they are, I think it's fully justified at the moment. I. Um, if you look at all the factors now that are contributing to this price fall, we're looking at the oversupply of LNG, which for me is one of the primary reasons. We'll get back to that later. Yeah, of course. Um, also as well, you look at the other fundamentals in terms of weather last year, towards the end, as everybody knows, we had the beast from the East that drained European storage levels. Um, also as well, we had a record hot summer. Um, which had other effects on different parts of the market. We had problems with the French nuclear river levels were heating up. Um, all in all, we actually had a lot of bullish issues, uh, this time last year. And now we're seeing all the risk premiums that were built into the contracts. If you look at Q3, where the market sort of topped out, um, sort of October, November, uh, we've lost literally, if you look at it on a curve, we've lost all of that, uh, upside premium. So for example, looking at the summer 19. Gas contract that's fallen by literally, uh, half. Yeah.

Richard Sverrisson, News Editor, Montel: 2:52

This is all kind of the risk premiums that were here last year have disappeared and this is all basically fundamentally driven. Is there any regional variance here in terms of prices, say for example, in other parts of Europe or, uh, are the same factors

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 3:06

looking at most of Europe and the fact the areas that I cover and my company we cover, um, we see in the same sort of. Downside on the curves. If you, I've got several charts that. Hmm. Detail country by country calendars on one chart, and you look at the shape, it's pretty much the same. Spanish gas prices have really fallen now. Uh, they're at low's. We haven't seen for every year and a half. Even Italian gas has been a bit softer as well, and that obviously in the touristy is, is one of the most expensive, uh, gas prices. So in general, regionally, most markets are in a similar position.'cause we're all benefiting from the, the supply glut that is LNG at the moment. I mean, this flurry of cargoes has been never ending really. I think last month we broke a couple of records. The first one was send out to, I think it was two Fridays or three Fridays ago. The amount of send out, uh, LNG send out broke the all time record in terms of cargo arrivals, uh, March thus far into Northwest Europe. It's been about 77, 78 cargoes. Mm-hmm. Uh, and the previous record was set in January. Think at 52 cargoes. That's this year. That's I'm talking, but these, yeah. And they break records going back to as far as, uh, the data is available 2013.

Richard Sverrisson, News Editor, Montel: 4:14

And where are these cargoes coming from?

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 4:15

Well, they, we'll touch more on energy later, but at diversity's really been important. I mean, we've seen a lot of diversity, but Russia's been a, a really been ramping up their send out with the ship to ship transfers in Norway that have been occurring. Mm-hmm. And Yamal has exceeded expectations in terms of Sendout, so a lot from Russia. But you've got players like Angola, Mozambique. Peru, we've seen a real diversity of cargoes.

Richard Sverrisson, News Editor, Montel: 4:34

Those cargoes are coming into Europe from Peru and

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 4:36

Angola and us, of course, the us. And don't forget, south Hook made some technical changes that allowed it to receive cargoes that didn't just originate in Qatar, and that's made a huge difference. The UK terminal? Yeah, the UK terminal was only set up for Qatari gas and they made some technical changes, I think, to oxygen levels that now we're receiving cargoes from all over the world into South Hook, which has really helped as well.

Richard Sverrisson, News Editor, Montel: 4:57

But these, I mean, it's the oversupply. That's hitting, that's driving the prices down, yeah. Across Europe. But did the, I mean Italy, Spain, are there other factors influencing this? Or is there Spain's been a record importer. Mm-hmm. Yeah. Yeah. The, the, you mentioned the milder weather. Uh, you know, the, the French nuclear availability, uh, we'll come back to that as well, Chris, but I think it's mainly in the southern European markets that it's, it's the, it's the supply glass. Yeah. What would you say then, is the outlook going forward, Wayne? I mean, um, could prices go much lower?

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 5:26

I think if anything, going into Q2, um, we could see prices fall, but I, I don't see it falling massively. I mean, looking at the day ahead, will it get into the twenties? Um, I'm not sure. Um, it's a possibility we're not too far away from that. It pence per term we're talking. Yeah. So what's the euro?

Richard Sverrisson, News Editor, Montel: 5:44

The euro megawatt hour equivalent of that would be. Um, okay. Um, yeah, around 10 or under 10 potentially. Yeah. Yeah, yeah. But

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 5:53

I don't, I, it would need a lot for it to go that further.'cause we're already at these really low levels and we'll be looking at some tightness probably in Q3, but I think Q2 has got the potential tightness in Q3.'cause demand will be well in Q3. There's a lot of maintenance going on. Okay. Um, there's a really heavy maintenance in Europe, uh, Norway and the UK especially. Yeah. Um, so that will feed into it and also. Q3, you might see an uptick in demand from Asia, um, ahead of the winter for restocking. So if that is the case, there's Q3 could be a little bit tighter, and we could see a little bit of upside. However, we'll be going in if all things, uh, status quo remains the same and there's no shocks, um, then we'll we'll be going in from quite low levels, uh, in terms of prices. So for me, the outlook is, is pretty much more of the same. Barring any, any, you know, shocks that we're not quite aware of at the moment. And also renewables have been very strong this year. Um, Germany, uk Wind has been a real good provider, so that in tandem with lower demand has also been driving this, uh, price as well.

Richard Sverrisson, News Editor, Montel: 6:55

Okay, sure. Um, let's look at France. Chris, you know, after all you live there.

Chris Eales, Editor France, Montel: 6:59

I do live there, Richard. That's very astute of you. Point absolute. The game actually, you didn't comment on Wayne's. Uh. Jacket. It's very nice. It's, um, waist coat, brown waist coat, shirt and tie. But

Richard Sverrisson, News Editor, Montel: 7:09

it's, it's not as class as double denim. No, but it's single denim. That's yours. I have to mention it, Chris. But berry swiftly onto gas and French gas in particular. Uh, Chris, it's, it's a gas. It's a gas, yeah. Um. But you would say the same facts are driving the French markets, um, even though France, I mean if we look on the power side, it doesn't really have that much gas fire generation.

Chris Eales, Editor France, Montel: 7:29

No, no. But the drivers are similar. You have pipe gas coming from Norway, uh, Russia of course. And then you have four LNG terminals in France, in the south and the north on the south coast and the North coast. So, but as you said. Prices f are following, uh, from the Dutch hub, the most, uh, liquid hub, the TTF. They really follow that. And so the prices have, have come, right. Have come right down. They were, they, they, I think they peaked last year at something like, uh, they were high last year, 18, and now they're down to 14 or so. So they're the same drivers. I mean, Wayne's told you about this. There are the same drivers, but you asked about the gas fired. Power plants, but they, it does have an impact even though it's, um, it's a tiny proportion, uh, in terms of the overall generation. It is important because, for example, last summer you touched on this Wayne, and when we had nuclear availability, we had problems with availability because of heat waves. Mm-hmm. Yeah. Which cuts generation at nuclear power plants because there are, uh, river temperature levels that have to be. Respected and, and these weren't respected. So they cut generation. When they cut generation, what takes its place? Well, actually last year it was gas fired, you know, uh, uh, power plants that took that, that were, were, were, uh, sparked up. Yeah. So beacon

Richard Sverrisson, News Editor, Montel: 8:51

unit. Yeah. France has, is peaking units, mainly France, isn't it?

Chris Eales, Editor France, Montel: 8:53

Yeah, well there, in that case it wasn't peaking units in a way 'cause they were replacing nukes interestingly, uh, last year for some, for some. So that has, uh, that can have a, does have, uh, an impact. It's an, it's an interesting difference with, with France, I would say. Um, because of the use of gas heating in France as well. Um,

Richard Sverrisson, News Editor, Montel: 9:12

maybe some of the imports from neighboring countries. There's also gas fire generation and under those situations potentially. But, um. We've seen some nuclear disruptions in, in France, uh, as, as I mentioned by Wayne and, and by yourself Chris? In, in the last two years. Really? I'd say 2002. Yeah. 17. 17 has started. That was when it really first became apparent. Yeah. What, what's the outlook for this year, Chris? I mean, would you, are we, are we, are we out of the storm?

Chris Eales, Editor France, Montel: 9:36

Uh, well, uh, if you, if you talk to EDF, they will tell you they are, uh, outta the storm. Of course, they were, they are experts in, uh, in positive information, but, um, the reality is probably not as rosy as they paint it. But it is still a better picture. We are looking at a better scenario than the one, uh, two years ago, for example, when you had reactors closed and um, you had technical problems with, uh, too much carbon. Mm-hmm. In your steam generators, which very bad thing you don want carbon there. You don't want too much carbon in your steam generators, uh, in the, in the, in the steel, in the steam generators. So let's be clear about this. Um, anyway, so, so we have

Richard Sverrisson, News Editor, Montel: 10:22

covered this in another project. We've covered

Chris Eales, Editor France, Montel: 10:23

this, we've covered this a bit. But what I will say is, what, what, which we also covered as well, but the interesting thing about this year, one of the interesting things is that they've got seven, 10 year visits. So they've got big outages lined up. Big nuke outages, and we've confirmed that recently since I last spoke to you. Okay. In gay Paris. Um, there are three already underway and f uh, four left to do this year. So that could, you know, there could be difficulties, there could be extensions, so that could hit, um, could hit, uh, that's a potential

Richard Sverrisson, News Editor, Montel: 10:52

curve ball then. And

Chris Eales, Editor France, Montel: 10:53

so you've got the heat wave and you've got the It's a risk for me. Yeah, it's a

Richard Sverrisson, News Editor, Montel: 10:56

risk. Yeah. It's definitely a risk. But has it been priced in when.

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 11:00

I imagine there's some element of some French nuclear risk cream. Same for Belgium, even though they restarted Dole a bit earlier than was expected, which was a bit of a boost. Still, there's always gonna be concerns. The market is looking, sorry, Wayne. I cut you off, didn't I? No. Carry on the market's. Looking at Q4 now, right? Or, or, or possibly has been

Richard Sverrisson, News Editor, Montel: 11:19

for, for electricity generation. Yeah. For

Chris Eales, Editor France, Montel: 11:20

electricity generation. So they're starting to worry about, I hear from traders, they're starting to worry about, uh, maintenance issues that could be, yeah. You know, maintenance starting in the summer, that could go into,

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 11:32

that's the problem. Extensions or even in the UK at the moment, we have six out of our nine reactors out. Mm-hmm. And any, any nor any nor normal circumstance that wouldn't, would really be quite bullish. But at the moment, because of the low gas prices, because of high renewables, because of low demand, it's not having a as bigger impact as it usually would. But again, these extensions, uh, are always, uh, a cause for fear really.

Richard Sverrisson, News Editor, Montel: 11:56

Absolutely. And even. Japan, Japan is restarting, they're restart. Yeah. Yeah. So that means that's also then lowering Asian gas demine. Correct. That's quite, so the nuclear element here is quite, is quite an interesting factor in, in the whole gas pricing dynamics, isn't it? Same

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 12:10

in South Korea. They restarted quite a few recently. They had quite a lot of extended maintenance, so that's lowered their imports as well. So yeah, nuclear is a common theme. It's a common theme, um, throughout Europe, in both basins, Atlanta and Pacific. It's, it has an impact, uh, on prices in, in Europe as well as, uh, in Asia. So.

Richard Sverrisson, News Editor, Montel: 12:25

What do you see as the potential un unforeseen factors here? Nuclear is one potentially. Uh, are there any others? I mean, know you haven't got a crystal ball, Wayne? Yeah, of course. Yeah. But, uh, um, but are there any other sort of, uh, curve balls that could potentially Yeah, political

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 12:39

factors. Yeah, have been quite high at the moment. And this is something we are looking at quite a lot 'cause they're affecting all markets. Mm-hmm. Um, oil, gas, power. Um, you've got the US China trade talks that are ongoing, that are having an impact. They could go wrong. You've also got the geopolitical situation in North Korea. Uh, even though things have smoothened out a bit, there's still a risk from that. What's going on in Venezuela. Throw in Libya. Mm-hmm. There's a lot of geo Brexit. There's a lot of uncertainty geopolitically, um, which could throw some curve balls also as well. The Norwegian hydro issue, that's still a problem. Mm-hmm. Um, the, the reserves are still. Probably below the, the three or four year average. Now, I think they recovered of late, but the outlook still isn't, the snow melt season is just about to

Richard Sverrisson, News Editor, Montel: 13:21

start anyway, or it's already starting, but yeah. But

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 13:24

their prices, if you look at the Cal 20, uh, Nordic contract, it's nowhere near where it usually is, uh, this time of year. So for me, that's also risk and hydro. Levels in general across Europe are still not great. And that was another factor that we saw last year. And again, LNG, we could see a cut in LNG production. If prices keep falling. I mean the Asian prices is now sub, um, it's below the UK month ahead price and is also below.$5. Um, so that, again, could have an impact. Same with the coal market. There, there's been, I say, rumors and talk of production cuts similar to OPEC in the coal market. So for me, there's a, there's a lot of factors that are still out there, and as we know, we can never rest on the laurels. We saw what happened with forties, no one expected that, and that caused a huge spike. So bees from the east, well, rough or rough, you know, there's been, there's been many things over the years, and again, the summer, even though the forecasts at the moment don't support it. We could see another 40, 40, 45 degrees summer, and that caused caused chaos in the markets last year. You mentioned the geopolitical issues.

Richard Sverrisson, News Editor, Montel: 14:26

I'd like to touch on another one, which is potentially the, uh, sanctions on Nord Stream and, and Germany. Uh, how do you see that playing out and having an impact on, on developments, uh, in, in the gas market? I mean, the threat of sanctions on companies that are involved in, in their pipeline. You know that that's a certainly a big risk.

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 14:44

That is a big risk as well. And I think America are quite keen for this not to happen. Mm-hmm. Um, but I think the German, Germany are keen for it to happen. And so are several other, uh, European players for the pipeline? Yeah, for the pipeline. Most definitely. Especially, I mean, Germany, I think they, they're definitely happy to have it. Um, I think 40, 40% of their imports.

Chris Eales, Editor France, Montel: 15:02

Gas

Richard Sverrisson, News Editor, Montel: 15:03

imports are from Russia. Exactly, exactly. I

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 15:05

know they're trying to wean themselves off it and they're looking to build l and g terminals now and try heard Trump saying, oh, we'll send l and g to Germany, we'll send it to Europe. You don't wanna become an over reliant on Russian gas, but I, I see it happening. It's been a lot invested. A pipeline part of it's already been built or it's continuing to be built. So for me it will happen, but there will be some. Bumps in the road, so to say, does

Richard Sverrisson, News Editor, Montel: 15:27

Germany need LNG terminals? I mean, we've got a massive over capacity of LG terminals. I mean, Chris mentioned the ones in France, there's several in Spain. I mean, taking Europe as a whole, I mean there's over 200 BCM of capacity and a lot of that is, is underutilized. I mean, the vast majority of it, isn't it? So yeah, why build new LNG

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 15:46

terminals? Wow. When they've got no coal, what they gonna do. So I think this is, this is preparing for that. Obviously they've got a lot of generation to replace, so I think import terminals are needed, uh, in Germany and it gives them access to this market. So, so for me, yeah, I think, I think Nord Stream will go ahead and I think the l and g terminal, they're looking at building four, at least they'll go ahead as well. Um, you

Richard Sverrisson, News Editor, Montel: 16:07

mentioned Brexit. What, what I mean, uh, it's a, if, if anything is coming clearer, it's, uh, no, it's brake. The mud not Brexit, please. No, just a slight touch on it, Chris. I don't know. Um, but. Yeah. What, how? I mean a no deal on the 12th of April. Carbon for me. Okay. It's carbon.

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 16:24

Carbon. It's the link with carbon. I mean, we all know that if, if we have a hard Brexit, uh, that's very bad news for carbon. Um, there's a lot of positions that the UK players hold that will get unwound. Um, there's also is get dumped on the market also. The, the, the, yeah. I mean not only positions being un wham, but also the, the. The, the permits as well, uh, being dumped back into the market. So that wouldn't be great for carbon. So that will have an effect, whereas obviously a positive, uh, deal. I think some of that's already priced in now, but a positive deal is good for carbon. Mm. Still don't think it's gonna hit the 35 that. A lot of people seem to talk about last year, um, the,

Richard Sverrisson, News Editor, Montel: 16:59

the Euros a ton

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 16:59

per carbon. Yeah, yeah, yeah. It might trade towards 30, but I, I'll be amazed if it gets to 35. It's

Richard Sverrisson, News Editor, Montel: 17:05

quite comp. Yeah, it's quite comfortable in that 20 to 23 range now. Sideways, range

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 17:09

bound now for the past few months. And also you've gotta look at some other factors for carbon, like low cold generation, like warmer weather, et cetera, and economic concerns. So.

Richard Sverrisson, News Editor, Montel: 17:17

What's the outlook for demand? I mean, we talked a little bit about supply, you know, LNG, Norway, uk, et cetera. Where, where's the potential demand growth for gas? I mean, given Europe has a real, you know, really ambitious climate targets, both for renewables and for carbon emissions, where does gas fit in?

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 17:34

I don't see demand following its traditional upwards, slant. Um, I think some of that is attributed to the simple things like energy efficiency, like renewables, um, but also as well in terms of that, you've gotta look at the economic, the broader economic situation. You look at the PMI. They're not great. You look at all the production numbers, not only coming outta Europe, also China, they're not great. So I think a lot of companies are struggling. Um, future orders struggling, Brexit's gonna have impact. So I think a lot of the industrial gas demand will start to fall. So we might see some little upticks in demand, but I don't see the overall trend, uh, for gas anyway. Um, rising that much. So I don't see demand growth prospects as being that great

Richard Sverrisson, News Editor, Montel: 18:20

in France. Chris. What's the outlook for for gas demand there? I know you touched on biogas or kind of, um, you know, I think there, that's potentially a growth area there, isn't it that

Chris Eales, Editor France, Montel: 18:30

people are looking at biogas or is, is insignificant at the moment, but it is an issue because, uh, of the. Uh, desire to de so-called decarbonize. And so you've got to find ways to use to have green gas. And now, uh, the country has set out in its energy path some targets for this. Uh. Green gas, if you like, um, which are not very high according to, uh, some observers and analysts. Um, and so that's going to be an issue going forward. That's, that's definitely a, um, a current subject of debate.

Richard Sverrisson, News Editor, Montel: 19:08

I. I mean, there's a bit huge challenges isn't there? Replacing, you know, natural gas that's being produced in vast quantities with basically with, you know, methane from cow effluence and, uh, animal effluent and also food waste and hydrogen, I suppose methane hydrate, something

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 19:23

that's in Asia where they're, where they're taken out of ice. Mm. Uh, that's another form of, uh, potential, uh, gas. So, and then, so

Richard Sverrisson, News Editor, Montel: 19:31

renewables, so this would be a green gas as well, so it would be part of the renewables targets in a sense, on the gas side, but do you see gas as a kind of bridging fuel? There's a lot been talked about. The bridge from, from the present fossil fuel world into the renewables world. And gas will see us through, uh, through that period. Uh, is that how you see it, Wayne? I don't see gas

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 19:52

as a bridging fuel. Personally. I think it's here to stay mm-hmm. For a long time. Mm-hmm. And you look, look at the investments in gas around the world and in terms of LNG and even gas efficiency, have better efficient plants. I don't see gas as a bridging fuel. It will. I basically, the coal have fallout from all the coal now coal's, um, being cut in many countries over the next 10 years. Mm-hmm. I mean, if, so,

Richard Sverrisson, News Editor, Montel: 20:15

I mean, certainly in, I mean, if we're talking Europe, um, I think that's that's correct. But if you're gonna meet those very ambitious targets, keep ourselves to 1.5 degree, um, change in, in temperatures, global temperatures, then, then is there a role for gas? I mean, what do you think Chris?

Chris Eales, Editor France, Montel: 20:31

I think that it's going to be, um, it's going to be tough, isn't it, on both sides. It's tough to do it. Tough to do without it. Yes. Right, exactly. So, but there is a. Apparently there's a willingness to go down the line, go down the path of decarbonization. So, but, but Wayne, what you are saying is you don't think that that's really going to have much impact. No. Maybe longer term. Uh, new. New. So plus 2030 maybe. Yeah. New technologies and, and increase renewables. But you slightly. You're still gonna need it. I mean, it might be used as base load or backup, but I, you're still gonna need it. Mm-hmm. And why would all these, all this infrastructure be spent on pipelines, terminals? A lot of, um, LNG uh, projects, fis are being passed. Mm-hmm. Why would all this investment be happening? If it's only a bridge in fuel for the next 10 years? Who, why would you invest in it? Is that bad news for the planet then?

Richard Sverrisson, News Editor, Montel: 21:25

I mean, this is off subject possibly, but that making all these investments, stranded assets, I dunno whether, you know, what, uh, whether that's a, there's a good move or, or not. We're onto something here as well. I think Wayne, with, you know, the, the switch from coal to gas fire generation, and I think in certain, a lot of countries now in Europe, there's a, the gas plants are backing the money Asia. Uh, and in Asia as well. Um, now where is gas? I mean this, this fuel switching occurring 'cause it's not happening everywhere. I mean, if we, if we keep to Europe and where in Europe do you see it? You know, uh, do you see it most, most happening?

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 22:01

Well, it can happen in, in several countries. And again, it depends on price. Mm. The price would incentivize that. I think some say TTF around 14. I've seen some say 12 and a half. Okay. Will incentivize, incentivize more fuel switching. Uh, so we're there now we Yeah, theres some fuel switching. There's evidence of it already happening now. Yeah. Yeah. Where, where's the evidence of that? Um, there's some switching going on definitely, uh, in Germany. Right. Um. Maybe in other parts of Europe as well, but there is some evidence of switching already happening. I think that'll, that'll continue.

Richard Sverrisson, News Editor, Montel: 22:30

Mm-hmm. Okay.

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 22:31

But again, it depends on demand levels as well. And the coal price is still falling. Mm-hmm. Um, coal's under similar pressure to gas. If you look at some of the fundamental reasons why the coal market is where it is, it's kind of similar situations, high storage, storages, low demand. Mm-hmm. Um, so yeah, I think there's, there's definitely potential for more switching over the summer. But again, it depends on the raft of factors for me.

Richard Sverrisson, News Editor, Montel: 22:53

And has the, the carbon price floor in the UK helped this, the, the, the move to more gas by generation obviously has put coal out the money, but there's also a contributing factor with low gas prices. Yeah, definitely. It's

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 23:05

a definite factor.

Richard Sverrisson, News Editor, Montel: 23:06

Demand. We, we touched upon demand in Europe, but obviously demand in Asia. Plays a key role here. What have we seen happening over recent years, Wayne? Um, because there's obviously a key price for European, I mean, a key price driver for European Yeah. Uh, markets. What, what's what's happening in China? Japan and Korea. You mentioned Japan and Korea with the nukes coming back online. Well, Japan, yeah, but China is a big, I mean, there's a, that's a key market really. It's very key, yeah.

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 23:31

Key for a lot of the markets. Gas. Mm-hmm. It's key for coal. Well, obviously China, everyone knows about the, the coal to aggressive coal to gas switching program that's still occurring. Yeah. Um, also as well now for, for China, they managed to get to a level, which is one of the reasons why we've seen so much LNG. Their storage levels are really full now. They're incentivized or incentivized or told to, you know, let's get these storages full ahead of the winter that we're now back to exit. We're now exiting that winter, and them like us had a very mild winter, so they've also got a storage overhang. Now we're in the shoulder season, but typically we might see a pickup as we move into Q3. Uh, but again, it depends again, how's the winter gonna turn out in Asia? Uh, that's gonna have a huge barr, but the good thing is they've already got really good levels of storage of gas they haven't used, uh, over the past six months. So for me, their demand will still be there. Uh, if you look at some of the broader. Economic numbers, again, you've seen their growth is falling. Uh, also you've gotta look at China in terms of renewables there. They've got some pretty impressive, um, projects that have been completed or being completed that are gonna have a huge effect. Um, you've seen, they've got three Gorges, the world's largest hydro. They're building the world's largest floating solar, the world's largest solar farm. They're building a lot of the world's largest installations, wind. They're making real efforts for that energy efficiency. That's a big drive. So I think. For them, what they're doing is having a huge bearing on what we're seeing, uh, in the Atlantic base. I suppose They don't have

Richard Sverrisson, News Editor, Montel: 24:59

the, uh, the hindrances of, of going through the whole permit, uh, processes. No, no. So they, they don't really care. Say something can Exactly. It generally happens,

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 25:10

but that's the only thing about China that's a concern. They're always inter interventions. Mm, policy interventions that happen consistently, like the minimizing of imports of coal. Now. If you look at, uh, some of the terminals, queen Dao probably pronounce that wrong, but there's a lot of ships there waiting, um, for clearance. Not just Australian ships just in general. They're really clamping down for the

Richard Sverrisson, News Editor, Montel: 25:31

imports. For someone like you, Wayne, sorry to Mm. To to interrupt. It must, you know, getting into the minds of the people driving Chinese energy policy is, is is quite a challenge here because it's such a key, important factor of the markets. Yes. But you, they, they throw kind of, you know, throw spokes into the wheel. It's quite hard to,

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 25:48

to get, I actually met someone from the NDRC uh, conference about two months ago, and she put together a very comprehensive presentation, which was, it was really good to see. Mm-hmm. And there again, if I reading that presentation, they're talking about how. They won a really slash coal usage because of the smug and I've been to Beijing. The smog was quite horrific, to be honest. Mm-hmm. Um, and not only in Beijing, there's other big cities as well. And they're also looking into LNG powered trucks. Mm. They're making a, a lot of, a lot of ground. I mean,

Richard Sverrisson, News Editor, Montel: 26:18

clean air is quite a movement, isn't it? China, isn't it? It's a big thing. I mean, it was in London, in the, in the 1950s. I don't know. Do you remember that, Chris? Or, but, uh, but that, that's what drove coal out about coal, you know, drove basically a decline in coal generation within London. But, so that's happening in China on a, on a vast

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 26:37

scale. On a vast, vast scale. So that's really, uh, having a huge impact on the market. And same with Japan economic reasons. It was costing 'em a lot of money. They were the number one importer of LNG. Um, they're not anymore. And again, they think they're up to nine reactors now. They're still public. Uh, opinion isn't great towards it. However, the economic benefits are, are there to see. Mm-hmm. And like China, they're also making a bit of gains in renewables. And same for South Korea. Mm-hmm. Um, their demand has also has gone a bit down recently, but we'll probably see it picked back up again. I think Q3 will be the, the time, it'll be the key moment, uh, for me. And there's also a lot of oversupply in terms of projects, so

Richard Sverrisson, News Editor, Montel: 27:17

I'm gaining a hint here from producer Anna that it's, uh, time to, to wrap things up already. Already. I'm, you know, did you

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 27:22

mention Anna's? Uh, jumper. It doesn't look like a bad TV screen, does it?

Richard Sverrisson, News Editor, Montel: 27:26

Uh, not, not from where I'm sitting, sitting. Chris. Uh, no, no, no. But thanks, thanks for mentioning that. Uh, yeah, we're back on onto fashion. We can, uh, she do an episode. Fashion. Fashion. Yeah. Fashion and energy. Yeah. We won't, we won't invite Chris then, I think. Um, but, uh, but anyway, moving back to, to the matters, the gas matters. We talked about LNG. A little bit about piped gas, but I mean, in light of all this oversupply and the glut coming into Europe, how, how is gas prom reacting? I've seen it's, it's selling a lot via its electronic sales platform and what's going on here. So it's not really, you know, it's not coming into the spot market. It's coming straight into this, this sales auction, auction, their own auctions. What, what, what, what does this represent and what kind of what, so they just,

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 28:08

they just want get rid of volume, don't they? If you look at G Prom, I think they're. Strategy's been quite aggressive. Yeah. I think their sales into Europe up 3% this year thus far. Um, and I think that's gonna continue. They really wanna make their presence felt. And if you look at it, it's like a, you've got Russia, you've got Norway, and you've got America. And it's like a three-way battle now of who can get the most gas into Northwest Europe. So it's all about market share. Mm. Um, for me at the moment, and I think that's gonna continue. Again, we might see, you know, spanner in the works over the next month or two when the prices start getting, if they start really coming under more pressure Mm. Um, and we see them in the twenties, which could happen, then we might see, you know, some maintenance is being extended not only in. Russian and Norway, uh, but also in LNG Mm, there's talk of extended maintenance is now Mm. Because we are looking at a real, uh, bit of oversupply at present. Mm. So, yeah, I mean, I think Gazprom will continue. They, I think it's more of a, they just want to get their gas into Europe. They want keep that reli, they want market share. Market share for them, it's. Yeah, it's

Richard Sverrisson, News Editor, Montel: 29:13

very cool. So would you recommend your customers to lock in the prices at the moment? Uh, would you, would you tell the golden question?

Wayne Bryan, senior energy and commodity analyst, Alfa Energy: 29:20

It depends on, I mean, we risk manage clients. We have some, you know, with different strategies, depends on how risk averse you are. But me personally, if it was my business, I'd definitely be floating, uh, Q2. Uh, and again, looking at the winter now, it's still quite an attractive price. If you look at where the price was, it, it was at a real high point. So those that held their nerve and didn't. Get stopped out or didn't lock in their volumes because they felt it was gonna fall then, then yeah. I mean, it's still a, it's still a good time to secure volume. Um, but going into Q2 is, was where I see the weakness. After that Q3, I mentioned this extended maintenance, I. I mentioned there could be some new, new factors in the market. You dunno where the hydros are gonna be. You dunno where French nuclear's gonna be. Mm-hmm. Is the LNG slow down gonna happen? If it does, apparently Q3 is where it's gonna happen. Storage is still in good position, but who knows? Again, next month or two we could see a return. Have some cold weather. But as it stands now, yeah, the Q2 for me looks like it's a continuation, but after that we could see a bit of upside. So for me, yeah.

Richard Sverrisson, News Editor, Montel: 30:21

We'll have to invite you back in Q2 then, Wayne, I think. Yeah. Yeah, please do. Um, I'm afraid we've run out of time, so I mean, it's been a great pleasure to have you here, Wayne. Thank you very much. Thank you. Thank you very much for joining us and a great pleasure as well, Christopher. And I'm sure we'll, uh, we'll meet again. We'll meet again. Dunno when. And thank you to producer Anna. Thank you, Anna. Anna. Keep listening to the Monte podcast, uh, and follow us on Twitter and on Monte News, all for all the latest engine news. Lots and lots of gas related issues. Thank you very much.

Chris Eales, Editor France, Montel: 30:53

Thank you.