Sales and marketing of LNG is evolving. Are you prepared?
Alex Georgievski A , Jamie Hamilton A , Giulia Gervasoni A and Priscilla Tan ADeloitte
The APPEA Journal 56(1) 283-294 https://doi.org/10.1071/AJ15022
Published: 2016
Abstract
Australia is in the process of transitioning from the project build phase to the project operating phase in the LNG lifecycle. By 2020, the number of operating LNG trains will grow from nine to 21, and it is expected Australia will challenge to be the world’s largest exporter of LNG. LNG sales and marketing activity is expected to increase dramatically across the Asia-Pacific region.
But what does this change mean for LNG players in the Asia-Pacific region? And what needs to be done to prepare for it? There is presently very little information available on how prepared LNG companies in the Asia-Pacific region are to undergo this transition. Equally, the maturity of the risk management and trading functions of the more established companies in the sector, and how much work less-experienced companies need to do to meet global standards, has been relatively opaque.
To bridge this information gap, Deloitte conducted a targeted global survey of LNG participants, particularly focusing on their energy trading risk management (ETRM) maturity. Deloitte also sought the industry’s views on the changing market, and challenges and opportunities for the future.
The results show the following:
There is a significant divide between established global integrated multi-energy commodity companies and regional Asia-Pacific LNG companies in terms of their ETRM maturity.
Organisations with existing marketing and trading functions covering commodities with more mature markets have been able to leverage past lessons and existing ETRM capability across their portfolios. For other companies without this experience in mature markets, the evolving developments and liquidity of global LNG markets presents both significant threat and opportunity.
The transition in LNG markets, and the increase in sales and marketing activity, will place high demands on existing and new operations—and their owners—to establish and mature their marketing and trading functions. An ETRM framework is a crucial part of meeting these demands.
In this paper the authors examine the background to this transition, what the essential components of an ETRM are, and how far away Asia-Pacific LNG players are from being prepared for transition and achieving maturity in this area.
Alex Georgievski is a Partner in Deloitte’s treasury and capital markets practice where he leads a team advising clients on their trading risk and capital management frameworks across energy, commodity and treasury exposures. He has 17 years of global industry experience spanning regulatory, policy, treasury, trading and corporate advisory roles. He has undertaken numerous risk policy reviews for clients across market, credit, funding and liquidity, and operational risks, including quantitative engagements for energy and commodity trading operations. He has advised on quantitative risk measurement and complex derivative valuation. In 2004, with the support of the US Fulbright International Visitor Program, Alex visited energy trading houses, investment banks and regulators across North America. In 2006 he was project lead of the Energy Financial Markets review undertaken for the Energy Reform Implementation Groups report to COAG. Alex has also led highly qualified teams at KPMG, EY and Deloitte in navigating technical quantitative and qualitative engagements spanning all elements of energy and commodity supply chains and treasury operations. algeorgievski@deloitte.com.au |
Jamie Hamilton is a Chartered Account and Partner, with more than 23 years of professional experience. He presently leads Deloitte’s Strategy and Operations consulting practice in Perth. During his time in professional services, Jamie has managed large-scale complex projects, and managed teams on audit, consulting and corporate finance engagements in Australia, Japan, Southeast Asia, Zambia and Mongolia. Jamie is experienced at dealing with boards and executive levels of clients, and has experience as a director of a listed oil and gas exploration company. JaHamilton@deloitte.com.au |
Giulia Gervasoni is a Director in the Energy and Commodities Team at Deloitte. Her main focus is on energy trading risk management, financial analysis, development of risk management metrics and techniques, and energy derivatives valuation. Prior to commencing her consulting career, Giulia worked as a market-risk analyst in the energy industry, assessing the risk associated with both physical and financial positions in LNG , oil and electricity markets, and developing metrics for the quantification and monitoring of ongoing exposure. ggervasoni@deloitte.com.au |
Priscilla Tan is a Director with Deloitte’s Strategy and Operations Consulting Practice. She has significant experience working with clients and organisations in the energy and resources sector. Priscilla has more than 18 years of business and consulting experience, and specialises in helping clients establish management systems, operating models, business process improvements and drive, and manage organisational change. prtan@deloitte.com.au |
