Beating vulnerabilities of the market by leveraging strong relationships and having patience

Energy systems have been buffeted by geopolitical tensions and supply disruptions which highlighted the need for more diversity and flexibility in resources. The challenges this scenario throws up was the basis for an Executive Leadership Panel titled ‘Enhancing energy security and supply stability: Unlocking new natural gas sources amid global uncertainty.’ 

Rashid Al Mazrouei, SVP - Marketing, ADNOC Gas told the Energy Impact Theatre how during his career he had encountered geopolitical situations since joining the industry in 2000.

“One thing that stands out is the importance of the relationship between a supplier and the buyer,” he said. 

“Energy is a capital-intensive industry and for this industry to flourish and buyers to get the security they demand it is very important to make a commitment, and that commitment is to form long-term relationships as a baseline. Those relationships have taken producers and markets through thick and thin.” 

Chett Chaisson, Executive Director, Greater Lafourche, Port Commission cited removing barriers to providing energy to different areas around the world as important. 

He said there were always going to be geopolitical issues to deal with. “We have to cut through that and remove barriers so that we can continue to create the necessary facilities.” 

Chaisson continued: “Coming from a port perspective, infrastructure is key, and being able to navigate through the processes in whatever country to get projects done quickly, efficiently and effectively is critically important as we continue to have demand for energy and increases in the cost of providing that energy.” 

Erica Ehst, VP, US International Development Finance Corporation said her organisation was one of few that could finance gas related infrastructure projects. It primarily works in emerging markets where there are barriers that need to be overcome in order to get infrastructure off the ground, but also in Europe on the energy security angle. 

“We can offer those type of products and relationships that can be helpful when you’re negotiating with governments in order to provide either credit mitigation strategies or political risk mitigation strategies,” she said. 

“It is that type of partnership, buyers and suppliers, but the financiers or the insurers can also be a really important partner in part of that transaction to get it over the finish line.” 

 

Vikram Mansukhani, EVP - Europe, Osaka Gas agreed that important relationships were “paramount in the way we function”. 

“And from our perspective, what’s happening in the geopolitical scene, we see the relationship factor will continue for a while,” he said.  

“There is a paradigm shift that’s happening going forward, which we’re very cognisant of, and that is that we want to prevent the idea and some of those themes that have been mentioned in this conference about a shift between East and West and how relationships function,” Mansukhani added. 

“So, I echo the sentiment that we want to continue those discussions in terms of collaboration, relationship and trading.” 

Yaoyu Zhang, Assistant CEO & Global Head - LNG & New Energies, PetroChina International, said he was in a unique position as a buyer, supplier, trader, all in one outfit. 

“If I look at it from perhaps an offtakers or buyers perspective, we firmly believe that diversifying across different assets is perhaps the best way to de-risk your portfolio. 

“With a larger and sufficiently diversified portfolio like ours, we’re less exposed to a single set of problems, be it geopolitics or perhaps temporary liquidity squeeze.” 

Zhang called for patience. “LNG is a long-term business - having a long-term mindset is imperative,” he said. 

“People are tempted to react, perhaps over react, to a major event like geopolitics, but be encouraged just to wait, let things play rather than rushing to a decision you may regret further down the line.” 

On the subject of LNG costs and meeting demand, Mansukhani said LNG remained “a point to point commodity…not fungible.” 

“It’s really important we have a good understanding of how the oil markets function and how we can apply that to LNG. 

“This relationship factor that Rashid mentioned…a huge part of that is flexibility, talking about it, being honest about it, being transparent.” 

Al Mazrouei, meanwhile, raised the notion of LNG having its own index. He added: “In the long term, by the mid, maybe the end of 2030s, you will see the emergence of an LNG index that will be independent of Brent.”