Noble Returns to London LNG Trading as U.S. Adds Volume

May 23, 2014 1:02 pm ET

(Updates with start timing in second paragraph.)

May 23 (Bloomberg) -- Noble Group Ltd., Asia’s biggest commodity trader by sales, is restarting liquefied natural gas trading from London as the shale-gas boom in the U.S. is set to boost global shipments of the fuel.

Noble hired Gabriel Gonzalez Laguna and Alejandro Sanchez Gestido from Bank of America Corp., Gareth Griffiths, global head of power and gas trading at Noble Europe Ltd., said yesterday in an interview in Amsterdam. They will start in the coming months after leaving the bank’s Merrill Lynch Commodities unit, Griffiths said, adding that the precise date is still to be confirmed.

Companies from RWE AG to Vitol SA are trading LNG to benefit from regional price differences as a wave of new supply after 2018 is set to make more cargoes of the super-chilled fuel available. LNG trade will rise by 31 percent or 100 billion cubic meters by 2018 from 2012 levels, the International Energy Agency said in its medium-term gas market report in June.

“We will be looking to participate in both short-term and long-term optimizations of physical and financial arbitrages,” Griffiths said. “This may include looking at U.S. shale, European deliveries and Asia.”

Henry Hub

U.S. gas traded at $4.378 per million British thermal units on Louisiana’s Henry Hub at 3:15 p.m. London time. Northeast Asian LNG for delivery in four to eight weeks cost $13.50 a million Btu in the week to May 19, according to assessments by World Gas Intelligence. U.K. front-month gas, a regional benchmark, traded at 44.6 pence a therm ($7.51 a million Btu) on ICE Futures Europe.

Sanchez Gestido is returning to Noble after leaving “about a year ago when a decision was made that the business wasn’t ready for this initiative,” Griffiths said.

Cheniere Energy Inc. will start exporting LNG in the first quarter of 2016, Jean Abiteboul, president of Cheniere Supply & Marketing Inc., said on May 19 in Amsterdam. The Houston-based company’s Sabine Pass terminal is the first to win full approval for U.S. exports from the Federal Energy Regulatory Commission since ConocoPhillips’s Alaskan Kenai plant in 1967. There were 14 more U.S. export terminals proposed to FERC as of May 21.

Cheniere will charge 115 percent of Henry Hub prices plus $3.50 a million Btu in liquefaction fees, and estimates shipping costs of $1 per million Btu for Europe to $3 for Asia, according to an April presentation on the company’s website.

Oslo, Hamburg

Griffiths, previously in charge of merchant trading at EON Global Commodities in Dusseldorf, Germany, joined Noble in London in October. Noble’s European gas and power team consists of 40 people in London, Oslo, and Hamburg, he said.

“I have been here for eight months and LNG is a natural and very important part of our strategy,” he said at the annual Flame gas conference in Amsterdam.

Noble, listed in Singapore and based in Hong Kong, was established in 1987 and now has a market value of S$8.74 billion ($7 billion). The company is involved in agriculture, including originating, storing, processing and marketing, and handles energy products from coal to power as well as metals and ores.

LNG export capacity is set to reach at least 500 billion cubic meters a year by 2018 as supply arrives from Australia to the U.S., according to the IEA, the Paris-based adviser to developed nations.

‘Plenty of LNG’

“The trading market will pick up significantly in two to three years because there will be plenty of LNG around,” Andree Stracke, head of global gas and LNG at the trading arm of RWE, Germany’s second-biggest utility, said in January. “There is so much LNG from the U.S. uncommitted.”

Gonzalez Laguna is currently director of LNG trading and origination, and Sanchez Gestido is director of LNG business development at Merrill Lynch. The two men will leave the bank in June, two people familiar with the situation said earlier this month, asking not to be identified because the move hadn’t been announced. Bank of America remains active in LNG, a market it entered in 2011, Peter Abdo, a managing director at the bank in London, said May 20.

The LNG market will remain tight until at least 2015, according to the IEA. Spot and short-term LNG trade increased to 27.4 percent of the total last year from 25 percent in 2012, according to the International Group of Liquefied Natural Gas Importers, or GIIGNL.

“The short-term opportunities are interesting but are relatively few, so the whole process is one of evolution and we are at the beginning stages,” Griffiths said. “A company needs to find its niche in this very complex and capital intensive sector.”