Thursday, March 28, 2019

"Commodity Traders Turn to LNG as Big Oil Profits Prove Elusive"

Have I mentioned LNG? It appears the game is afoot.

From Bloomberg via RigZone:

With margins narrowing in the crude oil business, some of the world’s biggest commodity trading houses are helping to reshape the energy industry with a drive into liquefied natural gas.
Gunvor Group Ltd., Trafigura Group Pte. Ltd. and Vitol SA have moved a step beyond trading LNG, investing in ships and terminals handling the fuel. That’s accelerating the growth of the industry, moving more gas that traditionally has flowed through pipelines onto ocean-going tankers chilled to minus 162 degrees Celsius (minus 260 degrees Fahrenheit).

Those houses in the 1970s broke away from Big Oil’s long-term contracts and created a market where cargoes change hands in the blink of an eye. Now they’re turning their attention to LNG, where spot trading is rapidly expanding. The result is handing utilities from Centrica Plc to RWE AG more flexibility to buy gas, encouraging them to make the leap away from more polluting coal.
“It looks like a much younger crude oil market,’’ Russell Hardy, chief executive officer of Vitol, said in an interview in Lausanne, Switzerland. “It is an area that can grow and that is a positive for us.’’
The top three commodity trading houses active in LNG have more than doubled their delivered volumes over the past two years and took almost 9 percent of the global trade in 2018, according to data compiled by Bloomberg. Royal Dutch Shell Plc remains the industry leader with 22 percent and stakes in LNG plants and import terminals.

Other traders such as Glencore Plc and Koch Supply & Trading LP also are building expertise or looking to expand in LNG. Most trading houses set up their desks earlier this decade, while Vitol started back in 2005.
There’s now at least 800 people working in LNG trading and sales, no more than 150 or so a decade ago, according to Connexus Search, which has hired for leading trading houses, producers, developers and utilities. Many companies have three to six traders each in Europe and one or two in Singapore.

“Five to 10 years ago, it was really immature,” said Alex Lee, managing director of Connexus. “Now we see LNG become a much more of a traded commodity, like oil, like metals, as the market becomes more liquid.”

Slower growth in the oil trading business is pushing the trading houses into gas. The biggest energy commodity traders now trade twice or even triple the amount of oil they did a decade ago, but their earnings have remained largely flat as the margin per barrel narrowed.

The oil business remains gigantic, with annual physical crude deliveries of at least $2.3 trillion. LNG is enjoying more rapid growth with about $150 billion in revenue last year, according to McKinsey Energy Insights. By next year, LNG volumes will be more than triple what they were at the start of the century, making it the quickest-growing segment of the fossil-fuel industry, according to Shell.
The biggest reason for the expansion: tighter curbs on pollution have pushed power generators toward cleaner fuels.

“We are spending a lot of resources on developing our gas and LNG business,’’ said Gunvor CEO Torbjorn Tornqvist. “In any realistic scenario for cleaner fuel oil, you can’t bypass gas to replace the more polluting sources.’’...MUCH MORE
A Google search of the blog shows 2100 hits for LNG, although many of those are duplicates or other sites linking in.
Excluding those, the hits are still a bigger number than I care to count, or have someone else count.
Let's just call it "A bunch"