Mark Gyetvay introduces himself to Flame 2012
What are you currently working on?
“I am currently working on a series of initiatives aimed at improving the overall level of financial and operational disclosures for NOVATEK as we begin the next phase of our Company’s evolution into processing, refining and marketing our wet gas. Moreover, as the Company recently announced our Corporate Strategy Up To 2020, we will begin working on a series of new and exciting exploration and development activities in the Yamal and Gydan peninsulas, a new hydrocarbon frontier in Russia’s Arctic zone. We are very exciting about the prospects of these activities, and I look forward over the next several months to explain in more our plans and development targets. We are also actively involved in our new Yamal LNG project, a new Arctic hub for future Russian LNG development, and I will be responsible for overseeing one of the largest project financing in the world, as we move into the project construction and development stages. This project is a major transformational project for NOVATEK, and I am very proud to be part of this new challenge.”
What is the biggest challenge that the gas industry needs to focus its attention on currently?
“It really depends on the particular region where you presently operate. For example, the US gas industry is currently facing many challenges to balance supply and demand, and we have seen a shift in development activities from dry gas to liquids rich gas, which by the way, is the cornerstone of NOVATEK’s resource base, so I believe we made the right strategic decision in early 2004 to undertake the construction of various infrastructure related projects to exploit our wet gas reserves. Going back to the US markets, it really reminds me of when I started working in the oil and gas industry in 1981, where the US was just ending a drilling boom in the 1970′s led by incentive prices – deep gas, tight sand, coal-bed methane to name a few – and this led to a repricing of the US gas market when natural gas pricing was liberalized – a reversion down to the lowest common denominator. We saw a significant reduction in drilling activities and a “gas bubble” that lasted more than a decade; fortunately, demand recovered and the supply side was relatively balanced, a slow, but steady recovery in commodity prices.
In Europe the major challenges are coming to the eventual realization that indigenous supplies are declining, and imports will be a way of life for many years to come, so a cooperative business model must be developed to ensure a sound working relationship with those countries exporting natural gas, rather than a confrontational tone, which ultimately solves nothing. Europe must find a way to cope with the fact that the region is “gas short” and will need to balance carbon reduction initiatives, alternative energy mandates and other such programs. Despite its insatiable appetite for hydrocarbons, China remains the unknown “trump card” in the globally balancing of natural gas, and until such time we get a better pulse on the supply side, we will continue seeing new project announced in LNG, excitement, albeit more rational, hopes pinned on unconventional resources, but the real winner in all of this posturing will be Russia, as they begin diversifying their markets to include the all important Asian Pacific region as well as commissioning additional LNG capacity like our Yamal LNG project. High cost projects, like those in Australia will need to be mindful of these moving parts because the economics are based on continued high LNG prices in the Region. “
Are oil linked gas contracts a thing of the past?
“In my opinion, wishful thinking because the industry is opposed to moving away from this pricing model and looking at the value destruction in the gas industry in the USA. So, I believe the oil-linked pricing model will be around for quite some time, although there will be a higher spot price component in the equation, and some element of certainty in cost recovery for the necessary capital commitments.”
In your opinion, how will global gas flows change over the next 10 years?
“Clearly, LNG has played a major role over the past decade, representing the single largest proportion of growth in the gas industry, but the success of the US shale development activities has considerably altered the projected flow of LNG into the US markets, and now potentially represent a very limited opportunity for exports from this region, completely unheard of 10 years ago. So, I believe we will continue to see LNG changing the logistical flows of natural gas over the next 10 years, but I believe the idea of a gas bridge is highly overstated and regional markets will continue to dominate and compete for market share. As mentioned above, China will play a major role in the consumption of natural gas for the foreseeable future, as this country moves away from a coal-based society, as well as continued economic development in export oriented countries like the Middle East, where domestic consumption is rising and products, like natural gas will consumed internally rather than purely for export.
Another important element that I see evolving in the flow of natural gas is the opening of logistical routes, like the Arctic Ocean’s Northern Sea Route, to move LNG to important consuming markets, and more importantly, bypassing some of the logistical “choke points”, like the Suez Canal and the Straits of Malacca. We have been very successful in developing this new route since we launched the historic voyage of transporting hydrocarbons through the Northern Sea Route in 2010, and again in 2011, and this logistical route will serve as the cornerstone of our strategy to penetrate the important LNG markets of the Asian Pacific region. We were able to reduce time and distance by 50%; thus proving the economic viability of this shipping route for future LNG cargoes.”
On a scale of 1-10, how much is shale gas an industry game changer and why? (1= not much and 10 = a complete change)
“This scale is more or less a relative question because it is really region specific. For example, it is safe to say that it would be high in the US as it is has completely changed the industry dynamics for natural gas but it does come at a price – high cost of projects and questionable economics without even touching the subject of environmental concerns and issues, which I believe are overstated. In this regard, the US gas producers were very astute in playing the “hedging” game to lock in high pricing to mitigate the questionable economics but that game is now over, with the recent December 2017 forward price reaching below $5.00 per mmbtu; so, in response, we have seen a shift in drilling activities from dry to wet gas, capitalizing on the historic disconnect in caloric parity basis, and I believe we will eventually play out this game too in the near term.
In Europe, it was pure hysteria and similar in mentality to the internet boom, where everyone was trying to sell unconventional gas projects in Europe on the speculation of increased market valuation (our banker friends never learn their lessons), as well as a reduction in import dependency, particularly aimed at Russia. Well, if the drilling and exploration results are any indication, the importation of natural gas is quite secure!!! I can continue to provide my views on this topic but it would be too lengthy for this forum.”
What are you most looking forward to at Flame this year?
“Some sensibility in the realities of the natural gas business – our challenges, our commitments, and an unbiaised view of market opportunities looking ahead. Flame is a great success, bringing together many industry players in open and friendly environment, despite the many differences of opinions we may share. Moreover, the quality of the speakers, the sessions, the panels and let’s not forget, the organization of the conference are all top notch ana testament to the important role natural gas plays in the hydrocarbon mix. I always look forward to this annual event, and am proud I have had the opportunity to actively participate over the past several years.”
Tell us a little known fact about yourself?
“Our perfume was worn by Kate Middleton at the Royal Wedding last year – a very proud marketing and PR coup by our team!!!”
Involvement at Flame 2012
Mark Gyetvay will be speaking at Flame 2012, in the Russian segment of The Global Market Outlook, providing an Arctic LNG Progress Report on Wednesday 18th April at 3:10pm.
You can find out more about Flame 2012 at the website. Click here for all event details, agendas, speaker line-ups, and to book you place at Flame 2012.