Uniper Market Insights | Middle East, eFuels, Diversification, Headlines & more

00:00:00: 1 We signed a six year contract with Respect Energy in Poland.

00:00:05: 2 LNG provides these opportunities leads to a situation where shipping in general is dangerous in these areas.

00:00:11: 1 EU Energy Commission and then you kind of want the energy ministers of the countries about a supply shortage and price hikes.

00:00:26: 3 Hello and welcome to Unipers Market Insights. Finally, the summer break is over. My name is Florian Oberländer and on my side as usual. The specialist Gregor Prett.

00:00:35: 2 It's been a long time, so I couldn't. It was very hard without this format here.

00:00:40: 3 Same here. You know, I had to watch some market insights during my vacation not to get to homesick. Thanks for being with with us today. Of course, I have prepared multiple topics today, and we asked people on Instagram to vote for the topic that we start with. We will discuss a little bit what was in the news over the last couple of weeks, and also shine some light on the newest trend fields.

00:01:08: 3 But we start and unfortunately we have to still report on this. The impact of the situation in the Middle East on the energy markets. It's worth mentioning that, of course, all of the human tragedy that is behind that, you know, we cannot report on this in this format, but of course, we want to recognize that. But needs also need to focus on what impact it has on the energy market.

00:01:32: 3 And it does. So maybe you can share a little bit what the latest status is here.

00:01:37: 2 If you recall, we face the situation that the Straits of Hormuz, where major part of the world energy supply for all and an engine particular goes through. So it's one of these famous choke points, as they're called these days, that has been first blocked and then has been partly reopened. And so some vessels can go through. The situation has in total not materially changed.

00:02:03: 2 The conflict is still ongoing and there is no realistic short term solution inside where these this conflict could be resolved. So it's a bit of a back and forth. They made situation where some results go through. Some are blocked. Heavy intervention military measures necessary. Then we see the conflict has enlarged into a full regional conflict. The existing conflict between the the Houthi rebels in Yemen.

00:02:32: 2 And that conflict has been there for for a long time, but it's now increased. So. And that also has an impact on on energy markets in particular, because the route towards the Suez Canal well, goes past Yemen. And so we have an impact on that route as well. So a second chokepoint and all of this is is very dynamic.

00:02:56: 2 So and it leads to a situation where shipping in general is dangerous in these areas. So it leads to an increase in in freight rates and insurance rates and also danger to the people involved, to the, to the sailors on the ships, but in particular and all of that leads to a tight situation, but it's not a full blockage.

00:03:17: 2 So we still see see some deliveries going through.

00:03:20: 3 On September, Numbers are 22 vessels that went.

00:03:23: 2 Through.

00:03:25: 3 But we have two bottlenecks now. And there was also reports on the damage of the east west pipeline through Saudi Arabia. I mean, this is just all but, you know, also move the market quite a bit.

00:03:35: 2 Yeah. And that's the alternative route that pipeline was built in particular then to avoid the Straits of Hormuz as a bottleneck. But also that pipeline, as you just said was was attacked by the by the rebels then.

00:03:50: 3 Yes. And maybe just as the background for the people out there who rebels are financed by the Iran. And to add to that dynamic, Saudi Arabia has a military partnership with Pakistan. So we also see Pakistani soldiers being present in Saudi Arabia. So quite a dynamic situation. I would say.

00:04:12: 2 It's not that there are two major blocs, etc., but every each and every country tries to protect their own interests and forging alliances as people go along. And that can be very dynamic and very complex. And we see that here as well.

00:04:29: 3 Without getting to political, of course it has to be watched. What will happen in front of the midterms or after the midterms in the US as well, price wise, for all, we moved to above $100 per barrel down to below 80. And again this morning was above $100 per barrel. Similar movements with gas. However, I have the view that the markets and, you know, energy markets and the capital markets don't react as extreme anymore to signals from the US administration as they used to.

00:05:08: 3 It's just like a risk premium getting normalized.

00:05:11: 2 Or it's fair to say that markets price in a certain volatility. And markets are used to the volatility right now. So they are of course looking not only what is announced, but also what is done and what the effect of that will be, because they have seen that measures were were announced and then one fully executed then or or other announcement came later.

00:05:39: 2 So it's also clear that announcements are a tool in negotiations to put pressure on on other on the counterparty and the markets. I would say discount these these these messages and these announcements a little bit and look more of what is really happening. So for example, if there's physical damage, I would still say that something that makes the markets move because markets try to assess will there be a physical shortage.

00:06:11: 2 But pure announcement, we have seen an inflation of that over the recent weeks and months.

00:06:18: 3 For sure. I mean, take a look at the supply situation to Europe. We have quite healthy Norwegian flows and LNG is also decent. So we don't face an outage there. Short term EU Energy Commissioner Daniel kind of want the energy ministers of the countries about a supply shortage and price hikes. Germany reacted with instructing the effort to fill storage levels.

00:06:48: 3 Is this enough facing the winter? I mean, Germany were at 57% right now and in Europe above 70%. So lows in comparison to to last year. Is that enough.

00:07:03: 2 We have to see these these three factors together. So the demand the supply situation and and of course the storage levels. And it's fair to say that in comparison to previous years, LNG can serve as a flexible supply source and to an extent substitute also storage. And this is what we see right now. So we need to see all these elements together.

00:07:26: 2 It's also fair to say that, that responsible suppliers to, to customers have of course bought the volumes or nough volumes to, to supply these customers. I don't think that anybody who manages their portfolio in a responsible way would go short and wait for a couple of terror dollars to find them in the winter. This is not how companies operate, for sure, not how we operate.

00:07:50: 2 And so what, of course, can happen is if a customer, for example, in a company, decides then to buy more short term. So because they want to make use of market opportunities and they decide during the month to buy the gas for the next month, and they might, of course, find themselves in a situation over the winter that that gas might, depending on the situation, be very expensive or even difficult to find.

00:08:16: 2 So it's the artists, of course, then to look more long term to secure these, these supplies. But in total for a normal weather situation, also slightly colder. I'm convinced that we'll be fine. The main risk is, of course, that it's so cold it could be so-called that nobody expects it. So a 1 in 100 winter or something like that or something breaks a piece of critical infrastructure is damaged and cannot be used to supply.

00:08:46: 2 These are the main risks that still remain, of course.

00:08:49: 3 Yeah. And I talked to our meteorologist and he said that currently looks wet in windy as well which would be good for renewables. Of course we have that support. But you mentioned it. It's also a little bit of homework to secure long long term volumes as well. And that's what we did over the summer. We, contracted with Aquinas from Norway, a 15 year agreement for the supply of more than 30, what, hours per year of natural gas.

00:09:24: 3 So these were good news. And also we signed Canadian Project LNG, about 2 million tonnes of LNG per year for up to 20 years. So good news coming from that front as well. But when I look at all of these news and we talked about diversifying portfolios when it happened with the Russian gas couple of years back, now we have another, crisis, is it possible to diverse portfolio and to be, immune against all of this in a global network?

00:10:00: 2 Yeah, it's absolutely possible to diversify and to become less vulnerable against single events. Immune. Not because the broader your portfolio is, the more you will, of course, be affected by by global incidents that that occur somewhere. The art is then to to build the portfolio in a way that any single event or any or 2 or 3 events cannot really, put your entire position at risk.

00:10:28: 2 And LNG provides these opportunities, and you can't build so many pipelines that you have, gas from so many countries compared to LNG. And it's also fair to say that the LNG exporting countries are becoming more and more diverse. Yes, of course we have the US as the biggest supplier right now, and they have basically emerged within the last decade as the strongest supplier.

00:10:53: 2 But we have also other suppliers that emerge, like Argentina, for example, but also African countries like Nigeria, Mozambique, where where we see these volumes emerging. So there are opportunities out there. And you mentioned Canada already, which is of course now where political cooperation also happens on many levels. So that's very promising. And even if those I mean, this project is West Coast Canada.

00:11:19: 2 So the supply is physically due to the shipping routes will probably go to the Asian markets, but they replace other volumes that then are free to come to Europe. So it's like a bathtub. It's all connected and it's optimized and according to the shipping routes. And it all helps for our security of things.

00:11:37: 3 You can even swap vessels.

00:11:39: 2 Yes, our LNG team, they do that every day and they almost get up in the morning and then decide where to relocate ships. And this is why it's important to have a, what we call for contract free on board so that you get the gas on your ship and then can decide where the ship goes. And that helps, of course, to, to optimize these routes.

00:12:01: 3 Okay, good. So shout out to the team we often discuss here. Of course that gas is the partner of renewable energy. Absolutely. In regards to the security of supply as well. And we've done some homework here as well. We signed a six year contract with Respect Energy in Poland, a power purchase agreement and also with Skype own bills, over 100MW offshore wind, PPA, the first offshore wind PPA for universe.

00:12:30: 3 So quite significant milestone here. In the last episode we talked about renewables and partnering with with gas, security of supply and so on. And one thing that was always mentioned was the storm. Maybe give us an update. What happened in the meantime?

00:12:47: 2 Absolutely. So just to recall, is a is born out of the need for security of supply, for electricity in Germany. And it's to to build power plants that could balance the load from from renewables in case there's no sun, no wind. So this is why the government has basically put that straight that that law. And it's fair to say that we have now seen the first tender auction.

00:13:17: 2 So these capacities are auctioned and people can bid for them and then get, get contracts. Yeah. Basically for fixed term where they get payment that supports and pays for the capacity that is there. And the first tender, took place in early September. We will see the results in the first days of November then. So we we will see how that turns out.

00:13:43: 2 Then the Senate sergeant tour, the federal agency said it's strongly oversubscribed. So quite a competitive situation. And so we are very eager to see what how it turns out. Yeah.

00:13:56: 3 Good deal. Yeah. Another thing that was in the news over the summer, was something that is called efforts. We signed a deal with Arcadia about electro sustainable aviation fuels and also with Syzygy plus monarchs about facilities in Latin America. We reserved capacities for future productions. And the deal with Arcadia is is about aviation fuel. And the contract goes over a volume and I, you know, did some math as well.

00:14:27: 3 It would fly 100,000 Boeings, between Dusseldorf and Abu Dhabi for each year.

00:14:34: 2 Okay. Sounds great. Which Boeing.

00:14:36: 3 That's the 7879.

00:14:39: 2 So it's a big one. Yeah, yeah.

00:14:41: 3 Sounded like a big one for sure. What are you.

00:14:44: 2 Fuels are fuels that are not.

00:14:48: 2 Fabricated using, using fossil sources, but rather renewable energy in general. For example, hydrogen is is produced by for example, electrolyzer then which uses energy electrical energy for example, renewable energy. Then it becomes green hydrogen and water essentially. And if you basically add carbon molecules to that, for example by using CO2, then you can establish a process that creates a fuels that can be used in, for example, in aviation.

00:15:22: 2 And that's particularly useful for how to decarbonize sectors like aviation, like transport, and where basically you have the same or similar molecules like the ones you have from fossil sources, only that they have no fossil footprint in the world. Action.

00:15:38: 3 Think also relevant for shipping sector and.

00:15:41: 2 Absolutely.

00:15:42: 3 Not for cars at this point. It's not a very cool topic and and we hope to dive deeper into that in one of the next episodes, hopefully November. Already with our specialist, our other specialist, Wagner is already waiting behind the scenes and we will talk to him about bio methane and ball and G. We will do that in in a second and that episode will be published in a couple of weeks.

00:16:10: 3 So at this point, thank you very much for for your insights. And yeah, let's see what Ralf has to say. To you out there thank you for tuning in. I hope you tune in next time again. Until then.

00:16:22: 4 Bye bye.