Uniper | Market Insights | Middle East, LNG, EU Methane Regulation, Power Plant Strategy & more

00:00:00: We have around seven hundred LNG ships worldwide.

00:00:03: You

00:00:03: take the gas into the liquefaction plant, you liquefy it by cooling down and that is a really fascinating experience.

00:00:14: Hello and welcome to Unipass Market Insights!

00:00:16: My name is Florian Oberländer and warm welcome to all of our audience today as well with his comeback to Unipar Market Insights.

00:00:28: I'm happy to welcome Gregor Pet as well, hi Gregor!

00:00:32: Thanks for coming back and i talked to Jess Torpe in the last episode.

00:00:39: really great episodes special topic weather which is always interesting.

00:00:44: so if you haven't watched it and need some advice on where to book your summer vacation check out their last version.

00:00:53: just give some hints there.

00:00:54: Well, but we have interesting topics today as well.

00:00:58: The main one is LNG and the impact it has on the markets And also what world that plays in regards to conflict in the Middle East.

00:01:08: But we will start with two short updates because they were news recently.

00:01:13: German power plant strategy.

00:01:15: there There's been an update.

00:01:16: What exactly is behind?

00:01:18: Yeah So We've been waiting for a while so It's very important.

00:01:22: So just to recall the background, we need a dispatchable capacity in the market.

00:01:28: Because of the fluctuation due to renewables in feed because of weather.

00:01:32: so that links to previous episode.

00:01:35: We need a capacity that can balance and there's couple of gigawatts missing.

00:01:41: This is why this capacity needed The German government introducing tender procedures then for in particular that capacity.

00:01:50: And as explained episode or so these plants need to be paid for by capacity, not by the amount of power they produce but rather that it needs there even if I don't produce much.

00:02:03: But just as when wind doesn't blow and sun doesn't shine on them is a background.

00:02:08: government has now provided a draft tender procedures, which is now on the table.

00:02:16: It's being consulted with industry associations and other stakeholders And it's very important that then goes into the legislative process and is decided by the government, also by parliament of course.

00:02:33: So they can be implemented fairly quickly.

00:02:35: The plan to do the first tenders in September or December would be very important so we could move ahead with an important step forward for more security.

00:02:47: I

00:02:47: think we're talking about roughly four and a half year.

00:02:50: Yeah,

00:02:51: so for each tenure?

00:02:53: So yeah when i understand it correctly they are aiming for the summer to pass.

00:03:00: maybe in one of the next episodes we can then

00:03:02: repeat on that again.

00:03:04: very important

00:03:05: also in the news.

00:03:06: The United Arab Emirates exited the OPEC.

00:03:10: We previously discussed the role of their OPEc In this format as well.

00:03:16: What is the reason behind?

00:03:17: Yeah, so they are a major producer of oil.

00:03:22: It's around four million barrels per day.

00:03:25: So quite a major player in the oil market and the OPEC as a cartel introduces strict regulations for their members.

00:03:33: For example there is production quota which limits the amount you can produce as member state.

00:03:40: And of course for a major player that limits their flexibility then to market more or less depending on the preferences, strategies and also investments they've made.

00:03:51: According to an announcement they have now decided And the current situation in the Middle East of course Has led to the conclusion that also they want to be flexible then reacting to those To those challenges and that according to their statement is behind a decision.

00:04:11: Okay, understood

00:04:12: Yeah interesting to see that happening but let's stay in that region.

00:04:17: and Of course we want to talk about it little bit on the impact Conflict in the middle east there But off course We are format that analyzes energy markets, but of course I want to mention here that it's a tragedy for the

00:04:31: people there.

00:04:32: Exactly

00:04:33: and then we have teams on site as well who live in work there And of course we hope situation resolves better sooner than later Aswell.

00:04:43: Yes when you look at reporting conflict as well There is always LNG mentioned.

00:04:51: For those not heard about it before what is behind LNG.

00:04:57: Yeah, LNG is basically the same as natural gas.

00:05:01: So it shares the same production process But then its cooled down and becomes liquid at minus one hundred sixty two degrees Celsius And so the volume was much smaller.

00:05:13: It can be loaded on ships and transported in an efficient way.

00:05:18: That's what's behind LNG.

00:05:20: You take your gas into a liquefaction plant.

00:05:23: you liquify by cooling it down Then put it onto those chips.

00:05:27: It's basically pumped on the ships.

00:05:29: The ship have tanks and it is not that these tanks are under pressure, but they're cooled down and very well insulated And some of the LNG boils off which keeps the entire load cool.

00:05:42: so can be transported over several days then from the liquefaction point to a point where it has regressified Which means its return to its gaseous state fed into distribution grid in the import country or on the recipient.

00:06:00: Okay,

00:06:01: why is everybody talking about LNG over the last couple of years as well?

00:06:05: Well, LNG has really made the gas market global.

00:06:08: so that's behind it for a while but very often there have been point-to-point production and now since a few years.

00:06:19: its being global with lots of flexibility similar to oil, has the advantage that you can it instead of going from A-to B. It could go from A to C and so You are quite flexible in optimizing where it goes.

00:06:33: So then you can do that depending on the price or where shortages occur.

00:06:39: And its really a global optimization Of these flows and LNG has enabled That.

00:06:45: When we look at conflict In the Middle East and of course The straits of hormones Are bottom neck there Has that led to the increased prices?

00:06:55: Yeah.

00:06:56: Definitely, yes.

00:06:58: So first of all for Europe LNG has become very important as well.

00:07:02: so because a lot of the Russian gas that was cut off is being replaced by LNG deliveries many of them for Europe coming out of US Because the U.S.. Has very much increased their production capacity over the next couple years and they will continue to do so.

00:07:18: And in the Middle East A Lot Of The LNG that is consumed worldwide goes through the Straits of Hormuz, which has a very narrow strait out-of-the-gulf region and like twenty percent of world LNG.

00:07:34: Go have to go through that bottleneck and due to the conflict This has been blocked which means then this LNG is basically trapped in a gulf region can't get out.

00:07:43: And um, this has led two these price bikes because everybody now who gets lng Out of the Gulf Region needs to replace it.

00:07:52: Which isn't particular true for Asian countries.

00:07:56: So there are countries like Pakistan, who were very much almost entirely dependent on LNG from the Gulf region.

00:08:06: China also but not to that extent and they can switch their alternatives.

00:08:12: Japan is another example.

00:08:15: so these countries need to replace the LNG because it cannot get out.

00:08:21: Everybody's now competing for cargoes then that are trapped.

00:08:27: Europe is less dependent on energy, so there's no... or like very limited direct deliveries from the Gulf region into Europe?

00:08:35: There some but it's limited.

00:08:38: But still for the cargos Europe wants to buy in short-term spot markets where you buy short term delivery we will compete with all countries of Asia and that has moved prices up significantly

00:08:52: Of course, yeah.

00:08:53: I mean we at UNEPA don't have supply from there and it's definitely something that we observe closely as well.

00:09:01: Let us stay with what i found very interesting the ships for a second here.

00:09:08: What is speciality of these ships?

00:09:12: So they are fascinating vehicles so first off all their over three hundred meters long And they capture like one terawatt hour of gas, which means it's like seventy thousand households for a year.

00:09:28: So the crew is actually very small.

00:09:34: so there are thirty people on such ships and they're really specialized people who are highly qualified amongst the highest... qualifications in the maritime sector and it's really fascinating to see them at work.

00:09:49: Yeah, I can imagine!

00:09:50: So you've been on a ship like this?

00:09:54: Yes that is very fascinating experience.

00:09:58: Very fascinating topic size-wise even... And i looked up as well.

00:10:03: we have around seven hundred LNG ships worldwide right now and the aim is to have fifty percent more by twenty thirty.

00:10:12: so ambitious goal.

00:10:14: What do you expect?

00:10:15: Is there a cost to build this ship like that?

00:10:17: roughly well I guess they're mainly made in South Korea, China i think.

00:10:25: So between two hundred three hundred million dollars Around

00:10:30: that, yeah.

00:10:30: Two hundred and fifty is the average.

00:10:32: so you're on spot there.

00:10:34: And charter costs per day are around seventy thousand euros given the length of the contract at Charter... ...and off course to change end?

00:10:43: I mean that changes.

00:10:45: of course it's very expensive at the moment because its in high demand.

00:10:48: On a higher demand for this situation!

00:10:50: Yeah absolutely.

00:10:52: And yeah, we have a team that analyzes just that within the universe as well.

00:10:58: Absolutely and they've been trading our hundred seventy cargoes last year.

00:11:02: so... We own also four ships ourselves So it's quite an experience in this business.

00:11:11: Two of them are called Schneeweißchen & Rosenroth Very creative, so

00:11:16: very nice names from German fairytales.

00:11:19: Absolutely absolutely.

00:11:20: So that's the unipal reference and I guess.

00:11:22: then let's look at Exported imports.

00:11:25: what are the main?

00:11:27: Countries that export?

00:11:28: yeah, so I mean we cut ha.

00:11:31: obviously in the Gulf region is a major exporter And they've been planning to expand their capacity significantly.

00:11:37: but the biggest player is us and They've basically rosin.

00:11:45: They thought they would import by two thousand ten, but then it turned around to the shale gas.

00:11:50: They produce in the country and have become the largest the biggest exporter of energy in the world.

00:11:57: want To come back to Qatar in a minute.

00:11:59: But let's look at their imports first.

00:12:02: who are the main importers?

00:12:04: Well that's China And Japan mainly but also Europe is growing Europe as a whole if you take together as a major importer.

00:12:13: Japan has traditionally been the biggest importer of LNG, but it's surpassed by China a couple years ago.

00:12:22: So these are big ones because of economic growth in China and they needed the LNG to fuel that In Europe as I mentioned due to reduction of Russian pipeline gas That gas was required for replacing LNG which made Europe also an important asset

00:12:41: Absolutely.

00:12:41: Let's go back to Qatar for a minute because there were some news about damages to the infrastructure, I think Iran attacked Qatar.

00:12:49: What are the details behind that?

00:12:50: Yeah well There is two problems.

00:12:53: The first is this blockade of the straits of Homoos has prevented LNG from coming out off the Gulf and being delivered To customers And in addition to production facilities In Qatar was hit by Iranian missiles and it's the biggest LNG liquefaction plant in the world, Rastafan.

00:13:15: And that has been hit by missiles... ...and their repair will take a while!

00:13:20: That is of course significant for the market.

00:13:24: When we look at Europe and also security of supply if you look at that.... We are talking about this quite frequently now with our geopolitical situation Like this.

00:13:37: Yeah, like we mentioned Uniper is not getting energy supply from that region.

00:13:42: however you know looking at the just sheer size of regas capacities like Rastafan there I wanted to highlight a few numbers here To invest into an onshore terminal or to build one You're looking at roughly One billion US dollars so quite a significant amount and you can add Sizes of the storage on site off around two hundred fifty thousand cubic meters, which is the size of I looked it up hundreds Olympic swimming pools.

00:14:15: So

00:14:16: quite quite quite huge and we also have a Swimming alternative like in Willem-Sarfen FSRU And Which Is Also Helping Security Of Supply Here In Europe?

00:14:28: And Something That We Are Of Course You Know Discussing as well on a political stage at this point is the you methane regulation.

00:14:38: Why?

00:14:38: Is there a topic when we look at sustainability of supply?

00:14:42: yeah, so where does it come from?

00:14:44: to start with though The methane regulation regulates or tries to prevent reduce methane emissions during the production, transport and consumption of natural gas.

00:14:57: Why is that?

00:14:58: Because methane is very bad for climate so it's much worse than CO² when it comes to greenhouse gas effect which means its important to prevent leakage of methane.

00:15:13: this what the methane regulation about.

00:15:16: So to give an example, so it regulates that these emissions need to be monitored then leakage needs to be detected and repaired.

00:15:26: And practices like flaring of gas or basically expansion when set free in the atmosphere are prohibited.

00:15:35: for example on old days you had a compressor station which is under pressure.

00:15:39: if needed to repair you need to get the gas out, and in old days it was let-out into atmosphere which is of course very bad from a climate perspective.

00:15:50: And that's now prohibited... ...and you have to kind of capture use and capture that gas then use it Which is offcourse good for an economic perspective but even better than a climate environmental perspective.

00:16:04: So these are examples why this makes sense to regulate things.

00:16:09: The second step is also to look at imports of natural gas and make people want to import natural gas, check the entire production transport chain.

00:16:21: and to make sure that you have investigated the emissions, so that your producers are certified in a certain way.

00:16:29: So we can be sure what methane emission is in this process.

00:16:35: And there's a lot of detail about the problem because it has been done specifically for a long time.

00:16:47: In addition buy LNG, for example to pick up that example and you need to go through all this process.

00:16:56: And then do we investigate your producers?

00:16:58: This of course adds complexity to making those deals or may put you as a disadvantage in the competitive process of buying that LNG.

00:17:11: So we need to balance security-of-supply, and we need contract LNG on long term basis for security supply reasons.

00:17:19: We need to be balanced against climate protection and environmental aspects.

00:17:24: But isn't it tricky to measure these things especially if you have producer really far away from different countries?

00:17:32: Absolutely, I mean if you look at a country like the US which is the biggest LNG exporter as we said earlier and there are hundreds or thousands of producers and individual infeed points where producers feed their gas into the grid.

00:17:53: And all these You need to look at and then it feels is fed into the pipeline system.

00:17:58: It's transported to a Gulf Coast where most of the LG export terminals are And, Of course this is very complicated process not like as one producer can check.

00:18:09: all that sounds

00:18:12: very

00:18:13: tricky.

00:18:15: Let's check this off and we come to the last segment, which is one of my favorite ones.

00:18:21: The questions are from our trainees.

00:18:23: This time Zoe had two question for us – let's have a listen!

00:18:30: Hi Gregor,

00:18:31: I'm Zoe nice to meet you….

00:18:32: …and today I've got some questions about young professionals... ...and what they should keep in mind if they want to build a successful career at the energy market?

00:18:44: And my second question is, to what extent are the European energy markets actually interconnected and why it's so relevant in times of increasing energy demand?

00:18:55: Thank you very much.

00:18:56: I'm looking forward to hear your answers!

00:18:59: All right...I would say that we start with how was Europe connected energy-wise?

00:19:06: Let us start with that

00:19:07: Yeah..it's very connected a target of the EU for long time to connect energy markets.

00:19:16: For example in power markets we have very close connections, also very near-term.

00:19:21: so exchanges are connected and there is automatic algorithms that connects those marketplaces.

00:19:28: There's common reserve energy markets.

00:19:33: That has been big success.

00:19:35: In Central Europe it was very connected.

00:19:39: We have also inter-connected to the Nordic countries, a bit less on the Iberian Peninsula.

00:19:45: Countries like Spain and Portugal.

00:19:46: that's because it is difficult to get across the Pyrenees On the gas side similarly probably not very close but very well connected.

00:19:56: Also industry managed successfully The change of flows when Russian gas was cut off.

00:20:05: historically all came from east to west, had to be reversed in some cases.

00:20:09: So there needed to be some technical adaptations to make that possible and that was done.

00:20:16: so the connectivity is a very important aspect of European security or supply for example from LNG to pipeline.

00:20:24: we have that flexibility.

00:20:25: Okay Zoe I hope your question has answered.

00:20:29: i think it's really good and understandable.

00:20:32: second questions are What does a new starter bring to the table entering the energy sector?

00:20:40: Very good.

00:20:40: It has been awhile for us, but

00:20:43: you start!

00:20:44: Yeah I mean...I've been in industry over thirty years now and it's never been boring so that can promise everyone who wants to starts in the industry.

00:20:56: first of all There is a lot of change, so you need to be able to adjust that.

00:21:02: But also the change cycle... ...is due to investment cycles longer ones.

00:21:08: So sometimes we have to be patient and sometimes agile in order for us to follow these developments.

00:21:15: It's an interesting combination.

00:21:17: For me it was always important what we are doing.

00:21:20: The purpose of energy is about economy and lives of people To help them.

00:21:28: And for me, it always felt that helping to make the work gives me a purpose in working here.

00:21:34: So if that resonates with people who would probably want them to work in industry... Being analytical also helps because energy has got a lot Numbers with analytics both economic and technical.

00:21:55: so if you bring that to the table That's really helpful.

00:21:59: Yeah, well said And uh You know it never gets boring.

00:22:02: I can just underline that.

00:22:04: maybe just add from my side i mean um i think It's always good to bring flexibility in Just going for it?

00:22:11: I mean I never went to university.

00:22:14: I have a hotel background, so something completely different.

00:22:17: but my flexibility allowed me to work in HR, I did trading also and now ended up with communications And i'm allowed to ask you tricky questions So if you're interested just go for it.

00:22:31: It's definitely worth it

00:22:33: Absolutely!

00:22:34: I can fully support that.

00:22:36: Good deal

00:22:37: Alright!

00:22:37: Zoe hopefully everything is answered.

00:22:41: questions were all answered by you today as well.

00:22:44: So thank you very much for all of your insight and I'll see in the next round again!

00:22:49: Yeah, Thank You very much Florian!

00:22:50: All right?

00:22:51: Until we are there... Thank you so much for listening or watching.

00:22:53: hope to tune-in next time again.

00:22:55: until then Bye bye.