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Editor’s Note: The following is a component of a NGI LNG Insight series, which aims to explore how the global liquefied herbal fuel (LNG) market works. The conversations in this series will also discuss the news and issues that matter most to the industry in North America and beyond.
Yury Sentyurin is the Secretary-General of the Forum of Gas Exporting Countries, a foreign organization of some of the world’s largest exporters of herbal fuels working to build the point of collaboration among its members. Sentyurin is a diplomat who has held senior positions in Russian government. He is a graduate of the Institute of Foreign Languages, the Russian Academy of Foreign Trade of the Ministry of Economic Relations and Foreign Trade and the Russian Academy of State Service.
NGI: Can you tell me more about GECF and how it’s working to expand herbal fuel usage around the world?
Sentyurin: Since its inception, GECF has been building a mechanism for a more meaningful and strategic discussion between fuel manufacturers and fuel consumers for the sake of source stability and safety and demand in global herbal fuel markets.
The organization supports its members’ sovereign rights over their herbal fuel resources and their ability to develop, maintain, and use those resources to gain benefits from their peoples, through the exchange of experiences, perspectives, data, and coordination on fuel-related issues.
Current members are Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago and Venezuela. Angola, Azerbaijan, Iraq, Kazakhstan, Malaysia, Norway, Oman, Peru and the United Arab Emirates. observer status.
The coalition accounts for 72% of global fuel reserves, 46% of its advertised production, 55% of the pipeline and 61% of LNG exports worldwide.
NGI: As noted, the forum accounts for the majority of LNG and pipeline exports worldwide. Have the adjustments we’ve noticed in recent years, with more fuel supply, more LNG money transactions, and more transactions similar to global fuel references, benefited or damaged its members?
Sentyurin: Most LNG for geCF member countries’ exports is linked to long-term contracts with buyers, ensuring the safety of the Array GECF fuel remains committed to meeting its contractual fuel obligations flexibly, in specific and exceptional circumstances, such as Covid -19.
This flexibility in the component of our member countries includes the postponement of the delivery of certain LNG shipments to the component of the time of year due to the pandemic. On the other hand, the United States, which has recently been a major LNG player in the world, however, this is based on purely economic considerations, as short-term marginal prices of US LNG have exceeded European fuel prices, forcing some LNG suppliers to cancel LNG shipments for 2Q2020 and 3Q2020.
These cancellations had no monetary implications as buyers must pay liquefaction prices either if the LNG shipment is transported.
It should be noted that the fuel market is cyclical and is experiencing periods of high and low spot costs mainly due to a lack of solid investment in fuel export projects. , during periods of overproduction without the desire to curb production.
However, we face exceptional circumstances, which have forced manufacturers and exporters of high-cost fuel and LNG without an acquisition of the company’s market to reduce their production. GECF member countries are among the cheapest manufacturers in the world and must deal with this typhoon – or any other – especially through their LNG supply, as the maximum of LNG projects operating in member countries have recovered their initial investment.
All GECF member countries have responded to recent adverse situations by implementing their own corrective measures, for example, national oil and fuel corporations have announced relief in their investment budgets, while others have reduced combustible materials to regional and global markets, and this was done independently. – not together – through member countries as a general reaction to market dynamics.
We believe that, despite existing adverse conditions, new opportunities will emerge for the global fuel industry in general and for GECF members in particular, so it is vital to intensify the promotion of herbal fuel as target fuel and selection. , as well as to help our member countries assess and forecast advances in fuel markets through 2050 and beyond.
NGI: Continuing the big LNG adjustments, do member countries that have shaped the fuel export market, such as Qatar, offer more contractual flexibility to their consumers to adapt?
Sentyurin: As we said, the herbal fuel market is undergoing basic adjustments due to its dynamic nature. All market participants will have to adapt to the new standard. Our member countries are no exception.
As a leading supplier of herbal fuels to the market, and at this turning point in global activity, we are determined to continue to play its important role in global energy security. Most of them have a long history of supplying resilient, sustainable and securing herbal fuel for their customers, with whom they are partners, and thus making them trusted business partners for countries that consume herbal fuel. .
There is no doubt that recent global progress, coupled with the Covid-19 pandemic and the emergence of new herbal fuel suppliers on the market, have forced some adjustments. As a result of those market adjustments, we are seeing shorter ones. forward contracts and some hybrid pricing mechanisms. With respect to geCF, we believe that long-term contracts ensure sufficient investment in capital-intensive fuel projects and decorate source safety in a world that is constantly looking for cleaner energy.
Some of the contracts of GECF member countries have expired in recent years, however, due to the established history of collaboration between major GECF manufacturers such as Qatar, Russia, Algeria, Trinidad and Tobago and Nigeria, and major client countries, the maximum contracts have been effectively renewed or new contracts signed.
NGI: In the future, are state-owned enterprises operating in member countries where LNG expansion projects are underway or more likely planned to replace the design of any new industry agreements as costs fall and more short-term money volumes available?
Sentyurin: First, we will have to put into tension the vital point that each member country enjoys autonomy in the use of its plant fuel resources for the benefit of its people, in addition, the respective state-owned enterprises have full sovereignty over all advertising. decisions regarding their contracts and advertising operations.
However, we believe that existing industry agreements are already excited by oil indexing formulas that prevent fluctuations in value. The GECF helps oil indexing formulas to help heavy upstream investments. Suppliers grant buyers permission to complete several unfinished value reviews in foreign courts, which somehow does not reflect a spirit of association. In addition, one of the main facets of the “destination clause” is now much more flexible than in previous contracts, where buyers are no longer limited to a port or country, but to regions, allowing buyers much more flexibility in reselling their loads.
In the meantime, it will be necessary to identify that in recent years the trend of new long-term contracts has been for a maximum of 10 to 15 years, in addition, the percentage of short-term transactions and money continues to increase. . It was 34% in 2019 and is expected to increase by 2020, and those points can replace long-term market design. However, the percentage of short-term contracts and money remains well below that of the long term. contracts, and as THE GECF member countries have strived to contribute to long-term partnerships, this bodes well for them.
NGI: Can you tell us how your members have dealt with market weakness through Covid-19?
Sentyurin: GECF members are no exception to global market weakness and have been affected. Export earnings have declined in the last six months. Most domestic fuel companies suffered losses in the first part of 2020, forcing them to spend, he added. Capital investments. Such a scenario poses a medium-term risk to the safety of the fuel source, which considers not only fuel exporting countries, but also fuel-importing countries.
Although coordination within the GECF to jointly reduce production or help fuel costs is not provided for in its statute, which distinguishes it from the Organization of Petroleum Exporting Countries, the forum would possibly have other scenarios for rebalancing the market. mitigating risks.
In this context, it is attractive to take a look at pipeline (PNG) and LNG exports. The GECF countries account for one hundred consistently with a percentage of non-European imports of PNG. In the first seven months of 2020, these imports decreased by 19% according to the year to 149 billion cubic meters (Bcm), with all suppliers, adding Russia, Norway, Algeria and Lithrougha, recording a decrease in the source. This decrease is due to declining fuel demand in the midst of the Covid-19 epidemic, as well as a developing source of LNG and superior fuel storage. It is vital to note that the decrease in fuel source caused by the policies of the loading countries, which reduced their PNG rate to a level of acquisition or payment. Meanwhile, some exporting countries have only reduced the volume of fuel they offer for spot trade, but this represents only a small component of the general source, which is largely based on long-term contracts.
In addition, GECF LNG exports also declined by 2% consistently with the year to thirteen8 million tonnes in the first 8 months of 2020, reflecting the weakening of the market and the expansion of the festival with non-GECF supply, which increased by 9%. GECF member countries that exported LNG consistently with the year increased their supplies by at least six countries, while the other seven reduced their supplies, with Egypt highlighting themselves, while some members have reduced their timely source of LNG, which is moderate given that it is traditionally low. spot prices.
NGI: When does GECF expect the global fuel market to improve?
Sentyurin: Current fuel market situations are already sending positive symptoms of valuable improvement in the centers.
On the so-called side, we are cautiously positive that last year’s fuel consumption point can only be reached until 2022, in the event of a momentary wave of coronavirus and weaker-than-expected economic activity in 2021, but we do not anticipate global blockade or serious containment measures that were in force in the first part of 2020. La Asia-Pacific region will be the main driving force of on-demand recovery , supported by hot fuel prices, abundance of materials and transition from coal to fuel.
On the source side, we are seeing a stagnation in some projects. This slowdown in upstream operations will result in production relief by 2020 and will make a gap between our updated and previous production forecast by 2021. We expect a turning point by the end of 2021, and the hole is expected to shrink in our perspective horizon.
NGI: As things recover and nations around the world continue to control emissions and move away from fossil fuels, is that a risk to GECF or do you think its members have a role to play in the power transition?
Sentyurin: The effort to reduce carbon emissions is a genuine opportunity for herbal fuel. We see that herbal fuel can relieve emissions in 3 ways.
First, replacing and penetrating high-carbon, polluting fuels, namely coal, is important. Over the past decade, we have monitored countries that have achieved truly extensive relief in carbon intensity and found that many of these countries have taken a step forward. as opposed to coal penetration. The United Kingdom, the United States and China are smart examples. Fuel expansion in the maritime transport sector, through herbal fuel cars and LNG testing, is also a lever to reduce emissions, in addition to adopting stricter emissions. Standards.
Second, herbal fuel improves energy power because fuel-based technologies, which add combined-cycle fuel turbines and fuel boilers, offer intelligent energy functionality to other technologies.
Finally, we note that gas force plants are complements and facilitators of the advancement of renewable energies, offering the flexibility to balance variability and keep electrical systems within the required stability levels.
In the long run, we see emerging features for deep fuel decarbonization, such as hydrogen production or carbon capture, use and storage. So far, the use of fuel to produce hydrogen has proven to be the ultimate competitive option. Capturing carbon dioxide from plants that consume herbal fuel provides a cost-effective path to decarbonization, as it requires less investment in processing due to decreased carbon content and pollutants that you want to remove from emitted fuels. Emissions are an opportunity without a risk to GECF.
Extracts of this have been modified for the sake of brevity and clarity.
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