SocGen says no firm plans to enter LNG physical trade
Tokyo, November 18, 2010
French bank Societe Generale has no firm plans at present to enter physical LNG trading, although the startup of a number of new projects over the next few years will boost trading activity, a company official in charge of energy finance said.
A growing number of trading houses and banks, long established in the oil market, are now looking to cement positions in the fast-growing LNG market, historically run by a clique of major players.
'It's not going to happen tomorrow but it is something we are looking at,' Robin Baker, the firm's global head of energy project finance, told Reuters in an interview in Tokyo.
'Big projects will still require long-term committed supply-purchase agreements. But nevertheless, those contracts usually have some flexibility in volume, which gives the buyers and sellers the opportunity to trade a certain amount on a short-term basis. So it's certainly something we are looking at.'
Barclays Capital announced plans in August to trade physical cargoes while European energy trading house Mercuria has also said it is entering the market.
LNG production is set to grow by 50 per cent from 2009 to 2013, according to the International Energy Agency.
London-based Baker, who oversees a global energy team of about 65 people, and Katan Hirachand, the company's director of energy project finance, were in Tokyo to work with Japanese energy clients.
Societe Generale has been involved in the financing of many LNG projects and advised on and completed six major projects, including the $15 billion Exxon Mobil-led Papua New Guinea LNG project.
Baker added that Societe Generale has been involved in some LNG projects currently in progress that may be announced in a month or two, but declined to comment further because the discussions were confidential.
The LNG market has been well-supplied this year as new production came online in Qatar, Russia, Yemen and Indonesia, while demand in the United States, which was expected to be a major importer, has fallen due to massive increases in domestic supply from shale gas.
But there is uncertainty whether the United States will become a major LNG exporter on the back of booming shale gas output.
'At least in the medium term there is a surplus of gas in North America which could be exported,' Baker said, adding that his firm was keen to finance such export deals if the economic fundamentals were sound.
Hirachand said he was not worried about tanker supply shortages, although a wave of new projects coming online have somewhat tightened what was a long market.
'A lot of the historical contracts are coming to an end, out of places like Indonesia, Malaysia,' he said.
'With the traditional contracts from Indonesia and Malaysia declining, and growing domestic demand, there is a big need for Japanese companies to source new projects,' Hirachand said.
He said Japanese companies have been playing a key role in several African LNG projects in progress, trying to secure long-term supplies for the Japanese market.-Reuters