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Natural Gas House of the Year Awards Koch Supply & Trading Natural Gas House of the Year Natural Gas House of the Year K Reprinted from och Supply & Trading (KS&T), a unit of Kansasbased Koch Industries, is well known as a major trader in crude oil derivatives, particularly in North America, where its parent company has deep roots in refining, fertiliser production and other energyintensive businesses. But, in 2012, KS&T began a drive to deepen its involvement in global natural gas markets by launching a Europe, Middle East and Africa (Emea) gas business, as well as a liquefied natural gas (LNG) trading arm. Since then, KS&T has become a truly global player in gas. The Genevabased Emea business now has about 60 counterparties, up from zero less than three years ago, and is active in 15 countries, from the North Sea to the Mediterranean. The LNG business – based in London, with offices in Dubai, Houston, Rio de Janeiro and Singapore – has taken delivery of and supplied its first cargoes, and trades financial contracts linked to several LNG markers. “In the beginning, it was tough for the Emea natural gas business, because we were new to the gas market outside of North America and Koch was not an established brand name in the European gas markets,” says Carl Hagert, Geneva-based head of marketing and upstream for KS&T’s Emea natural gas business. “But we managed, through the contact network we have and through the Koch companies’ disciplined approach, to build up our reach to what it is today.” Notably, this has taken place as banks have retreated from gas and power, causing liquidity to dry up and leaving utilities and other energy firms scrambling to find reliable trading partners. Although Hagert stresses KS&T does not offer the same services as a bank, he says the gap in the market has created Counterparties say KS&T’s experience makes it a solid trading partner. “What I appreciate is that they are fast and efficient,” says a senior energy trader with an Italian gas company. “They have strict rules, but they are clear in advance and, once you understand these constraints and rules, it is easy to work with them.” The physical capabilities of KS&T’s Emea team include the ability to source gas directly from the North Sea and, in some countries, to transport it all the way downstream to industrial customers. Moreover, KS&T has Carl Hagert In the beginning, it was tough… because we were new to the gas market Carl Hagert, head of marketing and upstream, Emea natural gas opportunities for his team to enter into physical deals with various types of firms, including gas distributors, municipalities and industrials. “It has been very sad to see the retreat of highly respected financial institutions from the marketplace,” Hagert says. “On the other hand, though… it creates demand for other players such as ourselves, and it allows companies with our sort of pan-European, cross-valuechain breadth to step into the fold.” Many of the key people in KS&T’s Emea gas business – including managing director Stephen Cornish, who oversees both the Emea and LNG groups – are veterans of the trading arm of Netherlands-based utility Essent, which was acquired by German utility RWE in 2009. Another large part of the Emea team previously worked at Switzerlandbased commodity trader Gunvor, while others came from various banks, trading firms and oil majors. accumulated a significant storage portfolio, giving it a great deal of optionality that it can use to create structured products for clients in places such as eastern Europe, according to Hagert. “Our ability to channel volatility and optionality across the value chain, with us in the middle, is part of our core strategy to add value to the market and its participants,” he says. On the LNG side, KS&T has been chartering vessels and building a supply portfolio with short-, mediumand long-term durations. Hagert believes KS&T is well positioned to become a major new player in global LNG as the market evolves. “The LNG business has gotten off to a strong start,” he says. “To date, the LNG industry has operated with only a few dominant player types. We believe a healthy market should also have industrial players like KS&T, with a strong credit rating, a global presence and an industrial background.” ■ June 2014