The true price of LNG

Multiple times since I have turned into the Pitbull, I have faced the same questions. How do I get myself into the LNG business? How will I get LNG spot cargo or even a term commitment? What shall I do to get ready for LNG or to get ready for the next big thing in energy or mobility?

Frankly, most of the time my answer was a clear-cut roadmap for success in LNG. But all too often, soon after having been paid, it disappeared in a drawer to never see the face of the earth again. Those clients simply had made an educated decision that LNG is not for them after having seen the requirements list they needed to work on to make it.

That was an excellent decision in most cases as the first thing I always tell anybody “Don’t do what you don’t want to do – you will make a mess out of it”. Having a passion for a job certainly helps when the going gets tough – and it will get tough more than once. However, passion is not a lifesaver.

Another big pre-requisite is having cash. It takes cash to do LNG – and if you are cash-strapped or just being grumpy, it is not going to work out. In LNG, you will suffer lots of misses and you need to be able to sustain the blows. If they knock you out too early, you are toast. You will have spent whatever smaller sum for nothing. I am always trying to save on unnecessary expenses, but I am not Merlin the magician so – no wand-wielding here.

But the real big thing – I am gritting my teeth now – is that you have to forsake the one thing, most managers cling to as if their life depended on it. You know what I am talking about.

EFFICIENCY

Managers build organizations around this very notion. They squeeze whatever value is in a product or process and prune all the superfluous away so one becomes a leaner, meaner beast. And they are good at this, really efficient.

Spot LNG (and indeed LNG)  is not a business as you would define the term and chances are that it will never be. Because just when LNG reared its head to become “normal”, the biggest reversal of energy history – since the internal combustion engine – flew into our faces. And this is just the beginning. I have said it countless times (and will no doubt say it many more times) that in a few years, it will seem impossible to burn toxic chemical substances and blow the remains of that process into the air we breathe. But I digress.

Jack Welch once famously said, “If the rate of change outside the organization exceeds the rate of change inside, the end is in sight”. Today’s energy corporations are not feeling the fear anymore, the fear to be obliterated by a smaller, smarter, and more flexible and yes – cooler – competitor. Instead, they are frozen in some form of anxiety endlessly wondering where the next twist might take them. In this, they are “Fate-takers” instead of being “Fate-shapers” while obsessively overstudying any potential opportunity until it has gone away. They hesitate to take action as this action asks them to reduce efficiency, which is the holy grail of the company.

Instead of being efficient, new players in LNG must work on being robust. They must nurture the ability to roll with the punches as punches there will be aplenty. Robustness instead of efficiency will give them the edge they need to withstand all the disruption that hits us from all angles.

By creating an adaptable LNG business, you can make market disruption your strategy. Inciting industry change to higher standards will cost you dearly, but it will cost your competitor much, much more to run after your lead. Robustness lets you roll for the long haul and it is better than constantly struggling to adapt to changing business conditions when they have flown in your face already.

Lord John Brown once said “Giving up the illusion that you can predict the future is a very liberating moment. All you can do is give yourself the capacity to respond. The creation of that capacity is the purpose of strategy.”

Organizations, just like people, get irresistibly attracted to take a place on the bell curve just as anything in life does. Most congregate at the bulge of the curve, but some are drawn to the fringes. Some indeed always find their natural place either at the bulge or at the fringe, no matter where the curve starts or ends. They naturally gravitate towards it. The laggards are wiped out when the markets start to shake and jolt and many of those on the bulge too but it is those on the leading edge that will not only prevail but become the superstars of tomorrow. The task is not to change the bell curve but to change your location on the curve.

LNG is a business for those who have money – that is right. However, it’s not the money you need to pay for the LNG, the EPC of a plant, or the time charter of a vessel parked in the Middle of the Atlantic to pick up some wedge cargo. It is much more the cost of adapting to the new realities of the business and not getting trapped in the cauldron of the established ones. It is the cost of doing your first seemingly “useless” trips to rub the flesh with the sellers. It is the cost of trying out new things and seeing how that goes. However, it’s most of all the cost of giving yourself opportunities when they appear.

For the last quote, Stanley Tucci said in the movie Burlesque to the bartender Jack that “Opportunities have a shelf life” while he stares after Ali Rose played by Christina Aguilera. This is true for everything in life especially so in LNG. The sheer disruptive force of today’s energy market being tortured by high oil prices, skinned alive by alternative energy solutions eking an existence on subsidies, roasted by rising emissions standards, and sandblasted by the shale thunderstorm is one of the biggest opportunities in energy for the last 100 years.

Those already established think that they have the luxury of being in and that’s it. For them, getting their foot into the door was already it. The true LNG – and indeed energy – professional will push the door to this new world wide open and show us how deep the rabbit hole goes. He will pay the price and carry the scars to prove it. And he will reap returns unimagined by the pack.