Navigating the Tides of Change in the Natural Gas Industry

In an interview with Energy Business Review magazine, Mark Reese, Vice President, U.S. Natural Gas Supply at Just Energy, shares his insights on the challenges and emerging trends in the natural gas industry and the experience he has gathered in the domain.

Could you please throw some light on your journey over the years in the natural gas industry?

With a career spanning over 25 years in the energy industry, my professional journey began in 1997 at Sonat Marketing, working in business development for natural gas storage. My role entailed serving as the point of contact between the company and storage facility operators, while evaluating potential investments in natural gas storage facilities and pitching these proposals to senior management and clients. Later I joined Enron Energy Services, serving in diverse roles from financial portfolio management to international project finance and finally in retail, focusing on deal structuring for a range of commodities and product management. After Enron, I moved to Dominion Retail, leading the retail gas desk, where I managed financial hedging, physical trading, and natural gas scheduling. My most recent transition was to Just Energy in 2015, a role similar to my previous one at Dominion, with a broader geographical footprint. Over the years, I have navigated various aspects of the industry, from wholesale to retail, trading, business development, and deal structuring.

What, according to you, are the major pain points affecting the energy sector lately?

The energy sector, particularly the retail side, presents complex challenges due to its highly competitive nature and evolving customer usage and supply trends. Businesses must constantly reinvent themselves to stay relevant and valuable to their customers. The primary risk is the unpredictable nature of demand, primarily affected by weather, which often leads to substantial increases in usage and consequently, serving costs during extreme weather events. Navigating through such volatile price and usage fluctuations periods is a key concern. Moreover, with the ongoing industry-wide shift towards renewable energy, energy efficiency, and green initiatives, we’re faced with questions about what the competitive supply landscape will look like going forward. For example, we might need to anticipate decreasing natural gas usage and a rise in electricity demand, presenting new challenges and opportunities for adaptation in the future.

Could you explain about some of the emerging industry trends that help tackle these pain points?

The energy sector is increasingly, the energy sector is leaning towards analytics rather than purely technological advancements. There’s a rising trend of hiring data scientists to accurately predict customer usage and reduce uncertainty linked to weather changes. Enhanced modeling techniques are also being employed to strategize the hedging of business portfolios under various usage and pricing scenarios.

There’s a rising trend of hiring data scientists to accurately predict customer usage and reduce uncertainty linked to weather changes

On the competitive front, many companies are focusing on differentiating themselves through the introduction of green products. These range from energy-saving initiatives to offering customers renewable energy credits and carbon offsets, which help companies position themselves competitively in the evolving green energy landscape.

Would you like to talk about any successful project initiative that you were a part of?

I have been fortunate to participate in many successful initiatives in my journey. A case in particular that has been quite successful results from a combination of rigorous customer usage analysis and risk management. We forecast customer usage, primarily influenced by weather conditions, while simultaneously managing our risks. This is achieved by combining physical assets like pipeline transportation capacity and natural gas storage with an assortment of financial hedging instruments.

How do you envision the future of the energy sector a couple of years down the line?

Looking toward the future of the energy sector, I believe we’ll continue to see retail energy suppliers, like Just Energy and our competitors, offering products to consumers. Despite some markets reregulating in recent years, I predict an uptick in customers switching to third-party suppliers, driving a return to deregulation. This comes as the value proposition from retail energy suppliers becomes more apparent in the face of increasing volatility. Furthermore, the green trend will gain more traction, becoming a larger part of what companies offer.

However, I don’t foresee natural gas consumption fading away as quickly as some predict. There remain numerous logistical challenges to substantially decreasing natural gas consumption. For instance, in regions relying on gas-fired heat, a mandate to switch to electric heat raises questions about who will bear the costs of such a transformation. Moreover, moving a significant proportion of the fossil fuel to renewables or electricity will put enormous demand on our existing electrical infrastructure. Therefore, I anticipate a more gradual shift to a green, renewable energy environment, slower than what is often projected. This takes into account the realistic challenges and costs involved in such a transition.

From your experience, what piece of advice would you like to share with your peers?

Drawing from my experience, the best advice I can offer is maintaining a relentless focus on adding value to the customer and adopting a holistic approach to the business. Often, companies operate in silos with distinct departments like marketing, sales, and trading. However, to be truly successful in the retail energy sector, it’s crucial for these departments to integrate tightly and collaborate continuously, especially when managing risks. So, the key is to remain customer-centric while fostering internal integration and cooperation.