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Natural Gas
House of the Year
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Koch Supply & Trading
Natural Gas House of the Year
Natural Gas House of the Year
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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