Today we were thrilled to welcome back Gabe Collins, Fellow in Energy & Environmental Regulatory Affairs, along with his colleague Steven Miles, Fellow in Global Natural Gas, with Rice University’s Baker Institute for Public Policy. Gabe last joined us on COBT in May of 2022 (episode linked here) and has a fascinating background in the economics, policies, and geopolitics of Russia and China, as well as national security-related research and analysis. In addition to his position at the Baker Institute, Steven is a Senior Counsel at Baker Botts and previously was a twenty-year Partner with the firm, serving as the Energy Sector Chair focused on LNG, natural gas, electric power, and renewable energy industries. It was our pleasure to visit with Gabe and Steven for a global energy conversation focused on LNG and Europe. The focus was on one key question: “why isn’t Europe locking in more long-term gas supply?”

The catalyst to our discussion stems from a report co-authored by Gabe and Steven that will be published in the near future. Titled “Eastern Promises or Energy Fantasies: Why Is Europe Not Replacing Russian Pipeline Gas With Long-Term LNG Contracts?”, the report leverages analysis from 600+ LNG contracts over 25 years leading up to the Ukraine invasion. In our discussion with Gabe and Steven, we cover key themes including the inspiration behind writing the paper, the potential role and intentions of China, Europe’s response to its gas shortage and its reliance on spot LNG, potential geopolitical risks, and the potential explanations for Europe’s reluctance to sign long-term gas contracts. We also discuss the concept of funding post-war Ukraine through gas surcharges, Mexico’s growing LNG capacity, how Europe’s decision not to contract LNG longer-term could be hurting the developing world and the climate, and the discrepancy between European policymakers’ optimistic view of hydrogen and renewable energy with the unease among industrial players who see the ongoing demand for gas and the challenges in transitioning away from it. Gabe and Steven also recently wrote an article in Foreign Policy that touches on many of these aspects, linked here.

Mike Bradley kicked us off by highlighting upcoming events and topics of interest. Economically, all attention is on Federal Reserve Chairman Powell’s Jackson Hole speech this Friday for color/clarity on how much higher/how much longer interest rates could stay elevated. In commodities, crude oil remains steady around $80/bbl., with traders seemingly divided on which dynamic will win this year, that being supply (OPEC cuts) or demand (China weakness). He also noted that LNG markets will be closely following this week’s current Australian LNG labor negotiations to handicap the potential for an LNG strike in the coming weeks, which could impact up to 10% of global LNG. From a broader equity market standpoint, equity traders will be intensely focused on NVIDIAs earnings and rounded out the conversation by flagging recent midstream deals with one of the key themes being “controlling the molecules” from wellhead to end user/markets. He also highlighted a Permian E&P merger this week between two mid-cap E&Ps, which is leading investors to contemplate whether an acceleration of public-to-public deals could be forthcoming, and whether they’ll be done at premiums. Arjun Murti highlighted the spillover effects of how policies from the EU will have ramifications for the rest of the world, comparing key themes from Gabe and Steven’s report to recent Super-Spiked themes. Todd Scruggs chimed in to share LNG trends including the short-term extremely tight supply-demand balance in Europe and longer-term potential for the US to become

"Living On A Prayer" Featuring Gabe Collins and Steven Miles, Rice University’s Baker Institute for Public Policy

C.O.B. Tuesday