 Mr. Stink Tech Hawaii, the community matters here. That is Lou Puliarisi in the flesh, how about a shot of Lou? See, we have talked to him so many times, but he has not been in the studio. And the joyfulness today is he's here with us in Honolulu in the studio. Say hello, Lou. Hello, I'm happy to be here, Jay. Thanks for inviting us. Great to have you. So just to tell you who he is, as indicated, as you know from many early shows, he's the president of EPRINC, the Energy Policy Research Foundation. I get that right? Absolutely. And in Washington, D.C., he covers energy there and around the country and around the world. And he talks to us every couple of weeks on energy in America and beyond. And just one little thing more is that he's here for 10 days or so, and in the middle of that he's going to Singapore. Bangkok. Bangkok. Sorry, I didn't change my notes on that. Bangkok. And he's going to be doing an energy conference there in Bangkok. Yes, part of the workshop with our Japanese colleague research group in Japan. Institute of Energy Economics, Japan. Great. And when he gets back to Washington, he's going to do another conference. What's that about? So we have several events. We are going to do a follow-up workshop on September 8th that we have with our Japanese colleagues. But we're also going to do an event at the Canadian Embassy on September 6th, called Building Out the North American Energy Infrastructure. And as you know, that resulted in a lot of controversial issues that Dakota Access Pipeline and all the protesters. And by the way, today, the Dakota Access Pipeline Company, which is owned by Energy Transfer Partners, sued Greenpeace under a RICO provision. RICO, really? Yes, claiming that they engage in a conspiracy and racketeering to destroy their project. Well, that'll be interesting to watch as the courts handle that. That's very interesting. That's what I call pushback. Okay, well, let's talk about our principal subject, which is Asian in nature. And may I say, Lou has a lot of connection with Asia. He's got some kids that speak Mandarin, which is always good to have in the household these days. Yeah, let's hope it pays off, yeah. Planning for the future. Right here in Minoa, that's fabulous. So let's talk about the principal subject of our discussion. That is the coming conflict between LNG and coal in Asia. So can you describe the way it is and the conflict and the way you think it's going to be? Yes, if you think about, of course, Asia is a very varied set of countries. Some are energy rich, some are energy poor. But it's undergoing a big transformation right now. But it has over the past 20 years become a highly reliant on coal to generate electric power for home. Asia is also one of the last remaining parts of the world that uses, except for the Hawaiian Islands, that uses a large amount of heavy fuel oil, a direct crude oil burn to generate electric power. So gas has a lot of potential benefits for Asia. One is it could help out with local air pollution problems, because it's a clean burning fuel. It can also move you along the gradient from a more intensive carbon dioxide emitter to a less intensive carbon dioxide emitter. So in that regard, I thought what we do is first look at what does the kind of coal capacity look like in Asia if we pull up the first slide. Okay, here we go. So this shows you just for one year, right? And this is dollars in billions, right? So actually, this is an installed capacity for coal and gas-fired power investment in Asian markets, right? And in that year, about $65 billion was spent investing in new coal-fired capacity, but only about $10 billion in natural gas. This is power plant capacity, really. So coal is still a dominant and important force throughout Asia. They have clean coal, though. They have clean coal, and it is quite possible to use with these high-efficiency boilers with the use of scrubbers and other kinds of environmental devices. It is quite possible to get the particulate emissions to a low level. So if you go to Beijing and you see all this terrible air in Beijing, if you talk to chemical engineers as well, if the Chinese would just turn on their scrubbers, you know, that air would be a lot better. Now, it's more complicated than that, but you know, the Chinese, you could talk about all these global climate agreements, but I don't think the Chinese have really covered themselves in glory in doing the most basic things, which is getting the kind of soot out of the atmosphere. Are they trying? So there's a debate about that. I think they are trying, but the ability of the national or the central government to get the local guys to behave isn't always effective. Okay, sure. And I remember going down the Yangtze River and seeing barge after barge, huge barges of black soot in the hole. So if we're going to put, so one, we've spoken about this in the past, if the, for going to the U.S. because of its vast natural gas supplies, we now probably can produce ever-increasing volumes of natural gas in the U.S. So much so that we don't have enough to, we can't use it domestically. We're exporting something like four billion cubic feet of data, Mexico by pipeline. We're probably going to get up to two billion cubic feet a day of liquefied natural gas. This is where we take the gas, we turn it into a liquid at very high cost. It's not a cheap thing to do. Put it on a tanker, either ship it through the Panama Canal or all around South America for Asian markets. So a billion dollar tanker. Oh yeah, these are massive facilities. I went to the opening of the one at Sabine Pass in Louisiana. It was quite something. But in order to move this gas into Asia, we are facing a number of challenges. And one of the challenges are that in the main countries like Japan, Korea, and Taiwan, which represents 75 to 80 percent of world LNG demand, their population, their electricity growth is growing quite slowly. And this growth is also highly uncertain depending upon the rate at which other fuel sources are permitted or end up generating power. Those two are nuclear power and coal. And as you know, there's a sort of anti-nuclear movement underway for a lot of reasons in Japan. And Korea and Taiwan as well. And so there's some existing capacity which is offline. In Taiwan and Korea, there's decisions on what to do with existing capacity, whether to extend it out or reduce it. So we have a great deal of uncertainty on the future. You have infrastructure that allows coal, that relies on coal, and you want to change to LNG. Even if the LNG is around, even if it's cheaper, you still have to pay the cost of moving the infrastructure from coal to LNG. Yes, and I think the next slide might help us understand this a little bit better. Because the market is quite segmented. So let's take a look at the next slide. I think this is a really interesting slide because it shows, if you look at the segment of the world LNG market, it's really divided into different kinds of characteristics. And we've got the number of countries listed there in each one. In some countries, when we say matured indigenous resource, what that means is their gas production is declining. And so Indonesia, Malaysia, Pakistan, Thailand, Bahrain, parts of Europe as well. That is actually where you're going to see a lot of potential demand grow to 2030. But if you go to places, but there are other elements of natural gas demand, countries that are growing rapidly, like China and India, also haven't historically thought about LNG as a flex fuel. But for peaking or for seasonal demand, parts of the world that have not too much in Asia, cold winters, or seasonal requirements, some places like Kuwait and South Africa, they're really displacing their energy mix away from coal. And even bunkering, many cruise ships now are considering moving to LNG so they can meet coastal zone management requirements. Lots of countries don't, they won't permit you to emit sulfur dioxide and all the heavy fuel oil components that are often prevalent in diesel fuel and heavy fuel in big tankers. So you're going to see a movement away to more LNG tankers. That's the primary fuel on the ship? Yes, but in order to do that, you have to have what we call bunkering facility, a place for the ship to go and refuel. On land, yeah. And there's a great deal of interest in Asia, in building the bunkering facilities in Singapore or Tokyo or even Korea. LNG on a ship, is that going to be more, what do you call it, dispatchable more quickly? It can bring up the energy. Yeah, this is really good. So historically, LNG was, my friend who lives here in Hawaii says, they're doing fresh Iraq. He says, well, it's like getting married. So if you go to the old way the model contract would work, you had to find a buyer and developer of the LNG, someone to build the tankers, and a good credit worthy receiver. They would get together and they would go to the bank and say, we would like some risk capital for this. And the bank would say, no, we don't provide risk capital. We provide liquidity. You take the risk. So these three together, so that market was very locked in. It had very severe destination restrictions, but that's all changing now. Shorter term demand and the emergence of new kinds of technologies, which would allow shorter term and more flexible markets. Does this mean that the banks will take risks? Probably not, but there are other ways to fob off this risk. So one of the interesting problems we have in Asia is some countries have a lot of uncertainty or poor credit risk. But and also there's always been a requirement, you build a large installation facility to re-gasify this field because it comes in as a liquid from the tanker, right? So it has to be re-gassed and turned back into a gas. But the development of something called floating storage re-gasification units. Oh, you mean FSRU. Exactly, FSRU. That these now offer enormous potential and flexibility because if your country doesn't pay, you can refloat it and move it somewhere else. It's like a barge. It's like a barge. And you have tugboats or other boats that will take it away. Put it into position and they just take it away. So you leave it there for a while as long as they pay the bill? Yeah, as long as they pay. And take it away if they're not. Actually credit worthiness is a big problem in this business for these to expand the market among the traditional buyers. So if you're careful about risk and you don't want to lose your investment, you're going to be careful about investing in a short facility. Yeah. Country may not be completely stable. Yeah. And I think for gas, part of the problem is it's really still not as cheap as coal. So national policies in the Asian countries have to say, well, pay a little more for the gas because it's worth it to clean up local air pollution or because it's worth it for a long time, secure energy source for us. Yeah. Well, conflict means that ultimately there will be a change. Ultimately there'll be a transformation, a transition from coal, which is I guess most those countries are relying on coal to LNG. What's your timeline on this, Lou? So I think that right now if you think about the international financial institutions like the World Bank, the International Finance Corporation and IFC, they are not financing any new coal-fired power plants with these public funds or these public financing instruments. So that's the beginning of the transition, really? Yes. But the Asian Development Bank still finances coal plants, right? Japan actually has one on the books. The Philippines is considered a big coal plant. So the pace at which the countries decide is really going to be a matter of policy. And for them to move their policy away from coal, I think they're going to have to have strategies which show them that it's not too much more expensive, that they can build out the internal use, internal infrastructure for gas, power plants. In many cases, these smaller countries like Vietnam and Thailand, they may not have the scale to really make these plants work. So we're going to have to find a unique financial instrument to do this. And that, in turn, may depend on the technology of these FSRU units. Because if it gets more efficient, then the cost of the LNG goes down. And maybe even goes down below the cost of coal, maybe even one day. Anything's possible. Okay, well, I was interested in getting a prediction on how long that would take. And I guess it's not easy. You want to give me a five years, ten years? You could get substantial displacement over the next 20 years. 20 years. These are long-term projects at the same time. And I, in turn, would like to make a prediction for you. We're going to take a break now. And my prediction is that we'll be back in one minute. You're a good forecaster. It moves quickly. I'll be right back. This is Think Tech Hawaii, raising public awareness. Okay, we're back. And I guess my prediction was exactly right. That was exactly one minute. This is Lou Puliarisi. He's visiting Hawaii from his operation. His headquarters in Washington, D.C. He's the CEO, the chair, rather the president of EPRINC, the Energy Policy Research Foundation in Washington. And he's here to go in many different directions. We say we're in the space between energy economics, petroleum economics, and public policy. And we've been doing that since 1944. 1944. Not me personally. You're looking pretty well. So, in this part of the show, we want to talk about something different. Last part of the show, we talked about the coming conflict. That was very interesting between LNG and coal in Asia. Now, this part of the show, we're moving on to another issue, one in the United States, one under the rubric of our Energy in America banner. And that is President Trump's strategy for energy dominance in quotes in the U.S. So, Lou, this is so interesting. Dominance? Quezca say dominance. What does that mean? Well, you know, I'm not sure exactly what that means. Maybe only President Trump knows that. But I mean, if we look at what's happened in North America, it's a quite remarkable story. And we just did some analysis on this. I'll send it out to you. If you took the three countries of North America, because that's what you really have to do, the U.S., Canada, Mexico, and you said, okay, how much do these countries, when they're put together as a single unit, how much oil do they import? And how much gas do they import? And it's true that the U.S. still physically brings in 10 million barrels a day. But we send out five million barrels a day in value-added products, and mostly refined products. And for North America as a whole, if you blend in Mexico and the U.S., our net imports are only four million barrels a day. And within a few years, North America, that is the U.S. can of Mexico together, will be net zero import. Yes, we will import and export, but our net imports of petroleum will be zero. Within a year or so, our net exports, our net imports of natural gas will go to zero. So it's really going down, it's going to a wash. North America is no longer going to be a net draw on world supplies of gas and oil. So we are sort of already heading for dominance. But we do have, I do think in this sense, the President Trump has some points. We have a regulatory program that creates a lot of uncertainty. And the National Environmental Policy Act, I always tell this story, I worked in the Interior Department for the few years, right? And the Secretary decided, oh, let's improve the grazing lands out west. So that's about 10 million dollars worth of fencing, and we have all these public lands in the U.S. We then went ahead in order to meet all the requirements of the National Environmental Policy Act and not be sued, we spent 100 million dollars writing environmental impact statement. And so you have to ask yourself, is that a regulatory strategy that really makes sense? And actually the President announced that all major infrastructure projects in the U.S. will now be approved within two years. The review process should not be more than two years. And I don't think anyone really realizes how difficult that is without major change of legislation, because you can't do anything in the U.S. without addressing endangered species. Getting permits from the Fish and Wildlife Service, the Bureau of Land Management, the Interior Department, the Corps of Engineers, and the Corps of Engineers. There's a, talking about LNG, there's a major LNG project in Jordan Cove, Oregon, a very depressed area. The local community wants the project. The gas supplies for that project will come from Colorado and also Canada. And it will be right on the west coast, no Panama Canal, ship it strictly straight to Asia. And that project has had enormous problems in getting all the permits it needs to proceed. Even though the local community wants it, everybody wants that project to proceed. It means a lot of jobs. So where's the holdup? So the holdup is a lot of the environmental communities think, you know, that this project should be viewed as unnecessary, that we can instead produce power in Asia from renewable fuels and other things. And we don't really have a good system to kind of resolve these issues in the country. Or coordinate them when you have to go get permits from 10 Asians. And in fact, I can tell you that Jordan Cove itself met with the president. And he said, probably a little impetuously, don't worry, we're going to get all those permits well. There's a famous statement John Kennedy met, said once. A woman asked him a question, he would take, if he would, you know, see that this issue got fixed, they had to do with some problem out west. He says, I don't know, I'll check with the government. That would have been better for Trump to say that. Exactly. So and so I think all the other kinds of problems he's creating with his, you know, off the cuff of marks are not helpful to these real serious problems that we need. And get everybody frustrated in the environmental section. Because what it sounds like is I don't care what the issues are. I don't care what the controversy is. I want it approved. We've talked about this. Look, we have clean air. I mean, people may disagree with us, but the data is strong. We have very clean air in the United States. I mean, places that were terrible. Pittsburgh, Los Angeles, New York, the air there is so much better than it was 30 years ago. And whether you like it or not, that was a regulatory program. It probably could have been done more efficiently. It could have probably done at lower cost. But we got there. We got to a much cleaner. And you see many immigrants from China desperate to come here. The environment is so much better. Yeah, just for the air. But I got to add, though, that, you know, wear a couple of years ago in Beijing, you had to wear a mask. You still have to wear a mask. Okay. It hasn't got a lot better. So how do we want to achieve energy dominance? So I think the way to kind of crosswalk that rather aggressive term into something useful is we want to be able to export and expand the development of our natural resources that makes sense to export within the realm of common sense environmental rules. And I think there was a lot of misallocation of resources among the environment. You know, they fought very hard for the Keystone pipeline. They fought very hard against the Dakota Access pipeline. These major infrastructure projects, which were part of this North American petroleum medicine. And at the margin, I would have said, look, I think you're fighting a long issue. We should be working on research and development and transitioning into the future in a more regular way, not in these huge battles over things which have high economic value and were worth a lot to not just the capitalist, but the workers on the field. Well, but when you say dominance, I mean, my sense of it, if that is this administration's term, dominance, they're not including renewables, because I don't think they like renewables too much. Where does renewables fit in dominance? So I think, yeah, so the renewables are in many ways, and we've talked about this. The renewables are largely important in the utility sector. Utility sector today is still dominated, dominated by regulatory programs and authorities from local public utility commissions. So the president could hate renewable, but that has nothing to do with what Hawaii decided to do. The federal agencies have no kind of reach here unless it's in the subsidies, which are legislatively formed and approved and are slowly going to fade out over the next five years. Sounds like it, yeah. But presumably, these renewables now have had a pretty good head start, and in many cases, they're quite cost-effective. So if we have renewables, I mean, you and I have spoken about this many times, is it ultimately an economic question? Because right now, I mean, tell me if you disagree, renewables are more expensive than alternative fuels. So yeah, so people say they're not, but they are more expensive than a lot of conventional fuels. Yeah. Everything's more than expensive than coal, but not every, but you're not going to build a new coal-fired power plant in the U.S. I don't care what President Trump's saying. They'll be pushed back all across the world. The public utility commission's not going to do it. It's too risky for them. It's not about whether they like coal or not. They're just not going to take on that risk. So where do renewables fit in energy dominance? I mean, do you see, I mean, I kind of imagine his vision for this is really excludes renewables, but if we look at it in terms of a better definition of dominance, do you see that, say, in five, 10, 15, 20 years, we will have national, we have the possibility of national dominance, including renewables with substantial percentage of renewables? So the installed capacity of renewables is going to continue to grow. Whether we dispatch that renewable power is going to depend on a lot of factors having to do with building out the grid, putting more resiliency into the grid. And if you look at the big models and the official government models, in 20 years, I still think you're not going to see more than 20%, 25% dispatchable power on renewables. And that's because? That's because even if you go with an aggressive program like a carbon tax, an aggressive program to cut back emissions of CO2 in the utility sector, the most efficient strategy is energy efficiency. If you look at the big models run by ExxonMobil and the government and everyone else, when you go out to 2040, you still end up with the share of coal declines a bit, the share of liquid petroleum use sort of stays where it is, gas grows, and all the cats and dogs are renewables are below 20%. The big 90% of the ship in the emissions, the reduction is efficiency. Yeah. And you know, that sort of thing. We have a lot of efficiency efforts here at Hawaii. So I'm just wondering, we don't have a minute left, but just wondering, he has made those pipelines happen. I mean, I think that's really... He's done what the executive branch can do to make them happen. It's really, in this case, it was all done. It was so it was easy for him to stop intervening. You could argue that what the President Obama was doing was he was still intervening after the deal was done. Right. So he made them both happen. He made them both happen. Very hard, but he did do that. So now we have the pipelines. I just wonder in this energy dominance analysis, if there's anything else, and you know, I'm just clearly, I don't agree, a lot of people in Hawaii don't agree with anything he does, but if he wants to achieve this dominance in his definition, what else can he do? He's not going to be able to control the PUCs in the various states. So in a traditional Republican administration, what he can do is say, okay, we should fight this out in the marketplace. We should kind of intervene a bit, at least in the research and development place, and we should intervene also to protect health and safety. But I'm going to take out all the kind of silly regulatory programs that are presenting good projects and going forward. So that would be, and then he would say, I'm for all of the above. Now everyone says they're for all of the above. That's a silly statement because all of the above, that's like going to the buffet. You know, that's not really, you should be for all of the above, that makes sense. Lots of things above don't make sense. Policy choices. Well, what about renewables? I mean, he doesn't particularly like renewables. What can he do to stop the march of renewables? I don't think he can do a lot. That's basically set by the Congress. It's already set. I don't think Secretary Perry is going to go on a tirade against renewables. You may see some of the massive amount of money that's going into climate research cutback. You're going to see that. I'm not sure all that research was useful anyway. And research will continue anyway. Yes. So one last question on this, on this very point about energy dominance. It seems to include exports, seems to include exports. Exports is a big theme of that. Big theme. And so from a policy point of view, forget about economics, national economics, and, you know, interested parties, if you will, who would make money by export. Is export in the interest of the United States? Absolutely. I think as a kind of beacon of stability and democracy and the security of the United States, that having the U.S. as a major supplier to allies and friends around the world of not just natural gas, we're now exporting over a million barrels of crude oil to Asian markets. Which we could stop exporting if you wanted. We could stop. We had to change the law to permit it. It's got to be strategical. The other thing, and you mentioned this before we started the show, is that export has a diplomatic implication. Exactly. A global diplomacy is involved in export. Can you talk about that? Yes. If you look at President Trump's visit to Poland recently, before he arrived there, the polls announced that they were buying LNG from the United States. Which is something, because they normally buy gas from, so it's different. They wanted to show that there was an alternative to gas from. They wanted to show that the U.S. could be, and the U.S. wanted to show that we could be relied upon to provide this gas, and so it was a symbolically, if not a substantively a big deal. It's a very important symbol. And it really is. And within Europe now there's a lot of attempts to install more LNG receiving facilities to find more ways to use U.S. gas. To avoid dependence on gas from. As a counterweight. This is a counterweight. Yeah. Great. You know, I'm so glad you're here, Lou. I'm so glad we get to spend social time together and everything on this trip for sure. Absolutely. Thank you so much for coming down. And thank you for all the shows we've done over the past one couple of years. It was my pleasure. It's lovely to have you here. Thanks, Jay. Thank you.