News Post
Trafigura seeks to reopen LNG import terminal in UK
Swiss commodity trader Trafigura is looking to reopen an import terminal for liquefied natural gas in north-east England in the latest sign of how LNG is playing a growing role in global energy supplies.
Trafigura, one of the largest energy traders, is investing in the Teesside LNG facility as gas increases its share of UK energy markets, with the fuel competing with renewables to replace heavily polluting coal.
The trading house wants to capitalise as supplies of LNG — gas frozen to minus 160C so it can be shipped on tankers — are set to increase by almost 50 per cent between 2015 and 2020, with rising output from US shale and Australia both adding capacity. This is pressuring the price of the fuel and making it more competitive.
“Given the growth in volumes globally and the flexibility of US supplies it is likely that LNG shipped from the US will make up the lion’s share,” said Hadi Hallouche, head of LNG trading at Trafigura.
“LNG infrastructure is coming down in cost, and liquidity in the LNG market is getting deeper, making these kinds of projects possible.”
The terminal — which was shut two years ago after previous attempts to import LNG attracted only a handful of cargoes — will accept vessels known as FSRUs, or floating storage and regasification units, which are helping to transform the LNG market by opening up new export destinations.
By turning the fuel back into gas onboard, it saves having to invest upwards of $1bn in a large-scale LNG import terminal. Additional LNG tankers can dock alongside the FSRU to make further deliveries into the grid.
For Trafigura, having access to an import location will provide greater flexibility as LNG supplies increase.
“The UK is a good place to have access to in term of fundamentals, trading liquidity is good, and you are also in position to trade around the asset having that guaranteed route into the UK,” said Frank Harris, head of global LNG consulting at Wood Mackenzie.
“This is a sign that Trafigura are marrying commercial [trading] savvy with a willingness to get involved in LNG infrastructure that will give them an option on both the UK market and north-west Europe.”
The terminal, in which Trafigura is investing about $30m, is planned to start operating in the middle of next year. It has been taken on a long-term lease from PD Ports, which said it was an “important step in positioning Teesport as a major energy hub for the UK”.
The two companies are working to obtain the necessary permits for the project from authorities, a spokeswoman said.
Trafigura said Teesside LNG would increase the UK’s supply security and that it plans to invest in other terminals where it sees potential demand. “We’re interested in having more infrastructure both in Europe and around the world,” said Mr Hallouche.
https://www.ft.com/content/25121f3a-ec7c-11e6-930f-061b01e23655
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