State of Play: Where Are We Now?

1 - > SPEAKER_02: I think the main constraint is around getting the 2 - > economics right, getting the price signals right, and making 3 - > it attractive for investors, for users. 4 - > SPEAKER_01: When it comes to politicians this decade, you 5 - > know, whether it's post-Ukraine war or now the Middle Eastern 6 - > war, the responsibility for the government is to keep the lights 7 - > on somehow. 8 - > SPEAKER_00: But the idea that current gas prices could double 9 - > from their current levels, I think, is you know more than 10 - > plausible.

11 - > And particularly if there's no, you know, the straight opening 12 - > remains slow or partial, um, may actually be quite likely by the 13 - > end of the year. 14 - > SPEAKER_03: The road to decarbonisation looks 15 - > increasingly complex amid geopolitical tensions, highly 16 - > volatile gas and power prices, a renewed focus on energy 17 - > security. 18 - > So in this episode, we'll be exploring how global events are 19 - > shaping Europe's energy policy and whether the energy 20 - > transition can stay on course.

21 - > I'm very pleased to be joined by Jan Rosenel, who's a professor 22 - > of climate and energy at the University of Oxford. 23 - > A warm welcome to Plugged In, uh, Jan. 24 - > Thanks for having me. 25 - > I'd like to start off really by if we have a look across Europe, 26 - > um, how on a scale of one to ten would you rate the current 27 - > status of the energy transition?

28 - > SPEAKER_02: Well, if I look across Europe, I think we are 29 - > certainly not at 10. 30 - > There's still a very long way to go, but we are also uh certainly 31 - > not at uh two or three. 32 - > I would put us at somewhere around six or seven. 33 - > Um yeah, overall, I think we've made huge progress over the last 34 - > 20 years.

35 - > When you look at electricity, we're now in a situation where 36 - > more than 70% of electricity is from non-fossil sources. 37 - > Yeah, that was a lot more um just 10 years ago. 38 - > Uh so that's amazing uh in terms of the achievement of Europe's 39 - > energy transition. 40 - > Where we are lagging behind is in the transport sector, in the 41 - > building sector, and in the industry sector, because there 42 - > we're still using a lot of fossil fuels.

43 - > We burn them, uh, and and that's where the opportunities for the 44 - > next phase of the transition really lies is around 45 - > electrification. 46 - > Um, but overall, I think we're we're actually doing relatively 47 - > well. 48 - > On a good path. 49 - > There must be some regional variation here as well, or huge 50 - > variation.

51 - > I mean, if you if you look at um countries that have accelerated 52 - > really fast, um here, for example, uh, well, Germany, uh, 53 - > of course, even though there's still quite a bit of coal on the 54 - > grid, but when you look at the share of renewables, you know, 55 - > Germany had about 5% um uh in the early 2000s, and then we're 56 - > now looking at um uh more than 50%, um, or pick Spain and the 57 - > huge deployment um you know of solar and wind or Portugal, 58 - > Denmark is at more than 90% now when it comes to renewables.

59 - > Um but then you also have countries that have not done 60 - > quite as much, um, but even places like Poland that used to 61 - > be 95% coal are now really you know speeding up and picking up 62 - > the pace. 63 - > SPEAKER_03: And so so looking ahead, Jan, what will determine 64 - > whether Europe's transition accelerates, stalls, or becomes 65 - > more fragmented? 66 - > What what are the what are the key elements here to determine? 67 - > SPEAKER_02: I I think technology is now at a such advanced stage 68 - > where uh it's it's hard to see uh what else needs to happen to 69 - > also make it work from a technology standpoint because we 70 - > have uh you know storage, uh we now have um uh cheap generation 71 - > assets, we know how to manage the grid.

72 - > Yeah, there are no insurmountable obstacles uh when 73 - > it comes to technology, at least for the next five to ten years. 74 - > You know, there's still work to be done for the harder to 75 - > decarbonize uh parts of the economy. 76 - > Uh and then on the demand side, you know, heat pumps, electric 77 - > vehicles, uh, even industrial electrification, all of that is 78 - > now available. 79 - > I think the main constraint is around uh getting the economics 80 - > right, getting the price signals right, um, and making it 81 - > attractive for investors, for users to use clean electricity, 82 - > clean energy.

83 - > Um and then I think the hardest part is the politics. 84 - > Uh, and that's where I think we have a lot of work to do, you 85 - > know, as a society. 86 - > Like what's the what's our what's our vision? 87 - > Where do we want to be?

88 - > Do we want to be more like China um and um electrify, use lots of 89 - > renewables, we go into that direction, or are we trying to 90 - > be more like the US, but then we don't have any you know oil and 91 - > gas reserves in the same way that the US does. 92 - > So uh I think we're a bit of stuck at the moment and and we 93 - > gotta find a way forward uh in terms of the politics. 94 - > And the pendulum is swinging a little bit against kind of the 95 - > net zero and climate policy, isn't it?

96 - > 100%, and it has already before the war. 97 - > And I think what's interesting here is that you know clearly 98 - > when you ask experts, they will point the finger at geopolitical 99 - > tensions. 100 - > First, the invasion of Ukraine by Russia, and then more 101 - > recently the um Iran war that lead to high gas prices 102 - > primarily, but also higher oil prices, uh, and that has ripple 103 - > effects to the economy. 104 - > Um, but there are those who will say this is the fault of 105 - > renewables and the transition.

106 - > Uh, and there's certainly some people who believe those 107 - > arguments and they're willing to give people their vote who say 108 - > we're gonna do away with all the energy transition policies and 109 - > go back to the old system. 110 - > Um and that I think is a very dangerous uh situation that 111 - > we're in where um you know this polarization of net zero and of 112 - > the transition is rather unhelpful. 113 - > Because that's really, you know, we don't want to turn the clock 114 - > back, do we?

115 - > Uh well, it's impossible also, you know, when you look at the 116 - > uh the share of the global oil and gas resources that Europe 117 - > has, it's tiny. 118 - > Uh yeah, we are not in a position where we can rely on 119 - > our own uh fossil fuel resources, even if we ignore 120 - > climate change for a minute. 121 - > Yeah, um, and we it's just not possible. 122 - > So we would have to rely on imports, which of course, as we 123 - > have now seen, is is a very risky business to rely on 124 - > imported fossil fuels.

125 - > And increasingly those will be in the form of LNG, for example, 126 - > which uh you know can suddenly become very, very pricey, as we 127 - > have seen in the recent uh crisis in the Middle East. 128 - > SPEAKER_03: Absolutely. 129 - > We don't want another crisis in two or three years. 130 - > I think it's that's certainly, as we've talked before on this 131 - > blog about, it's a real wake-up call, isn't it?

132 - > Thank you very much, Jan, for being a guest on the Plugged In 133 - > Summer Series. 134 - > Thanks for having me. 135 - > So if Jan Rosenau lays out the long-term picture, the next 136 - > question is what that looks like on the ground today. 137 - > Europe has made enormous progress on renewables, but 138 - > markets remain volatile, power prices are under pressure, and 139 - > governments are once again balancing energy security with 140 - > climate ambition.

141 - > To explore how geopolitics is reshaping and transition in real 142 - > time, I spoke to Simon Flowers, Chairman and Chief Analyst at 143 - > Wood Mackenzie. 144 - > A warm welcome to the podcast, uh Simon. 145 - > SPEAKER_01: Richard, thanks very much. 146 - > Great to be with you.

147 - > SPEAKER_03: We're talking today, and and we'll be across the all 148 - > over the you know in the summer about the energy transition in 149 - > Europe. 150 - > Is it is it slowing down, is it faltering, or is it accelerating 151 - > given the geopolitical unrest? 152 - > What's your view here? 153 - > I think it's too early to say.

154 - > Big question to start with, Simon. 155 - > SPEAKER_01: Well, it well look, I think if we if we if we think 156 - > about prior to the crisis, the there were there was some 157 - > tremendous progress uh towards the policies which are among the 158 - > most ambitious uh anywhere in the world. 159 - > But there were also some some difficulties, you know, cost and 160 - > not not not being leased, and some of the investors in in the 161 - > tradition, thinking about the you know, big oil companies, for 162 - > example, the European big oil companies who backed it, many of 163 - > them backed it from the beginning, uh, started to find 164 - > they had to move away from it.

165 - > And so uh even before the crisis, there was uh a bit of uh 166 - > a bit of drift, if you like. 167 - > It was beginning to slow down a little bit, and then comes the 168 - > crisis. 169 - > And I think it's too early to say what's gonna happen, but you 170 - > could you can make uh definitely think, well, it's reinforced. 171 - > The crisis has reinforced how dependent we are on the old 172 - > hydrocarbon system or the current hydrocarbon system, as 173 - > you'd say.

174 - > And there's a very urgent need to make sure we can secure 175 - > enough energy, even whether it's oil, gas, and and even coal, to 176 - > keep the lights on for the next few years. 177 - > At the other end, there's well, this is yet another lesson that 178 - > we mustn't become too dependent on uh hydrocarbons. 179 - > We we need to maybe double down on our our view uh that we need 180 - > to get towards a low-carbon system uh as soon as we can, or 181 - > at least over the next few decades.

182 - > SPEAKER_03: So you mentioned oil, gas, and coal. 183 - > Do you think the the the crisis in the Gulf has really shifted 184 - > how you know the thinking among European governments, how they, 185 - > you know, especially in relation to energy security and the pace 186 - > of the transition? 187 - > SPEAKER_01: Well, I I think there the the immediate thing is 188 - > well, where where do we get our oil and our our our gas from? 189 - > And so quite a bit of it is from the Middle East, and and so I 190 - > think Europe, like others, will be thinking, well, we need we 191 - > need diverse sources of supply, whether it's a bit more from 192 - > North Africa, a bit more from Latin America, North America, 193 - > and and maybe even regenerating our own sources.

194 - > At the same time, I think it'll give them, give the policymakers 195 - > tremendous um confidence that in the medium to long term, they're 196 - > going down the right line. 197 - > So, renewables, let's keep those, keep that investment 198 - > rolling. 199 - > Let's think about more diverse sources of electricity as well 200 - > to complement uh the renewables, which of course is a variable 201 - > source. 202 - > You can't survive only on that.

203 - > So I I think it's a bit of a double message in the near-term 204 - > uh where are we going to get the oil and gas from? 205 - > Longer term, let's keep the pedal to the metal in getting a 206 - > low-carbon system going. 207 - > SPEAKER_03: I mean, you know, Europe has added record 208 - > renewable capacity in recent years. 209 - > As you as you mentioned, it's a it's a success story, it's an 210 - > incredibly ambitious uh targets and objectives here.

211 - > But power markets still feel kind of structurally stressed 212 - > and volatile, and you you know, the talk of curtailment, 213 - > negative prices, etc. 214 - > Uh what what what's what's happening? 215 - > What's going on, Summer? 216 - > SPEAKER_01: Well, yeah, I mean renewables is is is a pretty 217 - > cheap uh marginal cost of production.

218 - > And and uh when the sun shines and the the wind blows, in in in 219 - > some countries which have very large amounts of uh renewables, 220 - > you you you do see negative prices, and and that's been 221 - > around for a while, but you're seeing it in it more not more 222 - > often than not, the more than we used to, right? 223 - > As the as the as the percentages click up. 224 - > So we've got you know a number of countries which are over 50% 225 - > already. 226 - > That's renewable capacity as a share of electricity generation, 227 - > and and that's going to increase because the targets are going 228 - > higher and the um the investment is going in.

229 - > But look the so the variability is one factor, and another thing 230 - > is that the electricity, the the the the renewables may be 231 - > produced in one place and needed in another, so interconnection 232 - > is another big thing. 233 - > But we shouldn't forget also that that gas is still an 234 - > important part in setting the prices, and and so wholesale 235 - > prices are very, very volatile because you've seen gas prices 236 - > double uh in in the last few months with the the crisis in 237 - > the Middle East.

238 - > And so it's it's it's frustrating. 239 - > You've got this low-cost electricity pervading the 240 - > system, but in many markets, and it varies across markets, you 241 - > know, but somewhere like the UK, for example, your gas sets the 242 - > the price uh uh more often than not in the UK market. 243 - > So we're we have a cheap electricity system in many 244 - > respects, but we we're the the about the highest cost 245 - > electricity in the world, uh in the United Kingdom, certainly in 246 - > Europe.

247 - > SPEAKER_03: I mean, I think you know that's something we'll be 248 - > returning to in in this summer series and and and you know 249 - > other episodes, especially this uh this element of uh of gas 250 - > setting the setting the wholesale price. 251 - > But which European markets, which European countries are 252 - > currently managing the energy transition best? 253 - > And which which regions would you say look more vulnerable 254 - > over the next few years? 255 - > SPEAKER_01: Well, look, we're muddling through as a continent, 256 - > but uh the the the ones that are are are coal or gas reliant are 257 - > are struggling the most.

258 - > So say take Italy. 259 - > So uh Italy is uh has among the highest prices, is the most 260 - > dependent uh of the European countries on imported oil and 261 - > gas, so you know, roughly in the the descending order, um you you 262 - > you go Italy, then Germany and the UK, and then um at the lower 263 - > end of the scale, the the where they've got either very high 264 - > renewables uh penetration, such as Spain, or super high nuclear 265 - > production like France, they're weathering the storm a little 266 - > bit better.

267 - > SPEAKER_03: Germany's post-nuclear strategy continues 268 - > to divide opinion, um, and it's burning probably uh large 269 - > amounts of coal. 270 - > Um has this damaged confidence in Europe's wider transition 271 - > story? 272 - > I mean, it you know, it's a it's a leader in new renewable 273 - > capacity, it's been at the forefront of the energy 274 - > transition, but yet it has to burn coal to keep the lights on. 275 - > Is that is that damaging this the the energy transition story 276 - > somewhat?

277 - > SPEAKER_01: Obviously it doesn't help, but but here you've got uh 278 - > uh a divergence, if you like, between the higher policy from 279 - > the European Commission and then the federal situation. 280 - > Because each country has its own legacy base, if you like, and 281 - > and Germany, you know, some would say, and and I'd probably 282 - > agree with them, that you know, the decision to move away from 283 - > nuclear wasn't the greatest one ever. 284 - > And and so when it comes to politicians this decade, you 285 - > know, whether it's post-the-Ukraine uh war or now 286 - > the Middle Eastern war, the responsibility for the 287 - > government is to keep the lights on somehow.

288 - > So you you you then have to edge towards or or make a decision to 289 - > be pragmatic, and and that's what Germany's done. 290 - > So actually, you know, it's not using as much coal as it might 291 - > do. 292 - > Uh it's got around seven gigawatts, uh, which is just 293 - > sitting in reserve for the time it's needed. 294 - > And through the Russia, through the Middle East crisis of the 295 - > last um several weeks, and uh, the the things have been in 296 - > Germany's favor, like it's been milder than it might have been 297 - > at this time of year.

298 - > Renewables have worked pretty well, so they sort of muddled 299 - > through. 300 - > But I take your point, you know, they've still got those seven 301 - > gigawatts uh in in place, and they're also going to build new 302 - > gas fired power stations, which seems to step away from the the 303 - > low carbon trajectory. 304 - > They've just got to muddle through as best they can. 305 - > And I think they've they're trying to reassure their own 306 - > people that they're going to have a diversified supply 307 - > source, so be it, if it has to contain a bit of coal in the 308 - > background and some more upfront gas, but they're they're still 309 - > going to keep to their targets by 2020 2045 to get to net zero.

310 - > So I at the moment the the long-term policy is still in 311 - > place, they just have to find a pragmatic way to weather the 312 - > difficult next few years. 313 - > SPEAKER_03: Absolutely. 314 - > Are there other countries that are you know falling back onto 315 - > coal in in in in in terms of these very high, also, 316 - > especially gas prices that you mentioned there, Simon? 317 - > SPEAKER_01: I think it's happening almost everywhere.

318 - > You know, I I think we're talking about Europe here, but 319 - > it's certainly in Asia. 320 - > There's a leaning towards coal, and those countries which are 321 - > not only in Eastern Europe but more towards the eastern side of 322 - > the European continent will be using uh more coal than they 323 - > might have expected. 324 - > What you're not really seeing is uh new coal plant being built. 325 - > I mean, that that would I think be uh a real concern for climate 326 - > ambitions.

327 - > It's just not happening. 328 - > SPEAKER_03: So they're falling back on the burning coal with 329 - > old old stations rather than building. 330 - > I think that's a very important point as well. 331 - > Is Europe still on track for its long-term decarbonisation goals, 332 - > or are we entering a slower, more sort of disorderly uh two 333 - > steps back, three steps forward phase of the transition?

334 - > SPEAKER_01: I'd say we are, yeah, most of the targets, 335 - > whether it's your renewables targets or or the other low 336 - > carbon build-outs like carbon capture storage and hydrogen, 337 - > they're all uh they're all behind, okay, but it's it's it's 338 - > it's not being derailed. 339 - > And I think that the the next few months or so are going to be 340 - > critical. 341 - > I mentioned at the beginning it's too early, really, to tell 342 - > whether transition is being slowed down.

343 - > And I would predict that you'll see the European Commission 344 - > cement its concept of a low-carbon economy, not delay 345 - > the dates, but use or leverage this crisis as a means of uh 346 - > supporting uh the move to low carbon even further. 347 - > Uh the big question is: well, it's easy to think, right? 348 - > Where does the money come from? 349 - > And and and it's still got uh particularly the renewables is 350 - > is a goer in its own right.

351 - > You know, certainly onshore wind and uh and solar are 352 - > competitive. 353 - > It's when you come to the industrial scale, very 354 - > large-scale offshore wind, they need heavy subsidies. 355 - > You electric vehicles need heavy, heavy subsidies, and so 356 - > there's a bit of a question about where that money is going 357 - > to come from. 358 - > But I'd say in the next year or two we'll we'll hear affirmation 359 - > that the European Commission is still maintaining its uh its 360 - > long-term goals of of net zero, whether whether it be 2045 or 361 - > 2050, depending on the the country.

362 - > SPEAKER_03: Still on track there, Simon. 363 - > Simon, thank you very much for joining the the summer series of 364 - > the Plugged in podcast. 365 - > My pleasure, Richard. 366 - > Simon Flowers argues that Europe's long-term direction 367 - > hasn't changed, but the immediate priority is keeping 368 - > energy supplies secure.

369 - > That brings us to perhaps the biggest short-term risk facing 370 - > global energy markets, the conflict in the Middle East, and 371 - > what it could mean for oil, LNG, and ultimately European gas and 372 - > power prices. 373 - > To unpack those risks, here's Saul Kavanich, head of energy 374 - > research at MST Marquee. 375 - > A warm welcome and welcome back to the podcast, uh Saul. 376 - > Pleasure to be with you as always.

377 - > I thought we could start by talking about, you know, this is 378 - > about the current energy crisis. 379 - > This is the the the second time in four years that there's been 380 - > an uh absolutely uh grave energy crisis or price energy price 381 - > crisis. 382 - > Is it time that Europe in particular thought a little bit 383 - > differently about its energy supply and its energy energy 384 - > dependencies? 385 - > SPEAKER_00: Well, sitting here in Asia, many of us thought that 386 - > Europe was going to heed the lessons of the 2022 crisis 387 - > precisely to make sure they didn't end up in the situation 388 - > that they now face in 2026.

389 - > I don't know how many headlines we've read about various 390 - > developments since the Ukraine war, which said, in essence, 391 - > this is a wake-up call for Europe. 392 - > And we're now at the point where Europe has managed to relax its 393 - > gas storage and end up near record low gas storage just as a 394 - > major geopolitical event disrupts gas markets at an 395 - > unprecedented scale again. 396 - > Um, and it gets to the point again, when we look at this um 397 - > from through an Asian lens, it it looks very much like Europe 398 - > is unable to learn the lesson that it keeps being uh given 399 - > repeatedly uh over the last few years, which is very different 400 - > to the way some major Asian economies are approaching things 401 - > and adapting and fundamentally have shifted their entire energy 402 - > procurement strategies since 2022 and now are in a better 403 - > position to withstand the current shock, which we're 404 - > seeing right now, um, because they've actually learned the 405 - > lessons from the Ukraine war that Europe didn't.

406 - > SPEAKER_03: How exposed is is is Europe today to disruption in 407 - > LNG flows if tensions with Iran escalate further? 408 - > I mean, we're we're recording here uh at the start of June. 409 - > Um the war's been going for three months, but what how would 410 - > you say uh talk a little bit about the exposure that Europe 411 - > has to these global uh supply shocks? 412 - > SPEAKER_00: Well, first of all, it's important to understand now 413 - > this shock is different to the Ukraine war shock.

414 - > Uh so what we have this time is a larger withdrawal of supply 415 - > from the market. 416 - > So it's about 80 million tons per annum equivalent, where it 417 - > was about 60 million tons equivalent that was uh removed 418 - > via Russian pipeline gas in 2022. 419 - > Uh, but this time the disruption is actually more directly 420 - > affecting Asia and because a lot of the Qatari contracts are 421 - > coming into Asian customers. 422 - > So that means the impact this time, unlike in 2022, is it's a 423 - > secondary impact on Europe because ultimately Europe is 424 - > still in the LNG market, including in the LNG spot 425 - > market, uh supply, which will have to now directly compete 426 - > with Asia for the limited supply available, including out of the 427 - > United States.

428 - > Uh the other main difference this time is in 2022 we saw 429 - > some, you know, you know, I think one of the really 430 - > constructive and positive things we saw in Europe, particularly 431 - > in Germany, was pulling a lot of levers to reduce gas demand, 432 - > improve efficiency, do things like insulate manufacturing 433 - > equipment across the nation, which uh made it to really 434 - > capture that low hanging fruit to reduce gas demand. 435 - > Uh the problem, of course, this time around is with that lever 436 - > being pulled in 2022, we can't pull it again in 2026.

437 - > Um so when you've got now coming into this war, very low gas 438 - > stocks in Europe um and limited ability. 439 - > In the near term to reduce demand compared to a few years 440 - > ago. 441 - > What I think we see now is Asia's felt the brunt of this 442 - > first, and there's been some demand destruction there, or at 443 - > least demand reductions across Asia. 444 - > But it is going to take this lag time.

445 - > So, first of all, a lot of LNG tankers that left the Stratomers 446 - > before the war still take one or two months to get to their end 447 - > markets. 448 - > Then you still have to start to see your stocks with draw down 449 - > in Northeast Asia. 450 - > We're now at that point now. 451 - > So the real pressure point for competition between major Asian 452 - > economies and European economies is only going to start in the 453 - > next month or so, right as we start to see an uptick in 454 - > seasonal demand for the Northern Hemisphere sun up summer.

455 - > And so I think we can see, particularly if the Strait of 456 - > Moore's closure is prolonged, but frankly, even if it starts 457 - > to open soon, we could actually see an uptick in prices over the 458 - > next two quarters as demand rises, the need to refill stocks 459 - > ahead of winter rises, and the actual um end user impact of the 460 - > war starts to be felt in earnest. 461 - > SPEAKER_03: So, what other levers do policymakers have? 462 - > What other options do they have to in in and in in light of the 463 - > current crisis and ahead of the winter?

464 - > SPEAKER_00: Look, short term, the reality is there's very 465 - > limited levers one can pull. 466 - > The most effective one is going to still be demand management 467 - > measures. 468 - > We're seeing, particularly in some emerging Asian economies, 469 - > for example, uh things such as thermostats, um, so reducing the 470 - > amount of air conditioning or reducing the amount of heating 471 - > that is being used, uh, which is you know perhaps exemplary of 472 - > the amount of effort that is being taken to reduce demand 473 - > because every molecule counts.

474 - > Uh so mostly is going to be in demand side measures. 475 - > The reality is you need to, you know, to be fully prepared for a 476 - > shock like this, you need to have been prepared beforehand, 477 - > which has not fully happened. 478 - > And most of the other things that you can do on the demand 479 - > side in particular, along the lead items, for example, 480 - > regarding electrification, which has been given a huge push in 481 - > Europe anyway. 482 - > So it's unclear how much harder that can be pushed to make it uh 483 - > move more quickly.

484 - > I think what, you know, let's look at what we're hearing from 485 - > our major Asian counterparts. 486 - > Remember, we're the original foundation um and founders of 487 - > our energy industry globally, is they are looking at this and 488 - > seeing they need to rapidly change their procurement 489 - > strategies to have greater diversity of supply, 490 - > particularly from outside the Middle East, but also um invest 491 - > more direct investment directly in equity projects, to have 492 - > equity molecules they can bring to their markets and to 493 - > overinvest to have more LNG than they need in their portfolio in 494 - > order to have buffers uh when shocks happen.

495 - > So that's what you're seeing from the likes of Japan and 496 - > Korea. 497 - > China, of course, is going down a different route, particularly 498 - > on the local production and demand switching side, which uh 499 - > unfortunately, from an environmental perspective, is 500 - > going to ramp up coal production. 501 - > Uh, but what we haven't yet seen from particularly European lands 502 - > is government support for measures to also see increased 503 - > amounts and diversity of supply going forward.

504 - > The impetus behind that in 2022 seemed to have fallen away by 505 - > 2025. 506 - > And I think it needs to return again because you can't leave 507 - > all the heavy lifting here to Japan, Korea, um, and other 508 - > Asian nations. 509 - > SPEAKER_03: So, what are the options there, Soul, in terms of 510 - > diversifying supply? 511 - > Are we talking Nigeria, Mozambique, um, uh other such 512 - > uh, you know, Asian markets?

513 - > SPEAKER_00: Yeah, well, I mean, the unfortunate thing is if you 514 - > look at where the major growth centers for LNG were expected to 515 - > be, which is Russia, Qatar, Mozambique, and the US, we've 516 - > all got, you know, Russia and Qatar embroiled in um uh a much 517 - > higher risk profile. 518 - > So we're now trying to diversify away from those very places. 519 - > Mozambique does look like it is coming back, so that's one. 520 - > And the US obviously is a huge part of that, but we can look 521 - > beyond uh additional capacity, obviously, in the US, where 522 - > there's some opportunities in West Africa, there's some 523 - > opportunities uh to, again, in Mozambique to expand it more 524 - > quickly, even in places like Tanzania, although the cost is 525 - > obviously higher, even in places uh such as Australia, where 526 - > there are uh is gonna be a huge amount of investment required 527 - > just to keep current production levels going, let alone grow it.

528 - > Um, if we don't see increased support from major customers to 529 - > get those projects which are currently marginal and 530 - > questionable over the line, then they're not gonna happen. 531 - > And if they don't happen, it means we remain in a tighter uh 532 - > market outlook. 533 - > And I'm particularly looking at beyond the 2030, the early 2030s 534 - > here. 535 - > We've obviously still got a lot of supply ramping up into the US 536 - > and Qatar near term.

537 - > Uh, but the outlook, particularly if we still want to 538 - > have impetus on phasing down coal demand, has to see much 539 - > higher LNG demand and therefore supply decisions made in the 540 - > next few years so that it comes online in the early to 541 - > mid-2030s. 542 - > SPEAKER_03: If we can bring it back to 2026 and sort of ahead 543 - > of the coming winter, Saul, I mean, do you do you see you 544 - > mentioned a potential uptick in prices? 545 - > Is that on the level as we saw in 2022?

546 - > SPEAKER_00: Do you think? 547 - > At the risk of putting out a highly controversial and 548 - > counter-consensus view, I think it could um still approach some 549 - > of those you know more lofty levels we saw uh in 2022. 550 - > I mean, I think there were some lessons learned from 22, 551 - > particularly regarding the forced uh buying out of Europe, 552 - > which might you know mitigate those very like peak highs. 553 - > But the idea that current gas prices could double from their 554 - > current levels, I think, is you know more than plausible.

555 - > And particularly if there's no, you know, the straight opening 556 - > remains slow or partial, um, may actually be quite likely by the 557 - > end of the year. 558 - > SPEAKER_03: And which European countries are most vulnerable to 559 - > to such a gas price spike? 560 - > SPEAKER_00: Oh, Richard, you're far better European gas market 561 - > experts than I am. 562 - > You know, I I'll be where you're sitting here in Asia and uh 563 - > pointing out who's doing a better or worse job of the 564 - > European nations.

565 - > Uh, I guess you know what matters more is what Germany's 566 - > gonna do. 567 - > Um, you know, I mean ultimately Germany is where the leadership 568 - > from gas runs out of Europe. 569 - > And if Germany gets it right, everyone, a lot of others are 570 - > beneficiaries, and if Germany gets it wrong, everyone else is 571 - > gonna be in paying quite regardless of how well they try 572 - > and prepare at a national level, assuming the European gas market 573 - > remains intact.

574 - > SPEAKER_03: Absolutely. 575 - > Germany is key, potentially Italy as well, uh very 576 - > vulnerable. 577 - > But so so a final question, really. 578 - > You mentioned uh an increase in coal burn.

579 - > Um is this kind of temporary balancing or potentially 580 - > evidence of deeper structural problems in the in the energy 581 - > transition? 582 - > SPEAKER_00: What's your view? 583 - > Well, unfortunately, it is a sign of deeper structural 584 - > problems with climate policy and the appetite and support for it 585 - > more globally. 586 - > So, again, sitting here from in Asia and someone who's spent a 587 - > lot of time visiting Europe over the last five years, Europe is 588 - > being very much in a climate bubble compared to the rest of 589 - > the world.

590 - > Um, you know, to the point where, you know, a few years 591 - > ago, if I was uh uh it doesn't matter if I was in Berlin or 592 - > London or or Paris, to say for someone to go somewhere and say, 593 - > I believe that climate policy is a sham and net zero shouldn't be 594 - > adhered to, you wasn't even allowed in polite society. 595 - > But keep in mind, if you said something like that in China, 596 - > Japan, or US, that would be a perfectly normal thing and 597 - > perhaps often what the majority of the table around dinner would 598 - > be talking about.

599 - > And so Europe's been very much in a much more progressive um 600 - > policy space, which is and that pendulum has started to swing 601 - > back, began in 2022, particularly in 2025. 602 - > Now, what you saw last year is the ESG pendulum regarding 603 - > climate has started to swing back in a very large way. 604 - > That's been partly driven by some of the logistical realities 605 - > of the energy transition, which have been proven much harder, 606 - > but also on a popular level, uh, we've seen obviously the 607 - > election of Donald Trump, um, we've seen the US move away from 608 - > this in a big way, and cost of living pressures around the 609 - > world, which makes this climate is no longer the top item on a 610 - > voting level that it was a number of years ago.

611 - > And my fear is, and you know, this is playing out exactly as 612 - > many of us predicted, is that by um climate policy being pushed 613 - > so ideologically and so impractically so fast that it 614 - > didn't bring people along with it. 615 - > And now the risk is that the pendulum swings too far 616 - > backwards and we end up not doing anywhere near as much as 617 - > we could do. 618 - > And I think that's exactly now in what the situation is that we 619 - > are in.

620 - > And you can see, for example, even what's happening now in the 621 - > wake of the war with China moving more to coal. 622 - > Um, the reality is right now, while it was paid lip service to 623 - > a few years ago, most Asian nations considered nets in euro 624 - > by 2050 not only is not uh uh something to be desired, but 625 - > something that is logistically impossible. 626 - > Right? 627 - > And we need to get back on a path where we are doing what we 628 - > think is practically feasible and can bring populations along 629 - > with us because if we don't, then we're not going to end up 630 - > doing anything.

631 - > SPEAKER_03: And that would be a very worrying situation indeed. 632 - > So, thanks very much for being a guest on the Plugged In Podcast. 633 - > Always a pleasure. 634 - > And to you listeners, thanks for listening to this episode of 635 - > Plugged In.

636 - > If you enjoyed this discussion, please like, rate, and follow to 637 - > make sure you get the latest podcast episodes as soon as we 638 - > release them every Thursday. 639 - > And finally, you can head to Montanews.com for more news and 640 - > analysis from our team of journalists across Europe and 641 - > beyond. 642 - > See you next time.