Natural gas is abundant. Reliable supply is not. Liquified natural gas, commonly known as LNG, was meant to close that gap. I like to think about liquified natural gas as oil's. Nerdier cousin. It isn't as big as oil, but it's becoming bigger, and it's sort of becoming this backbone for a lot of energy systems. It has so much of a broad reach in terms of where it goes for power generation, for industry, for transportation. India, Japan, Asia, and also Europe, all have long-term contracts. If you were gonna build your economy

around liquified natural gas imports, it had to be reliable. And this is what Qatar offered, until now, The energy war escalates. Qatar's Ras Laffan industrial city, which houses the world's largest LNG export plant, has suffered extensive Damage from an Iranian strike. This plant, which had been running for 30 years had never ever missed a delivery. Never in the industry's wildest dreams would this facility be damaged and damaged to such an extent that it would take years for parts of it to restart.

So what happens when a war becomes a stress test for a global addiction? How do you replace supply from a region that's now so fragile and vulnerable? Natural gas is an incredibly useful fuel. It can be used for heating, for used for cooking, used for power generation even goes into a fertilizer to be used to grow our foods. It's often cheap and abundant. But getting your hands on it can be difficult if you are not in the right region. So traditionally, it's been moved through pipelines.

Liquified natural gas helps to solve that problem because it turns gas into a liquid so that it can be much more easily transported anywhere in the world. Oil and gas come from wells either on land or offshore, but to make it into liquified natural gas, you need really specialized equipment. LNG, really it's a magic of engineering. It gets super chilled to negative 163 degrees Celsius. This gas, when turned into a liquid is 600 times more dense. So every shipment is packed full of energy.

It goes from the LNG plant to the vessels, and then on the other side, when it gets delivered, it has to be sent to these specialized import terminals so that it gets warmed back up. It has become the fastest growing fossil fuel globally. It represents about $250 billion in global trade. I like to describe it as the champagne of fuel. The infrastructure that's required is very expensive, but it became more affordable or more accessible to a lot of emerging countries for a few reasons.

One is the US shale boom. This is the combination of hydraulic fracturing and horizontal drilling that really unlocked this enormous resource potential. Out of the US there was a wave of build out for import terminals. So this helped increase the ability of countries to import more LNG. Adding to the number of countries that we're able to import Cheap supply floating terminals fast build out a fuel, once reserved for richer countries, suddenly became available to everyone and it was sold as a bridge fuel to renewables.

Which means basically it's for countries to get away from using dirtier coal because gas, when combusted emits less CO2, but also backup intermittent renewables. Gas has about half the emissions of coal. So it's cleaner than coal, obviously not as clean as renewables, but it provided that solid, that base load power. But over the last few years, the industry, especially big oil, which has invested a lot into LNG production capacity and exports, has changed this pitch. As the world's energy demand has grown, both in the developing world and the developed world, liquified natural gas came to be seen more as a destination fuel, not just a bridge fuel.

Liquified natural gas, an affordable and reliable source of cleaner energy. Much of these LNG exports are from Qatar and head mostly to China, India, and other Asian destinations. But there's one little problem- All LNG exports from Qatar have to pass through the Strait of Hormuz. The Strait of Hormuz is a key choke point in the Persian Gulf because about 20% of the world's liquified natural gas production passes through there each day. So the fact that the world became very reliant on Qatar was no surprise given that it had the resource advantage, the geographical advantage, and it had really built itself up as the world premier producer in LNG.

Our energy will find its way into millions more homes and businesses around the world. With such reliance on LNG having taken hold, the fragility of the system has been quickly exposed by war. With the attack on energy infrastructure, especially the Ras Laffan facility in Qatar last week, the likelihood of a quick normalization is now diminishing. There were Iranian missile strikes on the facility at Ras Laffan, damaging two out of the 14 trains of this massive LNG complex. This is something that Qatar estimates is gonna take three to five years to rebuild and cost the country anywhere up to $20 billion a year in lost revenue.

Meanwhile, customers have to look elsewhere to get the fuel that they need which causes a bidding war in markets and for price of natural gas to rise. LNG output around the world had been rising steadily, but the closure of the Strait of Hormuz and the damaged facility has led exports to fall roughly 20%, and it's unclear how soon that supply will return. The war has revealed that the LNG market is much more fragile than people had before thought. As country's consumption of liquified natural gas increased, so did their dependence on this fuel.

By relying heavily on imports of natural gas, you're essentially Swapping one vulnerability for another. And so when a big disruption happens in a place like Qatar, there are no alternatives. The only thing that you can do is cut consumption of gas. The hardest hit economies will be the countries that had the biggest reliance on LNG from Qatar, Southeast Asia in particular. So Bangladesh, Thailand. They're seeing the impact almost immediately. There is energy rationing, power rationing. There's now a bidding war in certain areas in order to replace that liquified natural gas that's been lost, and it drives up costs ultimately for consumers.

Spot LNG prices have more than doubled in recent weeks, going from $30 million for a single cargo to now almost 70 million. This moment destroys the view that LNG can be an affordable and reliable fuel for the emerging world in the energy transition. And this could be the real damage, not just lost energy, but lost faith. Countries are already looking towards other energy sources, and for now, they're likely not taking the bridge to renewables. In the short term, at least in the immediate term, they might use more coal.

You're seeing Japan restart a mothballed coal fire power plant. You're seeing South Korea also increase the limits of their coal power generation. But it's complicated. When you also have coal prices just as high,fuel oils just as high as well, everything is elevated, then it really means no good options for countries that rely on energy imports. But without a reliable and affordable bridge fuel. And with oil prices rising, the long-term could see a push to renewables out of pure necessity. Renewables have been attacked for many, many years as being intermittent. However, the sun cannot be trapped in a canal.

The winds cannot be held back. So these are domestic sources of energy that have a big security advantage over imported fuels such as LNG Asian countries, reliant on LNG imports are already looking to diversify their energy mix, which includes renewables, the equipment of which will mostly come from China. It was never gonna be a linear line of, you know, everything would eventually transition to renewables. But I think there were some countries and regions in particular that were working hard to pivot away. Now, I think a lot of those investment plans could be delayed because of this massive disruption. So in the near term, there remains a serious gap in the LNG market, which puts one country in particular in a pretty good

position to capitalize. American natural gas production is at an all time high because I kept my promise to 'drill baby, drill.' US liquified natural gas export capacity has climbed nine times since 2017, and the country is now the world's biggest liquified natural gas exporter. When there is a spike in prices and when people are trying to diversify away from Qatar, away from the Middle East, ultimately the US stands to benefit. Even though the US is now the world's largest exporter of LNG, it's not gonna be enough to backfill the chasm that has now been formed without having Qatari LNG,

especially for the foreseeable future. Upcoming LNG projects in Mozambique, Canada and Argentina could help plug the shortfall, but not in time to fill the gap. Companies are now scrambling to think about where can they invest, where can they trade. It's a paradigm shift for the energy industry where a lot of things that were previously planned are no longer in place. This brings into question the role of LNG and gas in the energy transition, like never before.