Natural gas/LNG house of the year: ENGIE

In a year of volatile gas prices amid extreme weather and the global Covid-19 pandemic, the gas and liquefied natural gas (LNG) commercial activities of ENGIE’s  Global Energy Management Solutions (GEM) arm are thriving thanks to its expertise in key gas markets, its strong focus on commodity price risk management strategy and a commitment to its low capex business model.

What a difference a year makes. The first half of 2020 was challenging for many utilities as the price of natural gas and LNG plummeted as a consequence of the unfolding pandemic. 

As the third-largest importer of natural gas in Europe, ENGIE had clients that were highly dependent on its supply capacities. The gas and LNG team rose to the challenge and transferred all of its energy management and trading activities to a fully remote work setup in just a few weeks. Thanks to the team’s ability to quickly realign their commercial and risk strategies, staff were able to face the crisis by supporting their clients, and even drove a 50% increase in revenue on origination activities. 

Varun Gujral, ENGIE

Volatility in the market also provided new opportunities, prompting ENGIE to rebalance its portfolio with gas derivatives, which strongly accelerated in 2021, thanks to increasing demand in Asia. 

Traded volumes doubled this year compared with 2020. With Asian gas prices reaching an all-time low last year and rising to hit their highest seasonal level on record in September 2021, ENGIE continues to service its clients with hedging solutions amid record volatility.

Varun Gujral, co-chief executive officer at ENGIE GEM in Asia-Pacific (Apac), says: “We are committed to providing energy management solutions to our clients, and this award is recognition from our clients of our capabilities and services in both LNG and gas derivatives hedging. Over the past two to three years, with increased volatility in the market and development of gas indexes, Asia has increased its focus on gas derivatives, and ENGIE has been focusing on this market from an early stage to position ourselves as a competitive player with the ability to offer more structured deals.”

Guillaume Servajean, ENGIE

Guillaume Servajean, senior business developer and structurer at ENGIE GEM in Apac, says: “Under our strategy for LNG, we are putting significantly more focus on the risk management side of things, in order to safely navigate through the volatility and connect more naturally to downstream markets by either contracting on gas indexes or via dynamic use of our derivatives capabilities when contract indexation doesn’t necessarily match our end-markets.”

ENGIE’s LNG low-capex business model also continues to pay off. In 2018, ENGIE sold $1.5 billion of its mid- and upstream LNG business to oil major Total as part of a strategic repositioning towards a more streamlined LNG business. Fast forward to 2021, and the team has now rebuilt its presence in all key markets with staff in Singapore, London, Paris, Madrid and Houston, and trading in excess of 125 cargoes in 2020 despite the extreme market volatility. 

Servajean says: “Our strategic repositioning towards a leaner, risk-managed and low-capex LNG business has proven to be the right business model for us, allowing us to rebuild a solid midstream and downstream footprint while the pandemic was ravaging financial and commodities markets.” 

New customers for ENGIE’s financial risk management expertise include clients across the region. To accommodate an influx of new customers, ENGIE’s staff grew by one-third last year, including up to around 80 people in Singapore, as it continued to build a well-balanced portfolio based on short- and mid-term LNG positions, and expanding its customer flow on gas derivatives. Major wins for the LNG business included building a strategic co-operation agreement with an LNG partner for joint optimisation of an LNG contract, as well as developing synergies with ENGIE downstream affiliates in Europe and the Americas.

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