Bloomberg

(Bloomberg) -- Axpo Trading AG is seeking to expand its liquefied natural gas operations as rising global volumes offer opportunities even after prices collapsed.

The Swiss trader plans to buy and sell LNG in the Atlantic and Pacific basins and is in discussions with emerging buyers, according to Bart Riemens, head of gas trading for long-term contracts & LNG at Axpo Trading. It hired two people for LNG this year.

Trading houses and utilities are expanding LNG activities as global capacity to produce the fuel is expected to rise 45 percent through 2021 and more fuel is sold under shorter and more flexible contracts. More than 50 nations may join countries that already import LNG after the fuel lost almost 75 percent of its value since peaking in February 2014, according to Wood Mackenzie Ltd. There were just 15 in 2005 and 34 in 2015.

“Where we were very much focused in downstream Europe previously, we are now taking a broader view,” Riemens said by telephone from Dietikon, Switzerland.  “The spreads have disappeared, but due to the increased liquidity and increased amount of players in the market, and also new buyers emerging, it gives us a new possibility to expand.”

Two Hires

Axpo this year hired Anna Polozova from Excelerate Energy LP as head of long term gas supplies and LNG. Fabien Untereiner, formerly at Engie SA, will start in September and complete the three-person LNG desk, Riemens said. Untereiner didn’t respond to an e-mail seeking comment.

Axpo will focus on medium-term deals of as long as five years and spot trading, Riemens said. “Spot, small volumes” from the U.S. “could be feasible,” he said. The company started trading LNG in 2008-2009 via now-incorporated EGL AG.

Spot LNG in northeast Asia traded at $5.20 per million British thermal units by June 20, after reaching a low of $4.05 in April, according to the World Gas Intelligence publication. The spread with front-month gas in the U.K., a European benchmark, narrowed to 50 cents a million Btu from as high as $10 in 2012.

Portfolio Building

“Five years ago the spreads were great -- if you could access them you made huge margins, you were able to do back-to-back deals and make money on it because there were not so many players,” Riemens said. “In the upcoming years it’s about building a portfolio, extracting value from that portfolio.”

As output from Angola to Australia to the U.S. is rising, Europe will be able to absorb excess LNG because of its hubs and terminals.

“Right now we don’t see a huge increase that everyone expected for LNG going to Europe, but it is imminent to come,” said Riemens. “What we also see is that there is some extra demand coming online.”

The International Energy Agency estimates LNG demand and supply won’t align until 2021, while Bloomberg New Energy Finance forecasts the glut will peak in 2020. The market may rebalance one or two years earlier than 2021-2022 on higher demand, Riemens said.

“I am probably a little bit optimistic in the sense that I think this rebalancing can happen earlier,” he said.

--With assistance from Rachel Morison To contact the reporter on this story: Anna Shiryaevskaya in London at ashiryaevska@bloomberg.net. To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net, Rob Verdonck

©2016 Bloomberg L.P.

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