What Next Week’s Crucial Energy Summit Means for You
We only just landed back in South Florida from Paris. And I’m already preparing to move out again on Sunday, bound for Frankfurt (through Vienna).
You’ll be hearing all about the energy meetings I’ll be attending, right here in Oil & Energy Investor.
Now, I hope our trip back from Paris is not a harbinger of the trip back to Europe this weekend. We have enough concerns already.
Especially given who I’ll be meeting in Frankfurt…
“Bad Omens” for Next Week’s Summit
Our flight back home may have been direct from Charles de Gaulle Airport (CDG) outside Paris to Miami, but that didn’t mean it was without problems.
First, our terminal at CDG went into lockdown just as we were at the ticket counter. It seems that somebody decided to leave a bag in the security area. After what has happened recently in this city, Parisian gendarmes take a dim regard of such actions.
That delayed everything by about 90 minutes.
No word on when – or if – the tourist gets his bag back. The last we saw it, two heavily armored bomb specialists where putting the black piece of luggage into a specially reinforced van and speeding it off the airport grounds.
But that was just the beginning…
Then we arrived at Miami International, one of the worst airports in the world when it comes to long passport lines. We used to spend literally hours waiting. That’s why we committed to what turns out to be one of the best investments we have ever made.
If you travel frequently abroad, I suggest you do the same: make the $100 investment, go through the interview, have your fingerprints taken, and get Global Entry. This time around, despite the normal long lines, Marina and I went through passport control in less than 10 minutes because of that program.
Unfortunately, that turned out not to be the problem this time. Our driver was over an hour late with no idea when he would make it down south to the airport. He was blocked in traffic because of an accident in the “express” lane on I-95.
We ended up having to take a taxi with traffic now inching north on the interstate with the meter running. It took us almost two hours to travel the less than 35 miles back home to Fort Lauderdale. In all, the little adventure cost us the evening.
Now, I don’t believe in omens.
But with the people awaiting me next week in Frankfurt, I need flights to be uneventful…
Iran is Looking for Natural Gas Investment
The people in question are Iranian. The occasion is the Iran LNG & Gas Summit, meeting at the Kempinski Hotel in Frankfurt. On Wednesday, I’ll be addressing the plenary session. But the real action will be elsewhere… and so will I.
At many high-profile international meetings, next week’s included, the formal program provides cover for more important and specific “side-bar” meetings. These are where deals are struck, investments secured, strategies reached, and risk farmed out.
Managing this last matter – risk – is always important, but especially in this case. Much of the financial community that underwrites global energy projects needs to be able to spread out the risk of any undertaking.
But when it comes to Iran’s interest in expanding its influence in the international natural gas and LNG (liquefied natural gas) market, the risk calculation is even more crucial.
It’s that all-pervasive need to manage risk that I’ll focus on in my public presentation. In the private meetings, however, the emphasis is likely to be on how the risk will play out and the impact on securing outside finance.
Let me be clear here. I am not going to Frankfurt as an advisor to Tehran.
They requested, and I have agreed, to provide an objective viewpoint. I represent no projects or interests.
In other words, I have “no dog in this fight.”
On the other hand, I spend a lot of time analyzing what changes in the international energy markets mean for how one invests in them. That is, after all, one of the main reasons why Oil & Energy Investor comes your way twice a week.
On that score, what Iran is attempting to do with next week’s summit will have an impact on how you invest, and where the profit centers are likely to be…
The Threat of U.S. Sanctions Will be Looming Over the Summit
That’s why I’m there, and why I’ll be following up with the heavyweights attending upcoming sessions in other locations.
Whenever I give a risk management seminar someplace in the world, early on the main eight risk categories requiring management are laid out: operational; political/geopolitical; market; project infrastructure; taxation; regulatory; trade; and finance. How one weights these factors depends on the environment under review.
The geopolitical will certainly overshadow all others next week. Once again, acrimony is rising between Washington and Tehran. It will permeate the meetings in Frankfurt even though it’s not likely to be mentioned much in the overt proceedings.
French oil and gas major Total SA (TOT) acknowledged yesterday that the U.S. sanctions currently in place against Tehran would need to be rolled back, or the company would not fund a $2 billion proposed natural gas project in Iran.
If the U.S. were to scrap the nuclear accord with Iran, most participants at the summit recognize little natural gas and LNG business will take place with the Iranians. What will ensue is another round of stiffening sanctions.
Here’s why I think that’s not going to happen…
The Nuclear Accord is More Entrenched Than it Looks
The nuclear accord is now far more difficult to unwind than some politicians realize. Bilateral relations will remain tense but the door is opening nonetheless – and with that comes opportunity.
Here is the relevant slide from my Frankfurt presentation on the perceived weighting of the eight elements appears when Iran is the subject.
My public comments in Frankfurt will be emphasizing how finance risk needs to be managed. It is hardly a new consideration. For some time now, lead banks structuring project finance (also sometimes called “book runners”) syndicate development loan exposure to other banks, thereby reducing the risk held by any one financing participant.
Much of that syndication will need to take place before there is any significant advance on the Iranian front. I will suggest initial steps to consider a “matrix” approach, one that places a greater emphasis on private investment in the finance of LNG projects and the delivery of product to end markets.
Therein lies the curious nature of the current situation in global energy politics.
As I noted in the last two Oil & Energy Investor briefings coming from my meetings in Paris, European and other sources of finance are prepared to move on several energy fronts without American involvement.
The Iranians clearly hope this increasing push back will facilitate project finance. What I will need to remind them is another emphasis. Investment will not come if the risk associated with it is not managed.
That requires Tehran to provide more substantive guarantees and protections to outside financing sources than it is used to offering.
This may not go down well and may create some friction, especially when it comes to the private meetings.
Well, it won’t be the first time I started a fire at an international gathering.
PS Stay tuned for next week, when I’ll be briefing you from the Frankfurt summit…