All posts by Daniel Lacalle

About Daniel Lacalle

Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Author of bestsellers "Life In The Financial Markets" and "The Energy World Is Flat" as well as "Escape From the Central Bank Trap". Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Frequent collaborator with CNBC, Bloomberg, CNN, Hedgeye, Epoch Times, Mises Institute, BBN Times, Wall Street Journal, El Español, A3 Media and 13TV. Holds the CIIA (Certified International Investment Analyst) and masters in Economic Investigation and IESE.

Lybia In Flames And The Clash of Civilizations

English, Global Economy, Lybia, On the cover

How naive we were. We thought that the riots in Egypt were going to wake up a sort of semi-hippy dream of peaceful transition to an oasis of Western-style liberal democracy.The Western world is increasingly lost, and we believe our own illusions. And the illusion is over.

On Tuesday, Colonel Gaddafi slashed all expectations and brought us back to reality . From the balcony of one of his homes, speaking to a virtual audience as the camera focused a huge golden statue of a fist crushing a military aircraft, he reminded us that the delusions of peace and democracy were just that, delusions. The picture was worth a thousand words. The Colonel is not resigned to be another Mubarak .

Until last week, the risk to the energy market appeared to be limited because the process in Egypt and Tunisia was contained with no impact on the supply of oil and gas. Tunisia and Egypt were not high-risk countries. The protests were relatively peaceful. They had weak governments. The army was close to the people. None of the two countries owes large sums to Western banks and governments, and none was a significant net exporter of oil (both net importers of 25 thousand barrels per day in 2010 due to growing demand).

Libya is different . Because Libya is a large net exporter and the real army “is” Gaddafi’s 120 thousand soldier. Because Gaddafi arrived in 1969 when he was 27 years old in a coup that many thought would fail, and has shaped the country to his image and personality, with a mixture of Islam, iron hand, socialism, capitalism and good old totalitarianism … and there he has remained, longer than any of the international leaders, rivals or friends.

Now anarchy is about to explode along the risk of breaking up the country in tribal areas. And if that happens, billions of western investments into the country will be wiped out.

The Western press shows a country seemingly unanimous in their demands and objectives. Nothing is further from the truth. The Libyan population is extremely diverse, proud and a machine of military prowess. Both Italy and the late Ottoman Empire are aware of the risk of facing the Libyan tribes. Of the 140 tribes in the country, thirty are considered highly relevant as agglutinating powers, of which four have real influence in the circles of power. The tribe Misurata is one of them, particularly strong in two cities, Benghazi and Darneh. The tribes Beni Hilal Beni Salim have goals and interests that are perceived to be opposed to Colonel Gaddafi, but another, the Magariha tribe, is considered very close to the leader, although some observers believe it may be precisely this one which could instigate a coup. The risk of civil war and dismemberment of the state is far from negligible. And democracy or Alliance of Civilizations? No way.

Do not forget that Colonel Gaddafi has been a unique dictator, only comparable to Saddam Hussein in his mix of charisma, influence and iron fist control of a highly complex ethnic puzzle. Rumors that Gaddafi has a personal army of 120k mercenaries (compared to 50k of the official army), willing to blast wells and refineries and defend his position, make Libya a dangerous powder keg and the similarities with the Iraq of Saddam Hussein in 1991 are quite significant.

Also, do not forget that the Libyan leader has gone from being public enemy number one in the seventies and eighties to one of the most defended by politicians of all colors. While he was self-proclaimed defender of Palestine, the “anti-imperialism” of Cuba and of Islam, he also became a major trading partners for Italy, the US and UK, laying down his weapons of mass destruction in 2003 and collaborating with the West in the war on terror.

This led to a huge flow of Western investment between 2001 and 2010, particularly Italian. And Libyan oil concessions are some of the most attractive margins and returns for firms in the country. Lybia has also been one of the largest investors in Italy, with c€50bn in investments including Fiat,Unicredit and ENI.

Colonel Gaddafi from this balcony reminds us that we have much to lose. And that the examples of Egypt and Tunisia are nothing more than that, examples. That MENA (Middle East and North Africa) is not the EU. Each country is a world of ethnic, tribal, religious and military power. And the risk of further deterioration and lengthening of the crisis is not small, bringing to mind the memory of Saddam Hussein in 1991, whom also seemed trapped after the massacres of Kurds and Shiites and still remained 12 more years in power. And the information I receive from the Middle East reminds me that Bahrain, Syria and Jordan will not be comparable to Egypt and Tunisia.

Saudi Arabia, Oman, Kuwait and UAE still remain in relative calm. They should stay that way. Saudi Arabia has announced measures to increase social security protection, subsidies for housing and job creation as well as increasing the budget for charity and reduction of citizens’ bank debt. From our European paternalism we may criticize what we want, but do not forget the importance of balance in geopolitics. I recommend “The Lesser Evil” by Michael Ignatieff. Because things can get much nastier.

Libya produces 1,661,000 barrels per day of crude, 80% of them for export, and 16BCM of natural gas. It has about 44 billion barrels of oil reserves and 54 trillion cubic feet of natural gas reserves . And unlike in Egypt, supply shortages are a reality.

ENI, OMV, and Repsol, have the highest Lybian exposure, with 20%, 24% and 7% respectively of its net asset value in the country. They all announced on Tuesday the evacuation of nearly all staff in the country.

Supplies of gas to Italy through the Greenstream pipeline have been suspended. This means 8BCM of gas and nearly 80% of supplies from Libya to Italy, which accounts for 10% of the total supply of gas to the country.

The reason why the commodities market has reacted more strongly to Libya than the Egyptian crisis lies not only in the aggressiveness and forcefulness of the government’s response to the demonstrations, but the fact that the majority of Libya’s production is exported. If we consider that there is a risk of cuts in oil production because of the crisis in the MENA region, the net exported barrels (total production minus domestic demand) of Libya, Yemen and Bahrain account for 1.7 million barrels a day, almost 1.8% global production.

Today those possible “lost” barrels can easily be replaced immediately by barrels of spare capacity from Saudi Arabia (4 million barrels a day). But the contagion risk, and inaction of the West are starting to shift the market’s mind to the possibility that the spare capacity of OPEC as a whole, 5.5 million barrels a day can evaporate rapidly, and then find ourselves in a really problematic environment.

But the danger is complacency and to think that this ends here, and stay looking and waiting. Italy at least has a chance to mitigate the Libyan risk due to its access to Russian gas from Gazprom. But for Spain, although Libya is irrelevant within the total supply, the real risk lies in Algeria, followed by Qatar and Egypt. Algeria was no less than 30% of gas supplies to Spain in 2010, Qatar and Egypt 15% 8%. And Algeria, in terms of geopolitical risk, comes after Libya . Do not forget that in Algeria there were intense protests in January, but also years ago, long before the crisis erupted in Tunisia and Egypt.

Those who mention nationalization risks should not forget that that process already occurred. The vast majority of producing countries nationalized all their reserves between 1951 and 1980. But, as mentioned here two weeks ago, oil companies are going to be, as they have been for decades, the ones paying in this situation. All those investors who have been driven to buy shares of large integrated oil stocks in a Bear Market forget that they are mere concessionaires and that the PSC (Production Sharing Contracts) are at risk of further cuts, at best, or fall into the limbo of a long and tedious administrative chaos. And it should be noted that the Libyan PSCs are some of the most attractive.

In the end, Samuel Huntington was quite right in his indispensable book, “The Clash of Civilizations.” Most of the instigators of the riots don’t seek Western democracy. They seek regime change and conquest. Huntington did not predict that the detonating force would be the implosion of some Middle Eastern countries First, implosion, in which the Internet has played an undeniable detonator effect, and after explosion. And the shock wave could be coming towards the European Union.

Egypt: A brief guide to the energy implications of the unrest

Egypt: A brief guide to the energy implications of the unrest

Energy, Global Economy, On the cover,

Egypt: A brief guide to the energy implications of the unrestHere is a summary of my views on the Egypt crisis, stocks involved and how to play it.In terms of oil, none of the countries presently affected is a major producer in a global context of oil (1.1mb/d). Yemen and Egypt are important for gas markets as significant producers of LNG for international supply (20mtpa/ 8% global capacity). However, they are very important for low cost deliveries to Europe and for South Europe refiners (Repsol gets part of its crude for Cartagena and ENI for Toscana from Egypt).

The threat of contagion within the MENA region (Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestinian territories, Qatar, Saudi Arabia, Ethiopia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen) is what most analysts see as most worrying. I would categorize the risk as low in the pure arab states (Saudi-EUA-Kuwait and Iran) and higher in Algeria, Jordan and Syria, where civil unrest has been highest (food prices up 59% in Jordan and Syria while unemployment soared). Out of these, only Algeria is a serious threat to global supply of gas.

Algeria has 159 trillion cubic feet (Tcf) of proven natural gas reserves – the tenth-largest natural gas reserves in the world, and the second largest in Africa. Algeria produced 3.08 Tcf of dry natural gas in 2010, and consumed 1 Tcf of dry natural gas domestically.

Egypt consumed more than it produced for the first time in 40 years in 2010.

Egypt’s EGPC is a strange animal as it does not operate any of the licenses in the country, but foresees the developments and takes the money. Most of the production is offshore or in the Western desert and has not been affected by the riots. As an example, in the past 20 years of presence of Apache in the country there has never been a change of license or nationalization. Egypt also has a very advantageous (for the country) taxation system, local content employment requirements and now that is a net importer, needs more from IOCs than ever.

The final risk is the possibility of disruption to the smooth passing of ships through the Suez Canal. So far this has been denied as a threat.

Companies exposed to Egypt and Algeria.

If we establish the low(er) risk of disruptions in Saudi, Iran, Iraq, etc… The key companies exposed to the Egypt problems are:

OMV, REPSOL & ENI have the largest exposure with c.20% of their commercial reserves in the region.

ENI’s Egyptian exposure is 14% of group production and 7% of upstream value. However, ENI is the most exposed to North Africa and the MENA with additional risk to supplies to Italy from Egypt and Algeria. Eni has a limited exposure to Egypt but 36% to the region (including Libya and Algeria).

OMV has a 20% exposure to the region (mainly Lybia) and recently added exposure to Tunisia through an acquisition. OMV, Total and BP each gets 3-4% of their total production from Tunisia, Egypt and the Yemen in aggregate. However, Egypt, Tunisia and Yemen account for quite more than that in their growth strategy and give them the highest ROCE. Exxon also drills offshore Egypt but the exposure is negligible. Chevron and Conoco also only marginally present. Of the rest, exposure is also quite small, including Statoil with less than 10% upstream value exposure (mainly Algeria).

BG. Egypt and to a lesser extent Tunisia are relevant production centres with around 30% or 220kboe/d of its 2009 production. Worth noting it is mostly offshore, with a large presence of local workforce and that there has been no disruption to activities.

GDF-Suez, Shell. Jointly operate the Alam El Shawish concession in the western desert area of Egypt. In Egypt, GDF Suez holds stakes in two other offshore licenses: it operates and owns 50% in West El Burullus area (together with Dana Petroleum, bought by KNOC), where an initial discovery was announced in 2008 and has 10% in the North West Damietta licence operated by Shell (61%). In liquefaction gas, GDF owns 5% in the first LNG train from the Idku plant that delivers 4.8 bcm of natural gas annually and buys its total production. GDF SUEZ loads about 60 cargoes per year.

Gas Natural-Fenosa, Repsol YPF. Gas Natural owns and operates the Egypt Damietta liquefaction plant. The Egyptian government told Gas Nat-Fenosa to consider importing gas from abroad to meet the needs of the Damietta liquefaction unit located on the Egyptian Mediterranean coast, after the company suffered from a set back in its supplies from the gas national network during the first half of the fiscal year 2009/2010. The firm currently receives 320 million cubic feet of gas per day, 70% of it from the Egyptian Natural Gas Holding Company (EGAS).60% of natural gas delivered to Spain comes from Sonatrach (Algeria). Risks have increased in an ongoing and well-known dispute between the countries. Gas Natural lost the license for Gassi Touil in 2009.

RWE. In recent years the company made a number of major gas discoveries in Egypt and boosted its activities considerably with the acquisition of additional concessions. RWE Dea has a total of 13 onshore and offshore concessions in Egypt, across a concession area of about 13,300 square kilometres in the Nile Delta, Gulf of Suez and Western Desert.

EDF through Edison (Italy) Holds the $1.4-billion concession agreement for the offshore fields of Abu Qir, which has lost them money and were trying to sell or renegotiate.

Apache. Egypt is 21% of Apache’s production. Most of their assets are in the Western Desert. Apache is critical to Egypt as it drills 50% of all the country wells, supplies gas domestically at prices that are 60% below international prices, and employs 5000 Egyptians. Apache pays $11m a day in taxes to the treasury.

Premier has a very small exposure to Egypt (only 20% stake in a non-operated field).

Of services, Halliburton and Schlumberger undertake around 70% of the oil and gas service contracts in Egypt. Transocean has 10 jack-up rigs in Egypt, more than any other company, although six of those rigs are either cold-stacked or idle. Diamond Offshore has 3 rigs, 8% of its total rig count. Rowan Companies has 1 rig, but it wasn’t in use as of this week. Petrofac had a contract in Egypt that finished in December, and has no further exposure to Egypt but is very exposed to MENA region (15-20% of backlog). Saipem and Technip also have c20% of backlog in the region.

The biggest threat in my view is to the big IOCs and utilities who tend to solve these issues through paying up, and losing returns.

Play the oil and gas spike through utilities (generators with no Egyptian MENA exposure) and high oil geared explorers and producers more exposed to LatAm, US and especially Russia. Gazprom will love this MENA problem.

I see services relatively unaffected once the risk of oil and gas field shutdowns is clarified. In the Iraq war and other risky geopolitical environments the specialized names benefited from the need to protect and continue operating the oil and gas fields. However, the short term impact will likely continue to be negative. This is also bad for southern european refiners because their low cost oil comes from Lybia and Egypt and the refining margins will likely fall as oil rockets but heavy-Brent spreads collapse.

Further read:

http://energyandmoney.blogspot.com/2011/03/war-in-lybia-and-possible-algerian.html

http://energyandmoney.blogspot.com/2011/02/lybia-in-flames-and-clash-of.html

http://energyandmoney.blogspot.com/2009/11/china-exxon-and-war-for-resources.html

Continue reading Egypt: A brief guide to the energy implications of the unrest →

Some energy thoughts for 2011

Energy, Global Economy, On the cover
coal
(This article was published in Spanish in Cotizalia on December 23rd 2010)

First of all, dear friends,I wish you all a 2011 filled with peace and prosperity.

As this is a time of predictions, and last year I was not very wrong, I’d like to leave my humble opinion on what 2011 can bring us, I see as a year of consolidation of trends in 2010: OECD decline up to their eyeballs in debt, low rates and more inflationary monetary policies.

. Oil at $105/bbl due to increased emerging market demand . With +1.5 to 2% oil demand growth in 2011, 75% from emerging markets, crude oil inventories should be reduced to levels close to the average of the last 5 years. Global demand will continue to be dominated by growth in China, India, Latin America and the producer countries. Pay attention to demand. It’s all that is going to move prices. Do not bet on peak oil theories or supply shortages in 2011. OPEC still has 5 million barrels per day of spare capacity, and we will see Russia confirming its 10.2mbpd output, while Saudi Arabia could easily increase production by 1mmbpd if needed. The world economy has shown that oil at current prices is not a problem. A high price is a sign that the economy works, companies are investing more in exploration, they discover more and the total cost to consumers does not rise due to crude prices, but due to taxes. The cost of fuel is less than 25% of the cost of airlines, and a tiny percentage of the final price of petrol and diesel (55% -60% is tax).

We have oil for many decades. More than sixty years of demand in proven reserves. And rising. In 2010 the replacement rate of global reserves will exceed 100%. And with a 17% increase in overall investment in exploration and production, the chances of a global reserve replacement of 100% in 2011 are very high. And probably in the coming months we will see major innovations in unconventional oil, as we saw in shale gas. If oil stays above $60/bl, as expected, investments in new unconventional reserves, which rose 230% in the past five years, will continue to grow.

Bad year ahead for Iraq and Nigeria. The price of oil is not flowing to the people and patience is being exhausted. We are seeing new security problems in the Niger Delta, and I think in 2011 we will have some major scares. In Iraq, the war is now administrative. On a recent visit to Baghdad by a group of investors, companies made it clear. With no stable government, no legal clarity and security to invest, it is impossible to reach 3-3.5 million barrels per day of production. Beware of listed exploration companies heavily exposed to Iraq especially those that rely to Kurdistan to work.

I still see a positive environment for service companies that benefit from increased investment, from Petrofac and Seadrill to downstream-heavy TRE. I am still cautious on seismic names. Capacity is way too high and increasing, while demand has not recovered to absorb the already high supply, so margins are not going to rise easily. As for independent exploration and production companies, the war for natural resources will accelerate M&A, and growth new frontiers. Focus on Tullow, Soco, Chariot, OGX, Cairn, Anadarko and Novatek.

M&A in Oil & Gas will surpass the $150bn mark set in 2010. Large companies have to find truly transformational deals to drive growth that has been so elusive in 2000-2010. More shale gas ventures in the US can be expected, but I believe the focus will be in frontier areas: West Africa and LatAm.

Refining margins are likely to do nothing as the economy recovers but overcapacity continues to dominate the refining sector. We had 7mmbpd of overcapacity and this is rising, with 370 refining projects in 90 countries around the world in the next five years (UBS source).

. Coal, Coal, Coal. Coal at $140/MT. China burns 55% of the world’s coal, and that number is expected to rise by 65% over the next five years. China has half the U.S. GDP and consumes 3 to 5 times as much coal. And in India and the rest of Asia the situation is similar. Despite the environmental rhetoric that we use, these countries do not have to cut their growth just because we say so. Meanwhile, the supply problems will continue, with the protests of organized groups in Newcastle and flooding problems in Australia. As of today, c.100mMt of annual coking coal production (c.40% of the global supply) is under force majeure arrangements.

. Weakness of carbon dioxide (CO2). You know it, that “fake commodity” artificially invented, where demand and supply are imposed by political entities… and it still does not work. In 2010, CO2 has barely kept the €14/MT level. Neither Copenhagen, or Cancun, or the efforts of several investment banks and environmentalists have helped to raise the price. The alarms bells are ringing and there are voices calling for imposing a minimum price for CO2. Interesting. The interventionists were rubbing their hands at the prospect of increasing the price of CO2 through more than questionable environmental policies, and now they need to find inflation through imposition.

The supply of CO2 (EUAs) exceeded 24.8mMt in November (a record) and 24.4mMt in December. With the European Union and OECD undergoing a very slow recovery in 2011 and the most environmentally committed countries experiencing huge debt problems with c$300 billion to refinance in 2011, the excess supply will increase.

The companies benefited in this environment may be the traditional power generators.

Beware of turbine manufacturers. 2010 was no exception, it was the the beginning and the fall in new installations will continue impacting a sector with significant overcapacity. Europe new installations will be flat at best, China up 10%, US flat at best, rest of the world +5%, driving a +5% to +13% growth in the global market… while manufacturing capacity, which was already too high, has increased by c8%, driving a 39% oversupply (MAKE, GWEC source).

. Natural Gas to suffer for another couple of years. A bad nat gas year is one that sees the price of Henry Hub at $4.5/MMBTU amid the coldest winter of the last ten years. In 2011 we will continue in a complex environment. Liquefaction capacity increasing by 10BCM, shale gas production increasing by 6% and a very slow recovery in demand for electricity. The NBP (UK) price will continue to support the $7/MMBTU equivalent thanks to the decisions of Qatar, Norway and Russia to control supply. The liquefied natural gas sold to Asia will continue to trade at a premium over Europe, but a significantly lower one, as supply problems in Korea, Japan and China are eased.

Of course, a volatile gas market benefits the companies that profit from arbitrage between markets, like BG Group, but also to a lesser extent, Statoil and Shell. The losers are still the Central European power conglomerates heavily exposed to gas, and companies like Gazprom, which will again have to renegotiate some contracts.

. The nuclear renaissance is delayed, but it is happening. Low power prices, weak gas and excess capacity have delayed plans in the UK and other European countries to increase their nuclear fleet. But if they care about the environment and strive to reduce CO2 emissions, the nuclear option is the only real alternative to achieve these goals. The nuclear renaissance is inevitable in China, Russia and other countries. 56 reactors under construction, 20 of them between China and Taiwan. More than 180 gigawatts of new nuclear capacity through 2024.

The winners in this environment are the equipment companies that build new plants, Siemens, Alstom and Amec. Nuclear-heavy generator stocks are more dependent on the evolution of power prices. And in that area, in 2011, again we will see major differences between countries with capacity problems (Nordpool, with hydro reservoirs at 24%) and over-capacity countries (Germany, Spain, Italy). In Europe power demand growth in 2010 (+3.5%) did not offset the fall of 2009, while capacity continued to increase (predominantly solar and wind). This is not a positive backdrop for power prices throughout the continent.

Further read:

http://energyandmoney.blogspot.com/2010/01/energy-predictions-for-2010.html

Can Oil and Nat Gas go back to historical parity?

Global Economy, On the cover, Sin categoría

 

(This article was published in Cotizalia on December 16th)

oil gas sobrecapacidad

We discussed many months ago that the link between the price of natural gas compared to oil broke in mid-2006, reaching a historic high gap in 2010.

Why natural gas and oil have “de-linked”

a) Natural gas is used mainly for power generation and heating. Oil is used primarily for transport. Natural gas demand has suffered from falling electricity demand in the OECD, which has slowed down aggressively between 2007 and 2010, and most countries face problems of overcapacity in generation after the growth of renewables and thermal capacity. Meanwhile, oil demand has remained almost constant between 2007 and 2010.

b) The revolution of U.S. shale gas, which is approaching Europe from Poland, has increased the reserves of gas dramatically (and growing production in the U.S. by 15BCMs per annum despite Henry Hub trading at historic lows, between $4 and 4.5/MMBTU). Meanwhile, oil reserves, which have also grown with the discoveries of recent years, have not increased so dramatically even when in 2010, as was in 2009, we will have a global reserve replacement ratio exceeding 100%.

oil gas curva 2

Of course the anti-oil lobbyists say that there are only 40 or 60 years of oil (depending on whether or not we include NGLs), but the reality is that there’s plenty of oil. Plenty but not necessarily “cheap”, if we assume $40-50/bl as benchmark. Because oil is very cheap indeed. One of the world’s cheapest and most productive liquids. In 1991 when I started in the oil industry people said there were just 20 years of reserves, and now there are 60 (proven). And after the discoveries of Brazil, we will continue to see a very solid replacement ratio. Wait till we see the results in the Arctic, new frontiers, etc …

c) The shale gas revolution and LNG have lowered the marginal cost of natural gas, while in the oil complex, the marginal cost has stayed flat even in the downturn, as the oil complex re-rated due to the increased technical costs and more complicated geologies.

d) Additionally, the price of natural gas has been affected by a very significant increase in liquefaction capacity (more than 15BCM per annum to 2013), while in the oil market supply challenges remain. Oil-on-sea stored in vessels was rapidly consumed in 2010, and despite OPEC claims of almost 5 million barrels a day of spare capacity, the supply-demand balance has tightened.

oil gas curva 1

These fundamental shift in supply and demand fro both commodities has made companies enter a process of renegotiation of oil-linked long-term gas contracts to achieve a higher level of spot indexation, suited to a more cyclical and flexible power demand environment.

The Future

It is worth mentioning the huge difference between prices of liquefied natural gas sold to Europe or Asia. This shows how each gas market is very different and regional. On the other hand, the oil market is global and, despite talks of electric vehicles and other inventions, Asian demand and the traditional use of oil for transport will not vary dramatically.

In the fourth quarter of 2009 the average prices of LNG varied between $4.5/MMBTU (Spain) and $ 7/MMBTU (Korea). But between the second and fourth quarter of 2010, Asian demand and a colder winter have led liquefied natural gas prices to reach levels of $9/MMBTU (Spain, Japan and Korea). In oil, most countries are seeing that the price of crude in local currency remains very attractive, due to the collapse of the dollar, especially for China, whose dollar reserves fall in value every month. That is why demand has not fallen despite the poor economic environment when oil surpassed $90/bl. As the president of OPEC stated, oil is trading closer to $70-75/bl in constant dollars for them.

In summary, it is hard to foresee an environment in the short-term (1-2 years) where the difference between oil and gas will return to historic levels. While LNG capacity expands and shale gas advances, supply will continue to be well above demand. But in the medium term, the horizon is a little more positive.

If there has been something that has been shown in 2010 is that the natural gas market is suffering from less overcapacity than expected. And in the medium term, we can see that uncontracted demand for liquefied natural gas will likely exceed 10BCM in 2013, leaving the market balanced. This does not imply a massive price appreciation given the spare capacity in the system (Russia, Qatar, US-Europe shale), but the market is set to gradually tighten in gas, although at a slower pace than what we have seen in oil. Only a collapse in oil prices from unforeseen excess capacity or a switch in the use of oil for transport to gas could help close the gap.