Beautiful insight. A bigger potential (probable) problem is the Turks themselves: they have perfected blackmail and hoatage-diplomacy. Erdogan declares "Asad must go", infiltrates Islamists into Syria, destabilises and loots the country, then cries like a spoilt child for help with refugees...and when he doesn't get what he wants, he weaponises the refugees and "Opens the Gates of Europe". This carpet-trader mentality is not unique to him: when China wanted to by a a half build aircraft carrier from Ukraine, Erdogan's predisessors blocked it and made a deal (citing the Montreux Convention) and relented after ballistic missile technology transfer was granted. Is Europe really going to give Turkey leverage with life and death resources control? A Turkey that has openly stated the desire to obtain nuclear weapons.
Great addition. The only supply that carries no transit risk is domestic. Which makes the refusal to develop European gas reserves not just an energy policy error but a security one.
I’m still amazed that any sensible (the operative word here) European leader could look at that map, see that most of it’s energy options rely on stability in historically unstable regions, and yet continue to double down on proven destructive energy policies. This is ideology devolving into mental illness. And yet, I’ll repeat the truth I have learned, with very few exceptions, most people around the world have the government they deserve.
Correct. Though consider Germany: voters threw out a government partly over energy policy, only to get a coalition—assembled behind a firewall against the electoral alternative—that continues the same policies. The voter delivered a verdict and the political class found a procedural workaround.
Indeed. And the same epidemic lack of critical thinking skills that allowed most of the European populace to be bamboozled into killing commercial nuclear energy production is now using that same lack of rational mental faculties to elect clowns who mirror their own idiocy. They can can blame the politicians, but the real culpability lies with those who put them in charge.
Great insight. What would be "interesting"? Look at that first map again. What's the FASTEST way to get NG from Qatar to the Med? a pipeline ending in either Lebinon or Israel. With Lebanon in some turmoil still but coming out of it as Iran's puppets starve, and Israel becomes more open to cooperation with the actual government, due to Hamas's weakening position, this would be a golden oportunity for Lebanon to get some reconstruction money coming in. Or if that's too risky, run it to Halfa. Qatar is one of the most "enlightened" of ME Muslim countries, doing this, and signing the Abraham accords would cement their place as one of the "good guys" in the ME with the west, if that is their goal.
Intriguing proposition. That bypasses Hormuz entirely. The economic difficulty is that the pipeline might only make sense if it stays gaseous all the way to European distribution networks.
liquifying in Israel instead of Qatar? I don't think Qatar is that desperate. Make it work for oil first, much less investment but it substitutes Iran with Israel for instability...
Great take here, certainly not something I had considered, but very cogent thinking. I guess we will learn if it is correct as time passes but an excellent mental model. As to Europe, it is hard to list all the strategic errors that the continent has made with regards to energy, there are simply too many.
To prevent starting contracted sales agreements and debt service. Per GROK: Venture Global LNG’s Calcasieu Pass LNG facility (also called VGCP or Calcasieu Pass) in Louisiana deliberately delayed declaring its commercial operations date (COD) for years after it began producing LNG in early 2022. By not declaring COD, the project avoided triggering its long-term sales and purchase agreements (SPAs) with buyers such as Shell, BP, Edison, and others. Instead, Venture Global could sell the vast majority of its cargoes on the spot market at much higher prices (especially during the 2022–2023 price spike after Russia’s invasion of Ukraine). By extending the commissioning period (ultimately until ~April 2025 for Calcasieu Pass), Venture Global sold hundreds of cargoes (reports cite 177+ worth >$15 billion by mid-2023, eventually over 400) on the spot market before the SPA obligations and associated debt-service waterfall fully applied. This generated massive extra revenue that would otherwise have gone to lower-priced contract buyers.
So this diversification strategy includes having Qatar LNG blocked in the Persian Gulf, and blocked in N America when/if the US decides it can't continue exporting because it needs it for itself? Mmm, its a plan, just not a very good one I think.
Yes, but. Qatar has a significant knowledge of LNG, so its obvious first 'diversification' is to do more of what its really good at elsewhere. Fine as far as it goes. But as far as Qatar Inc is concerned you are still putting a lot of eggs in one basket. Some of that might be OK , but really to diversify properly they need to put substantial proportion of their funds in something else ( and i don't mean spare change in european football clubs). If they want to stay in raw materials/fuels, try minerals, rare earths or Australian coal.
I think you produced an astute report that said the EU should be looking for countries that had loads of spare gas but not growing populations and didn't need the stuff itself. Obviuoslt there is a big northern country that fits that bill , but they have ruled it out. But if Qater wants to stay in LNG why not own/operate/ re-badge LNG from Yamal? Desperate customer waiting...
I’m not sure I agree with you on this. Force Majeure (FM) only allows contract suspension under very specific circumstances. Qatar can’t fail to supply just because they see a superior commercial opportunity they can call FM usually only in the event of an “act of god” or war. If they failed to supply for other reasons they would open themselves to very expensive litigation. Typically pipeline supply contracts (just like any supply contracts) will also contain FM clauses just like LNG contracts.
Correct on FM mechanics. But consider: Golden Pass volumes are uncontracted. QatarEnergy sells them directly into spot markets. It could have prioritized those molecules to cover affected European buyers. Instead it invoked FM on the contracted volumes and kept the spot optionality intact.
I guess the reality is that Golden Pass is a different corporate entity (Exxon would not have been a fan of Qatar using molecules to supply what would have been a far inferior price). The Qataris are taking a massive financial hit from this conflict and probably didn’t feel too charitable to boot. I sort of get your drift but I think many entities would do the same if they were in the same position and the contract allowed. Most buyers would not expect Golden Pass to meet QatarEnergy obligations as contracts would be site specific
Beautiful insight. A bigger potential (probable) problem is the Turks themselves: they have perfected blackmail and hoatage-diplomacy. Erdogan declares "Asad must go", infiltrates Islamists into Syria, destabilises and loots the country, then cries like a spoilt child for help with refugees...and when he doesn't get what he wants, he weaponises the refugees and "Opens the Gates of Europe". This carpet-trader mentality is not unique to him: when China wanted to by a a half build aircraft carrier from Ukraine, Erdogan's predisessors blocked it and made a deal (citing the Montreux Convention) and relented after ballistic missile technology transfer was granted. Is Europe really going to give Turkey leverage with life and death resources control? A Turkey that has openly stated the desire to obtain nuclear weapons.
Great addition. The only supply that carries no transit risk is domestic. Which makes the refusal to develop European gas reserves not just an energy policy error but a security one.
I’m still amazed that any sensible (the operative word here) European leader could look at that map, see that most of it’s energy options rely on stability in historically unstable regions, and yet continue to double down on proven destructive energy policies. This is ideology devolving into mental illness. And yet, I’ll repeat the truth I have learned, with very few exceptions, most people around the world have the government they deserve.
Correct. Though consider Germany: voters threw out a government partly over energy policy, only to get a coalition—assembled behind a firewall against the electoral alternative—that continues the same policies. The voter delivered a verdict and the political class found a procedural workaround.
Or perhaps they really do deserve their governments good and hard. Certainly democracies.
Indeed. And the same epidemic lack of critical thinking skills that allowed most of the European populace to be bamboozled into killing commercial nuclear energy production is now using that same lack of rational mental faculties to elect clowns who mirror their own idiocy. They can can blame the politicians, but the real culpability lies with those who put them in charge.
"With the Sabine Pass sitting on the Gulf of Mexico, this project also has the obvious advantage of being outside a war zone."
You failed to account for the ferocity of SEC football rivalries.
lol
Not a war zone, but just six months of potential atmospheric artillery.
Yes! But only last 4 mos of the year!
Great insight. What would be "interesting"? Look at that first map again. What's the FASTEST way to get NG from Qatar to the Med? a pipeline ending in either Lebinon or Israel. With Lebanon in some turmoil still but coming out of it as Iran's puppets starve, and Israel becomes more open to cooperation with the actual government, due to Hamas's weakening position, this would be a golden oportunity for Lebanon to get some reconstruction money coming in. Or if that's too risky, run it to Halfa. Qatar is one of the most "enlightened" of ME Muslim countries, doing this, and signing the Abraham accords would cement their place as one of the "good guys" in the ME with the west, if that is their goal.
Intriguing proposition. That bypasses Hormuz entirely. The economic difficulty is that the pipeline might only make sense if it stays gaseous all the way to European distribution networks.
liquifying in Israel instead of Qatar? I don't think Qatar is that desperate. Make it work for oil first, much less investment but it substitutes Iran with Israel for instability...
Well done, thank you for your clear thinking.
Smart people have a forward looking, clever strategy in addition to opportunistic tactics.
Not smart people look down towards their feet when searching for strategic emergencies and have random tactical impulses.
Thank you. And agreed. The feet-gazing description fits EU energy leadership rather well.
Most interesting analysis!
Thank you!
Great take here, certainly not something I had considered, but very cogent thinking. I guess we will learn if it is correct as time passes but an excellent mental model. As to Europe, it is hard to list all the strategic errors that the continent has made with regards to energy, there are simply too many.
Thank you! Europe's energy policy is certainly the gift that keeps on giving (except to its citizens).
But why hasn't Sabine Pass started exporting? Are they holding off for a better price?
To prevent starting contracted sales agreements and debt service. Per GROK: Venture Global LNG’s Calcasieu Pass LNG facility (also called VGCP or Calcasieu Pass) in Louisiana deliberately delayed declaring its commercial operations date (COD) for years after it began producing LNG in early 2022. By not declaring COD, the project avoided triggering its long-term sales and purchase agreements (SPAs) with buyers such as Shell, BP, Edison, and others. Instead, Venture Global could sell the vast majority of its cargoes on the spot market at much higher prices (especially during the 2022–2023 price spike after Russia’s invasion of Ukraine). By extending the commissioning period (ultimately until ~April 2025 for Calcasieu Pass), Venture Global sold hundreds of cargoes (reports cite 177+ worth >$15 billion by mid-2023, eventually over 400) on the spot market before the SPA obligations and associated debt-service waterfall fully applied. This generated massive extra revenue that would otherwise have gone to lower-priced contract buyers.
Superb, Brawlster.
Instant restack.
👏👍
Much appreciated!
Great piece!
Europe should end all the political nonsense and just let Wael Sawan go do his job.
Thank you! And yes, the people who understand the business seem to be the ones least consulted on the policy.
Sharing this with a few people who need to read it.
Pleased do!
If Europe's hope is a pipeline through Middle East, it better get used to some cold winters....
The forecast does look frosty.
As always, you provide insight found nowhere else.
Genuinely appreciate it!
What happens to that 'qateri' lng when the US imposed export restrictions?
Hence QatarEnergy's global diversification strategy.
So this diversification strategy includes having Qatar LNG blocked in the Persian Gulf, and blocked in N America when/if the US decides it can't continue exporting because it needs it for itself? Mmm, its a plan, just not a very good one I think.
Which is why QatarEnergy operates across 30+ countries.
Yes, but. Qatar has a significant knowledge of LNG, so its obvious first 'diversification' is to do more of what its really good at elsewhere. Fine as far as it goes. But as far as Qatar Inc is concerned you are still putting a lot of eggs in one basket. Some of that might be OK , but really to diversify properly they need to put substantial proportion of their funds in something else ( and i don't mean spare change in european football clubs). If they want to stay in raw materials/fuels, try minerals, rare earths or Australian coal.
I think you produced an astute report that said the EU should be looking for countries that had loads of spare gas but not growing populations and didn't need the stuff itself. Obviuoslt there is a big northern country that fits that bill , but they have ruled it out. But if Qater wants to stay in LNG why not own/operate/ re-badge LNG from Yamal? Desperate customer waiting...
I’m not sure I agree with you on this. Force Majeure (FM) only allows contract suspension under very specific circumstances. Qatar can’t fail to supply just because they see a superior commercial opportunity they can call FM usually only in the event of an “act of god” or war. If they failed to supply for other reasons they would open themselves to very expensive litigation. Typically pipeline supply contracts (just like any supply contracts) will also contain FM clauses just like LNG contracts.
Correct on FM mechanics. But consider: Golden Pass volumes are uncontracted. QatarEnergy sells them directly into spot markets. It could have prioritized those molecules to cover affected European buyers. Instead it invoked FM on the contracted volumes and kept the spot optionality intact.
I guess the reality is that Golden Pass is a different corporate entity (Exxon would not have been a fan of Qatar using molecules to supply what would have been a far inferior price). The Qataris are taking a massive financial hit from this conflict and probably didn’t feel too charitable to boot. I sort of get your drift but I think many entities would do the same if they were in the same position and the contract allowed. Most buyers would not expect Golden Pass to meet QatarEnergy obligations as contracts would be site specific
Unreal that in the age of drones that people believe pipelines provide energy security. 🤦♂️