The world’s leading independent commodity traders have increased their presence in the liquefied natural gas market, raising their delivery volumes by almost 40 per cent in 2018 from a year before.
The top three commodity traders — Gunvor, Vitol and Trafigura — delivered more than 31m tonnes of the super-cooled fuel, up from 22.5m in 2017. The overall market grew 9 per cent to 313m tonnes, according to energy consultancy Wood Mackenzie.
Growing LNG supply from new gas projects in the US and Australia is increasing liquidity and fuelling demand from emerging market buyers such as Egypt and Pakistan, providing independent commodity traders with more opportunities.
Flexible destination clauses for LNG contracts, which were previously fixed between producers and end buyers, have also made it easier to trade the super-cooled fuel.
These changes have allowed commodity traders to increase their presence in the LNG market over the past few years. Buying and selling of LNG has historically been dominated by state-owned producers and international energy companies such as Royal Dutch Shell and BP, which sold to importing countries and their power groups.
Torbjörn Törnqvist, chief executive of Gunvor, said: “The LNG market has evolved over the past few years with more liquidity through an emerging spot market, which is good for further development, transparency and competitive pricing — all of which will continue to create opportunities.”
This year, Gunvor is set to become the largest commodity trader in the LNG market, delivering 11m tonnes of the super-cooled fuel in 2018, up 60 per cent from a year before. Trafigura, another commodity trader, reported trading of 10m tonnes in 2018, on par with Vitol, according to Wood Mackenzie.
The commodity traders have long been regarded as opportunistic short-term players in the LNG market, only picking up purchases to match their sales. However, over the past few years they have been pushing to do longer procurement and sales deals as they look to build long-term sustainable operations in what they regard as an increasingly profitable market.
More than 60 per cent of Gunvor’s volumes delivered in 2018 were under mid to long-term contracts, the company said. The trader this year delivered the first cargo from Russian LNG project Yamal under a 23-year contract.
Vitol and Trafigura have also been recently signing long-term deals with US shale groups. This month Vitol signed a 15-year memorandum of understanding with Tellurian, one of the second-wave US shale LNG producers, as well as an agreement with Petronas of Malaysia. Trafigura has signed agreements with US LNG companies Freeport and Cheniere.
Traditionally, the utilities companies, the end users of the LNG, provided an underpinning of the new projects. They were then joined by energy groups such as Shell and BP. Now the commodity traders were also joining the fray.
Frank Harris, head of global LNG consulting at Wood Mackenzie, said: “[The traders] will play a role in underpinning the new projects.”
The new projects looking to announce final investment decisions early next year include ExxonMobil’s Golden Pass LNG, Venture Global LNG’s Calcasieu Pass, and the latest facility at Cheniere Energy’s Sabine Pass.
New LNG projects, especially in the US, have provided the traders with opportunities to sign longer term purchasing agreements, while they have focused on new emerging market buyers, such as Pakistan and Egypt.
Source: Financial Times
