Shell LNG Outlook 2018

Feb 26, 2018

Slides

Hi, good afternoon, and welcome everyone here in the room in London and online on the webcast. My name is George Menon from Wells at Shell Investor Relations and it's a pleasure to welcome you for the 2nd presentation on LNG outlook. The purpose of this presentation is to give you a share perspective on general outlook for the LNG market. And it is the 2nd year we do that, picking up on what we thought was an excellent practice by BG. Today, we have Steve Hill leading the presentation and answering your questions after that. Steve is the Executive Vice President for Shale Energy. And Shale Energy is the entity in charge of our global marketing have a view. Steve, over to you. Thank you very much, George, and good afternoon, everybody. I'm going to spend probably about 40, 45 minutes taking you through the presentation and I'll welcome your questions. We've had a few today, so hopefully we're well rehearsed now, but we'll see if you can come up with some new ones to challenge our thinking. But I look forward to this opportunity. So I'll start with the start with trying to find a way to get this liquid to If we could click forward to Slide 5, that would be great. No, let's stop there, sorry. There's 3 messages that we're going to deliver today or 3 sections in the presentation. We're going to talk about how the external environment is very helpful and very complementary to the gas industry at the moment in general and the LNG specifically. We don't always do a great job in the gas business of telling you our story. So we thought we'd take the opportunity to tell you about some of the structural and fundamental things happening that are supporting the growth in gas demand. We're going to talk in quite detail about what specifically happened in the LNG market in 2017. And we're going to talk about one of the challenges that we see in the industry that needs to be and not to enable continued growth of the industry going forward. So those of you that are familiar with Shell presentations will be familiar with the Energy Challenge. We're in an environment today where the population is growing rapidly from 7,000,000,000 people to 9,000,000,000 people by the middle of the century. The combination of more people and more people living in cities and we expect energy demand to increase by about 30% over the next 25 years. And therefore, we see a requirement for increased supply to meet that demand. However, we're in an environment where climate change concerns and air quality concerns are of ever growing importance. And therefore, the existing solutions to meet that demand aren't going to be sufficient on their own, and we're in a world of probably unprecedented change within the energy mix. So this story is going to tell you the LNG story within that context. Just to focus you on that, this chart looks at the air quality issue in particular. So the chart on the left tells you that the areas in the world today, which have the biggest air quality issues typically in South and East Asia. And the chart on the right shows you that the areas in the world today, which have the biggest growth in energy demand, and they are the same places, it's China and India. They're the countries with the worst air quality issues, with the highest coal penetration in the energy mix today and where there's the biggest air quality issues that need to be resolved. And that creates a unique challenge, which we will talk about as we go forward. So this chart talks about some of the policies that are responding to this environment. And we're not going to take you through all the different policies in detail. What we're really trying to highlight here is the cumulative effect of many different policies coming from many layers of organizations across the world, which are all very complementary and aligned either indirectly supporting gas and LNG or indirectly supporting them through making coal or nuclear or other energy supplies more challenging. Globally, we see the G20 being very supportive, the IEA. Not listed here, but the IMO is continuing to implement changes to the fueling specifications for LNG shipping for shipping from 2020, which we think will create significantly more demand for LNG, which we'll talk about later. In Europe, we've now seen 12 countries announce the phasing out of coal from their energy supply mix. In China and in Korea, we've seen very strong government led initiatives, particularly the coal to gas switching initiatives in China, which are already resulting in near term growths in gas and LNG demand in those countries. And we're also seeing places where sometimes when the national governments aren't taking the lead, then local governments are stepping in. And the example we use here is in Berlin, whereas while the German government doesn't really have any policies that are pushing coal out of the energy mix in Germany, Berlin as a city has decided that it doesn't want coal in its energy mix and has therefore taken its own actions to make that change. We only got as far as the Bs in terms of the local examples, but Delhi is another example. They've pushed out petroleum hope for the energy mix there, and there's many, many other examples around the world. So what does this mean to the overall energy supply mix going forward? The first chart here shows that we expect energy demand to grow by about 1% a year on a compound annual growth rate and that we expect gas to take the biggest share of that growth. Clearly, renewables is growing the fastest in terms of the rates of growth for that specific energy source, but it has grown from a very small base and it is very focused in the power sector. Whereas when you look at the energy mix as a whole, we see gas as being the biggest portion of the growth. And therefore, you can see in the second sector, the blue charts, that actually gas is forecast to go twice as fast as overall energy demand at 2% a year. And almost half of that growth is expected to come from the power sector and there's a lot of debate clearly about what future power mixes will be around the world. But more importantly, more than half of the gas demand growth is expected to come from other sources of demand other than power. And we think gas is particularly robust in those markets because there will still be pressure in those markets to provide cleaner sources of energy. And in energy demand sectors, which are difficult to electrify, then gas is clearly the cleanest realistic option. And then the final chart going back to the theme about Asia shows that gas demand in Asia is forecast to grow faster than overall at 3% a year. And that's driven by some of these air quality issues that we've seen and the fact that energy demand is growing faster in Asia overall than in other markets. And this will lead to a very positive story about LNG because LNG is particularly well positioned to supply gas demanding growth in Asia compared to other markets simply as a result of geography, the gas supplies in the markets tend to be further apart in Asia than in other regions. So looking at power in particular, we don't clearly, renewables is growing rapidly in power markets and will play a very key role in the development of power markets. We don't see that as a threat to gas. We see that as an opportunity to gas. Gas is very complementary and supportive of renewables. Renewables provides clean power and it provides competitive power. What it doesn't provide is reliable power and it's the combination of gas and renewables that provides the clean, competitive and reliable power. So the first example we're going to show you here is California. And these lines are the power demand in California after the renewable supply has been taken into account. So it's the power demand for nonrenewable supply. And as we've seen a very big penetration of solar in California over the last few years, you have seen the power demand for fossil fuel decline by approximately half in the middle of the day, in the time of the day when the sun is shining. But what you also see is a trend at the end of the day when the sun goes in and the solar power disappears, where the demand increases rapidly. And that's due to people coming home from work, plugging in their cars, turning on their air conditioning. And therefore, there is a mismatch between when the renewable power is being generated and when power is being consumed. And it's the flexibility of gas that allows that renewable solution to be complementary with reliable power. So while California isn't an LNG market, it is an example of how renewables change the requirement for other sources of power generation and how that is very complementary for gas' advantages due to its low capital cost and its flexibility. And then the right hand chart looks at Brazil. Brazil is a market where 90% of the power generation comes from hydropower, assuming there's sufficient rain and there's enough water in the rivers and behind the dams. But when there's not enough rain, then Brazil needs a lot of an alternative source of power at short notice. And gas is ideally suited to provide that flexibility and that gas supply into Brazil comes from LNG. So these are two examples where the complementary nature of LNG and renewables can clearly be seen. So when we look at power markets overall, we look at we've split this into 2 because we're seeing different characteristics today in OECD countries and non OECD countries. In the OECD today, we see a growth in both renewables and in gas, gas fired power generation. So again, the 2 don't compete with each other. They compete together in a complementary way to take demand away from coal. And last year was the 1st year since the Industrial Revolution when gas supplied more of the power mix than coal did in these specific markets. In fact, in April last year, we saw the first day in the UK with no coal fired generation since 18/82. If we look at the right hand side, you see quite a different pattern. You still see coal as being the dominant source of power generation. But the growth in coal in the energy mix has halted over the last few years. And in many ways, the shape of the coal curve looks a bit like what we saw in the OECD maybe 30 years ago. So we now have expectations that we will see a similar growth in power from gas and renewables in non OECDs and take on coal in that space. It's clearly a big opportunity for the combination of gas and renewables. But I also mentioned earlier on that over half of the expected growth in gas demand is expected to come from non power demand uses. And a great example of that was China last year. Gas demand in China grew by 15% last year, so very, very strong growth in demand, up to about 2.40 BCM. Now the government's target for gas in the Chinese energy mix is between 350 Bcm and 380 Bcm by 2020. So another 50% increase from where we are today. Whether that's reached or not, we will see. But clearly, we expect very strong continued growth in gas demand in China. And the right hand side of the chart here is particularly because that growth in gas demand we saw in China last year didn't come from power at all. It came from other sources of demand. It particularly came from the industrial sector and the residential and commercial heating sector. It basically came from replacing boilers in small industrial facilities and in district heating facilities from coal fired boilers to gas fired boilers. And this is very important for us because this is a structural demand change. We don't expect to see those sources of demand switching back to coal and replacing their gas fired infrastructure with new coal fired infrastructure to keep having cold trucks on the roads and all sorts of stuff. This we see as a one off structural change, and we see it as continuing. The heating system the heating season in China basically starts on the 15th November. People don't necessarily control their own heating in China. They're part of community housing. And it's only when the community switches on the heating that people get heat. And we only had 6 weeks benefit of the 40 odd 1,000 boilers that were converted last year in these demand figures. So we expect to see continued strong demand in gas continued strong gas demand growth in China going forward. And then another interesting fact for China, we see transport actually starting to become a material source of gas demand. Last year, there were 70,000 new LNG fuel trucks came onto the roads in China, increasing the number of trucks energy fuel trucks in China to about 300,000. So again, lots of strong structural changes in China driven by government policies supporting coal to gas switching. So now if we focus on LNG. LNG is the fastest growing segment of the gas supply mix. It represents a bit over 10% of the overall gas mix today, but is expected to represent over 30% of the growth in LNG demand going forward over the next 20 years. And that again is driven by Asia. As you can see on the right hand chart, Asia, which is a particularly important market for LNG, is expected to account for over half of the growth in LNG demand over the coming 20 years, although we do see growth in all the key LNG markets and LNG being a truly global industry. So some of the changes that we've seen last year have in many ways, changed our perspective on the role of LNG in the energy mix. LNG was always seen as providing energy security, but it provided energy security through long term contracts. And what we are seeing now is a much more flexible market, which is much more responsive to changes in the gas market, changes in demand from other sources of energy and responsive to buyers' needs. And therefore, LNG played a particularly significant role the uncertainties that we saw in the gas market last year, be they supply uncertainties on other sources of gas or uncertainties in gas demand. At the same time, while the LNG markets faced its own challenges, it was very resilient to those challenges and was able to provide a reliable, flexible supply when called upon by the market. So LNG has always provided energy security, but it's starting to provide energy security in multiple ways. So that's the introduction. I'll now move on to the 2017 details. So we saw a strong growth in new supply in 2017. That was very much expected. This is very much driven by the wave of new supply that's coming on stream from Australia and from the United States. And now about half of that new supply is actually on stream and has been absorbed by the markets quite comfortably. In fact, when we dig into that in a bit more detail, what we see is that the LNG market actually grew by more than expected in 2017. When we did the outlook last year, we presented what had happened the previous year. This year, we're doing that, but we're also comparing it to the expectations that were that people were forecasting for 2017 a year ago. And what we can see is that the market grew by almost 30,000,000 tonnes in 20 17, which was about 30% more than was forecast at the start of the year. And that was basically driven by supplies from existing projects in Africa. The new supply from Australia and the United States came on pretty much as forecast. But in addition to that, LNG projects in Africa, particularly in Angola and Nigeria, which have been struggling for various challenges in the previous few years, actually performed much closer to capacity. And therefore, we saw a greater increase in supply than expected. That increase in supply, that 29,000,000 tons of supply growth was comfortably absorbed by the market. And most of the supply growth was absorbed by the North Asian market, and we also saw a material increase into Southern Europe. What was different than expectation is that market mix. It was expected that the market would absorb those volumes, but a lot of that growth would be delivered into the Northern Europe flexible markets, the markets where you basically push LNG into where it has nowhere else to go. Whereas in reality, what we actually saw was the markets that needed LNG pulling LNG, so the North Asian and Southern Europe markets taking the LNG taking the growth that came into the industry. So if we look at that in a bit more detail, what we saw is various markets where we saw significant demand growth and many different factors behind that increase. So in China, we saw strong coal to gas switching driving demand growth, as I've discussed before. In Korea, the growth was driven by government policies and, in particular, a lot of issues in the nuclear issue industry and reliability of nuclear plants in Korea. In Turkey, the demand growth was driven by new import capacities coming online and new FSRUs in operation and therefore simply the ability to import more LNG. In Spain, the demand growth was driven by low amounts of hydro power. And France again also had nuclear issues. So many different factors driving the LNG demand growth. So obviously, the fact that many markets grew by more than expected, some markets grew by less than expected. And again, if you look at where those markets were, it's the UK, Belgium, Netherlands, not that there was any problem with those markets, it's just that those are the balancing markets, the places where you can put LNG if you don't have another home for it. And the fact that actually LNG imports reduced into those markets showed the continued strength of the industry. So now we'll look at China in a bit more detail. I mentioned before that the Chinese gas market grew by about 15% last year. The Chinese LNG market grew by almost 50%. And as you can see, it's almost doubled in the last 2 years. A couple of implications of that. First of all, there had been a concern over the last few years about whether China was oversupplied with LNG and whether it would be able to accommodate all its contracted volumes. That risk is clearly behind us now and China can easily absorb its contracted volumes and needs incremental volumes and buys considerable amounts of spot LNG on top of that. And secondly, I think the growth in China, both the volume growth and the seasonality growth that goes with it, is a further reinforcement of the flexibility of the LNG market today. So the chart at the on the right hand side here shows how the LNG market deals with seasonality. So this is where cargoes go by month over the last few years. And China is the yellow section at the bottom. And what you will see is a seasonality with higher demand in the winter to summer and then also strong demand growth over 2017. If you add on to that the other East Asian demand from Japan and Korea and Taiwan, you get to the top of the black bars. And again, what we see here is strong seasonality driven by China and Korea particularly, which means that as markets, they require more LNG in the winter than in the summer. However, that's very much offset by the brown bar columns, which is demand outside North Asia and outside Europe. And what we see is a strong offset between the seasonal demand in North Asia and the counter seasonal markets. So this is places like the Middle East where they have strong demand in our summer driven by air conditioning and the cancer seasonal heating market, places like Argentina, which have strong demand in their winter, which happens to be summer. So there is a natural offset between different markets where different buyers have different needs at different times of the year, which allows LNG to be very flexible to accommodate the different needs of different markets. And actually, Northwest Europe, which was historically provided the flexibility of the markets, we now see takes a very small portion of LNG and isn't providing the flexibility that it historically did to the market, but it isn't actually needed either because there is this natural offset elsewhere. So again, if we move on to prices, and we show prices because not because we want to talk about whether prices are higher or low, but spot LNG prices, we think, are a strong indicator of the nature of the market, whether the market is oversupplied or balanced or tight. We still read many articles that suggest there is an oversupply in the LNG industry. The consent the sentiment that way isn't as strong as a year ago, but we still read it. And we don't see any evidence of that in practice. I've explained how the demand has grown as quickly as the supply over the last year. And then again, when you look at pricing, commodity prices have increased over 2017, as you know. But when you look at spot LNG prices, the best way to look at the strength of the market in relationship to oil, what you actually see is a very similar price pattern in 2017 to what we observed in 2016. And in fact to what we've observed every year so far this decade. So this would suggest to us that the market is basically operating at a balanced at its usual level of competitiveness and there's no particular weakness or oversupply in the markets. Obviously, there were some changes in the market in 2017. We saw a very material growth in supply, and we also saw an increase in the amount of LNG sold under stock contracts. So that represents about 1100 cargoes of spot cargoes delivered in 2017, which is getting close to about 30% of the overall LNG markets. And we also saw a significant increase in the amount of financial trading done around the LNG business. It's still tiny in relation to the overall scale of the business, but it is growing materially compared to 2016 and provides buyers with more options in how to manage price risk and hedge their cargoes. So this raises the question, well, why do people keep foreseeing and predicting an LNG over It's projects It's projects which are well publicized. They cost 1,000,000,000 of dollars or tens of 1,000,000,000 of dollars. They take 5 years to construct and they're announced and well publicized. So everybody can see LNG supply growth coming 5 years ahead of time. Historically, LNG demand growth was quite similar. It was often driven by new investments in new terminals, new power plants, but that's changed over recent years. LNG demand growth is a lot less transparent today. It tends to come from 2 things which are harder to see. First of all, is increased utilization through existing facilities. And because you don't have the investments, you don't have the announcements, you don't have the triggers that create that publicity. And secondly, a lot of LNG demand growth comes from floating regas solutions. Floating regas solutions are very complementary for developing new gas markets because they can be bought on stream in less than a year compared to 4 or 5 years for a conventional LNG import terminal. But when you're predicting demand 2 or 3 years ahead of time, you don't often see these coming. So a lot of the markets which have driven a lot of the growth in recent years have been markets which people haven't been predicting that are going to be coming in the years ahead. And this technology lowers the barriers to entry for new markets, both on terms of the cost of the facility and the amounts of volumes you need to import through a facility to make it economic. So what will be the next change in demand? And an area where we're particularly focused on at the moment is in the LNG for transport sector. Historically, this was not at all material, but we think there's various things happening today, which will make this much more material going forward. To put this in context, transport represents just over a quarter of energy demand today. And half of that is cars, but the other half of that is effectively heavy duty transport, basically trucks and ships, which is basically transport demand, which is much, much harder to electrify than cars because of the high energy content, the heavy duty and the long distances travel, the high energy requirements. And therefore, we think LNG would be much more competitive in this sector. And just for example, the LNG bunker market today is as big as sorry, the global bunker market today is as big as the overall energy market, and the trucking market is many multiples of that. So in the shipping bunker market, we're seeing a lot of changes related to the change in the specification for ship fuel, which is being driven by the IMO and which comes into effect from 2020. Historically, virtually all ships in the world have been powered by high sulfur fuel oil. That won't be an option going forward unless ships invest in scrubber technology, which hasn't really taken off. The alternatives are either diesel or low sulfur fuel oil or LNG. And LNG historically has struggled to compete with high sulfur fuel oil, but can is much, much more competitive against diesel or low sulfur fuel oil. So when we look at the different sectors in the shipping industry, we're starting to see a lot of progress. 7 of the 10 biggest container shipping companies in the world have said that scrubbers is not going to be their choice of technology going forward. Some have already ordered LNG fueled ships, others have announced that they will. Some have already contracted LNG. CMA CGM, 1 container ship company, recently ordered 9 LNG fueled container ships, which will have a combined annual LNG demand of 300,000 tons, which is basically equivalent of a new market, a new country when it enters the LNG market for the first time. In the cruise sector, Carnival has now ordered 8 LNG fueled cruise ships. Shell is now committed to using LNG fueled tankers, which we have chartered from Soffkinflot and then many other sectors in the shipping industry is we're also starting to see a conversion to LNG. And then similarly in the road transport, this has been particularly successful in China. As I mentioned before, there's 300,000 LNG fueled trucks in China. There's 2,000 LNG fueling stops in China. And we're starting to see some penetration in Europe as well where there's 100 different fueling stations across Europe where you can buy LNG today. So this is one of the opportunities for growth that we are focused on going forward. So I'm now going to talk about a little bit about the growth potential the potential for gas and the potential for LNG demand going forward. That should be a very positive story. And this chart on the left shows the opportunity. The area in red is the LNG projects that are under operation today. Obviously, over time, the production from the existing facilities declines as they start to run out of gas. The area in yellow are the projects that are under construction today. But as we go into the next decade, we expect LNG demand to continue to grow for all the reasons I've articulated already. And therefore, new supply is obviously needed in order to meet that potential demand. The chart on the right shows the amount of new supply that has been committed to by the industry over the last few years. And after a period of very strong growth, we have seen 2 years where we've made, as an industry, hardly any investment in new LNG supplies, about 7,000,000 tons of total capacity new total capacity committed in the last 2 years compared to about 50,000,000 tons in demand growth over the same period. That's sustainable over a short period of time as supply growth and demand growth aren't always going to be perfectly in sync and there's some timing mismatches that the industry can accommodate. But at some stage, more new LNG supply is clearly needed in order to meet this potential demand growth. So that should be a great opportunity. What's holding us back? And I don't think there is a pricing challenge. I think today, the price levels that are viable for new projects and the price levels that are needed by the markets are quite compatible. What we actually see is a contracting challenge. The chart on the left shows the type of market that is importing LNG. And historically, LNG demand growth was driven by markets that if you wanted gas, you had to have LNG because that was the only option, countries like Japan. And they were challenging markets because when you create a new gas demand growth, you had put all the infrastructure in place at the same time, the receiving terminals, the pipelines, the power plants, the other uses of gas, but they enabled the growth of the industry. What we're seeing now in yellow are markets where LNG is not supplying growth in gas demand, but it's actually declining domestic production in existing gas markets. And in many ways, these markets should be easier to launch because the infrastructure barrier is lower. But if you put an LNG import terminal in place, everything else is there. You have existing pipelines supplying existing customers, existing demand. And once gas catches demand, it's it does a really, really good job on holding on to demand. Gas very rarely loses demand. But the challenge for the industry is that these markets typically are in developing countries where the credit isn't as strong as some of the traditional LNG buyers. And the right hand side shows the market structure in LNG imported markets. So historically, 2 thirds of LNG was effectively sold into markets where you had strong typically government owned dominant players, often monopolies, who were driven by security of supply and had a strong ability to pass on commercial terms to captive end users. But what we're now seeing is that in existing LNG markets, we are seeing a lot of changes in downstream markets, the introduction of competition. And that means buyers are facing bigger risks going forward when they sign long term contracts because they don't have a captive downstream market. They have to be sure that, that the terms of that long term contract will be competitive in their downstream market over time. So as a result of these two changes, we are seeing a change in the types of LNG contracts that are being contracted. And basically, in short, LNG contracts are typically getting shorter, they're typically getting smaller and the credit strength of LNG buyers is typically getting lower. Now the industry has done a good job over the last few years in continuing to grow the market, supply customers, meet customer needs despite these challenges, but this is creating an issue in terms of the development of new projects. And this is a kind of a mismatch between the needs of buyers and the needs of producers. Buyers, as I say, are looking for shorter, smaller contracts and buyers often don't have as much credit or as much government backing as in the past. But the developers of new M and G projects often require project financing and the developers themselves and the finances are used to seeing long term contracts to creditworthy buyers in order to make their funding and investment decisions. And therefore, there is a bit of a mismatch that's occurring between the needs of new producers and the needs of buyers. And this, I think, is the biggest challenge facing the industry, the biggest thing that's inhibiting growth of the industry at the moment. And what we see on the left hand side of this chart is that, that is already being compensated in some way by the introduction of new business models and new players in the market. So if you go back a decade, about 80% of LNG contracts were direct contracts between producers and importers or end users. Today, that's reduced to about 50%, and the likes of portfolio players like Shell and Traders have taken up much of the gap because they have the skill sets to match the different needs of producers and buyers and meet the needs of both. So going forward, we continue to see a very positive outlook for gas and LNG. We think the external environment is very favorable to our business at the moment. Clearly, multiple layers of government policies are very supportive of both gas demand and LNG demand. And gas benefits from its inherent advantages of flexibility, which allows to be very complementary to renewable generation and because it simply provides the cleanest fuel option for non power energy supply needs. In 2017, we saw a strong increase in supply, stronger than expected increase in supply, but we saw that the market easily absorbed those volumes and accommodated those volumes. And we did see an increase in the spot business and the physical and financial liquidity in the market. And going forward, we have a lot of confidence in the continued growth of the industry, but there is an issue that requires resolving in order to fully meet that potential growth in demand. And that's not a physical issue. There's plenty of gas in the world. There's plenty of demand. There's plenty of capability to build everything that's needed. This is much more of a risk allocation issue determining who's going to take what risk as the buyers' needs and the sellers' needs need to be bridged. So that's the formal presentation. I thank you for your attention and I'd like to welcome any questions. Steve, you mentioned that the cost for new projects is now essentially compatible with the existing gas price structure globally. But there's only been 2 LNG projects that have been sanctioned since 2015 and one of them was floating. So I'm just trying to get an idea for what cost structure now looks like for new liquefaction given there aren't really any true market examples. And in the tons dollars per ton of throughput or breakeven price, either one would be useful. Yes. So the most transparent part of LNG pricing is the cost of U. S. Export projects. So if you take a view of the U. S. At the moment, people will predict Henry Hub prices maybe around $3 probably below $4 There's potentially an awful lot of gas in North America below $4 You can then add on the liquefaction costs, which are quite widely publicized in the market, add on the shipping costs, you get to a price in North Asia of around $8 maybe a little bit more. If you take an oil price assumption of $60 to $70 and apply typically oil index formally, you get to a similar price range. So I think the price level in the market is quite clear. Obviously, sellers always want higher prices, buyers always want lower prices. But I don't think there's a mismatch in pricing needs that's holding the industry back. I think the bigger challenge is just the uncertainty of what the world looks like in the future. So people have uncertainty over future energy mixes, renewables. They have uncertainty over government policies. They have uncertainty over oil pricing or commodity pricing. So I don't think it's the price level today that is the challenge. I think people are struggling to commit to long term contracts without in a world of more uncertainty. And I think equally, people are struggling to commit to big investment decisions without long term contracts. So it's not the price level itself. It's some of the broader uncertainty around indexes and broader energy supply mix questions that's holding people back today. It's John Rigby from UBS. A couple of questions. The first is simultaneous with this sort of expansion of supply, the oil price fell by even now almost by half. So we're in the 60s, it was 120. So I just wondered to what degree what we've just seen is natural price elasticity of demand for gas and to what degree that's threatened if oil prices were to rise or underlying gas prices were to rise, whether you can able to disaggregate that? And then the second is on future supply. What do you think the factors are that will determine what goes ahead? I mean in the old days, I would have imagined that buyers would be obviously interested in price, but also somewhat concerned and want to look at things like political risk and longevity and the ability to participate in the upstream blah, blah, blah. So what do you think are the things that kind of sort of tick the box that make the next wave for projects go ahead? Yes. Okay. So in terms of your first question, the inhibitors, I think, we've clearly been through a period where following the oil price crash, people change their prioritization quite quickly. So there was an increased focus on cost discipline and preserving cash. At the same time, there was a lot of new supply coming to the market. So the buyers felt quite comfortable that they didn't need to commit to long term contracts. And prices were falling, so it wasn't obviously the right time to commit to long term contracts. So there were many different reasons 2 years ago why projects weren't being developed. But it basically comes down to the buyers didn't need to contract and the producers didn't need to sanction projects. A lot of those inhibitors have been eliminated over the last 2 years. So the industry has taken the advantage of the lack of investments to really do a good job to really focus on costs. So the priority for the industry now is to develop the lowest cost, most competitive projects rather than just developing things as quickly as possible. At the same time, buyers have started to work through some of the significant growth in supply that's come into the market and have actually seen that the market has absorbed that quite successfully. So compared to 2 years ago, there is clearly more of a need for people to do deals now than then. So again, what's holding people back? It's the uncertainty rather than the lack of desire. I think there are buyers who want to do deals. I think there are producers who want to do deals. It's this uncertainty which is the challenge. And this is just a risk allocation challenge, which is different to the industry's faced in the past. So we need to develop a new solution to that. In terms of what's important going forward, I believe absolutely what's most important is being competitive. I think there's always been a some people have had a view that if you have an LNG project, you just have to wait for your term and the market will come around and at some stage you will go. I think that we are in a world where you clearly need to be competitive. And actually, the introduction of U. S. Supply has shown what that means because if you can't compete with the U. S, then you know by definition you're not competitive. But the points we're trying to make is it's not just competitiveness that matters today because there are competitive projects that aren't being sanctioned today, and they're being sanctioned by this disconnect. And therefore, the other thing the industry needs is a commercial model that allows the competitive projects to be sanctioned. And that is basically somebody taking the risk either producers and financier sanctioning projects with more uncertainty over the long term sales mix or buyers recognizing that the ideal optimal portfolio is a mixture of long term purchases, which enables new supply and short term purchases, which gives them the flexibility they need or people stepping in the middle of the chain and actually bridging the 2 or some combination of all 3. But it's different to the historic model of how projects were sanctioned. Thank you, Steve. I just want to talk about China. You talked very positively about the demand surprise in China. So I'd like to know Shell's ability to push further into that. Are you too big in China already? Are you dealing with petechina, Scenic? Or can you start to deal with other buyers of LNG inside China? Is that possible? And then secondly, arbitrage. I know you used to do quite a bit in BG. And as you come into Shell, is there still arbitrage available? But specifically, as you say, there's more traders and more companies coming in here trading around the edges. Is that an opportunity is arbitrage still available to Shell or some of these new competitors taking it as well? Thanks. They're both quite shell specific questions. And the objective of today is to be the one day of the year where we talk about everybody else and not ourselves. So I'll try to answer them as generically as I can. I think China is still a massive opportunity for the industry. It is a market where there is tremendous growth in energy demand, where gas is coming from a very, very small penetration and where there's strong government support to increase gas' share of the mix. So the combination of the increased energy demand and gas' increased share of it creates a big, big opportunity for LNG. Also, there's very little gas storage in China today. So China doesn't just have growing demand. It has a lot of seasonality. So LNG is particularly well placed to provide that flexibility to meet both the uncertainty in the growth in China's energy needs and the flexibility to deal with the seasonality issues. I think the China market is evolving. So that's historically, there's been 3 dominant importers. Over time, there will be more importers. And I don't see any reason why suppliers will not deal with whoever the importers are in any markets. We've seen that in other markets, which have transitioned from having a single government importer to multiple importers. Then companies that have supplied the traditional importer have also supplied the new importer. So I don't see a constraint in that. So it is a big opportunity for the business. In terms of arbitrage, the LNG market is becoming more flexible. And therefore, there is a need for people to sit in the middle of change to make that work rather than the model where long term contracts where LNG is supplying different markets. LNG can play its most valuable role by meeting short term demand response needs and meeting the needs of different markets over different times. That requires the trading model in order to fully provide that service to the market and to optimize it. People in that space benefit from price dislocations and they also benefit from efficiencies of scale and logistics. Shell is well placed that we have a lot of scale, a lot of flexibility that allows us to be competitive in that space. So the amounts of arbitrage will depend on market conditions, but I feel quite confident in our ability to compete in that market, but also to provide reliability and flexibility to our customers, again, because of the same scale and flexibility that we have. So it's a market that's evolving, but I think it's still fairly complementary to our business. I'll have to come over to the side, Steve, thanks. It's Luke Simon of Deutsche. 2 or 3 of them, Mike. You've lived through cycles before. You've lived through the cycle, the excess supply and the fall in pricing in 2,009 through Fukushima. Customer behavior through periods of excess supply, taking down to mean uncontracted quantities. What if you go back, if I think about well, I guess the first question is how much flexibility typically does the customer have in contracts take down to a minimum level, what is minimum level? And when you go and when you think of your own experience historically, what did you see through the 2,009, 2011 period? The reason I'm asking is very simply a view that there is oil supply still to come. Oil prices through summer at least are a lot lower. But that afford an opportunity for people to take down on contract to take as well. If there are read through to price on that. So that's a simple first question. I just wanted to Sure. Sure. And sure. The second one was on just demand in Europe. Your demand is demand in Europe for gas, which is which last year was, I'd say, remarkably robust. But you've got the observations as to why demand was as strong as it was. And I think more importantly, going forward, what one's expectations might be. I'm sorry, I have got a third and it's on modular LNG. Just if you could just talk around advantages, disadvantages both cost and timing with that information? Okay. Well, I think customer behavior is what it's always been. Customers have tried to look after their interest in the same way as suppliers tried to look after their interest. I think the points we're trying to make we're trying to highlight now is that customers have more challenges than in the past because they're not just trying to do the best deal in the LNG market. They're trying to make sure that the deals they do in the LNG market are compatible with their business in the downstream markets, where they're typically not able to lock in long term demand. So that's just putting an extra challenge and an extra constraint on the customer. In terms of this year, prices have gone down recently because prices always go down as you go out of the winter. I don't think there's any sign of any weakness in the market yet. We've just demonstrated how in 2017 we saw strong demand growth and typical pricing. We've just been through a winter where we've seen very high spot prices. Obviously, as you go from February pricing to April, there's a drop, but probably less steep than last year. But I think in the near term, the market looks quite strong. The inventories are quite low at the end of a cold winter. While there's a lot of new supply coming in 2018, it's very much weighted towards the end of 2018. So I think out of all the new supply projects due on stream this year, you have one train in Cove Point and a small floating liquefaction train in Cameron in the first half of the year. All the other new suppliers, Jeet, come on in the second half of the year. So in the near term, the market looks just fine for us. But customers will always try look after their interests. I think that an issue that's got a lot of publicity over the last couple of years, probably more than it might deserve is renegotiation of contracts. And I think what's tended to happen is whenever there's been a renegotiation, one side has talked to the press a lot more than the other side. And therefore, it's been perceived as one side has won and the other side has lost, whereas I think the actual deals that have been done have been a lot more balanced. And clearly, if there's been a price change, some of these went on price, but the other side has probably went on volume or other commercial terms. So the industry is still very good at solving its problems through people sitting down and solving problems together. In terms of Europe, there was strong demand for gas in 2017. A lot of that was the issues in Southern Europe that drove the LNG imports and reliability of nuclear plants, lack of whatever the sun or wind or whatever it is that drives solar generation. I think at some time more LNG will need to come back to Europe. People forecast it was going to happen in 2016, it didn't. They forecast in 2017, it didn't. It may or It may or may not happen in 2018. But I think Europe is clearly able to accommodate the LNG volumes that it may need to whenever it does come. In terms of modular LNG, I've not seen any evidence that it gives you a cost advantage. I think the bigger driver for modular LNG is the challenge we've discussed in terms of getting enough demand together in one go to launch a new conventional project or even a train. So getting 5,000,000 tonnes or 10,000,000 tonnes of demand for a grassroots LNG project is very challenging today. So modular LNG is, I think, being looked at because it lowers the barriers to entry to get a new project off the ground rather than it actually provides an economic better solution. I think the again, it depends on the specific situation. But normally, the critical path for an LNG plant is the storage tank. So if the modular solution requires a new storage tank, then it doesn't really solve you any time. If it benefits from an existing import terminal, for example, then maybe it can be a bit quicker. Sorry. Just to come back on the first one. What typically across the industry are MCQ terms? I don't really think this is kind of an event to talk about contractual terms. This is how we see the industry evolving, and we haven't seen that specific term evolve in the last year, so. Steve, when you're thinking Gordon Gray of HSBC. When you're thinking about the long term outlook for gas demand, LNG demand specifically, one of the things you pointed out was the reliability issue relative to renewables. Can you talk about the place of power storage in all of this? And how you think developments of storage threaten gas via the rate of growth of renewables over time? Yes. I don't think we compared the reliability of gas to renewables. What we said is gas and renewables together are very, very complementary because the combination gives you a reliable source of power that renewables on its own doesn't give you. Now clearly, there's potential for battery technology to replace gas in that equation. But I think that depends also on the length of storage. So to imagine a battery storage that's in a sunny place where most of the power demand happens in the daytime to get you through the night is quite conceivable. To come up with a renewable storage solution that gets takes the sun in Seoul in the summer and allows you to heat Seoul in the winter is completely unforeseeable. So I think it depends very much on the predictability of the demand and the length of time you need to have the storage for. So again, solar may be a better fit for the wind for storage as a backup because solar is more predictable than wind. So I think you get lots of different solutions in different cases. Renewables is part of the solution. Batteries will be an increasing part of the solution. We still think that in order to meet reliable, competitive, clean, flexible energy demand, there's still a very big place for gas in the power mix for not forever, but for quite a long time to come. And there will always be sources of energy demand, which simply can't be electrified. And again, we think gas is going to be the cleanest solution for those markets. Steve, it's Chris Coopman from Bank of America. As you've laid out, it looks like there's obviously been a dearth of new lease expansion developments gotten underway. And you yourself described the change of demand means that smaller players or smaller projects get underway. Do you think there is a risk that we'll see a number more years of only tiny small FLNG projects here or there getting developed before we see the next big cycle because this 10 MTPA big multi train projects Feels a little too soon right now to FID, even though we all know there are a number of them in the pipeline. So just wanted to hear your views on the next cycle or yes? I think that there's clearly a risk that will happen, and that's actually why we've highlighted the risk today. It's one of the key messages of the presentation. It's not our expectation as to what will happen. Our expectation is that the industry will solve this problem and new projects will be developed. We've seen a lot of positive developments already this year. We've seen Mozambique and Papua New Guinea talk very positively about the potential for their developments. We've seen long term deals done recently from Mozambique into Europe, from the U. S. Into China, small deals. So there's a long way to go between people making positive statements to the press and doing 1,000,000 ton deals, but we're starting to see some of the building blocks and some of the intent being put in place. So our expectation is the industry will solve this problem and gas demand will be satisfied. But there is obviously a risk where it doesn't happen. As I say, that's why we have flagged it today. Steve, thank you for the presentation. Two quick questions. The first one is, as you highlighted, one of the big changes in the LNG market has been the emergence of a liquid spot market with potentially JKM being the index. How do you see the likelihood in the next few years that you will have long term contracts based on JKM that get funding from the banks and that therefore some of the new builders of LNG could use this one as a way to get financing without leaving too much risk with the buyers? And then secondly, thinking about low cost new LNG, clearly, Qatar is at the very bottom of that cost curve. How quickly do you think they can get new supply on? Yes. Let me take the second one first because it's probably the easier question. I think it's how quick do they want to put the new supply on. The technical time line is quite clear, the time it takes to build a new LNG project. So the Qataris clearly will be a competitive supplier and will be very credible in the market when they choose to go. When that is, I don't know. So you'll need to ask them. And in terms of asking them, maybe I should ask you, we have probably several banks represented in the room, whether banks will lend based on the JKM contract. I would welcome your opinions. It hasn't happened yet. I think that as the liquidity of the market increases and the confidence in the index increases, then there is increased potential for that to happen. But it takes a long time for markets to transition from being predominantly oil index markets to spot index markets. We saw in Europe, it took 20 years for spot prices to become the dominant source of pricing in the market from when they were a credible option. So it's not something that happens at all quickly. This is Lydia from Barclays. I've got 3, hopefully relatively quick questions. The first one is how much in terms of long run demand forecast, is it sensitive to carbon pricing within that? The second one, what utilization rate in the U. S. Are seeing for the base going forward? And are there areas of potential surprise like Egypt coming back on stream that we didn't forecast? And then finally, just to relate probably to some of the arbitrage questions earlier, how important is it to have market share in the shipping fleet for LNG to take advantage of some of those opportunities? Again, let me take them in reverse. I think the LNG shipping industry is becoming increasingly commoditized. So again, if you go back 15 years, if you wanted LNG ships, you pretty much had to build them yourself or at least contract for them long term yourself. Today, it is a much more liquid market, so ships are typically available. The mix of shipping you want versus what's owned versus long term charters versus what's spotted, it's again, it's a risk management decision. It's do you want to be exposed to spot charter rates or not? And that's a commercial decision for companies. In terms of the utilization, that will be very much driven by project by project issues. Some projects have very good utilization. Others, the LNG projects are very reliable, but they have gas supply constraints and other projects are now quite old and challenging. So the assumptions will have different there's not a generic assumption applied to all projects in the world. And sorry, I forgot your third question. I think the sensitivity of the gas demand, but we don't get galvanizing how resilient are those numbers and demand? Again, a lot of these forecasts are presentation and interpretation of 3rd party data. So I don't have that by market in my head. Just a reminder that online participants can also ask questions. Operator, if you can remind us of the A couple of questions from me. So going back to the longer term supply outlook and the FID outlook, Again, you haven't seen a lot of FIDs over the last couple of years, but you've got a lot of companies that are talking about FID projects over the next year or 2. In the U. S. Alone, probably a couple of 100,000,000 tonnes and then probably 100,000,000 tonnes outside of the U. S. Now I get that you need contracts to push those projects forward. But I just want to say from the other side of it, what do you see the risk of oversupply coming into the market? And on the with all those other projects, how do you feel about pushing forward projects in that environment? And then the second one, just going back to China. I think the market's been surprised by the growth you've seen in China. But I one of the other interesting things is that you haven't seen much evidence of China coming out with new LNG supply contracts. So yes, the lack of new LNG supply contracts that you've seen signed by China over the last couple of years, what do you put that down to? And do you expect a big acceleration in China signing kind of tens of millions of tons of contracts? And if so, on what kind of basis do you expect that? Yes. So I think we're a long way away from worrying about an overinvestment in the industry at the moment. I think that in many ways, the reason we started this outlook last year is that the market was concerned that there had been an overinvestment and the market wouldn't be able to absorb all the volumes. And we saw the disconnect between how people were talking about the industry and what we actually observed. And that's why we started communicating this story. There needs to be more investments. Historically, the industry does have a bit of a track record of projects going in waves. If there is a wave that comes in the future, then I think we might be talking about it in a year's time or 2 years' time, but there's no sign of it being something to worry about today. I think the U. S, a lot of those projects in the U. S. Have a lot of challenges to get going today. We have just seen a 1,000,000 ton sale from the U. S. Recently. There's probably a train which might get to be sanctioned quite soon. But for new grassroots projects to be launched in the U. S, there's still some pretty big hurdles to be overcome. But I think the U. S, the latent supply in the U. S. Is very beneficial for the industry because it does give buyers confidence that LNG supplies can be made available and bottom line if they are needed by the market. There's obviously a time line required. But the fact that there is a lot more gas in the U. S. Than is ever likely to be needed in the U. S, the fact that the cost structure in the U. S. Is very transparent, the fact that the U. S. Regulatory environment today is very supportive of LNG exports, the fact that there's many different players in the U. S. Market, so it's not one single government entity that's controlling the rate of development, means that the U. S. The availability of LNG from the U. S. Gives the market confidence. There'll always be more supply there in the future in order to meet demand ongoing demand and demand growth. There's just a time line required in order to enable it. And there's still a lot of uncertainty as well over which projects will go next and that. In terms of China, the question was on growth, sorry, I was going to You haven't seen many new contracts being signed by China. So should we expect a huge wave of new contracting as well as the price? If you'll see more, I think there's been a combination of there's been quite a negative sentiment in the industry over the last couple of years where people have perceived there's a lot of LNG available and prices are falling and therefore there's no need to enter into contracts. I think we're moving out of that environment today. And I think Chinese buyers have historically been very keen to try to call the market. Sometimes they've been successful, sometimes they've been unsuccessful. But I think there is a cultural mindset that people want to buy at the bottom of the market rather than assume the market will do whatever it does and therefore buy in slices over time and kind of self hedge that way. So I expect to see an increase, but it's an increase from a very low base, as you say, over the last couple of years. How big it is, we'll discuss next year. Pricing, do you think they'll be looking at? Is it mainly oil linked? Or do you think that oil is still probably the most prevalent pricing structure discussed for new LNG contracts at the moment. Just going back to the question I asked before, just to explore a bit further on risk to supply. Is there a perception that by contracting with U. S. Supply, you are taking on this is from the buyer side, you're taking on sort of risk that is different to the risk that sits around other sort of traditional LNG supply either because of the underlying commodity risk rather than oil, it's Henry Hub. And although everybody has got very comfortable with Henry Hub 2 or 3 times historically, they've been historically very wrong. And then secondly, so just politically as well, it's this sort of disaggregated model where you've got an underlying market, maybe a third party who's running the plant and then sort of other players intervening? Is that seen as being a slightly different risk profile? I would think so, yes. I think that the political risk of the U. S. Is probably seen, bizarrely, as being lower today than a decade ago. When the U. S. First entered the market, there was a lot of debate over whether the U. S. Would limit the amounts of gas it exported. I think there was an attitude at the time that cheap gas was a competitive advantage the U. S. Had over the rest of the world and did it want to export its competitive advantage to its competitors. I think the U. S. Has moved beyond that now and is very supportive of LNG exports. But if you buy from any specific projects, then you always take the risk associated with that specific project, whether it's the operational risk of the facility or the political risk of the country. I think that's one of the benefits. We offer our customers a shell that when you're buying from shell, you're buying from shell. And we have many different supply sources, and therefore, we're able to provide reliability or flexibility because of the scale and flexibility of our own portfolio, whether that is either derisking the start dates of deliveries because you're not dependent on the timing of a new project or just ongoing managing operational risk for the portfolio. I think it is one of the benefits to the customer of the portfolio model. Some customers are very, very keen to avoid timing risk on new projects and will clearly choose to buy from suppliers like Shell. Some of the customers prefer to deal directly with the projects because, I don't know, many different reasons, probably mostly historical. Most of the contracts are linked to oil. What are the other most common contracts that you see on the market, Henry Hub? Are there any other interesting pricing that is emerging? I think Henry Hub would be the next most significant in terms of the volume. I think that there are various different other indexes that have been discussed, whether they are other gas market references or other references to LNG markets using customs data and average prices and stuff. There's a few different constructs that people talk about. But in terms of material volumes, it's very much dominated by crude oil. And then Henry Hub next. I know you mentioned that we're a long way from an over investment specifically related to the U. S. Coming on. What about Russia though? They have big ambitions. We've just been up to Yamal and seen a very successful on time on budget project and they're top Russia talking it up, Novatek and Gazprom. Could we be missing something where Putin just says, we're going to do this and there's a lot of gas and there's a lot of volumes come within a 5, 6, 5, 10 year period? Maybe. There is a lot more LNG demand required. I showed a chart in the presentation which had a demand outlook to 2,030, 2,035. And there is a whole of potentially 200,000,000 tons by the end of that profile. So 25,000,000 tons from Qatar, another 20,000,000 tonnes from Russia, a few trains in the U. S. It takes quite a few world scale big projects to fill that hole. Now we've got quite a bit of time to fill it as well. But again, that doesn't strike me as being one of the things the industry needs to worry about today. Once we've kind of solved the near term problem, which is making sure we start getting some projects, then we can maybe focus on making sure we don't get too many. But it's not an imminent problem that I see. Mark, it's Steve. You referenced that 30% of 2017's transactions were done through the spot market. Is that primarily because of European buyers being able to redirect cargoes? Or is this just a natural evolution where that's the percentage of the market that is uncontracted? And then do you still look at the LNG market as being essentially a 2 basin market? Or are you seeing a lot more interconnectivity in more of a global market as a result of all the spot flow? I think the spot market is growth is ultimately driven by LNG providing flexibility to gas markets as well as long term security to gas markets. So we've highlighted a lot of cases where LNG provides solutions, which long term LNG contracts in their historic model don't typically provide. So again, Brazil needing LNG when it happens to be dry. It's very hard to go and sign a long term contract that manages that requirement. So it's not simply a case of LNG cargoes without places to go because as you point out, some of these cargoes are sold under term contracts and then resold under spot contracts. So we look at the final deliveries in the chain when we come up with the 30% estimate. But it's a combination of more markets, different needs in the markets and changes in the commercial structure along the chain where you've got more intermediaries in the middle, which have the ability to sell cargoes on a spot basis. In the past, there may have been opportunities when cargoes were needed in one place, but the inefficiency of the industry prevented that from happening. Your other question was? I think you're now looking at the market as being a fairly liquid global market or is still Atlantic and Pacific basin? I think there is an increase in connectivity in general, but the markets do diverge over time. So a lot of the time, you can the price relationships between different markets make a lot of sense based on logistic costs. But when things happen and you get strong demand in one region or very short term needs, then you can get price dislocations. So the premium for Asia over Europe certainly increased in the middle of winter when the demand was very strong. So it's more consistency is a general trend, but it's not always perfect. Question about who are going to be the next round of buyers. You've got obviously a kind of tension here between the ultimate buyer one saying better terms from their perspective. And then you're saying also that we're kind of falling into the trap of not having enough projects. So one thing that kind of fills that gap is a big portfolio player who can come and take a very large lump if you like of demand and then find a way to get that into the market. And if you're worried that that's going to happen, I presume that's something which you would be prepared to do for you and other big portfolio effects like taking a very large project in terms of all those volumes. Yes. So clearly buyers want better terms, but sometimes they enable better terms by making the commitments that enable new projects to be developed. So while buying on the spot market is the lowest risk option for buyers, basically buying in the spot market takes the flexibility out of the market, whereas a long term contract allows a new project sanction, which brings new supply into the market is in the interest of the certainly buyers overall. And I think a lot of buyers are quite aware of that, inconsistency. And the challenge they have is how do they solve their problem rather than everybody else's problem. It's clearly in the buyer's interest to enable more supply, but the buyer doesn't want to be the person who enables the supply for all the competitors to benefit from it. So how do they manage around that? In terms of the portfolio players, clearly, Shell is fortunate to be well positioned within this market structure. Obviously, we design our business models around the way that we see the market, but we have the ability to succeed in this market from a couple of perspectives. First of all, we're probably less reliant on 3rd party financing to sanction new projects than many of our competitors. And also, we are less reliant on needing to secure long term new long term sales than many of our competitors to launch new projects because we have the ability in our own portfolio of existing sales and trading positions and market access to absorb supply. But equally, everybody benefits from the growth of the industry and the success of the industry. It's not in Shell's interest or anybody's in trust to have a supply crunch where no new supply is developed and prices spike and demand gets destroyed. So we're very keen for the industry to solve this problem in order to meet demand growth and to further continued healthy growth of the business. But equally, we also need to look after our own interests. So while we could solve this problem on behalf of the industry, we also need to make sure we do the right commercial decision for Shell. So that's not just developing the projects the market needs it. It's developing the right projects at the right time with the right commercial structure to make sure if we are going to take risk between supply and the market, we are compensated appropriately for that. Can I have time for a couple of questions? James, do you think the contract market, the long term contract market is bottomed pricing terms? There is more awareness around buyers that the market is tighter. China has been, I suspect, a bit of surprise to come up with by and large constraint back into this year. Yes. I don't see a lot of upside in a short pithy statement on that. I think the evidence of the falling prices doesn't exist anymore, whether it's going up or flat or what, it takes time to establish. But you don't see signs of prices plummeting? I don't think prices are plummeting today. I think prices have stabilized, yes. We still have questions from the folks. So last question here in the room in London. When do you think Saudi starts buying LNG? I don't have a specific opinion on that. Obviously, we are delighted to finish last year with the biggest sale in the industry during 2017 into Q8. I think there's many similarities between Q8 and Saudi. So it's a logical thing to happen at some stage, but I don't have a specific view on the timing. All right. Thanks very much, everybody. I really appreciate your interest in all the questions and your time. So let's see what happens this year. Thank you very much, all, and we