From Data to Decisions: How IIR Energy Helps Navigate Market Volatility

[Intro] (00:00):
With geopolitics, trade tariffs and still relatively tepid economic growth continuing to be seen, energy markets are hovering in a state that is neither deeply tight nor massively oversupplied — a state that is very sensitive to any shifts or changes in demand or indeed supply. So what does the near-to-mid-term picture look like, and what does it take to find the best pathway through this outlook?

Shaheen Chohan (00:43):
Welcome to Navigating the Currents of Change. My name is Shaheen Chohan, and I lead Global Analytics here at Industrial Info Resources. For over 40 years, we have been providing market intelligence, data analytics and geospatial solutions to those companies involved in the design, construction and maintenance of plants and facilities, but also to the trading and investment community across the world. To help me shine some more light on some of these trends, I am delighted to be joined by Paul Copello, president of IIR Energy. Welcome, Paul.

Paul Copello (01:19):
Thank you.

Shaheen Chohan (01:20):
Now, Paul, I'm going to start really top line here, and really just trying to put some context around all the hard work that you and your teams are doing. You are obviously head of IIR Energy — you've seen clearly many commodity boom-bust cycles over the last few decades. Before we really get into some of the deeper points of the discussion, could you perhaps explain to folks who've joined us today a little about the individual sectors or industries that you cover, and some of the commodities that you're researching and providing analytics on?

Paul Copello (01:51):
So the participants that we serve are primarily right now in about six segments, six industrial classifications. We internally call them six pillars, our foundation. And they're made up of different sectors and SIC codes. But the primary six industries are power, natural gas, petrochemical, refining, alternate fuels, and NGLs. We also have a seventh one coming, which is critical minerals and critical metals. And that's the fact that we're seeing that national security now is less important on oil and gas reserves, and leaning more towards who has access to the supply chain — critical minerals that are facilitating global electrification, and the electrical vehicle world, and the boom in artificial intelligence. So that buy-down demand is creating the seventh sector. But those are our world, and again, you would have certain industries within each one of those that you can break apart. But that's our world, and we do that globally now.

Shaheen Chohan (03:02):
Paul, staying with actually that last pillar — we've obviously seen, I guess, consistent, albeit a little moderate, levels of energy demand growth over the last few years. But more recently we are seeing a new driver of energy demand, right — that's clearly associated largely with rising levels of electricity demand in Asian markets. We usually saw just below double-digit growth, six, seven percent, in those Asian markets as they continue to industrialize, and population growth. Europe, and especially the US, always saw below 1% electricity demand growth. But that's now changed. What is the big driver of this, and what kind of data and analytics are you using to be able to keep our trading clients and customers informed?

Paul Copello (03:52):
Yeah, that's exactly right. It's the global electrification of the world, as the world becomes more industrialized, and we want to be carbon conscious. Primary — back 50 years ago, we would just burn fuel oil to generate electricity, right. Those days are gone. There's obviously some pockets where I think there's 30,000 barrels of fuel oil still being burned for electricity. But the point is, our clients are realizing this new wave of electricity demand, that they wanted in a cleaner deliverable, which, of course, is your renewables, and they need it more in location. So they don't want the wind farms built out in West Texas if it's going to be used in Dallas.
There's a lot of drivers that go into solving the, let's say, the market analytics and the supply demand models for these sectors. I think when you talk about artificial intelligence, of course, that's driving the electricity demand through the roof. We're seeing it become realized in Virginia, in PJM markets, in Texas, and things like that. It's starting to, you know, obviously in Europe, in Asia. But it's not just the artificial intelligence that's got the marquee in the headlines. The industrial world is becoming more electrified — they're using more electricity for their processes, and either they're going to build cogen and supply at the plant, or they're going to rely on the grid. And the more they rely on the grid, it goes back into how stable the power grid is — the generation, transmission and distribution, and the reliability of those assets.
And so this electrification, again, it's being driven by — yeah, artificial intelligence has the headlines, but you're seeing industrialization, electric vehicles, fuel switching. A lot of these assets are just finding that electricity can be a lot more compatible with their board, if they, especially if they can secure PPAs with clean energy. And in a lot of cases, it's more reliable, especially if you've got it on site.

Shaheen Chohan (06:20):
I do want to stay though with this important topic that you've actually just raised, which is artificial intelligence. The US in particular is seeing this, I mean, quite phenomenal wave of new data center capacity build-out, and that really is going to be placing a huge amount of pressure on both available and probably future electricity supply. Obviously, the Trump administration has come in very much with a focus on the hydrocarbon markets, and I think — would it be right to say that natural gas is going to be a big enabler of providing the necessary baseload power for all of these data centers? And I guess this gas flow analysis that you guys are doing is absolutely essential to keep that supply-demand picture in place, right?

Paul Copello (07:01):
That's correct, and that's exactly right. Natural gas is the molecule that kind of ties these other electrons and steel and molecules together, because this convergence of our six pillars — power, you know, relies on natural gas. Well, the natural gas, for instance, is a byproduct of oil production — and natural gas, part of the natural gas, is ethane, which feeds ethylene crackers in the United States. So when we look at critical minerals, and we look at natural gas or LNG exports, or power demand, or refining capacity — they're all sort of connected.
And so now that you bring this artificial intelligence demand, and you bring global electrification, and cities around the world want more electricity — you've just added a delta on top of sort of a fixed curve, and you threw a wild card into the equation, which skews everybody's models.

Shaheen Chohan (08:00):
Very much a wild card, right? And when you upset people's...

Paul Copello (08:05):
Exactly — you upset people's homeostasis. You tend to create activity and questions and unknowns. And when you have unknowns, you need answers, and you need to rely on a reliable source with knowledge-based, fact-based research. And our trusted data is built from trusted research. There's data out there — yeah, you could get a lot of data, but without validated, verified boots-on-the-ground, knowledgeable, fact-based research, I don't think your data is that good — you can't really rely on it.

Shaheen Chohan (08:44):
Right. So, Paul, commodity markets, I guess, are defined by both long-term macro factors as well as these sort of intraday shifts in supply and demand — very dynamic markets. I think you know where I'm going with this question — what would you say is one of the key ingredients that you offer the trading community that you serve, that kind of sets IIR Energy apart from others?

Paul Copello (09:08):
Well, our clients who participate in the gas and power and the oil world — they are subject to changes in the near-term market as well as exposed to the long term. A lot of these companies have different groups that manage their short-term, mid-term, long-term investments and strategies. But most companies need to know what's right in front of them and what's down the road 100 miles. And that's the strength of our company — we have a methodology, our research methodology, which is primary market research, where we're going to be garnering and gathering and verifying facts about events that are happening today, or happening ten years from now, and everywhere in between.
Some of those events can be very planned, strategically organized, well thought out, which has a lot of runway, and we're going to report and give facts on that status, because it's really supply demand — if there's a supply interruption or demand interruption, that's going to drive price. And that's the main unknown for our customers: what is the value of our position, of our asset, of our trade? And that is affected by the changes in supply-demand fundamentals. And there's a lot of fundamentals — there's geopolitical, there's weather, there's operations. We are subject to all those drivers, and we get the facts.
So if a storm comes in and knocks out the Lake Charles Citgo refinery, or a critical minerals supply chain doubles in cost and they stop building batteries in the United States — all those little drivers and instances have ripple effects across all these hard assets. And our job, Shaheen, is to report on it, whether it's an hourly effect or a long-term effect. And the strength of our company is we have over — what — 650 researchers now, speaking 59 languages. So that sets us apart. We're different because we do things differently, and we care about the results. And when you care about the results, and the fact-finding that you do has different value. And we've been doing this for 40 years, and customers know they can come to us for the answers.

Shaheen Chohan (11:41):
Now, Paul, when I've sat in on discussions that you've had with your customers, you've used this phrase "verified data, trusted data." Just share a little bit about what that really means, because I know a lot of people throw these phrases out there — what do you mean by that?

Paul Copello (11:58):
Well, to really get the facts, you have to — and our CEO, Ed Lewis, I think this is the first thing he told me when I joined IIR: to get the right answer, you have to ask the right question, okay. And really, there are such things as stupid questions, I found out — and if you don't ask the right question, poised the right way, you're not going to get the right answer, or it's going to take you a lot longer, or you will get shut down.
So to be able to answer that question takes a dedicated, experienced staff with huge knowledge of these sectors, and who can, on the fly, converse and garner the results of the conversation and the research that they want. So it's that primary market research — we started this 43 years ago, before the internet, before there were cell phones. It's humans to humans, and that's the last layer. And I would say one thing — yes, there's a lot of public information out there, and data, from government data to the data you can buy on a CD-ROM that would come in, you know, triple digits —

Shaheen Chohan (13:06):
You're showing your age now.

Paul Copello (13:09):
Yeah, but — exactly. But what we do is validate and verify. What's more valuable — 10,000 records that tell you nothing, or ten that give you the answer? And it just again goes back to our staff, our dedicated, experienced folks that have been doing this for decades, and that know what a hot gas path inspection is versus a turbine rewind, and just being able to get the facts firsthand.

Shaheen Chohan (13:41):
Now, Paul, I do want to pivot a little bit. I know a big part of your time and attention is supporting refined product traders, right — a market obviously that is, to some extent, in a state of reinvention and reshaping, certainly in Europe, with a lot of cost pressures on European refiners at the moment. Production capacity — you've seen production capacity right-sizing in the US, that seems to have been complete. And obviously we continue to see expansions in other parts of the world, namely Middle East and certainly Asia. And I guess all of this comes at a time when traders are not only looking at the big picture of where refining capacity is changing, whether it's flexing or shrinking, but also the intraday changes at an operational level at individual refiners. How on earth do you manage to keep your trading community connected and informed on these sorts of shifts and changes?

Paul Copello (14:48):
Yeah. Thank you. And refining is — the way we handle refineries is the same way we would handle power, natural gas, alternate fuels. And the first thing we have to do is be comprehensive. Our clients count on us for a comprehensive view globally. So for instance, in refining we have a plant profile — we call them an asset profile — for every refinery, every primary, secondary and tertiary unit. So by cataloging and having a comprehensive database of what's operational now, and knowing the operational capacities of each unit, that's your foundation.
From there, we have to be responsible for tracking all unplanned events and planned events, as well as additions in refining. They have to deal with bottlenecks, they have unit conversions, they'll do unit expansions, grassroots units that specifically — the refineries, as well as, of course, petchems and other assets that supply their supply. The picture's always changing — they're always rationalizing down in certain areas where they can't. It's based on economics mainly, and some environmental and other drivers, geopolitical of course, but it really comes down to economics. But what you'll see is that the decisions they make every day about their turnarounds or unit additions or closures is coming from price drivers, and we know the drivers, and we are going to follow what our clients ask for most and what's most relevant for them.
We have a very unique research team put together globally — to answer your other question there — that has really boots on the ground, 60 languages. I mean, we cover all the major refineries around the world, and clients go "oh my gosh, how do you get all this?" But all those unplanned events, force majeures, all day every day, we're responsible for every update. Then the planned ones — we have more runway, those things are nine months out, maybe six months out, a year out, and that's a little less stressful for our research team, but still not an easy thing to do. And that's what we do — we have the right people ask the right questions to get the right answers. And the main thing, Shaheen — once we answer the question and publish, per se, the information, we have to go back and continuously update it. So it's not just one and done.

Shaheen Chohan (17:13):
Thank you. Now, Paul, that's an interesting aspect — it's one thing to collect the right data in the first place, but it's this constant revisiting and refreshing of that content and information. So, and I guess this plays into my next question for you, Paul, which is — by nature, your end users are very time-sensitive, and are not only crunching big data, but also really trying to get a sense of what events have happened in the marketplace, really on a daily, daily, daily basis. How do you and your team ensure that these customers, our end users, the trading community, the analysts who support those traders — how are you keeping them connected and aware of some of these latest market developments? But often some of these events often go under the radar, right?

Paul Copello (18:02):
Right. Well, all those events have continuous dynamics and changes to them. So whether a nuclear plant is going to get relicensed in 18 months or three years — we gather that information today, right now, that's critical news, it has to be released to the market even though it's long term. And at the same time, you might have a cat cracker or an FCC unit that goes down unplanned at Marathon's refinery in Galveston, and that just happened — that's big news. So the window of the event, when it's happening, sometimes isn't as important as how quickly we can validate and verify the facts and get that to our customers, that they can use in their day-to-day workflow.
And so that's the question — how do we embed all this great research, all these different toolsets into our clients' workflows, that are energy traders, marketers, asset development and equity guys? So that's where our innovations come along. When we look at our company, we're really research, analytics, information and news — that's how we put it together: RAIN, RAIN at IIR. And the research, we talked about that — it's a unique asset that we have, and nobody really — it would take years for somebody to duplicate that, I would think, and I wouldn't want to try to duplicate what we've built. The analytics, of course, are unique to us because it sits on top of the research, and the views you get from our analytics are unique to nobody else. So you can't get that when you start stacking year-over-year, or time series and views like that, with our data — it's unique.
The "I," intelligence, is all the little tools we have — so the MyReports, the technology that we've had to develop to answer that question, which is how do you get the clients to consume in their workflow all this great data that's being updated in many different, let's say, silos. And so our great team of innovators and technology scientists have built some great tools. We have web-based interfaces, you can go in and see the data live. We've got — and I can say that, you know, I was around working here when email was invented — I got a date, I can't think of anybody that came out with email alerts before we did, okay, so I remember that was brand new, driven by our customers.
You know, all these innovations and all these tools we have — like Ed Lewis said in your podcast, we listen to our customers, they tell us what they want, and we go back and innovate. And from these MyReports, we have a Refinery Insights capacity tracker that houses time series and millions of updates on the fly. We've got saved searches, we've got news, we've got chat box, a huge network of alliance partners that's taken years to develop, so you can consume our data along with price reporters and supply and demand and shipping. And these innovations, these digestible, let's say, touchpoints that we've built, have really taken decades to put into place and modify, because building alliances and the trust involved, and building these reports, don't happen overnight. And again, all these solutions, if you will, these technology solutions, were requested by our customers to do exactly that — digest the data, trusted data, trusted research that they can plug into their models and make the best decisions.

Shaheen Chohan (21:39):
Now, Paul, that unfortunately brings us to the conclusion of the discussion. We've obviously seen heightened levels of geopolitical tension and, you know, volatility prevailing, on top of what I think is still pretty tepid economic growth, and that's expected, unfortunately, to pass a little bit into the early part of next year. And so I guess this clearly brings altogether some sort of shifting sands around supply and demand and maybe some price volatility, right. In closing — what is the most important ingredient that, when you speak to your end trading customers and the equity analysts and trading analysts that support them, what do you think is the most important aspect or component of helping keep your trading community connected and confident about what they're potentially going to be seeing emerging in the market?

Paul Copello (22:23):
I think, you know, question, research, fact-finding the details — that's the number one thing. They rely on us because we get answers that no one else can. And the power of all those answers, when you start putting them together in a comprehensive database with 40 years of history, provides you the analytics that nobody can get. So it starts with the research, the research methodology, which our founding father put into place from the get-go, and it's not an easy thing to duplicate. And it takes a very well-trained, efficient, dedicated, motivated team, 24 hours a day, really 365 days a year. And that's what we do.

Shaheen Chohan (23:15):
Thank you, Paul.

Paul Copello (23:16):
Thank you.

Shaheen Chohan (23:17):
Okay, that does bring us to the end of the discussion. A very big thanks to you, Paul — I always enjoy getting some time with you and having a catch-up. Thanks for sharing your views and perspectives today. If any of you have got any questions about any of the points that we discussed today, then please do reach out to myself or to Paul on these contact details that you can see here. And a very big thank you to all of you who've managed to join us today. I do hope that we've helped you all better navigate some of the currents of change that we're seeing. Thank you.