Shell LNG Outlook 2021

Feb 25, 2021

Welcome, everyone. My name is Manoj Sundaram. I'm the VP, Investor Relations at Shell. Thank you all for joining Shell's 2021 LNG outlook event. We will start with a presentation from Martin Wetzler, Director for Integrated Renewables and Energy Solutions. I'm Steve Hill, EVP of Shell Energy. Following the presentation, we will move to Q and A. To ask a question, you should be dialed in via the telephone line. Please press star 1 to be added to the queue. If you wish to be removed from the queue, please press star 2. I'll now hand over to Martin and Steve for the presentation. Martin? Yes. Thank you, Manu, and thank you all for joining us today. Steve and I look forward to speaking with you. I'm very pleased As you're able to join us today, even if the COVID-nineteen virus prevents us from meeting in person. And while we work from our homes and to even attend events like this virtually, the world continues to rely on our industry to deliver the energy needed to keep the lights on, The homes heated, the goods transported. And indeed, thousands of people have been working tirelessly to run our plants, manage our terminals, SEDAR ships and delivery LNG in spite of such difficult operating conditions. And I would like to acknowledge the contribution Of these brilliant men and women who are our industry's frontline to enable its reputation for resilience despite personal challenges that they no doubt face. These are indeed extraordinary times, and we would like to take view through what happened in the industry last year and give you an outlook on gas markets in general and LNG specifically. But before we do that, we want to show you the cautionary note that we always include in our presentations with forward looking statements. So let's move on and say we have 3 parts to our presentation today. We will start with describing how despite this global pandemic that we're still in, in most of the world and the economic slowdown that came with it, The commitment to lower emissions and progress towards lower carbon energy systems did not waver. And how we saw gas and LNG play a strong role in decarbonizing energy demand and enabling the transition to a net zero world. We will then talk about The global LNG industry remained resilient in 2020 despite the demand destruction that we saw and the unprecedented price volatility we experienced. And finally, we will share our observations on what we expect to see going forward 2021 plus. But first, let's have a look And the postcards from Italy. And to be more specific, from Speccia, Where our coral methane bunker vessel carried out the first ever LNG refueling in Italy with many, many more to come, a real sign of the penetration of LNG around the world and around the various value chains. Now let's first go back to last year. And of course, COVID-nineteen understandably captured the headlines. I will talk a bit more about that later. But another very significant theme was the top down policy acceleration for decarbonization. Today, more than a quarter of the world's population and just under half of global GDP It's covered by countries with net zero emission commitments. And the countries in lighter green are where we saw the net zero announcements in 2020, and you will see that the top 3 LNG markets in the world are all now covered by this ambition. A real example of the strong policy push is that example is on the right hand of your slide, came from South Korea, Which in light of its net zero commitment updated its medium term electricity plan at the end of last year. And it proposes a significant 300% increase in the role of renewables in power. And it proposed to shut down 6 coal fired power plants, but it also proposed to convert 24 coal fired power plants to LNG. And that demonstrates the role that natural gas and renewables can play together in reducing CO2 emissions. But not only that, as you can see from the data on the very right hand chart, a PM2.5 reduction of 57% over the next decade as this policy gets rolled out. And indeed, natural gas remains a critical component of the energy transition. We see a combination of natural gas and renewables cover about 3 quarters of the growth in energy demand over the next 20 years And start to really replace coal in the global energy mix. COVID-nineteen has reduced energy demand across all fuel types in 2020. Energy demand itself shrunk by 3%. Gas demand declined by 2% compared to 2019. And our total outlook for energy demand by 2,040 shrunk by about 14%. Actually, only LNG, as Steve will say later, managed to grow in the year. Now as the middle chart shows you, natural gas has an important role to play across critical sectors. Gas, of course, enables increased renewables penetration in electricity generation, but 2 thirds of gas demand Some sectors that are harder to decarbonize and 2 thirds of gas demand growth comes from these sectors. Gas plays a critical role in powering industry, significant role in heating and cooling the built environment and increasingly an important role in heavy transport. And the chart on the right shows you that half of that gas demand growth sits in Asia. And given where gas is found and produced, most of that growth will be supplied by LNG from elsewhere. Now in the next four slides, we want to talk about the role of gas and LNG in helping to decarbonize sectors of energy demand, so called sectorial decarbonization. And we start with a well known partnership of gas and renewables on the left hand side of your chart in the power sector. It shows how Spain reduced power sector emissions by switching away from coal, deploying wind, solar and natural gas generation to form a combination that gives Spain reliable energy. And not only that, it gave it a 61% reduction of emissions from the power sector from its peak in 2007. Now turning to the building sector. Natural gas and LNG have the flexibility to help meet seasonal energy requirements. And the U. K. On the right hand side of this chart provides a very good example of how gas supports heating in countries that have big seasonal demand swings. As you can see on this chart, over a 5 year period, electricity, which is the orange line, has limited seasonal variation compared to gas in the blue line, Which has tremendous ups and downs seasonal swings, nearly 3 times higher in the winter than in the summer. If you wanted to meet that seasonal demand with electricity, it would come at a very significant cost. But it would also lead to significant unutilized electricity capacity in the summer that you wouldn't be able to export to Northwest Europe because they have very much the same demand profile. And of course, battery flexibility is becoming cheaper and will be increasingly competitive for daily balancing. But seasonal balancing is a very different game. And gas is forecast to remain the most competitive and scalable source of flexibility for the seasonal bond demand in the UK for at least the next 10 years. Now if you look at industry, For example, the iron and steel sector, where coal to gas switching enables a removal of 36% of all emissions by itself. And if you then apply CCS, you get to over 90%. And you can even get to 0 or negative emissions if you use biogas or other similar fuels potentially combined with CCS. And if you look at India on the right hand of the chart And India overtook the U. S. As the 2nd largest consumer of coal about 6 years ago. A major source of pollution in India is the industrial sector. Now coal provides about onethree of the energy used by the Indian industrial sector, as you can see, business accounts for 73% of total CO2 emissions in that sector. And CO2 is not the only issue. If you use coal for heat in industry, it also causes significant air pollution. And air pollution in India is estimated by the global burden of disease study, but also by a journalist Lancet to account for 17% to 18% of total deaths in every year. Now let's turn to the transport sector. With over 200,000,000 vehicles, The road freight sector accounts for about 9% of global carbon dioxide emissions. LNG has the potential To not only offer cost savings because it's cheaper than conventional diesel, to not only offer air quality improvements, reducing sulfur emissions, particulates and nitrogen oxide emission reductions. It also helps to reduce CO2 emissions. And these economic and environmental benefits of LNG are driving up demand as you can see in the various charts. LNG fueled vehicles in China now almost counted to 600,000 served by more than 3,000 stations. Europe is behind China, but it's growing 15,000 LNG fuel trucks by now, expected to reach 280,000 trucks in 2030, supported by a fast growing LNG network. In China, demand from the road sector today It's 13,000,000 tons, 2 times as much as 2 years ago, at about equal to UK imports last year. European demand will reach about €8,000,000 per year by the end of this decade. That's a significant demand. And LNG gives the road sector an excellent net zero option. Shell is starting to invest in bio LNG production sites In Germany and California, the potential for Bio LNG to decarbonize road transport, particularly heavy road transport, is very substantial. And then finally, the shipping sector, where we see similar ramp up emerging. Shipping is responsible for about 3% of total global emissions and of course needs to go to net 0 eventually. And the landscape of solutions for that is still wide with several options being considered including hydrogen, ammonia, but all of these are many years away from being ready for mass adoption. And as CO2 emissions are commutative, Until these net zero fuels emerge and scale, the industry needs to take advantage of the best available fuel option today and that is LNG. According to a think step report, when compared to traditional marine fuels, natural gas reduces overall CO2 emissions by up to 21%, but it also reduces sulfur oxide emissions by 92%, particulate emissions by 90% And nitrogen oxide is also significantly when compared to Hejetschulon. As you can see in the middle chart, the last mile infrastructure is also rapidly developing with 45 bunker vessels expected to come online by 2023. And these developments in infrastructure are encouraging more and more investment LNG Fuel Vessels. The chart on the left shows that we now have 187 LNG Fuel Chips in operation. We know every one of them. That's expected to break 400 by 2023, with ships currently on order and being built and a lot more in the pipeline being designed and being considered. You can see by 2023 that the confirmed demand is about 3,600,000 tons and much more to come from that pipeline. And also interestingly on the right hand side of that chart, it is really encouraging to see That both LNG fuel chips, but also LNG bunker vessels are becoming eligible for green financing. Now that can be an important mechanism to fund the faster shift to an LNG powered fleet, but it's also an important endorsement of the environmental case for LNG as a fuel for shipping. Now let's talk a little bit more about LNG growth. Domestic gas production and LNG are expected to be the leading source of gas supply growth between now and 2,040, as you can see on this chart by 46% and 39%, respectively. That LNG growth will mainly focus On Asia, whereas domestic gas production increase will be mainly in the U. S. The pipeline growth comes from Power of Siberia, Nord Stream East Sakhalin. With LNG demand, as you are no doubt aware, has nearly doubled Every decade for the last 3 decades to now reach 360,000,000 tonnes, up from about 50,000,000 tonnes in 2019. And now from a much bigger base, we expect it to once again double in the next 2 decades and experience a compound annual growth rate of 3.5% between now and 2,040. And more than 75% of that growth is expected to come from the fast growing economies of Asia. China is expected to nearly double its LNG demand by 2,040 and could do more. It has a significant focus on air quality and economic growth, and it needs to supplement domestic demand production growth and pipeline imports. LNG imports in South Asia are expected to triple over that period, Driven by growth in India, followed by Pakistan and Bangladesh, we'll need to supplement declining domestic gas production, but also meet the growing demand from Industrial and Power Sectors. The largest growth in demand is expected to come from Southeast Asia, from the emerging economies And from new entries such as Philippines and Vietnam, who don't today import LNG, but accept significant suppressed demand for it once the infrastructure is put in place. And even when you look at Europe, which, of course, a continent where we don't see gas demand growing, we see it actually declining. LNG demand is expected to grow by about 55 BCM in the next 2 decades Because of course the production in the EU is declining much faster than the consumption. Now if I close-up this section, LNG has a key role to play in the energy transition by displacing coal and partnering with renewables. Over time, it will, of course, have to get to net 0 in its own rights. And there are several pathways for that that Steve will discuss later, with include carbon capture and storage, nature based carbon offsets, hydrogen blending, biogas. But before we get to that, let's move to the 2nd section, where Steve will tell you the story of 2020. Thanks, Martin, and good afternoon, everybody. 2020 was quite an eventful year for the industry. This slide shows the key events that affected the markets and the consequential price outcomes in the red, orange and particularly yellow line at the bottom of the chart. But it was a year where we went through several periods. We actually started the year in relatively weak market conditions, And that was the driven by the combination of a mild winter across the key LNG markets in Asia and Europe and also the consequence of the previous 4 years where we've seen a very significant ramp up in LNG supply. Obviously, COVID hit us around this time last year. First of all, we saw demand destruction in China and cargoes got diverted elsewhere in Asia. But as COVID spread across Asia, then LNG cargoes were increasingly diverted back to Europe and displaced Russian pipeline gas. But by the middle of the year, the market simply couldn't absorb all the LNG production and we saw shuttings in the U. S. And a reduction in LNG deliveries as a result. But over the second half of the year, we've seen quite a strong recovery based on the combination of economic recovery and increased demand from Asia and some supply disruptions in various projects around the world. So going back to the start of last year. The first chart here shows Just how unprecedented the growth in supply between 2016 2019 was 30,000,000 tonnes of new supply added to the market 4 years in a row. And that basically meant we came into the year with a very, very well supplied market and then we had a very warm winter. The second chart shows the average temperatures over the last winter in each of the key LNG markets as the blue dots. And as you can see, the temperature was higher or significantly higher than any of the previous 10 years. And as a consequence of the warm temperatures, we started the year with high storage levels, particularly in Europe, where we entered the year with about 80% utilization of gas storage capacity compared to a more typical 60%. LNG was very resilient despite these challenges. The first chart here shows that despite GDP reducing across the world by more than 4% last year and gas demand being down 2%, the LNG market grew overall, not by a large amount, but it grew to 360,000,000 tonnes. And the center chart shows the key changes across markets that allowed that to happen. And the growth was really driven by China and India, both increasing their imports by over 10%. And China, pretty much driven by the economic recovery at the end of the year and India taking advantage of very low LNG prices in the middle of the year. If you look to the other end of the chart to see if there's any warning signs, The biggest reduction in LNG imports over the year was Mexico, but that wasn't really a problem in demand. That was simply LNG being replaced buy Pipeline Gas from the United States and then Japan, a combination of the mild winter and COVID impacts. And then the final chart shows how the market balanced each quarter. So in the Q1 of the year, we had strong growth in demand from both Asia and Europe. 2nd quarter was much more balanced where markets We're rebalancing amongst themselves. Basically, cargo is being diverted away from India and Japan back into China. In the Q3 is where we saw the big reduction in supply and the U. S. Shut ins. But by the Q4, we actually saw the market much more strong Asian demand basically pulling cargoes away from Europe. So the market reduction the reduction in the size of the markets in the 4th quarter was much more to do with the supply disruptions and the lack of supply availability than any COVID related demand destruction. So focusing in on some of the specific markets. In China, we saw 8% growth in gas demand last year with all the key sectors that Martin talked about, power, buildings, industry and tap transport and seeing growth in their demand. The majority of the demand growth was supplied by domestic production. There was a reduction in pipeline imports And therefore, LNG still saw strong growth of 11%. And if you look at the left hand chart, you'll see how LNG has been supplying an increasing proportion of Chinese gas demand over time. So between 2015 2020, LNG share of the Chinese gas market has increased from 14% to 28%. Moving on to India. And a similar pattern you can see on the left hand chart where LNG is accounting for an increasing proportion of the overall gas supply over time. In India's case, we actually see a decline in domestic production. So LNG is not just supplying the growth in demand, but it's replacing declining domestic production volumes. And again, if you look on the demand side, we saw significant growth in power and particularly industry, but with some decline in the city gas demand as the shutdown affected that sector in India. Moving on to Europe. We saw a significant reduction in European gas demand in 2020, but that was predominantly met by the decline in Russian pipeline imports. LNG imports were lower, slightly lower, 4,000,000 tonnes lower than 2019, 2019 was the record for LNG imports into Europe, so LNG imports are still at quite a high level. The second chart here shows what happened during the year. In the Q2, you saw the big reduction in demand related to the various shutdowns that happened around Europe. But towards the end of the year, you see demand recovering. And actually, if you move on to the 3rd chart, You see a pattern where LNG is being pulled out of Europe by the end of the year in order to meet increasing Asian demand. So if we switch on to the supply side, the first chart here shows that The United States by the end of the year had now caught up with Qatar and Australia, and we have 3 major supply sources to the market of equivalent size. But you can see better in the middle chart in the blue area the amount of variability that we had in U. S. Production during the year. So we saw a strong growth at the start of the year as new supply time on stream. And then we saw shut ins driven by demand destruction and economic optimization in the middle of the year And then a strong recovery towards the end of the year. But it wasn't just the U. S. That saw a reduction in supply over the year. The right hand chart shows that other supply sources across the globe also saw a reduction in their supply compared to 20 20 sorry, compared to 2019. In the middle of the year, that was predominantly driven by a lack of demand. But by the end of the year, this was mostly driven by supply disruptions and was partially the reason for the price spike that we saw quite recently. So focusing in on prices. The first chart shows the LNG price over time as compared to the oil price. So the LNG price as a percentage of the oil price. The yellow area is the 5 year range and the red area is the 2020 pricing numbers. For the first half, maybe 2 thirds of the year, LNG prices were weak. It looks quite attractive here in March, April, May. That's more driven by low oil prices we saw in that period as oil demand was destroyed due to COVID as opposed to any particular strength in the LNG market. But towards the end of the year, we saw a bounce back in LNG prices and actually very high LNG prices on a historic basis. And then to tell the full story, we've actually shown the pricing data for the 1st 6 weeks of 2021 where we saw record LNG prices, which we'll talk about more in a few minutes. And then the second chart here shows the incremental margins for exporting LNG from the United States. So the U. S. Has been exporting LNG cargoes for 5 years now. And this was the 1st year in which The margin for exports from the U. S. Went negative, and we did actually see shut ins of U. S. Production driven by this pricing mechanism. I think there had always been a theory that the introduction of U. S. LNG volumes to the market would create this additional flexibility and pricing dynamic and it was seen to actually play out in practice this year. So if we move on to the price spike. In many ways, the price spike was caused by a combination of 5 events all happening at the same time. First of all, there was a very cold period of the winter in December January in North Asia, which is shown on the right hand chart here. And secondly, the buyers had probably underestimated The rate of the economic recovery and the corresponding rate of growth in LNG demand going into the winter, and we're probably quite comfortable about the supply situation based on the low spot prices in the summer. Thirdly, we saw disruptions in other parts of the power industry, particularly in nuclear in Japan and coal in South Korea. And then we had supply disruptions in various projects around the world in Australia, Southeast Asia and further afield. And finally, we had delays in the Panama Canal, which caused ships to be late delivering their cargoes and then knock on effects as those ships were then late to move subsequent movements. So there were 5 near term triggers, which all came together at the same time that caused the price spike, but there were also some structural issues that contributed, and we show 3 of those on this chart. The first shows that over the last 5 years, the majority of the growth LNG supply has come from Atlantic sources, particularly the United States Gulf Coast, while demand is still growing strongly in Asia. And therefore the industry is more reliant on this long haul trade and therefore more vulnerable to disruption on that trade. The second chart shows the profile of demand in China. Not only has demand grown considerably over recent years, But the proportion of that demand that is used for heating has grown faster than other types of demand in China. So the seasonality The Chinese demand has also increased significantly over time. And then the 3rd chart shows that there's a lack of storage capacity in China compared to other LNG imported markets or gas markets. So the combination of high seasonality in China and lack of storage capacity means that the LNG delivery profile in China It's also becoming much, much more winter weighted. So you had a series of events on a applied to a market that was vulnerable for disruptions in that time period that caused this the price spike that we saw. So looking forward for 2021, The market looks a lot better than it did this time last year, and there's 2 key differences for them. First of all, we've just come out of a very cold winter and storage levels are very low and need replenishing compared to this time last year where we had the opposite situation. And secondly, we have we're no longer in a period of very rapid supply growth. The wave of new supply from the United States is pretty much over and the new LNG that's expected to come to the market over the next 2 or 3 years It's much more limited. But there is one other big change that happened in 2020 that's worth talking about, And that is the reduction in capital investments in the oil and gas industry in general and LNG in particular. The first chart here shows the amount of money the industry spends as CapEx each year. And because of the low price environment and the actions that companies took to mitigate that situation, there was a significant reduction in the capital spend enduring 2020 across the industry compared to what was expected at the start of the year. And that was probably seen in the LNG history more than anywhere. At the start of 2020, we were expecting 60,000,000 tonnes of new supply projects to be sanctioned during the year in Qatar, in Mozambique, in Russia and in the United States. And in reality, we just saw 3,000,000 tonnes new supply launched. Now that will have an impact on the industry, not immediately, but it will clearly have an thoughts on the forward market conditions. So if we move on and look to the future. First of all, I think our big reflection on COVID as it applies to the LNG industry We'll have a much more lasting impact on supply than on demand. The demand destruction that we saw in 2020 was very visible, Well, the industry has pretty much moved on through it now, whereas the supply will be affected for several years. First of all, the lack of investments. It doesn't just affect new FIDs, it affects the ongoing drilling and upstream investment required to keep existing LNG projects full. So without that investment in 2020, You're likely to see a lower utilization of projects over the coming years. Secondly, the projects that were under construction in 2020 are likely to see delays. There could be delays that affected the supply chain or it could be the limitations on the labor forces on-site, whether it's to do with accommodation or distancing when people work. But we would expect that an impact of COVID is the projects that are under construction today will be delayed. And finally, all those projects that were expected to be sanctions in 2020 have either been delayed, deferred or canceled, and therefore, it will be longer until the next wave of new supply comes to the market. So the first chart here shows our forecast for the Oh, sorry, the industry's forecast for the supply and demand balance going forward, pre COVID in yellow and post COVID in red. So as you see, we end up with a smaller industry overall, particularly over the next decade. And The second chart is looking at this from a different perspective. It's looking at the LNG volumes that come into Europe, the balancing markets, based on our expectation today compared to this time last year pre COVID. And as you see, we expect lower volumes to come into Europe and therefore a tighter LNG market driven by the lack of investments in up stream to fill existing projects, the construction delays and the FID delays. So this takes us to our supply and demand balance. The first chart shows that over the next 2 or 3 years, as I mentioned earlier, we expect to see about 10,000,000 tonnes of new supply coming into the market each year, which compared to typically 30,000,000 tonnes for the 3 years before 2020. So quite a different set of dynamics, A different level of LNG for the market to absorb. And then when we package all this information up to get, supplydemand balance. We have the right hand chart. So the area in red shows the LNG production that is in operation today. That declines over time as projects continue to their natural life. They deplete their gas reserves or gases pulled away from LNG projects into domestic markets. And the area in yellow is the LNG projects that are under construction today. And we've included the 32,000,000 tonnes recently announced by Qatar Petroleum in that volume. And then the blue is the range of mid forecast from several LNG market commentators. And as you can see, depending on which forecast you like to choose or whether you want to look at higher or lower assumptions. The market goes into deficits either just before the middle of the decade or towards the end of the decade. But clearly, more LNG projects will be required for the industry to grow and meet its 700,000,000 tonnes a year 2,040 demand expectation. So I wanted to now spend a couple of minutes talking about some of the structural issues that affect the industry. Supply and demand is one thing, but the LNG industry has quite a complicated commercial structure, which I think makes it quite intriguing compared to many. We've often talked about long term contracts being important for new projects. Producers need long term contracts to get financing to develop new projects to meet future supply growth. Over the next decade, we have over 100,000,000 tonnes of existing long term contracts from production projects that are going to expire. Now some of these contracts will come from projects, which as I say have come to the end of their natural life. But in most cases, the producers We'll be able to resell this LNG back to the market. But because it's LNG from an existing facility that's already finance bill paid for. Then those producers will have a lot more flexibility on the commercial terms and the constructs they choose how to sell the LNG. So in the market going forward, we have producers that will be looking for bankable contracts to launch new projects, and we will have producers who are looking to sell LNG under to meet other objectives. The second chart shows the mix in the offtake from supply projects under long term contracts. And for a while now, that's been a mix of end users and portfolio buyers such as ourselves. But over the last 2 years, you see that portfolio buyers have bought more than half of the LNG volume that's been committed and are becoming more active in the markets to bridge between the different needs of producers and importers. And then finally, we look at LNG importers. Often, we show the number of countries that import LNG show as a demonstration of the growth of the market and the number of players in the market and the number of countries importing LNG still continues to grow. But what we're showing here is the number of importers in 4 specific markets: Japan, South Korea, India and China. So these are the companies that own capacity in import terminals in these countries and therefore have the ability to actually buy LNG and import it into the market. And as you can see, across these four countries, Over the last 10 years, the number of importers has grown from 30 to 50. And outside Japan where it's being pretty steady, it's grown from just over 10 to almost 30. So lots of producers in the market with different needs, lots of importers in the market with different needs And portfolio players playing a bigger role. So what? So what's the consequence of that? And I think our observation this year is people often talk about commoditization as one way path. Once it starts, it only ever accelerates. And what we actually see today is the spot market is quite stable. The spot market has grown, as you can see in the columns on the first chart, considerably over the last 5 years, but it's grown with the overall LNG markets and the proportion of the markets that is sold under spot cargoes It's pretty steady. It's grown from about 25% to about 30%, but it's pretty steady at around 30%. And then we rather than showing where the spot volumes come from or go to, we've tried to identify the characteristics of markets import spot LNG, and that's shown in the different colors. So red is LNG that's sold into balancing markets Because it's not needed anywhere else. The yellow is LNG that's sold into seasonal markets where there is too much uncertainty over the demand for the buyers to be able to enter into long term contracts. And an example of that is Brazil where they have high LNG demand if it's dry and there's a limited amount of hydropower and very little LNG demand if it's wet. And then the next category is price sensitive markets. Countries that will buy LNG at certain price levels either absolute or relative to other fuels, but clearly switch away from LNG at other price levels. But the vast majority of LNG, which shown in blue here, goes into markets where The LNG spot buyers and importers are the same people as the long term buyers and importers. And basically, companies use the combination of long term LNG to meet their security needs and price predictability needs and Spot LNG to meet their flexibility and balancing needs. So what we see is rather than this one way path to spot market. We see a market that's actually very balanced and stable with the spot business model and the long term business model coexisting quite happily. Now the second chart here shows a combination of sorry, a comparison of spot prices to term prices. This is a little bit subjective because there's not a single term price. There's many different term prices in the market at any one time and they change over time. But this is our analysis comparing the spot price to a typical long term contract price in the market at that particular time. And what we see is sometimes spot is an attractive way to buy LNG and sometimes term is attractive to buy LNG. Clearly, when the market is weak for reasons of large ramp ups in supply or demand destruction Like we saw in 2020, then spot becomes cheaper. But then in other times, as we saw at the end of last year, then spot prices could be considerably War Expensive. And had we continued this chart into 2021, you would see that go up to over 300%. And maybe one of the consequences of the price spike that we've seen recently is for buyers to step back and rethink their purchase strategies and their balance between buying on the spot market and buying under long term contracts. In the middle of 2020, buying on the spot market was very attractive, But they're not typical terms, typical conditions. And clearly, the events at the end of the year Make people want to think through what it because they really want to take. And finally, we show the indexation for the different term contracts that continue to be signed. What we see over time is that different pricing options are chosen by buyers and sellers to meet specific needs of both parties over time. The indexes people shoes change over time, but oil remains the dominant price index. So to us, it looks very much like this long term market still underpinned by oil price indexation and the spot market will continue to coexist at its current level rather than any rapid acceleration to a 100 10 Spot Markets. Now we started our presentation talking about net zero emissions and we're going to finish in the same way. So the first chart here shows that following the announcements from Japan and South Korea and China and when you combine those with Europe, Over 2 thirds of the LNG market today is in countries which have 0 net carbon emission ambitions. And for LNG to stay relevant over time, we need to find a way to make our business compatible with those countries' objectives. The growth in LNG demand today is predominantly from countries that don't have those same ambitions, But we expect over time more countries will join the club and announce their net zero targets and the area in green in this chart will grow significantly. Now there's various things that the LNG value chain can do to reduce and mitigate its emissions. The usual value chain you see on the right hand side and the little red slices of the pie above it show what portion of the emissions hemp from each phase of the value chain. 80% of it is the ultimate consumption and burning the natural gas. But every part of the value chain contributes to the emissions. Now we could do a presentation just as long on what we're doing under each of these categories. But clearly, reducing methane is a big priority of the gas industry today to protect its reputation and to improve its performance. Operational efficiencies are available and being pursued at every stage of the value chain. Electrification with renewable power is a clear opportunity, and a great example of that is our LNG Canada project, which will be powered with hydroelectric power. Carbon capture and storage, as we have in Gorgon, allows us to capture the CO2 from the elements of the value chain where you get significant emissions. And ultimately, you can then offset the CO2 from reduced emissions of the value chain once you pulled all the other levers, and that's something that we are actively pursuing at the moment. There's been quite a bit of publicity in the last about LNG sellers announcing the emissions of their LNG production or documenting the emissions for their customers. That's something we've been doing for quite a while with customers who have been interested in that. But for us, that's very much the start of the journey. We are much more focused on actually reducing the emissions and I gave you the example of LNG Canada And then offsetting them through the sale of net 0 emissions LNG offset from nature based solutions. And again, we have been a major player in that market. So to conclude, What we'd like to think is actually a very positive and robust story. Clearly, natural gas is coming Under threat or under challenge in certain quarters. And there is not yet clarity over what natural Oil Gas' role is in the net zero emissions world, but we actually think it has a very significant role to play. First of all, it can decarbonize the hard to electrify the sectors. And it's particularly relevant in Asia where most of the energy demand growth is going to come from. 2020 was a year where we showed great resilience as an industry. We actually grew our the overall demand for LNG over the year despite the obvious demand destruction we saw in the middle of the year. And really, The lasting impact of 2020 is the reduction in investments in the industry, which we think will cause a supply demand gap to reemerge in the industry in the middle of the decade, but And that will require new projects. But the fundamental structure of the industry, the long term contracts and the spot market, we think, will continue to coexist. And actually, the big focus on the industry now is how we reduce our emissions to be as competitive and acceptable as possible in a the world's journey to net 0 emissions. I'll now Thank you for your attention and hand back to Holli, who will take any questions. Thank you. Thank you. We will now begin the Q and A session. Here is the first question from Oswald Clint from Bernstein. Please go ahead. Your line is open. Martin, Steve, thank you very much. Thanks for the slides. I know you like to keep this high level in terms of the gas industry. So perhaps, Martin, the first one, just on high level global gas demand. I think looking out over this next decade or 2 that you're showing, you had, I think, a 2% CAGR growth last year. Now it's 1%. The LNG demand is down 3.5% a year from 4%. And I know it's perhaps it's some WoodMac data in there and perhaps it's old from the first half of last year. But I mean the big delta is power and that's renewable penetration and you called out Korea boosting 300% renewable. So the question is, What's the chance we sit here next year at 3% CAGR LNG demand growth? And really, what do you think the right number is? I mean, Eastham will always tell us that he doesn't need consultants because he gets real time feedback on the forecourt from his customer base. I mean, What are you getting from your customer base as you go out and think about long term contracting, please? Thank you. And then Sorry, secondly, for Steve. You talked about more and more buyers and suppliers and different commercial structures needed To serve them and some more pricing innovation that's required. Although, as you just finished off there, oil indexation picked up in 2020. So really, I mean, what innovation or price changes do you think are needed as we look forward? And how do you think that chart might look in 2,030, that indexation chart, please? Thanks. Yes. Thanks, Oswald, For joining us today and for these two excellent questions. On the first one, we I wouldn't be Too drawn to the difference in percentages. In Medicare, this is rounding where last year just rounded up to 4% and this year, it was rounded down to 3.5%. And equally the 1% to 2%. We've always kind of been in between the 2. Now clearly, our view of total global energy demand by 2014 has dropped Partly because of COVID. So there's a kind of a lost year in there or even a year of shrinkage in there, partly also because we simply see energy efficiency being a more important factor in real life and in modeling than we had used before. I think if you take the Korea example, by the way, absolutely impressive on the 300% renewables. But equally for 24 power plants to be converted from coal to LNG that is a significant That's in the right direction as far as the LNG industry is concerned. That certainly wasn't in the plans a year ago. And in general, when we go around Asia or as we communicate with regulators and governments in Asia, and the drive on air quality, the drive on getting the industries and our power sectors to work well and to work at lower air quality and lower climate impact is in a way stepping up rather than stepping down. And so we are pretty firm actually and pretty confident and we are putting of course our investment behind that confidence that this that LNG is a play that has decades of growth and many decades of relevance ahead for a portfolio like ours, but where the industry is going to play an important role in keeping the world supplied. So I wouldn't read too much into the slight drop in percentages. Strategically, the role of gas and the role of LNG is unchanged, particularly, I would say, and I think the long term strength of it comes from its role in the hard to decarbonize sectors. I do expect the power sector to over time be very, very focused on renewables and only where gas Shell's. But if you think of industry, if you think of heavy transport Overall, very locked in home heating demand. There's a very long role, long term role for gas to play. Petrochemicals, and we can make a list on. You know the list. We believe this is a very resilient forecast and think the industry has at the moment more risk of underinvesting and overinvesting in it. Steve? Yes. So thanks Oswald. You asked about the chart that showed the different types of indexation and what it would look like in 10 years. I think our key message is that We'll still have the chart in 10 years. I think there's a lot of people who talk about the increase in JKM volumes As though everything is becoming JKN. And I think what we see is a world where 70% of LNG is being sold into long term contracts and the other 30 that is being sold spot. There is more financial trading around. There is more churn on. But just because the amounts of JKN trading increases. It doesn't mean the amount of LNG that's ultimately being sold spot rather than term is increasing. So that's what we were trying to really clarify, that disconnect. You asked what our buyers were for or talking about in long term contracts. And they are still keen to buy under long term contracts, Maybe smaller than a decade ago, maybe the contracts are 500,000 tonnes or 1,000,000 tonnes and they're 10 years not 20 years, But then there are more of them. But what we see is a world where buyers are keen to buy and long term contracts, increasingly keen at the moment. But they all many have different needs, and that's why we're seeing this emergence of more different pricing structures rather than a true commoditization pathway where everything ultimately converges into a single pricing mechanism. That's great. Thank you, both of you. Thanks, Omid. We will now move to our next question from Alastair Syme from Citi. Please go ahead. Your line is open. Thanks, Martin and Steve for the presentation. Martin sorry, Steve, just to pick back up on that JKM point. What do you think needs to happen in that market for it to develop? I've heard it observed in the past that there's not enough depth in the market in terms of at the wholesale end in terms of the buyers being able to offload risk. Is that a relevant observation? And I guess, do you expect that JKM to increase as the next few years unfold. Yes. So the JKM market is growing. There is no doubt about that. But I think what's important to differentiate is that JKN is a pricing product for a subset of the market. And it's not the whole of the market. It's not Brent. It's a pricing mechanism for a portion of the spot market. So the JKM market is growing, But it's a market that is predominantly used by intermediaries and not the ultimate producers of LNG or the ultimate consumers of LNG. So it's not necessarily what the market's all about. The fundamental players of LNG are able to make their business work because There's all sorts of different pricing mechanisms and contracting mechanism that suit the needs of buyers. And therefore, we recognize that JKM is there and it's a part of the market, but we're trying to just comment that it's not the be all and end all of the markets. So Maybe I'll stop there. I'm not sure if I've quite got to what you're after, but I I think our objective is a successful LNG market, not necessarily just a successful JKM pricing construct. I guess I was trying to target the point. Do you think JACAM is forming differently than say the European hubs formed as you said a look a decade or a bit less ago The way that the participants are able to play in that market. Well, I think the European hubs formed in this more typical commoditization pathway where ultimately everybody moves in the same direction together. And what we're saying is that that's not necessarily what's happening in LNG. And it's because the different players in LNG of different needs and true commoditization is not necessarily a solution to them. Brilliant. Thank you both for your time. We will now move to our next question from Irina Himona from Societe Generale. Please go ahead. Your line is open. Yes. Thank you. You spoke you both spoke about the need to decarbonize LNG and gas itself. And I just wanted to revisit your perception of risk to gas and LNG as a transition fuel. So For example, the U. K. Will ban the use of gas for heating in new housing stock from 2025. So leaving aside The benefits of substituting coal and complementing renewables, how do you perceive the risk to gas and LNG As the fossil fuel itself over the next decade, let's say. Thank you. Yes. I mean thanks for the question. I think It's a really important question, of course. The LNG, The home example in the U. K. Is actually a really good one because that sounds like a pretty significant decision that new housing stock should not be on the gas grid. But I believe there's 27,000,000 existing house in the UK In order to take them off the gas grid and move them into move them onto the electricity grid for heating and Get heat pumps installed, etcetera. It's an absolutely Herculean task. That no doubt over time will get liquidated. But that heating sector has a very locked in element to it. And while This is happening in the U. K. And to some extent in the Netherlands. Other parts of the world are actually moving from fuel oil based heating of buildings 2 gas fired based heating. So on a global basis, the trend is at the moment Upward rather than downward if you look across. Now that doesn't at all In validate your question, it is a very important one. But I think it illustrates just the difficulty of changing our infrastructure Changing locked in demand from one source of energy to the other source of energy. And I do believe that there will be in the forms of time in net 0 economies significant gas consumption in industry, in petrochemicals, In some of the heavy transport forms and still in power. And not all of that will be fundamentally 0. There'll be CCS where possible, but CCS doesn't work everywhere or isn't economic everywhere. So there will be an there will Still be a significant natural gas stream that will be producing CO2 emissions that will need to be taken care of by CO2 credits. And indeed, Nature Based Credits, we believe, is going to be a very significant business in decades to come. And we're growing our role faster. I think it is up to the gas industry to make sure it takes all the measures possible. It avoids emissions where possible then it reduces them where possible And only those emissions that can't be reduced or avoided then are compensated by nature based credits. But I think that system alongside the development of biogas and hydrogen blending We'll leave a very substantial role for natural gas even in a net zero economy in 2,050 or 2,060 depending on the geography you're talking about. But it won't happen by itself. The industry will need to be on its game on all the levers that I just described and that Steve mentioned in the presentation. Thank you very much. We'll Now move to our next question from Jon Rigby from UBS. Please go ahead. Your line is open. There you go. Just a year into it. I'm still making that mistake. Hello, everyone. Just want to ask 2 questions. The first is going back to the discussion on price indexing versus spot, etcetera. In the end, surely, The thing that has happened is you need some form of price discovery that makes developers comfortable in building something that's payback is maybe 10, 15, 20 years and buyers comfortable that they have security of supply both in terms of the sort of price range and the volumes being delivered. And the recent markets, both if you just observe that situation, price and volume, And the fact, I think, as you point out, is that most of the buyers recently have been portfolio buyers, suggesting sort of end users are somewhat confused, nervous, reluctant to commit. Does that raise an issue for the LNG market? Is that The next wave of very large capacity needs some sort of underpinning for it to go ahead, and there doesn't seem to be Huge amount of agreement about how pricing should work. That's my first question. The second question is just looking at the 2020 market. And as you point out, U. S. Production got shut in in the summer spring and summer. Back in the day, it was always sort of cited that U. S. Supply would be the cheapest in the market. But if you think about it over a sort of full cycle with that kind of variability and think of it across the cycle, so from wellhead 2 end user. Where does U. S. Supply sit in the merit curve? Thanks. Shall I I'll take the second one. And Steve maybe you can gather your thoughts on the first question. John, to be honest, U. S. LNG isn't very cheap LNG. I mean, it starts with Henry Hubgas, Which depending on where you are, but at the moment around $3 Most conventional gas fields produced well below $3 not all of them, but most of them do. Many of them will produce below $1 per MMBtu. So it starts with relatively extensive gas. Then you add relatively competitive liquefaction because the Gulf is an efficient construction market. And then you add relatively expensive shipping because it's far away from premium markets. If you put all of that together, the U. S. Volumes are typically not at the left hand curve of the merit order from a perspective of long term marginal costs. So all in investment, you're easily above $6 US3 dollars Henry Hub plus liquefaction, plus gas usage plus freight. You're easily in the $6, $7 range before you're in the market. And short term marginal cost. You still have to start with buying Henry Hub and with burning these plants, whereas many of the integrated projects and made our extreme investments and our short run marginal costs are almost negligible. So it is actually relatively logical for U. S. Volumes to be shut in If the market is truly so long that you can't get the LNG into Europe anymore at a profit At a marginal profit, so that usually then excludes the tolling fee. And indeed, the long range marginal Also not at the left hand side of the cost curve at the moment. So I think that's the reason why. And it's also a reason why we haven't seen in the U. S. For some time now. Steve? Yes. I think the way to think about the U. S. Is that The cost curve will have a very flat part in the middle because there's a lot of potential supply from the U. S. And it has quite a generic transparent cost structure. So I think it's a good signpost for the industry. If you can develop a project that's cheaper than the U. S, then there's a high likelihood that you can be competitive. If you're going to be more expensive than the U. S, You're not likely to be competitive because there's a lot of U. S. LNG that come to the market at a cheaper price. So it provides a useful benchmark for other producers to know what sort of cost structure they have to achieve in order to be to find a way into the market. The pricing structure, John, this could take quite a long time. And you could approach it from a very theoretical perspective that ultimately all gas prices need to equalize and just be different by transport or liquefaction costs basis. Effectively then the U. S. Henry Hub price and the global LNG price becomes the same. And As we saw recently, you get drivers in the LNG industry. That means that that sometimes doesn't work. Your actual question was, does pricing work? And the answer to that would be, it does, because The industry grows. New projects get built. There weren't many sanctions last year, but that wasn't pricing issue. There was a lot the year before. The Qataris obviously have confidence that they can sell 30,000,000 tonnes based on their new sanction recently. But deals get done, people get to buy cargoes. So it's an unusual commercial structure, which is why we talked about You've got multiple pricing mechanisms for the same commodity. But ultimately, from our perspective, We have many customers who have different needs, who have different risks, who have different competing fuels, and we're able to provide pricing mechanisms that meet the customer needs and allow us to grow our business and be from that perspective absolutely. So in a way actually Just in a way, is that level of sort of multiple inputs and so on plays to having sort of broad portfolio globally, but also I guess up and down the value chain as well. Is that correct? Yes. Multiple pricing mechanisms is good for our business model, but it's also what our customers want. So I could take an academic theory arguments and say we should be driving the industry to price convergence, but there's no reason to do that. Thanks, John. Thanks a lot. Yes. We will now move to our question from Thomas Adolff from Credit Suisse. Please go ahead. Your line is open. Hi, guys. Two questions from me as well, please. Firstly, very interesting chart slide on LNG in rural transportation. And thanks for quantifying size of the market in China and where you think how big the market in Europe can be, 8,000,000 tonnes by 2,030. But I wonder if you can talk about the size of the market more globally and how you think about LNG field vehicles. The competitiveness, let's say, renewable diesel versus hydrogen versus technology. And of course, Bio LNG is very interesting. And if you produce Bio LNG from manual, it's almost a carbon sink. And then well, it is a carbon sink. And then secondly, interesting point you made on the Shell spot, 30% and they expect it to be largely unchanged by 2,030. And you talked about some of the characteristics, seasonality in Brazil, price sensitive markets Like India. Would you not agree, and I'm just thinking out loud, as the power mix changes and as you have more intermittent renewables, Having a slightly higher share of spot actually helps reduce the volatility more globally, electricity prices. Thank you. Yes. Thanks, Thomas. Maybe I'll start going on the transport your transport question. Although the size of the market globally, maybe Steve can think about it for a moment. But I would say from a cost perspective, LNG is actually quite competitive in road transport. And our business today the business in general is able to give people discounts to diesel to help pay for the cost of the LNG truck and to incentivize take up. In the long run, you would expect hydrogen to be the logical net zero solution for trucking. But as you say, Bio LNG could even be net negative and Bio LNG can be produced in relatively large amounts onshore, we believe. So the competitiveness will work in the coming period. To me, the LNG to trucking It's really a matter of having the infrastructure build out and having the truck makeups provide a wide enough range of trucks at competitive rates. We're getting into that space in Europe. We're clearly already beyond that part beyond that space in China. Do you have a sense of the size of the addressable market, Steve? I don't have a number for you. I guess I was going to talk a little bit about shipping because again, it's a big opportunity for us. You're starting off with the same strong fundamentals. Just as LNG is competitive with diesel for road, it's competitive with very low sulfur fuel oil for ships. And again, it's not clear what the end states of shipping is going to be, whether it's going to be methanol or ammonia or hydrogen or bio LNG or there's many, many different solutions. But what's Really important for LNG is it's by far the cleanest of the solutions that are available now. And that's why we're seeing an inflection point in shipbuilding for LNG fuel chips and demand is that, again, On these cumulative arguments, you're much better off using the cleanest fuel today rather than waiting for the end state. And therefore that creates quite an opportunity for LNG in that segment as well. Yes. You also Perhaps I'll add on the shipping side, the global opportunity is 200,000,000 tons, But that would require everybody to switch, which of course isn't really going to happen. So we're thinking more 30,000,000 to 50,000,000 tons in shipping. In trucking, it's a bit academic because it would need global infrastructure and that's not being built. But if you look at China already 30,000,000 tons and growing and Europe growing up to 8 and beyond. Yes, it will be tens and tens of 1,000,000 tons of LNG growing into growing up 2014 on the road as well. So all in all, quite a significant LNG transport market. Yes. And the big advantage for LNG in shipping today It's availability. For most of the competing fuels, you have to build the whole value chain. But for LNG, it's just the last mile infrastructure you need. LNG already exists in most big ports in the world. It's just a case of the bunker infrastructure, which we're busy putting in place. You also asked about would the spot be more than 30% in a decade's time? Yes, potentially. I don't think I was predicting it was going to be 30% forever. I think the message was that there's an ex many people seem to think that the rate of growth of spot can only accelerate. And we don't see that. We see a world where long term contracts and spot business coexisting is a very stable situation. In many ways, you should be able to argue that the last few years was when you'd expect to see the growth of spot be at its greatest because The growth in the market came from U. S. Supply, which has always been considered more flexible than other sources. So in a period when you had a lot of flexible supply coming to the market, the rates of growth of the spot portion of the overall market actually slowed down. So it's those kind of factors that Make us think that we're in a relatively stable equilibrium. Thanks so much and good day. Thank you. Thanks. We will now take our next question from Lydia Rainforth from Barclays. Please go ahead. Your line is open. Hi there. Thanks, Steve. Thanks, Martin. Two questions, if I could. On this first, I'm just coming back to the market. Steve, you talked about India increasing demand last year because of lower prices. How sticky do you think that demand is as a result of the lower prices coming in? And actually just while we're on the marketing side, What is being put in place in China at the moment to avoid the same sort of spikes that we saw this year coming through? And then a separate question around the carbon offsets. And are you finding there's a difference in the order of how you offset carbon set or reduce carbon emissions. So you talked about LNG Canada's being done with hydroelectric Is that seen as sort of being better than just doing it with offsets in terms of is it a case of actually people want the genuine reduction in carbon? Or is it an offset they A for those offsets. Thanks. Yes. Thanks, Lydia. The on your last question, I think it is fundamentally low carbon Complemented by carbon credits is a better proposition than fundamentally high carbon complemented by credits. Generally in the market, But also indeed in when you talk to customers. So in that sense, Canada is well positioned. We need to continue to also explain how carbon credits, nature based carbon credits particularly work and why they are actually genuinely things of CO2. But in the market pitch marketing pitch having fundamentally low carbon LNG already helps. In China, as Steve pointed out, There's not much gas storage compared to particularly Europe, but also U. S. And China is indeed building gas storage. So the main players in China are all being asked to build more LNG tanks, but also to build underground storage in depleted gas field. So we will see the amount of storage creep up over time. Of course, as a percentage of consumption, It's hard to grow it because the consumption is growing so fast. So I think China will for some time still have that fragility left with it. Steve, do you have any insights on India, Vishal? Yes. Well, before we leave China, the one thing the government has done is create this national pipeline company that controls most of the gas infrastructure, including many of the LNG import terminals. So rather than having 3 companies with their own networks Creating one single integrated business should allow for a higher utilization and more efficient growth of that because more storage is needed, more pipeline connectivity is needed. It's happening. It's just struggling to keep up, particularly day, the demand spike we saw this winter. On India, first of all, We have no problems with it being price sensitive markets because we want the flexibility to supply the premium markets when they exist and somewhere for the LNG to go at other times. But India is, I guess firming up its gas demand because of its recognizing its need to address its air quality issues. So gas will grow its penetration in power. It will grow its penetration in industry. And there's a particularly big opportunity for it in trucking. We've talked about trucking in China and Europe. India, it hasn't really started yet, but it's starting to duty versus the dirty fusel that's often used today. And we've recently commissioned our truck loading facility at our AZira import terminal that we can supply into that market as well. Holly? We will now move to our next question from Lucas Herman from Exane. Please go ahead. Your line is open. Thanks very much. And Steve, it's nice to have the chance to talk with you. Again, a couple, if I might. Volatility, I mean, it seems like it will be an increasing feature of markets most, I guess, especially between winter summer. We've seen it this year. Solar wind tends not work. It's cold. Oh, dear. Where am I going to generate my electricity from power? But the opposite is true of summer. So I was just Interested for starters in how you think about that volatility and what you can do To maximize the opportunity that exists. Secondly, I don't know if I'm allowed to ask about Shell and Shell And some of the forecasts that you laid down a couple of weeks ago, Martin, for the Integrated Gas business. I'll just I'm listening to you present very constructively on the outlook for the next 3 or so, 4 years. And then I look at the operating cash flow guidance or CFFO guidance that you gave 2 weeks ago and you end up scratching my head As to how you manage to keep it as low as it is all by. And if you're not willing to talk around that at all, Then I'll come back to an alternative if I might. But over to you guys on those 2. I'll take the volatility one first. And again, it's something that we touched on. We didn't actually use the expression volatility, but we said that The price dynamics been over the last 6 months may cause buyers to want to increase the amount of volumes they secure into long term contracts and protect themselves from that price volatility. And obviously, we're in the market to sell LNG on a term basis and keen to do that. We also have a trading business and the trading capability. So in that part of the business, we like volatility. We have the combination of a strong deep trading network where we have many different supply Many different market outlets around the world, a lot of insights into the market. So volatility allows our trading business to create value. It's obviously an issue that a lot of people might focus on, but it's not something that concerns us at the moment. Yes. Yes. And I guess the other one on that is, of course, trying to develop markets that are counter seasonal. We will start supplying Ghana with LNG this year, which obviously had a very different pattern than the winter skewed pattern of Northeast Asia. So the transport markets are, of course, different. Middle East LNG tends to be all in the summer. So really also looking to say, can we open up geographies Where summer LNG has either particular relevance or at least that are not seasonally skewed, so we can balance our portfolio more. On your other question, Lukas, we can definitely discuss Shell's CFO. Actually, we have a call in starting in 38 minutes Where we'll talk a bit more about the integrated gas strategy of Shell and let's say take the Shell view and the Shell consequence of this outlook into account and build on Strategy Day. So if you can bear with us until the late afternoon, then I would look forward to discussion your question and many more that are company and company outlook specific. And then there's also Hi, Surin. Martin, I'll happily bear with you, but I'm going to throw an alternative at you instead if I might. Just Europe, the outlook that you have over the next 20 years. I mean, Europe over the last 10 years has gone absolutely nowhere. If anything, the environment feels in many respects as though it would be more challenging for the next 20. So is your expectation of a 1% frac gas decline over that period not, I'd say modest in the extreme or too optimistic maybe is the right word. Well, I think it's a I would say, middle of the road projection. You can certainly see more aggressive projections of the gas demand coming down. But still there's still quite a bit of coal in Europe to take out the system and there's Quite a lot of industrial footprint to defend. So I agree that European gas markets are not growing and will not grow. But of course, With the domestic production falling away as it is, there's an LNG market and as a play for Steve's business To optimize between pipeline imports and LNG imports and domestic production streams, it continues to be quite an interesting playground even if it's There's no underlying growth and even indeed underlying shrinkage. Thanks very much, both of you. Thanks, Thanks Lucas. I only like to take one more question. And I know there's a few left. I hope that you'll find time to join us in our next call so that you can still ask question. And that we can also give you the Shell perspective on these on any questions. Olli? So we will now take our final question from Roger Read from Wells Fargo. Please go ahead. Your line is open. Yes. Thank you. Good morning, gentlemen or afternoon to you. Good morning over here in the States. I'd like To dig in a little bit, thinking about it, I guess, from a price versus emission standpoint. So if we look at India, China, some of the other developing markets, they've obviously continued to build coal. That's a price driven event. As we look at LNG, how should we think about it on a price driven event in those markets, right? I mean, China is still a decade away from wanting to top I might say wanting to, but planning to top out emissions. So in that environment, can LNG continue to outpace Growth in those markets, especially if it remains linked to oil prices, or are we looking at Where coal continues to gain market share in some of those places? That's a good question, Roger. My quick response to it will be and then I'll ask Steve for the final thoughts is that in most of these markets gas is a policy choice rather than fundamentally economically the cheapest way to produce energy. But actually as a policy choice, It's been doing rather well in Asia because in many countries and China for that matter is a good example, Air quality is seen as a bigger issue than economic growth in many cities in many regions. And to combat air quality, you simply can't grow coal. It doesn't work. And so you see in multiple Asian countries that air quality is now such a big issue. That policy is favoring natural gas. South Korea example It's a really good example, but it's of course a relatively developed economy. But if we add up the policy decisions and promises projections of Asian countries will easily come within the volume and market development projections that we are giving you today. Steve? I just agree. I think that In both of these countries, the gas business has about less than 10% penetration in the overall energy mix today, and The governments in both countries have targets to get it to 15% and beyond, and they're taking actions to do that. One of the biggest challenges gas house in India today is a tax mechanism where each time you move gas along the pipeline from one state to the next, you get a state And the union government is now planning to move back gas into its national GST, its national tax policy to takeaway that inefficiency. And yes, we see it already happening. It's not just theory. Strong 8% growth in Chinese gas demand we saw this year proves that this is already happening. Thanks, Roger. Appreciate it. Thank you. Let me take a moment to thank all the attendees for joining us today. We propose a storyline and we conclude that the LNG business having done So amazingly well over the last 3 decades is still set for a very significant growth over the next 2 decades doubling again in size over that period and continuing to play a core role in decarbonizing many important sectors of energy demand and increasingly Picking up this partnership with renewables that the Chairman of Qatar Petroleum recently described as a catholic marriage bound together for life in power. That role for LNG. We believe strongly, but we also believe LNG and those involved in the industry will need to work hard on the net zero agenda in order for this industry to remain viable in a net zero world. Thank you very much for joining. We hope to meet all of you in half an hour time when we talk a little bit more about the Shell Integrated Gas Business and you have Steve and I again. Thank you.