Asian energy groups flock to London to set up LNG trading desks

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Asian energy companies are flocking to London in response to the surge in demand in Europe for liquefied natural gas in the wake of Russia’s invasion of Ukraine.

The groups are establishing or drawing up plans for LNG trading desks to take advantage of Europe’s new position as the world’s biggest importer of the super-chilled fuel after Russia slashed the region’s gas supplies.

They include Japan’s Tokyo Gas, Osaka Gas and Kansai Electric and South Korea’s SK E&S, while China’s ENN, Cnooc, PetroChina and Sinochem are also considering moves to the UK, say people familiar with the situation.

The potential of bigger returns selling to European customers, typically utility groups, than in Asia has drawn the companies to the UK capital.

London is the obvious destination over other European cities because of its position as a leading gas trading hub, established after the discovery of oil and gas in the North Sea in the 1960s.

Trading profits in Europe were particularly healthy last summer when gas prices surged as the region scrambled to secure the fuel to fill up its storage ahead of winter.

“You need a stronger link and presence in the European markets” to make profits, said Felix Booth, head of LNG at energy analytics firm Vortexa.

“The companies are much more aware they can make big margins selling cargoes to Europe,” he added.

Tokyo Gas, Japan’s largest gas utility, set up a London trading team in April to deal with price moves in European time, which it considers crucial after the region overtook China and Japan as the world’s main importer of LNG.

Osaka Gas, another big supplier in Japan, has made two new hires in its existing LNG team in London since the full-scale invasion of Ukraine.

Kansai Electric, a utility company, is on the verge of setting up a London trading team, two people familiar with the situation said. Kansai Electric declined to comment.

SK E&S, the natural gas business unit of South Korea’s conglomerate SK Group, is also planning to expand in London after opening a London office at the end of last year, the company said.

Europe imported 130bn cubic metres of LNG last year, accounting for nearly 40 per cent of its natural gas consumption, according to the Energy Institute’s Statistical Review of World Energy.

LNG prices in north-west Europe also hit a record high of $78.15/mmbtu in late August, nearly $10 higher than those for north-east Asia, according to price reporting agency Argus.

While European LNG prices have come down significantly this year, Europe’s appetite for LNG is expected to remain high as it needs to import large volumes to replace the lost Russian pipeline supplies.

As well as Japanese and South Korean groups, Chinese companies are eyeing the UK capital.

ENN, one of China’s largest energy groups, is “looking to set up” an LNG function, while state-run Cnooc has recently made a hire to develop a gas trading business, say people familiar with the situation.

PetroChina, part of the state-owned China National Petroleum Corporation, and chemicals group Sinochem “have been on the hunt” for staff to set up desks in London, say the people.

None of the Chinese companies responded to requests for comment.

London is ideal for European operations because of its established gas market.

“There’s also the networking and human connections with a physical presence that can’t be understated in getting deals done,” said Allen Reed, managing editor of Atlantic LNG at S&P Global Commodity Insights.

“London remains a major commodity trading and financial hub.”