Continued volatility in LNG markets

LNG Market Report – Q2 2022

Throughout the second quarter of 2022, LNG Traders saw their markets all but come to a standstill as conditions with high flat prices and little to no liquidity made it almost impossible to take on new positions. While spot/short term traders were limited to managing existing positions and waiting for the markets to return to some sense of normalcy, it was in the long-term space that saw a raft of commercial activity.

Following the Russian invasion of Ukraine, energy security has risen to the top of the agenda as buying Russian gas is no longer a tenable option for many end users. US producers have benefited significantly from these market conditions. The likes of Cheniere and Venture Global have performed extremely well with both signing multiple long-term deals since March and will continue to be in heavy deal making mode over the next quarter.

For pre-FID projects such as Tellurian, NextDecade and Mexico Pacific, they will be striking while the iron is hot. These businesses are taking advantage of the greatly missed demand to ramp up their respective paths to FID. Tellurian sold the majority of their volumes necessary in 2021, NextDecade managed to revive their deal with Engie in addition to others and Mexico Pacific have just been granted approval by the Mexican government for their project.

The hiring market has begun to reflect the commercial activity through an increased interest for individuals with expertise in long term marketing/origination. NextDecade and Mexico Pacific have followed up their deals by bolstering their teams with experienced senior marketers. US majors ExxonMobil and Chevron are following suit and Sempra Energy have established an office in Singapore. As North American projects continue to develop, we can also expect demand across the market to rise for those at the Principal Analyst level to support the more experienced individuals with their build outs.

Within the trading houses, traders who have scope of responsibility across both the short and long term have certainly shifted their focus towards working on longer term deals as the value pools within the spot markets have diminished greatly. We have seen permanent internal shifts of experienced Asia LNG Traders move into Origination roles. Question marks do remain on these desks ability to weather the volatility in the markets with the likes of Trafigura said to be seeking equity injections. The traders came under significant pressure at the end of 2021 due to margin calls for their hedged positions.

Looking across to Europe, we can anticipate gas utilities setting up desks to handle impending LNG growth. For any gas buyer in Europe who doesn’t currently have an existing LNG desk, plenty of whom who are 10bcm gas buyers, one can imagine they will need specialist capabilities to help them switch out from Russian gas to LNG.

Contracts Specialists are also in demand in Asia. Although not necessarily a revenue generating position, the limited talent pool in the region and the specific nature of the role has seen businesses scrapping for the same individuals, with very strong counter offers presented in some instances.

Lastly, demand for Derivatives Traders based in Singapore is still present, but lukewarm at best as most financial activity remains in Europe. The minimal talent pool in Asia and their highly competitive compensation has certainly caused headaches for a few hiring managers in the region. Going for cross-commodity derivative traders to find the right individual has worked out for the likes of ExxonMobil.

In short, origination is the name of the game. Until liquidity returns to the spot market, we’re expecting plenty of activity in the long-term space and hiring to meet those demands.

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