Gregor Pett is the Executive Vice President of Market Analytics at German midstream gas, LNG and power company Uniper SE. We caught up with him at Flame to discuss LNG market dynamics, the unpredictable political landscape, gas storage and Brexit.
Energy is a political business, that’s true all around the world. You can only prepare if you watch closely what’s going on.
You’ve said that it’s going to be a volatile and interesting time [for the LNG market]. How do you see the market going?
Indeed interesting – and I would stress more so in the American sense of the word than the British sense of the word. I think energy is in an interesting place. A lot of things have changed – its technologies, its politics, a lot of things are going on, so it is indeed in a very interesting place.
Also volatile as well.
Yeah. I mean volatility is not always a good thing, but it’s not necessarily a bad thing. If you are positioned in the right way, you can actually benefit from volatility. You can help your customers to manage this volatility, and risk manage their portfolios. This is why volatility is very interesting and also good for business.
And who do you think will actually do quite well then out of volatility?
It’s all the players that are flexible, and that have a flexible asset phase. So for example, we are developing a flexible portfolio out of our strong European midstream position, regas capacities, and increasing LNG portfolio. It’s small but its flexible, and we believe we can put that to good use for our customers and our partners in the market.
What will you be doing with that LNG portfolio – is it likely to grow, or to stay as it is at the moment?
No we definitely want to grow it. We want to grow it from a shipping perspective, we want to grow the asset base, we want to manage the portfolio in a flexible way, together also with our partners.
Are you able to put any numbers on that, or quantify that any more?
It’s very difficult to do. As I said in my presentation, when exactly the market rebalances, that depends on a lot of developments. It also depends on how quickly you can make this growth happen. We’re developing our numbers internally, but it’s definitely set as a growth area for Uniper as a business.
When do you think the market will rebalance – are you prepared to put a timescale on that?
It’s in the 2020’s I believe. I think it’s less important exactly in which year it happens, because that is subject to a lot of changes and a lot decisions by other counterparties. It’s more important that we prepare to be flexible. So if it happens a year earlier, that we are ready for that, and if it happens a little bit later, we can also manage our portfolio in line with these developments.
You were talking in your presentation earlier about the growth in Asia, and you characterised it as a huge surprise. I wonder whether you have considered where the next surprise will come from?
I think the growth in Asia as such was less of a surprise, it was the way it happened in 2017 where everyone was expecting more volumes to come to Europe earlier. Yeah, I think surprises can be everywhere. Surprises can be in politics – if you look at what’s going on in the Middle East, that’s full of surprises, and not all of these surprises are pleasant ones. Also, with regards to which are the next projects to come online, and the FID’s people are going to take, then on the energy policies in big countries like China, that’s always good for supply. So it’s clearly something that needs to be watched very closely.
You’ve mentioned politics a few times now. That is in many cases the great unknown. I just wonder how you can prepare for that – what is on your radar, and what are you considering at the moment?
Energy is a political business, that’s true all around the world. You can only prepare if you watch closely what’s going on. If you try to be very close and understand what’s going on, and prepare different scenarios, so even if something happens, then you know what to do in this situation and don’t waste a lot of time by changing your approach.
Are there any particular areas you are keeping a close watch on at the moment?
All the growth areas basically, North America of course, the Middle East, and also East Asia. We should not forget on the other hand that also Europe can be surprising sometimes, so we must not forget what’s going on in Europe.
Let’s talk about Europe – how does Europe fit into the market for you?
Of course Europe is our home base, and we are a very strong gas player in Europe. We have been so for many years, which puts us in a position that we can use that home base to optimise the portfolio. So to give you an example, if someone wants to send a cargo to Europe, we can divert that because of our strong European base, we can make up for that and send it elsewhere in the World. We can therefore help others to globally optimise, and use our strong European home base as a basis for executive action.
You haven’t mentioned storage. I wonder about your thoughts on storage, and the regulation of it. How do you see the importance of storage panning out?
It’s really very important. For us it’s a part of this strong home base. We have a very sizeable storage portfolio in Germany and Austria, but because the market is so connected, we can use that in general to optimise our European portfolio. Regulation is quite diverse across Europe. For some business opportunities, that of course doesn’t help, that it’s so diverse. It’s not a big problem of ours, but of course a more harmonised approach to regulation across Europe would be helpful for many business development ideas.
I’m wondering what you think about the impact that Brexit will have on regulation, changing regulation or the flow of energy. What are you factoring in?
It could be impactful. But the question is, will Britain really want to be separated energy-wise from the continent? That’s the question mark. I don’t think it would be a good idea, so let’s wait and see what happens.
You’re taking a step back and waiting to see what happens.
It’s what you sometimes need to do – but prepare for all outcomes.