Welcome back. Today, we speak about gas and the future of gas in Europe especially. We have with us Thierry Bros, who is one of the faculty members in the International Energy Master Program at Sciences Po, and is also a key expert. So if you input and if you look into the thermal energies are either coal, the gas, and the oil, you have even further demand destruction. So what we are saying is, there is a drop in energy demand in Europe, and this is structural, and this will continue. On top of this, as you have more renewables getting in the mix because this is a policy from the European Union, we are going to see gas demand going down. So we think it's structural. But it is frequently said that gas is needed in order to compensate for the intermittency of renewables, and the two mix especially well together, so would not this lead to an increase in demand? It could, but then it will need to have much lower gas prices. In fact, you're right. If you look at what happened in July and August this year in the UK, we've seen gas demand, a bleep in gas demand, and this was linked to the fact that gas prices were low, and the fact that at those low prices gas was competing versus coal. What we are saying is, if gas goes below the six dollars per million BTU, then gas can compete with coal, and especially in the UK where you have a CO2 flow. But the problem is producers in Europe, i.e, the major producers, which are Norway and Russia, are not interested in selling gas at these low prices. So what you have is gas prices above those six dollars per million BTU, and therefore gas is not competing versus coal. Yes, we may not like it for climate reasons, but the complement renewable is not gas today in Europe, it is coal. But this might change if we have a reasonable price for carbon, which we don't have at the moment, but maybe if we are serious about decarbonizing, we need to do something about this now. Yes. I mean, this could be the option, but it is a non-market option, this is a policy intervention. I don't think policy people right now in Brussels will push for extreme higher prices for CO2 because then, you're transferring rent from the coal producer to the gas producers, and you're taking this rent out of the people that are living in Europe and vote in Europe. Because coal is domestic and gas is imported. No. Because coal right now is cheaper, so you're increasing the rent of the gas producers, and most of the gas producers are foreigners. Are foreigners. Well, there we come to the key problems, which is the European dependency from foreign suppliers, and notably Russia because I don't think anybody is worried about Norway, and also not much about Algeria. Let's start with Norway first and go to Russia at the end. Interesting enough, Norway has a view of the rent maximization, which is to provide Europe with a 100 BCM of gas per year for the longer term, and Norway has no willingness to increase this. So that's Norway's option, whatever, Europe needs who will provide a 100 BCM, and we can swing this 10 plus or minus around 10 BCM, plus or minus around this target, and this is once they've done their from their production, and they are not at this level. Algeria is another interesting story because people are thinking of Algeria, but Algeria is facing two major issues. First, is a production decline in Algeria, and secondly, a massive increase in domestic demand. So dropping Algerian supply is very significant, it's something like 11 percent last year, so we are getting less Algerian gas. So it leaves us with one key supplier, which is Russia. Russia has always stated, and has done the investment to provide gas to Europe, and right now you're right, Russia provides 27 percent of our gas consumption, and Russia could provide more gas into Europe. I mean, if we do basic math, we can find out that Russia is providing something like a 100, 110 BCM of gas into Europe, by Europe OECD, and Russia or Gazprom alone has a 150 BCM of spare capacity. So Gazprom has the flexibility, and the ability to produce and ship nearly twice as much as we've needed. So that's where the swing supplier is, first of all. Secondly, if we look at cost, because in a market you also look at costs, as you said I work for a bank, so we look at costs, the interesting part is Russia is the cheapest cost provider. So if you leave it to the market, and this is where you have this border between policy makers and market, if you leave it to the market, the market will provide more gas, will try to get more gas for the cheapest supplier, and this means that if everything stays the same, the market will try to catch more Russian gas, and less of the others. Again, if you look at Norwegian gas, Norwegian gas is closer, but it's more difficult to extract, hence a bit more expensive at the end of the day. So on the market basis, we could rely more on Russia if we leave it to the market. Yes, you're right. I mean, after the Crimean action, there have been some severe constraint and severe disruption in the EU-Russia dialogue, and so therefore today, policymakers in Europe are not so much lenient with having more Russian gas, they are more worried about this, security of supply is more in the mind of the people, and so therefore, policymakers could end up in Europe to try to cap the Russian share in terms of gas provided to Europe. So if that is the case, we have plenty of gas in the world than there is significant new projects for LNG coming up in the world. What is your expectation? Are we heading towards a period of abundant gas supplies or shortages? You're right. I mean, supply is there. As I said, just alone in Russia there's much more supply available than what we use, only if demand were there at the right price, the Russian will push this more gas. Interestingly enough, if you look at the way the producers, and when I'm talking about the producers, I'm talking about the two main producers, Russia and Norway, are operating, they try to fuel prices. They try to make sure that at a certain level prices do not go under certain flow, and so therefore back to my whatever, as mentioned, is a six dollars per million BTU, and so yes, we could have more LNG coming into the mix, which is exactly what we are seeing right now, but we think, and this is what we've seen so far, we've seen this this summer, we've seen this in the last years, that the other suppliers are either Russians and the Norwegian will swing, will reduce the supply to make sure that the price stays at a level that is acceptable to them. But LNG cannot come in at less than six dollars per million BTU. It would be very difficult to come in at less than six dollars per million BTU. LNG is an interesting element in terms of the banking industry because it's a massive CapEx, and you don't operate this on a swing level. No. You produce it full speed all year long. So if you look at the load factor of an energy plant, when it's operational, it's nearly a 100 percent, and on average on a worldwide level, it's 80 percent. So what we could see is, with the ramp off of the projects that are now in Australia, and they could come online in 2015, 16, 17, 18, we could see more LNG coming, and then the problem of this LNG or the advantage of this energy, it is oil linked. So therefore, it depends if the oil is at 70 or a $100 per barrel, the price of the LNG. So you're right, I mean, there is this element when you take this into consideration. But again, if we are too long in gas and too long in LNG, then spot prices could react quite a lot, and what we've seen in spot prices in LNG in the last 12 months, they went down from nearly $20 per million BTU to 10 today. So this can happen. I think also there is another scenario that you can look at, which is the LNG world may change after 2018, 2019 when you have US LNG coming online, because this US LNG is going to be completely different in terms of the structure of the CapEx, and who bears the risks. So the risk and challenges are going to change tremendously in the LNG industry. As I said, in the old days, you were building your LNG plant, and you were operating at full speed all year long. With the new US LNG that is coming online, what you are going to face is a new plant, a new system, where the owner of the plant doesn't own the gas, and the owner of the plant is not the one that takes the risk of shipping this LNG. So interestingly enough, we are going to have a plant operating as we say in the banking industry on the toning basis, and the risk and challenges of this are going to be completely different. We could envisage a boom and bust system, where in 2020 you have massive amount of LNG coming mainly from the state, if we continue to have those final investment decision in the US, and then the interesting question is, when will those plants stop if we are swimming into much LNG in Europe? There could be a price war there, and there could be area where the Russia, because they are the least expensive in terms of cost, could try to ask or to force the US plants to stop. So you see another possibility of a front, another battle, so to speak, of the giants in between Russia and American gas competing for the European market? Is that a possibility? I think, with the shale gas revolution, and the shale revolution in the US, as you said, America is becoming a backup giant, and interestingly enough, you can even say that they're not competing only for the European market. If you look at what happened in the last six months, in May this year, the Chinese and the Russians signed a major, the biggest gas contract on a worldwide basis, so this is also going to end up having implications in LNG in China, in Asia. Yes. So the battle might be also for the Chinese market? Exactly. Yes.