From the Wall Street Journal, August 8:
Along a narrow inlet off the Gulf of Mexico, 2.8 billion cubic feet of natural gas rolls daily through the Sabine Pass plant, where it is cooled into a liquid and loaded onto tankers bound for Asia and South America.
One may depart soon with the financial backing of Goldman Sachs Group Inc., a first for the Wall Street firm and a sign that its appetite for risk, though diminished since the crisis, hasn’t disappeared.
Goldman is in talks with Sabine Pass’s owner, Cheniere Energy Inc., to buy a cargo of liquefied natural gas, known as LNG, according to people familiar with the matter. Should a deal be struck—which is not a certainty—it would give Goldman a sought-after toehold in the LNG market, which is growing quickly as U.S. natural gas production soars and many countries shift from coal power generation to natural gas.
American LNG exports quadrupled from 2016 to 2017 to 1.94 billion cubic feet a day, all of it coming from Sabine Pass, according to the U.S. Energy Information Administration. The U.S. is forecast to become the world’s second-largest exporter by 2022 as new projects start operating. Some analysts expect LNG trading to eventually resemble the crude oil market, one of the deepest in the world.
Goldman is under pressure to improve results in its commodities arm, which posted its worst year on record in 2017. The firm would look to quickly resell the gas to another party, some of the people said, which avoids the dangers associated with a weekslong ocean voyage but leaves Goldman bearing the risk if it can’t find a buyer or if prices swing. The average spot cargo leaving the U.S. is worth roughly $30 million at current prices, according to consultancy Wood Mackenzie.
Regulators have tried to push banks out of the commodities business, imposing heavy capital charges on such trades as part of the Dodd-Frank overhaul. Two years ago, the Federal Reserve urged Congress to revoke a special exemption that since 1999 has allowed Goldman and Morgan Stanley to engage in a wider range of commodities activities than other banks. It warned that legal liability stemming from an oil spill, for example, could be crippling enough to endanger the entire financial system....
...It has been angling for a way into the LNG market, which is just beginning to develop. For years, most of the world’s LNG was sold directly to big energy companies and utilities, which used it to generate electricity and heat.
But financial firms have been edging in. Four European trading houses— Glencore PLC, Vitol Group, Trafigura Pte Ltd. and Gunvor Group Ltd.—traded roughly $10 billion worth of LNG in 2017, accounting for 9% of global trade, according to Wood Mackenzie....
...MUCH MORE
