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Interview: Gunvor seeks LNG, gas assets to support surging gas trade

Lausanne — Switzerland-based energy trader Gunvor is looking to build or acquire natural gas and LNG assets as part of plans to maintain its lead among independent trading peers in LNG, amid a global shift towards cleaner fuels, CEO Torbjorn Tornqvist said.

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With natural gas set to be the fastest growing fossil fuel in the coming decades, energy traders are building out their asset-backed trading models to capture value from booming flows of both piped and LNG gas trade.

Gunvor became the biggest independent LNG trader last year after delivering about 11 million mt, a 60% jump from 2017. Around two-thirds of Gunvor's volumes delivered were under medium- and long-term contracts.

"I think gas shows strong growth and also fits into the transition to something cleaner, both for the air and for CO2. So if you can replace coal with gas a lot of things will be achieved, so that's attractive," Tornqvist said in an interview in Lausanne, Switzerland.

"Natural gas is part of our business model and we are looking at some infrastructure on the ground," he said, without giving further details.

ASSET OWNERSHIP

The move to control gas assets reflects traders' well established model of an integrated asset base -- such as refining, distribution and storage assets in the oil sector -- aiming to gain a logistical edge over competitors.

Indeed, Gunvor's push into more gas and LNG is mirrored by other trading houses that are also positioning themselves for the current energy transition to lower carbon fuels.

Commodity trading rivals Trafigura and Vitol have also seen substantial growth in their LNG trading volumes in recent years, signing long-term deals with US shale gas producers.

Vitol, the world's biggest independent oil trader, saw traded volumes in its LNG business grow to 7.8 million mt in 2018, up from just 3 million mt two years earlier. It is looking to build an LNG import terminal on the Italian island of Sardinia, and Trafigura is working to reintroduce an LNG import site at Teesside in northeast England.

Gunvor opened a new natural gas trading desk in London last year, and it also delivered the first cargo under a 23-year contract with Russia's Yamal LNG.

"We are developing our gas and LNG business because we think that, in any realistic scenario for cleaner fuel, you can't bypass gas to replace the more polluting resources like coal," Tornqvist said.

NO PLAN TO TRADE METALS

Despite a wider industry trend of thinning margins on trading traditional arbitrage opportunities for oil and gas, Tornqvist said Gunvor has no current plans to diversify its trading model into metals or power, key planks in the energy transition trend towards electrification in the transport sector.

"We're not looking to trade battery metals in the short term, we are focused on the energy side of commodities," he said.

Gunvor has recently branched out into biofuels, however. The trader recently acquired two biofuels plants in Spain, at Huelva and Bilbao, from CIE Automotive for Eur13.6 million ($15.5 million).

At least one of the plants will continue to run on used cooking oil (UCO) for the production of used cooking oil methyl ester (UCOME), according to a market source, as Spain looks to implement double-counting for waste-based biofuels within its mandate, which is rising to 7% in 2019 from 6% in 2018 on an energy basis.

At least one plant is set to come online in the next month or so, with the other six to nine months away, according to sources.