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Glencore counting on revival of decades-long contracts to secure
top LNG position

Glencore sees 'spectacular growth' in LNG trading

SINGAPORE, September 19, 2015

Mining and trading giant Glencore is mounting a challenge to Trafigura and Vitol to become the top merchant trader of liquefied natural gas (LNG), as a market in which sales are largely frozen in decades-long contracts looks set to thaw.

Trafigura recently adopted tactics developed from years of trading oil to become the world's top LNG merchant, investing in logistics and storage, while also providing credit and shouldering risk for buyers.

Glencore, on the other hand, plans to double its global LNG trading team and trade as many as 50 cargoes of the super-chilled fuel over the next year - almost twice what Trafigura traded in its fiscal year to Sept. 30, 2014.

LNG could soon surpass iron ore as the world's second-biggest traded commodity, with estimates of the market's worth ranging between $90 billion and $150 billion.

"The opportunity for growth in LNG trading is spectacular," said Glencore's global head of LNG, Gordon Waters, who joined in July after 18 years at BP.

Trading companies, which industry sources say have so far accounted for less than 10 percent of overall LNG trade, could help trigger a more liquid Asian LNG market, with exchanges from Singapore to Tokyo launching indices and futures contracts in preparation.

Waters was in a team at BP that took it from selling LNG via long-term contracts to being a key player in spot and short-term trade. "The idea is to do that all over again," he told Reuters.

Glencore - which has had a limited presence in LNG up to this point - plans to trade some 40 to 50 cargoes on spot or short-term deals over the next year and double the size of its three-trader team based in Singapore, London and Madrid.

"Come back in 12 months, and I think you'll notice a rapid growth," Waters said.
Glencore's planned volumes would be just under what some analysts say Trafigura could sell in the year to the end of this month, after the latter sold 1.7 million tonnes of spot LNG, or about 28 cargoes, the previous fiscal year.

Trafigura declined to provide further details in its volumes and market strategies.

Vitol says on its website it delivered over 1 million tonnes of LNG worldwide in 2014.

A Vitol spokeswoman said the company has been active in the LNG market for at least 8 years, and that it did not see itself as part of a push into the market.

"We regard our business as experienced and established."-Reuters




Tags: LNG | trading | Glencore |

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