U.S. Oil Giants Bet Big On European LNG Trading Strategies

Most of the media coverage of Big Oil majors tends to draw comparisons between the European companies and their U.S. peers, almost invariably at the expense of the Europeans. Yet there is one sector where BP, Shell, TotalEnergies, and Eni are ahead: LNG trading. Now, Exxon and Chevron are trying to catch up.

The Financial Times reported this week that both companies were eager to expand their LNG trading operations despite previously treating this business segment as too risky to be worth the effort. “I want to scale it now. I need all the talent,” the FT quoted one company executive as saying. “Inside Exxon, they say only three things now matter: Guyana, the US and trading,” an unnamed gas trader told the publication. Not a moment too soon, either.

When Shell published the 2025 edition of its annual LNG report, the company said demand for liquefied natural gas was about to go through the roof in the coming years. By 2040, this demand was set to soar by 60%, Shell said, driven by economic growth in Asia.

“Upgraded forecasts show that the world will need more gas for power generation, heating and cooling, industry and transport to meet development and decarbonisation goals,” the head of Shell’s LNG trading division, Tom Summers said at the time.

Now, Shell is the biggest LNG trader in the world. It could be talking its book. However, it is far from the only one forecasting ever-stronger natural gas—and specifically LNG—demand. Take Europe, for instance. The majority of European countries are about to become dependent on LNG for more than two-thirds of their gas supply.

As the European Union’s leadership tries to quit all remaining Russian energy imports and replace them with U.S. energy, the share of the latter in the bloc’s total LNG imports is about to grow much closer to 100%–as long as that leadership reconsiders its strict methane emissions and supply chain due diligence legislation.

Asia, meanwhile, is living up to the name “developing economies”. Asian countries are growing, and they are certainly growing faster than, say, European ones. Indonesia, for instance, earlier this year said it would be deferring LNG cargoes for export in order to secure domestic supply and rising demand for the fuel. The country, by the way, is the sixth-largest LNG exporter in the world. As demand for liquefied gas in Asia rises, the European supermajors are ready to provide the supply.

Shell said two months ago it was going to add LNG capacity of 12 million tons by 2030. TotalEnergies plans to boost its LNG volumes under management by 50% by 2030. BP started a new LNG project earlier this year offshore Senegal and Mauritania, and plans to turn the two countries into a major LNG hub. Now, the U.S. supermajors are joining the party.

The FT reported that both Exxon and Chevron had recently appointed new heads of their LNG trading operations—both based in Asia, the demand driver. They have also started signing supply deals, to the tune of 7 million tons annually for each, according to the people that the Financial Times spoke to. This is not a whole lot, but it is just the start for Exxon and Chevron.

“If you go back in history, you found a customer, and you signed them up for the full offtake and you had a ship that basically went backwards and forwards,” the head of Exxon’s LNG segment, Peter Clarke, told the FT. “Today it is totally different.” Indeed, today even large LNG producers such as BP and Shell are quite open to signing trading deals with other producers, such as Venture Global—even if the deal sours, as it happened with Venture Global. LNG trade is a lucrative business, and Big Oil knows how to make the best of it.

This should be good news for large LNG consumers. The more competition there is among suppliers, the better the price buyers are going to get—especially with supply set to rise in the next few years in response to the healthy pace of demand growth.

The International Energy Agency said in a report in July that demand for liquefied gas was about to accelerate next year after an anticipated overall slowdown in natural gas demand this year due to economic factors. The International Gas Union, however, sees demand for natural gas this year remaining stable and rising, at a rate of 1.7%, compared with an estimated 1.5% increase a year ago. The IGU said in its annual report, published earlier this month, that “Observed trends suggest global energy demand is expected to follow an upward trajectory over the next decade, especially leading up to 2030.”

Exxon and Chevron are already among the largest gas—and LNG—producers in the world. However, as the head of one Swiss gas producer and trader told the FT, “If you are only in one segment, you have two, three good years and then a terrible year.” “If you want to be successful in LNG, you need to be everywhere,” Benjamin Lakatos, chairman of MET Group also said.

By Irina Slav for Oilprice.com

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