When sitting down years ago to decide on how to do a podcast, it never crossed my mind that conversations like today’s would be possible. I had the pleasure of sitting down with Robert Brooks, Founder and chairman, of RBAC, to cover the global LNG and natural gas markets.
Wow we had a great talk, and you can tell from the timeline that we covered the entire global market. RBAC is the leading Energy Market Simulation System to help in M&A, risk analysis, planning, and commodity trading. In order to understand the modeling tools, you have to understand the complex supply, demand, and geopolitical issues. Their tools are critical, but how do you put a price on energy security?
Thank you Dr. Brooks for stopping by the podcast again! This was a great discussion, and I can’t wait to get another update. – Stu
01:08 – Dr. Robert Brooks discusses his optimism for African self-empowerment, acknowledging challenges like corrupt leadership and poverty but emphasizing the potential to utilize abundant resources for development.
05:47 – Tell us a little bit about what you do and the importance of your global market.
10:29 – Dr. Brooks shares insights from his presentation at a DMG conference in China, focusing on energy security. Highlights include China’s substantial natural gas production, extensive use of LNG import terminals, challenges in massive cities, and transportation systems.
16:04 – Description of Beijing’s cleanliness, green spaces, and cultural emphasis on aesthetics. Positive experiences with considerate people are mentioned, along with the evolving nature of China’s natural gas markets despite top-down control.
21:36 – How much are they trying to put in for natural gas versus coal in their mix? Do you know?
23:14 – China’s approach to energy security, highlighting their reliance on coal for domestic production, slow development of local gas resources, and a diversified strategy involving Central Asian pipelines, Russian gas deals, and LNG imports to mitigate challenges and ensure energy stability.
26:10 – Doesn’t Egypt have spare capacity to export out?
30:20 – Mention of France’s long-term natural gas contracts with Norway and considerations of LNG storage and transportation logistics, including the strategic use of tankers as floating storage.
32:39 – The logistics and cost considerations of LNG storage and transportation, noting the strategic use of tankers as floating storage to minimize costs and maximize profits based on market conditions.
35:48 – Don’t long term contracts go to more stable geopolitical scenarios?
37:36 – Is determining the viability of contracts, especially through pricing models, a core function of RBAC’s software for companies?
39:59 – Do you factor in if the country buys in a ton of LNG tankers, does that matter?
43:09 – How does a model take into consideration the the shifting of effort may go to natural gas as the princess at the ball if you would.
46:52 – Dr. Brooks discusses liquefied petroleum gas (LPG) as an energy solution, emphasizing its benefits in developing countries due to lower costs and job creation in the supply chain. The conversation touches on the humanitarian aspect of providing reliable energy sources, particularly in rural areas.
52:35 – Tell us any thoughts that you have. It can be wide open. Tell me what you’re thinking on the last thoughts here.
56:06 – Where people can find you?
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Stuart Turley [00:00:03] Hello, everybody. Welcome to the Energy News podcast. My name’s Stu Turley, President CEO of the Sandstone Group. I’ve got another action packed discussion about global energy here. Not only is Dr. Brooks, Dr. Robert Brooks, he is the founder and chairman of RBAC. And I mean, he is a phenomenal thought leader, but he’s also just back from China. And we’ve been talking about some of the global impacts that are around the world. And I absolutely love my conversations. And Dr. Brooks, right before we jump in, I just want to give your son a shout out, because he’s in Africa right now. And I’ve had three podcast with him all round. And I mean, they have been phenomenal. I can tell he’s got a lot of your knowledge and passion for running around the world, so thank you for stopping by the podcast today, sir.
Robert Brooks, Ph.d [00:01:08] Well, thank you. That was quite an intro. I hope I can live up to it. And yeah, thanks for the shout out, you know, to my son Cyrus. He’s. He’s really a great young man and he’s actually more of a world traveler than I am, actually. He’s been all around the world, spent a lot of time in Australia, in Asia, married a girl from China, lived in Korea, you know, lived in Australia for many years. And, you know, he’s he’s just all over the place anyway, you know, he’s been interested in Africa for a long time and he’s going to be spending some time in South Africa there for the next few months. And I brought his wife, which is really great. So she’s going to be working, you know, from Africa. You know, fortunately, both of them can work remotely and and, you know, still be productive for their companies. And and yeah, so it’s great. And I’m I’m really excited to hear from him. I haven’t really heard too much from him regarding his experience at that African energy conference. But, you know, that’s I know, you know, we’re probably going to focus a little bit more on China. But I will say that, you know, I think one of my passions that I have not really figured out how to do much about. Right, but is to see that after hundreds and hundreds of years of suppression, the the people in Africa actually catch a break here. And.
Stuart Turley [00:02:49] Yeah.
Robert Brooks, Ph.d [00:02:49] You know, it seems like what’s happening, and I hope Cyrus is going to be able to clarify this, you know, from his experience there seems like. That a lot of Africans have come to the conclusion that depending on Europe or North America or even China is probably not a great idea after all of this stuff. And that, you know, they better take the bull by the horns themselves. They’ve got plenty of resources if they do need, you know, they’ve got a huge resource base. They need to to somehow, you know, bring themselves up by their own bootstraps inside Africa on on the basis of those resources. And they should be able to do this. They do have impediments to doing that. You know, history is one thing. Corrupt rulers is another thing. Just the just the. You know, just the abject poverty is another is another challenge that they have. But I think that actually I think they’re up to it. I think they’re up to this challenge. And I think they are starting to actually move ahead on this. Right. And good hearted people around the world need to be goodhearted and hardheaded at the same time. I don’t know how you are able to do that, but somehow be goodhearted and hardheaded at the same time helping this trend along. So I wish them the best.
Stuart Turley [00:04:20] I tell you, the fun thing is this morning your son Cyrus got to set up with the secretary general of the African Petroleum Producers Organization, kind of like the OPEC of about eight, eight different countries. And as visiting with the secretary general, Dr.. Amin. And, I mean, it was just super, super. You nailed it. That’s exactly what he’s doing. He’s out there. Joe Net So were you on that podcast by any chance?
Robert Brooks, Ph.d [00:04:56] Just was not. No, I was not on that podcast.
Stuart Turley [00:04:58] But But you sure picked it all up.
Robert Brooks, Ph.d [00:05:00] Well, that’s interesting. And, you know, I guess that means that they have they have that, you know, they some of the voices of Africa have have gotten through. You know, they’re starting to get the message through. And, you know, some of us are listening. So I think that’s great.
Stuart Turley [00:05:20] I’ll tell you what. Natural gas is such a critical piece in future for elevating humanity out of energy poverty. And before we jump in. I just want to ask, if you don’t mind. You’re the founder and chairman of RBC and tell us what that is because that’s really important why you got to China rather than just jumping right in. [00:05:47]Tell us a little bit about what you do and the importance of your global market, [5.1s] if that’s okay.
Robert Brooks, Ph.d [00:05:55] Well, thanks. Yes. Well, RBC is is an organization I founded, you know, many years ago. It was basically the outgrowth of a private consultancy of myself, which is where the R&D of our base comes from. And so when I started adding people a number of years ago, it became our Robert Brooks and consultants. So there’s the RBC. But then I actually had back in the late 90s, I had an epiphany for me, which was that being in the consulting business wasn’t really the best thing for, you know, what I really wanted to do. But rather I decided that the best way for myself and my fledgling organization would be to create some analytics software and then to license that to the industry and that the industry could use this for their own purposes on their own behalf in the in their own way that they wanted to do it. Right. So one of the problems with consulting projects is that you you sort of define the scope of work at the beginning of the consulting project. And it may involve the consultant using certain tools to do certain analysis or whatever. But, you know, when the project’s done, you know, the recipient of the work, you know, the one that’s funding this. Have a very limited amount of flexibility in terms of the saying. But okay, this is interesting. But what if this or what if that or what if that or what if this. Right. And of course, the consultant is going to say, sure, how much more do you have? How much more money do you have to pay for it? Because we’re not going to do it for free. So, you know, our idea of the business model we had was let’s let’s license for a fixed annual fee, right? This software tool that can do a lot of that. And then the licensee can run as many scenarios as they want to. It’s like the incremental cost is zero, right, of running the additional except for the cost of the consultants inside the company and even that is a fixed cost. So we are basically. You know, it gives them greater flexibility to use the tool for their own purposes in their own projects, whether they are themselves consultants or whether they’re energy companies or whether they’re government agencies or whatever it is. So that business model really worked well for us and enabled us to expand from me to about 15 people. You know what we have and the people around the United States and in China. So we do have people in China now and, you know, in Texas, of course, of course, you got to have them in Texas and California and Pennsylvania and, you know, various other places. So so anyway, that’s our purpose. I don’t know if I explained it well enough. Our focus has been on the natural gas. You mentioned natural gas. So it’s not all energy, commodities, natural gas and related things. We then work in natural gas liquids, for example, which is a very interesting market. And we’ve also done work that was related to the power market because of, as you know, a lot of power is generated using natural gas. So natural gas and power are closely related. And of course natural gas and natural gas liquids would be propane and ethane and butane and that stuff obviously very much related as well. So you want more? Is that enough?
Stuart Turley [00:09:41] Oh, no, that’s a great start because when you and I started our our podcast last time, which is done very well, we’re I mean, selfishly as a podcast host, you always try to find industry leaders and experts that are good and knowledgeable, be fun, and there their material goes off. So you’re like, Yeah, you’re back. But here’s the thing. You are just about ready to go to China. And I really wanted to get [00:10:09]an update from you on your trip to China, because as China is really important in the entire energy global market, in finding out what you had in some of your meetings and some of your insights to the global energy market. [18.3s]
Robert Brooks, Ph.d [00:10:29] Okay. Sure. Let me tell you about that. So you had asked before. Well, how did I why did I go in the first place? Well, I was invited to speak at a conference organization called DMG. Puts on conferences around the world, including. Oh, gosh, there’s this huge, huge conference. It’s gas tech or something like that. They my son actually Cyrus went to the one actually, James, my other son went to the one in Singapore not too long ago. And then there was one in Dubai that was like, I don’t know, 57, you know, exhibit halls or something. It’s just huge, apparently. Maybe it’s Abu Dhabi. But in any case, I didn’t go to that one, but I was invited to speak at this one in China. Now, I was invited to speak without a specific topic. So I was you know, in other words, they said you choose the topic. So, wow. Yeah, that was well, that was pretty good. And, you know, we knew that it did have to do with natural gas, but also other forms of energy. And and it did have to do there were sessions that had to do with hydrogen and ammonia and so forth as well. But I chose a topic that had to do with, you know, essentially energy, energy security, supply security for China. Okay. China is a very interesting place. And again, focusing on natural gas. Okay. So. Right. You know, to get ready for this talk, I had to do a fair amount of research, not just using our own tool and database, but do other kind of research and then out some interesting things. So, for example, you know, China actually produces a lot of gas itself. Right? And and it is it produces 60% of the gas that it needs for its market.
Stuart Turley [00:12:31] So they’re still buying a ton and they’re buying it.
Robert Brooks, Ph.d [00:12:35] They’re buying a ton. And it turns out that about. About 15 to 20% comes in from pipelines from Central Asia. From. From Myanmar a little bit, and also from Russia growing in from Russia. Right. The rest is LNG. And they’ve been building LNG import terminals like crazy all along the coast from the northern part of China all the way through the eastern down to the southern. I mean, it’s just they’ve got like 30, 30 LNG import terminals either built under construction or plant. I mean, it’s it’s a lot. Yeah. So huge. It is huge. And, you know, China is a huge country, as everybody knows. I mean, it’s, you know, essentially as big as the United States in terms of land area, but they’ve got almost four times as many people. So. Yeah. So and you find that out, by the way, when you go to one of these cities like Beijing, you know, which has almost 20 million people in Beijing, it’s it’s, you know, you know, you go to downtown Houston, it seems like it’s a ghost town compared to Beijing. You know, I mean, it’s or L.A., for that matter.
Stuart Turley [00:13:48] It just I mean, I really I want to live where I, I, sir, I don’t. I live where there’s nobody. I love talking to people every day, but not for I’m not a me and my 20 million closest friends. I’m not that kind of guy.
Robert Brooks, Ph.d [00:14:10] It’s you know, it’s really I mean, this gets into the China, you know, into the story about China. It is quite. A credit to to China and to the Chinese people and even to the government, whatever you would know, local government, more than probably the federal government that they are able to have these giant cities and actually make them work pretty well. I mean, you know, even looking at transportation is pretty amazing. You go to Beijing if you have never been there, of course, you don’t really have maybe an idea of what it’s like. But, you know, if you go to L.A., for example, Right. You know, there are some really big boulevards, right? If you go to like Wilshire Boulevard or other kinds, you know, these are pretty, pretty big streets. And there are sort of major streets that everybody knows about. Hollywood Boulevard, Wilshire Boulevard, Sunset and so forth. All of these places. Well, you know, in Beijing, they have these kind of boulevards for even wider. And the traffic is just incredible. And the thing is, the traffic is not like L.A. or Houston, whereas a bunch of cars, it’s a bunch of cars, a bunch of bicycles, a bunch of scooters, a bunch of covered scooters, delivery vehicles. You’ve got everything except my daughter. When she went to India, was amazed that they had all of that on the streets. But they also had a lot of animals. They had elephants and this and that and other stuff. You don’t have any animals on the on the roads in China, but you got a lot of people.
Stuart Turley [00:15:47] Was it clean.
Robert Brooks, Ph.d [00:15:48] Sperm? And he managed to make it work without killing everybody. It’s like it’s it’s astounding.
Stuart Turley [00:15:55] Was it clean? And because I’ve always heard that is it really clean and no dirty and everything picked up And how did you know?
Robert Brooks, Ph.d [00:16:04] It’s really you know, it’s a little bit hard to say because I stayed in the nicest part of Beijing. Right. You know, so when you when you stay I stayed at the Hilton Hotel that’s sitting on probably a mile from Tiananmen Square and and the Forbidden City and so forth. So this is it’s called Wang Ju Wang Food job, something like that that that area And and so yes, it’s course it’s really nice you know it’s nice there. And one thing that you see which is kind of interesting is they do employ older people to kind of clean up the area. So you see these older people with these brooms that are very different from any broom we ever saw in America. You know, they’ve got these I don’t even know how to describe it. But, you know, the the straw part, you know, the broom part is about twice as long or 3 or 4 times as long as what we normally think of in a broom. And it’s all kind of spread out like this. And it looks like, you know, it looks like it’s handmade. Right? But, you know, these older people are employed, you know, just, you know, kind of keeping, you know, keeping the sidewalks and so forth clean. So, you know, you look at that and you say, you know, well, it’s pretty, pretty good. They’ve got something that, you know, people can do that don’t have anything else to do. And. Right. You know, maybe they make a few bucks or one or, you know, whatever, maybe. And maybe they’re just maybe they just doing a civic duty. I don’t know. But but that’s sort of nice. But, you know, those are things that you notice. Other things that you notice about China is if you go around like to the parks and things, I’m a little I was really kind of surprised at how much green space there is in Beijing. Now, first of all, Beijing is huge. It’s like Los Angeles, except. You don’t wait. You don’t see much in China is single family dwellings. You see apartment houses. Okay. So it’s more like a lot of growth, you know, where these, you know, giant apartment houses, you don’t see too many or I didn’t see too many single family dwellings, certainly in Beijing. So what that means is you can actually have a lot of green space and then you have your people in these really tall towers. And so you don’t have single family dwellings sort of taking up all the space. So there’s a fair amount of that parks and other kinds of things. But, you know, the other thing is the Chinese people are very culturally, you know, they are, I think, more interested in and involved with esthetics.
Stuart Turley [00:18:50] Oh.
Robert Brooks, Ph.d [00:18:51] You know, cultural esthetics than most Americans. And, you know, I think Americans are pretty utilitarian. Now, Chinese, I think are also historically, but there’s a certain esthetic quality to life that is that you see and you see it in a lot in the parks and so forth. And it’s pretty nice. And in the hotels, they, you know, they really make it look nice and so forth. So, you know, there’s a lot of good you know, I certainly am not, let’s say a website. I say a fan, you know, of the of the highest leaders in China. But I’m actually not terribly much a fan of the highest leaders in the United States either, to be honest with you, at this moment. But but the point is that the Chinese people, there’s a lot of people who are really trying to make life work, you know, for Chinese people. And, you know, I think we have to give, you know, proper due to the authorities who’ve done this, because all you have to do is look at less than 100 years to the condition of the Chinese people. And it was very, very different. So anyway, I enjoyed my time there. The people are quite considerate that I ran into, that I talked with or dealt with, and and certainly the people at the energy conference which were more interested in here, I found them to be, you know, just like anybody at any other energy conference, anyplace, you know, it’s like they’re interested. They’re technical people. They’re interested there. They want to do the right thing. They Chinese people who are analysts are involved in the energy industry. They want to learn. They want to learn. You know, what they experience in America? They experience in Europe because they’re kind of going through a similar kind of experience in terms of of evolution of their natural gas markets. And I know it sounds strange because there’s so much top down control, you know, by the government, but it is kind of strange because there’s also quite a number of private businesses and there’s also this attempt to sort of have free markets with a Chinese influence or something, you know, I mean, it’s it’s it’s it’s a little bit it’s a little bit interesting along those lines.
Stuart Turley [00:21:14] Well, their power situation if they had the, you know estimated 30. Or so however many LNG import they are putting in, they have, I believe it’s over 300 coal plants per minute. I mean, that are already permitted in there. [00:21:38]How much are they trying to put in for natural gas versus coal in their mix? Do you know? [6.6s] I mean.
Robert Brooks, Ph.d [00:21:46] I can tell you that those it. Well, here’s the here’s the thing. There’s a lot of headroom for growth of natural gas in the power sector. My understanding is that natural gas is actually maybe only 5 or 6% of the of the power sector generation from natural gas. So, you know, you could imagine, I mean, even if they wanted to go to 10 or 12%, you know, that’d be like doubling the natural gas in there in the power sector. Now, that’s not their only consumption because they also consume gas and industrial sector as well as in, you know, residential and commercial. So they’ve got it and transport and transportation as well. But anyway, you could theoretically, if they really wanted to say, you know, seriously cut down on air pollution and that sort of thing, then they might want to go more with natural gas, more with nuclear power, more with renewables and less with coal. Right. But the problem is this, and that is they have a lot of coal. I mean, and they got a lot of coal miners. So there’s a lot of people who are working in that industry. And so when you look at it from an overall perspective, number one is you don’t want your people to be unhappy. You know, Chinese people unhappy historically is not good.
Stuart Turley [00:23:12] No. For bad.
Robert Brooks, Ph.d [00:23:14] Okay. Second of all, they have the coal there themselves, which means energy security is more in their own hands. Right. If they you know, if they use more coal. And. You know, I mean, I think those are probably two of the main things right there. I suspect that, you know, they they will in certain areas and certain times they will reduce the amount of coal that they’re burning. If enough if enough complaints are coming in from the people about air quality. And it’s clear because, you know, it’s the same story that we had in the United States. I mean, look, all you have to do is go back to England. I don’t know if you remember that. You know, they had some horrible event when they had fog and smog at the same time because of all the coal plants and thousands and thousands and thousands of people died. This is in the 50s. So, you know that obviously the Chinese people would like to have good air quality just like anybody in the United States or Europe or whatever. And so you do have that dynamic that’s going on as well. Right. However. Any incremental gas is going to have to come from. Increased local production, which is slow and difficult. Their formations are not nearly as good and prolific and easy to develop as in America, right. Or they have to get it from Central Asia or from Russia, which has its drawbacks. Or they have to get it from LNG, which means they’re getting it from, again, outside suppliers. Right. So I think I think the Chinese are sort of hedging their bets by saying, you know what, we’re going to take all everything. We’re going to use our local production and we’re going to invest in that first. We’re going to have pipeline gas from Central Asia and we’re going to try to work out really good relations with the people in Central Asia, the leaders. We’re going to get whatever we can get from Russia because we know they’re in a shitload of trouble anyway. So we’ll take You’re going to get us a deal. Good. Yeah. And then, you know, we can have all this LNG import capability and, you know, make deals with people around the world. We don’t have to depend on just the United States or just Qatar or just Australia or whatever. There’s all kinds of LNG. So, you know, that’s how we solve our energy security problems.
Stuart Turley [00:25:51] There is a lot to be said for having an LNG terminals because you can get it from just about anywhere. I mean, with the exports, you got the U.S., you got Qatar, you got even Israel, as you and I talked before, they they go to Egypt and Egypt. [00:26:11]Doesn’t Egypt have spare capacity to export out? [4.5s]
Robert Brooks, Ph.d [00:26:17] They have spare LNG production capacity, but they don’t have enough gas to convert into LNG because they also have a growing local demand for gas in in Egypt. Wow. And so it has actually been a bit of a problem to them. They’ve had a couple of export terminals and they haven’t been able to meet those contracts. And so, you know, one of their solutions was to work out a deal with Israel because of the availability of gas in these offshore eastern Mediterranean fields that Israel has been developing. So all of that was going along really swimmingly, you might say. Right. And then this blowup that’s happened recently, I think is likely to, you know, put a halt to much of that. I read someplace that Israel was closing down some of its offshore pipelines. Yeah. You know, because they’re worried about them getting blown up or whatever. So. So anyway. Yeah, that’s but here’s the other thing. Actually, from a global scale on this, do most of the LNG that that Egypt would produce or Algeria and so forth, most of that I think ends up just going across the Mediterranean over into Europe. You know, in short, it’s not going to go to China very much, maybe a little bit or something, but most of it, I think, is going to end up going to places in Europe. There are some places in Europe that are underserved in natural gas like Greece and Eastern Europe. And so there are places where it can go. And there’s other things that there’s plans to move some of the gas through Italy northward, you know, through Switzerland and into Germany and elsewhere. So but I would say the other interesting thing. I mean, there’s so many things to say about that. You know, there are so many plans that, you know, have been brought up about the Eastern Mediterranean building pipelines and so forth. But oh, yeah, it’s really impractical. And I think what they have done is to do the right thing. I think they figured out the right solution, which is to bring that gas onshore, which they’re going to have to do it anyway anyway. Right. And then, you know, connected up with Egypt and you know, because Egypt has that spare LNG capacity and as long as Israel and Egypt, as long as the peace agreement that they have between them is no holds up, you know, they can make these things go right. So, you know, I think for both of these countries that, you know, having some kind of long term resolution of the Palestinian issue would be, you know, great greatly to their benefit. And, you know, certainly as we talked about earlier, it would be, you know, in the end, you’ve got a couple of million people in Gaza. And I don’t know how many people in the West Bank. You know those people, you know, I think you would say, you know, just like America or any other Russia or China or any other place, most of the people would just like to live their lives. And they don’t really want to get involved in all this other crap. So.
Stuart Turley [00:29:35] Yeah, I know I want to avoid crab. But, you know, we we sit back and take a look. Qatar or Qatar? How do you say you say Qatar?
Robert Brooks, Ph.d [00:29:48] Well, I say Qatar rather than Qatar, because I know Qatar is wrong. I know Qatar is wrong also. But it sounds more academic or something. I don’t know. Okay, cool. But, you know, you can go you can go and Google and say, how do you how do you say to air to air? And you’re going to get, you know, people that and but it’s it’s everybody’s opinion about how to say it.
Stuart Turley [00:30:13] So that’s one that’s one that I’ve heard about 19 different ways. But Qatar or Cartier if you’re [00:30:20]French they just signed I believe it was passed well past 2050 on their natural gas with Norway. I mean, on their contract this past week. That’s a long contract in there. Those long natural gas contracts or huge LNG contracts? [21.6s]
Robert Brooks, Ph.d [00:30:43] Yeah, I think it’s with I think you’re referring to the contract with Totalenergies. Right. So it’s French. Unless there’s something else that I don’t know about that. Yeah. And there was another contract I think with Japan as well. But in any case, you’re right. I mean, it’s not going to start until 2025 or so, which means it’s you add 27 years to that and you’re beyond 2050. Right? So so it is. And and that’s that is that is very, very interesting. But, you know, they have huge debts, the largest gas field in the world. And as you know, it’s shared. It’s actually one giant field that shared between Qatar and Iran.
Stuart Turley [00:31:27] So it was Shell agrees to buy gas from Qatar for Netherlands Pass TV.
Robert Brooks, Ph.d [00:31:38] Yeah. So, yeah, yeah, that was that was the second one. The first one was total total energies. I believe so. But you’re right, this is another one. And I don’t know why they chose 27 years, but you know, that’s, that’s what it is. Yeah. And so what this means when they say Netherlands, this is supposed to be sent to the Netherlands, which you would think that means it’s all going into Europe. But the thing is that the Netherlands as a terminal that you can reexport from and so does Belgium. Okay. You know that it could be delivered there and stored there and then moved to where the best market is. So, I mean, there’s a lot of, you know, things, especially if you think about Shell and total energies. I mean, these are portfolio players, you know, So, you know, a lot of the supplies that they get, especially if they get them what they call FOB. That doesn’t sound like FOB. It sounds like a what you call a contract delivery in.
Stuart Turley [00:32:39] Right.
Robert Brooks, Ph.d [00:32:39] There. But from there, what is Shell going to do with it? They may sell it, you know, to Europe or they may move it someplace else, you know, wherever the markets are.
Stuart Turley [00:32:49] That’s got to be cheaper than tanker storage. When you see it, where prices drop so bad, everybody just parks their tankers into different storage areas, it’s much better to manage your inventory that way. I mean, it just seems that way.
Robert Brooks, Ph.d [00:33:07] Yeah. I mean, I don’t know the details of the pricing. I mean, the differences are, of course, but you’re right. I mean, if you just have a tanker and you sit it off Gibraltar, you sit it off Singapore waiting for the market, you know, you’d have to pay a day rate that’s associated with that. You know, I mean, it’s, you know, 100, $200,000 a day, you know, I mean, it’s it’s not cheap, even up to half $1 million a day. But, you know, these tankers, some of them are worth of, you know, more than $1 billion, you know, in product. Okay. So, I mean, they’re I mean, hundreds of millions, whatever. So so what that means is. I don’t know. I may have misstated the number there, but it’s a lot. Okay. I mean, they’re really worth a lot. And so what that means is maybe you’re willing to take the hit of a couple of hundred thousand dollars a day if you expect the price is going to go up in 15 days or 20 days and you’re going to get that much of a higher price for their product. So, you know, these these companies that do this are doing all those they’ve got all kinds of young, you know, MBAs or quants or whatever who are doing these calculations and making those kind of decisions. But the difference is they’re you just parking it, right. And then just move it where the market is. If you deliver it to a tank in the Netherlands or Belgium or France or something like that. Right. You incur the cost of actually delivery of actually loading it into the tanks.
Stuart Turley [00:34:38] Offloading then.
Robert Brooks, Ph.d [00:34:40] Location and then. Right. And then you store it and you lose a little bit every day storing it, you know, boil off gas and then you have to load another tanker and then move it to wherever. So, you know, there’s various costs associated with either either way of doing it. They’ve got another way of doing it, too, by the way, which is sometimes they’ll bring a tanker in and instead of offloading to a tank, they bring another tanker and sit it right next to it and then just move the LNG from one tanker to another tanker and then that other tanker goes off. So.
Stuart Turley [00:35:15] Okay. Yeah. I mean. I mean, they got it down to a science. No, it’s.
Robert Brooks, Ph.d [00:35:19] It’s totally a science for sure.
Stuart Turley [00:35:21] Now, when with our problem in Russia and you take a look at Germany is trying to ban fossil fuels and you date we take a look at this. Long term contracts, I believe were some of the biggest problems that then the EU go to just spot pricing and they really didn’t have any long term contracts. [00:35:48]Don’t long term contracts go to more stable geopolitical scenarios? [4.8s]
Robert Brooks, Ph.d [00:35:55] Yeah. I mean I think they you know, certainly if you can get a long term contract that at a reasonable price, it makes a lot of sense. But sometimes it’s a hard sell. If you’ve got, let’s say the Greens are in power and they’re trying to kill and they’re trying to kill fossil fuels now. And then you say, Well, I want a 27 year contract with Qatar, you know, for, you know, new gas supplies in Germany. You know, it’s going to be difficult. So it’s but, you know, you can get into trouble, you know, with that kind of thinking. Also, you know, India had actually made at least a tentative agreement with with a company, a US company for LNG for a significant period of time.
Stuart Turley [00:36:42] Right.
Robert Brooks, Ph.d [00:36:43] But then the price of LNG, the global price in Asia went down to $2 per million. BTU, Right. And so they canceled the contract because they thought that they would do better by going for a spot LNG. Right. But that was the beginning of 2021. And then in 2022, instead of $2, it was up that, you know, 50, $60, right? Yeah. So in a way, you know, then India was too expensive for India and Bangladesh. And in all these places in South Asia and in Southeast Asia to actually bioenergy. So even when they had contracts, they had to just pay the penalties for not for not accepting because it was just too expensive. So so yeah, so those it’s a it’s a hard game to play because, you know, there’s, you know, geopolitics can really throw the markets out of whack.
Stuart Turley [00:37:36] Oh, absolutely. Now, RBC, you’re a long term software. You’re software helps companies determine the viability of contracts. Correct. I mean, when you’re pricing models and you’re taking a look at that, that’s one of the core things of your company, correct?
Robert Brooks, Ph.d [00:37:56] Yeah, that that’s absolutely right. So, you know, the way that it works is if, you know, if there’s an existing contract, for example, and, you know, we we do a forecast and, you know, using our tool and the forecast. Indicates that, you know, in after a certain period of time, there’s just not really the market demands sufficient for that contract. They can tell you that. So it would tell you it should give be able to give you a pretty good idea of when a contract is sort of out of the market. Right. When it really, you know, shouldn’t be it shouldn’t have been made. But but it was so you know, you’re saying we don’t know about all of these things, though, right? Because, you know, usually when you do these longer term forecasts, you know, you don’t just, you know, throw some kind of geopolitical event in the 2035 or whatever because we can’t forecast or, you know, that, you know, such and such a war is going to break out or, you know, this is going to happen or that’s going to happen. I mean, theoretically, you could do those scenarios, but it’s you know, if you think about it, there’s. How many of them are there? There’s like an infinite number of potential scenarios that you could do, right? So typically, the way you run these things is you assume that. You know, you look at growth rates and patterns and that sort of thing, but you assume that the markets are going to continue on average more, more or less in in an orderly fashion going forward. And just you want to see where the supply demand balance, how it shifts and how, you know, how prices are likely to change over time.
Stuart Turley [00:39:39] Let me let me I’m just kind of fascinated by this whole thing because Cutter guitar, the guy has bought a ton of futures on their tankers. They’ve got orders in for a they believe in their export for a long time. [00:39:59]Do you factor in if the country buys in a ton of LNG tankers, does that matter? [7.5s] Because, I mean, it’s like all of a sudden going, man, we believe in this long term LNG energy mix. How does that how does that factor in? I’m I’m just amazed.
Robert Brooks, Ph.d [00:40:18] Well, yeah, I mean it does factor in for sure. I mean we do keep track in in our global system. We do keep track of of orders for tankers and you know how that you know how this is likely to change over time. And you can look at the various reports and see indicators of when new tankers would be needed in the marketplace.
Stuart Turley [00:40:43] And.
Robert Brooks, Ph.d [00:40:43] You know, when utilization of existing tankers gets too high, then what happens in the model is that the price of transportation goes up.
Stuart Turley [00:40:52] I’ve never seen this. I’ve never seen your software, but I just nailed a very important part of your software.
Robert Brooks, Ph.d [00:40:58] It is a very important part. Yeah. Wow. Yeah. So, you know the set. You know, the model or the system is designed with economics in mind. And economics basically says we’re going to try to find a solution, you know, a forecast that’s economically reasonable. And so what that means is that it’s going to try to, if it has two choices, when you know for the same Right, which I say the same cost supply, one has to go 1000 miles and the other one has to go 5000 miles, it’s going to break the one that goes 1000 miles. Right. Right. So, I mean, you know, it uses basic. Economic, you know, concepts that, you know, the, you know, the lowest cost supply is going to be, you know, delivered and accepted into the market before higher costs apply.
Stuart Turley [00:41:53] Right.
Robert Brooks, Ph.d [00:41:55] Subject, though, to contracts because a contract could be made. Right. Seems like it’s not bad economic, but for whatever reasons, it is made. So we do recognize that. And so this this whole will include those contracts as well.
Stuart Turley [00:42:12] You know, with Cop 28 and you can thank Cyrus for for this little animal this morning. But when we’re seeing such a big move that there is a, uh, a change in the paradigm shift where in 28 natural gas in 26, I started following their language. They snuck in natural gas and as they snuck in, natural gas Cop 27 was there. So what you know, they’re trying. They got it. The Biden administration also dropped it in some of their language as well, that natural gas was needed for the transition. And now Cop 28 is really saying we need natural gas. So the world is now accepting that the renewable energy is having a little bit of a trouble and they need natural gas more. [00:43:10]How does a model take into consideration the the shifting of effort may go to natural gas as the princess at the ball if you would. [11.0s] It seems like natural gas is really gaining traction Everybody’s really trying to do that, if that makes sense.
Robert Brooks, Ph.d [00:43:30] Well, I mean, I think it makes sense. And your argument, I think makes sense. I don’t think everybody buys it. You know, if you’re out on LinkedIn.
Stuart Turley [00:43:39] They don’t I guess I guess.
Robert Brooks, Ph.d [00:43:41] If you look at LinkedIn, you will see that there. You know, there are. You know, there are lots of people who I think are rational about, well, if you’re really serious about reducing carbon dioxide emissions, you know that, you know, you can get more bang for your buck, if you will, by substituting natural gas for coal than just about anything else.
Stuart Turley [00:44:06] Right.
Robert Brooks, Ph.d [00:44:07] So, you know, that, you know, would make a lot of sense. But you have to have the natural gas be economical or else nobody’s going to do it. So that’s you know, that’s one of the things there’s starting to be, I think, a little bit more realism about renewables and how, you know, whether they’re truly clean and green or not and you know, what the mining costs are for doing all of this. And, you know, there’s there’s a lot that’s going on like that. And then you’re getting a lot of pushback again from from sub-Sahara Africa and also I think from the Indian subcontinent as well, you know, where they feel like that they’re having renewables pushed down their throat and, you know, and that that is not really to their own benefit. So I think you you get that. But those are very small markets right now. So. Right. But you know, if you look at future forecasts of population growth and that sort of thing, you know that there is a potential for natural gas in the sub-Sahara Africa is huge, you know, in terms of demand as well as supply. And you know what? You know, I think. You know, some time ago I was talking with. Some of my colleagues, very, very smart people, also educated at M.I.T. and and very thoughtful, very good hearted people, you know, who were very, very, very, very concerned about the climate and and climate change and so forth and. And you know, they. Were really kind of pushing me to tell them why I wasn’t on that bandwagon. And I said, Well, it’s not that I’m necessarily opposed to that. I just think that there’s something else that’s higher priority and the highest priority in the world, as far as I’m concerned, is taking those billions of people who are not really in 21st century economics and condition and bringing them up to something like par, you know, not necessarily par with the United States in Europe immediately, but even on par with the Chinese people on average. You know, we’re going cooking, you know, and you’re right. And making it safe for them, clean cooking, you know, cut down on deforestation because there you know, that, you know, their source of wood for fire, for heating and cooking is is firewood, you know, and that’s not good.
Stuart Turley [00:46:44] It’s actually cut the area around it. And then they have to walk five miles there and five miles back for their wood. You bet.
Robert Brooks, Ph.d [00:46:52] So that’s one of the reasons why I got interested in LPG a few years ago, because actually liquefied petroleum gas, which comes from natural gas production mostly. You know, is a really good solution, you know, for that, you know, to and that ties in with natural gas as well. And so there are organizations like there’s you know, there are a couple of different organizations that are heavy into help which we can maybe talk about another time. Oh, I think, you know, that they are doing a great job. And Kimball Chan is the head of Global Partnership for LPG or something like that. He’s he’s really a very thoughtful guy. I really like him a lot. And he’s working. He works at the country level. He works with the governments and, you know, basically, you know, gets buy in from the governments, you know, that, you know, LPG, you know, would really be tremendously beneficial to your country, right? But you have to develop a whole distribution system for it. And, you know, there’s a lot that has to be done in order to make it really viable. And there are many places in the world where this is already true, you know, Central America and, you know, Mexico and, you know, various other places have these kinds of markets and they’re very workable. And it’s a lot less expensive, by the way, than having to build out a natural gas distribution system.
Stuart Turley [00:48:18] Absolutely. I just interviewed Tucker Perkins, and he is the president of the Propane Association in in the U.S. I’ve got propane tanks. I got three propane tanks at my places. And I love propane. And I’ll tell you what, it seems like propane and and the others are the great last mile to the getting the heat and getting the cooking and and getting that there because you don’t have the cost. But you do have to do the infrastructure. But it sure seems well cheaper.
Robert Brooks, Ph.d [00:48:57] Yeah. Well I mean even in the United States, as you know, there’s big markets there. As you said. You know, you get into rural areas where you don’t have a natural gas distribution network, you don’t have a utility, you know, or an what they call LDC. Yeah. You got to do well. You have propane tanks and, you know, you go to whatever the propane store is and you get your tank full or however you do it. And and so the point is, you know, that is a good it’s a good system and it’s a low cost system and it’s very workable. And by the way, here’s the other thing. Creates jobs. You know, because that whole distribution. You know, system, the whole. Just supply chain, you know, within that country means there’s jobs all the way from the import all the way to delivery and to each of these customers. So, you know.
Stuart Turley [00:49:51] And as Alex Epstein has said, you know, it’s a humanitarian issue. So you’re not wasting five miles a day to go get your wood and then you’re walking back five miles to get your wood so that you can either cook or clean or heat your water or anything else. You’ve got it right there. So, I mean, that’s that’s that’s a way of life, of getting people out of that energy.
Robert Brooks, Ph.d [00:50:19] Yeah, it creates time. It actually creates a huge amount of time for the people that can be spent doing other things that, you know, they may be able to make some money for, you know. So it really, you know, it really helps a lot of these, you know, it’s not just residences, but it’s also small businesses like, you know, like your your local taco stand or something, you know. Well, you know, they have that in in places in in Africa or whatever. It’s not tacos, but it’s, you know, but it’s sort of food that’s needed by the people that, you know, is run by a woman usually, you know, who who doesn’t have to spend two and three hours a day going and gathering would, you know, to actually run her little restaurant? You know, she can just run it on propane. So, yeah, there’s a lot of a lot of goodness associated with that. And, you know, let’s just face it, you know, the most people who are environmentally really very conscious or very involved or whatever probably don’t really know these stories and they don’t understand, you know, what the real impact would be of truly wiping out fossil fuels around the planet. I mean, it would be horrendous. There’s tremendous good, you know, that has arrived as a result of even coal, you know. Right. You know, just look at what the world was like or what the, you know, England was like before they started. Using coal and building a manufacturing industries. And all of this running life was pretty darn grim.
Stuart Turley [00:51:56] Right? Peat burning peat is not exactly the cleanest either.
Robert Brooks, Ph.d [00:52:01] No, no.
Stuart Turley [00:52:03] And I’ll tell you, we’ve got about five more minutes. Dr. Arthur Brooks and I have just thoroughly enjoyed our conversation again. And thank you for coming by the podcast. I have enjoyed getting to know you and your son and your company. You’re in, you’re on the front edge of humanity, so to speak, you know, and trying to get the world lower cost energy and understanding the entire market. You got your last word. [00:52:35]Tell us any thoughts that you have. It can be wide open. Tell me what you’re thinking on the last thoughts here. [7.2s]
Robert Brooks, Ph.d [00:52:43] Well, you know, thanks to I think you expressed it very well there. I mean, you know, I think we would all you know, most people in the world are actually pretty good. You know, they’ve got you know, there are most of the damage that’s done and the destruction is done by a pretty small percentage of the people. Most people are actually pretty good. And I think most people in the developing world would like to see. Those people who are much less fortunate that them, you know, to do better. And they would like you know, but they don’t really know how they can help. I mean, they they’ve got their own jobs and, you know, their own problems with their raising their families and doing this and doing that. So even our company, you know, we’ve got is one of our goals, you know, that that what we do in terms of providing, you know, really solid, really helpful analytics to the energy industry will help the energy industry to make better decisions. If they make better decisions, it’s going to be more economical. And in the end, that means that the cost of providing energy will be lower and therefore the price can be lower, which means that lower priced products can go to the market, which means people will be able to use these products for their benefit. Whereas if people are making a bunch of bad decisions and losing money all the time and and so forth, then the costs are going to be higher and prices are going to have to be higher. And then, you know, these other people are going to be left out. So, you know, it’s maybe it’s a small thing to some extent. We’re not in there, you know, building LPG plants in in Cambodia and in Africa and so forth and so on. And that would be an interesting business. And I hope that more people are doing those kinds of things. But from our perspective, we do it more from the sort of geek quant nerd kind of way of providing, you know, good software analytics to companies so that they can, again, make better investment decisions.
Stuart Turley [00:54:52] You know, I’m going to brag on you and I’m going to brag on me for real quick. I’m over here trying to think of everything that I can think of that would go into that model. And I you already nailed everything that was in there going, Yep, I already thought about that. Already thought about that. So I kind of like a lot. I lost track of trying to stump you on. All right, what’s in your model, What’s in your model and what’s in your model. So well done in in trying to figure out the design. That’s a whole wild thing to price. I just can’t even imagine the algorithms.
Robert Brooks, Ph.d [00:55:26] Well, thank you. And, you know, we have I mean, it’s not just me. We’ve got other people who work in the company and, you know, that are very bright and knowledgeable and so forth. And and of course, we’ve got colleagues in other companies and so forth, you know, who help and who have mentored me on my way. So, you know, it is a it is a collaboration. And and now we’ve got also people who are promoting, I think, you know, rational and good solutions.
Stuart Turley [00:55:52] Through.
Robert Brooks, Ph.d [00:55:53] Podcasts. Gee, I wonder who that is. You know, I think that, you know, there’s a role for all of us to play here. And and I appreciate you giving us time to to tell a little bit about our story. I really do appreciate that.
Stuart Turley [00:56:06] And people can go find you on the our RBC Web site, which is our B, a c.com. And yeah.
Robert Brooks, Ph.d [00:56:18] Pretty simple, isn’t it?
Stuart Turley [00:56:19] I have my kind of website. [00:56:21]So thank you so much for stopping by the podcast today, sir. [3.1s]
Robert Brooks, Ph.d [00:56:25] Well, you’re very welcome. Thanks for inviting me and I hope we have a chance to do it again.
Stuart Turley [00:56:29] Absolutely.
Follow Dr. Brooks on LinkedIn HERE: https://www.linkedin.com/in/robert-brooks-ph-d-8081231/
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ENB #142 Why is the Climate Crisis racist where Africa is concerned? The West policies towards Africa are like environmental racism. – Alex Epstien – Video UPDATE
