Europe May Become Swing LNG Buyer as Market Braces for Surplus

Europe May Become Swing LNG Buyer as Market Braces for Surplus

Europe may soon buy excess supply of liquefied natural gas, helping determine global prices,

according to MET Holding AG, a Swiss energy trader focused on eastern Europe.

As the price gap between U.S. and Asian gas narrows, surplus cargoes will end up in Europe,

Benjamin Lakatos, chief executive officer of MET, said in an interview at the Financial Times

Commodities Global Summit in Lausanne, Switzerland. The company, already trading gas,

power and oil, entered the LNG market this year to take advantage of a buyers’ market, he said.

“In three to five years, Europe can be the swing buyer,” he said Tuesday. “Just like in oil, the

U.S. is a swing producer that determines the price. In natural gas, there is a chance that Europe

might be the swing buyer of LNG, meaning if somebody has excess supply they will dump in the

European market.”

The start of U.S. exports of shale gas in February marked the start of a boom in flexible supply

amid waning demand in Japan and South Korea, the biggest LNG users, where spot prices

collapsed almost 80 percent over the past two years. Global LNG production will expand by 146

million metric tons a year through 2020, about half the capacity of existing plants, according to

Danish utility Dong Energy A/S, which expanded its LNG desk this year.

“We believe we are in an oversupplied market and we want to be a buyer of this oversupply,”

Lakatos said, adding that the company would target distressed cargoes. “There’s excess

regasification capacity in Europe, so the infrastructure is there. All you need is traders that are

willing to take the risk and can manage the risk.”

Gas Prices

LNG for delivery to northeast Asia in four to eight weeks fell to $4.15 a million British thermal

units on Monday, according to assessments by New York-based World Gas Intelligence. That

compares with about $3.75 a million Btu in Europe and $1.95 in the U.S.

Lakatos said he cannot rule out further price declines as costs are still above producers’ variable

costs. As the gap between regions narrows, the cost of transportation will become ever more

important, he said.

“We are getting to a global price,” he said. “In the past, it was about arbitrage, now it’s about

logistical optimization.”

MET has been expanding its natural gas operations and now trades in most of the European

hubs including the U.K.’s National Balancing Point and the Dutch Title Transfer Facility, the

continent’s biggest, he said. As the industry consolidates, with bigger players buying up smaller

ones, it was important for MET to scale up its activities, including with its two LNG traders, he


“The old good days are over and consolidation has already started in the European gas market,”

he said. “There’s a minimum scale for this activity and if you don’t reach that level you are not

economical. That’s why we pushed for this growth. Growth was more important than



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