Helping Asian LNG Buyers

Following regulatory reform of the domestic energy markets in Asian countries, notably Japan in the form of the ‘Power and Gas Systems Reform’ it is now imperative for large LNG players to begin optimising their procurement portfolios through more flexible contracts and interaction with the spot market.

Historically Japanese power and gas utilities have been able to pass fuel purchase costs directly through to consumers via the full-cost principle. Currently a review of the transitional agreements that exist prior to full deregulation in the 2020-2022 timeframe is taking place. If this review results in the abolishment of rate regulation based on the full cost principle, Japanese power and gas utilities will need to face fuel price risk. They will then need to consider hedging of this price risk from their physical positions by trading appropriate paper derivatives… Futures and Swaps.

TwoTwoFive are the only training company that has the capability of replicating the physical portfolio of a LNG player. Our trading simulator accurately calculates any pricing exposure that exists for the sale and purchase of physical LNG using a number of different indexes including Brent, TTF, JKM using a number of different pricing terms, for example, M-1 pricing on a percentage of Brent basis.

We can create real life simulations with a number of different scenarios that allows delegates to experience the true exposures likely to be created in a de-regulated world. This practical experience coupled with short lectures that describes risk management theory and philosophies puts the delegates at a competitive advantage over others.

We give delegates the opportunity to trade all the major derivatives likely to be used for hedging, including JKM futures, which price out in a similar way to the real ICE JKM Future, allowing us to replicate the real market. We demonstrate how these derivatives offset physical pricing risk and some of the pitfalls/issues to be considered.

A TwoTwoFive LNG course is the only way to safely allow delegates to experience and learn about risk management and hedging of a physical LNG portfolio.

All of our lecturers have many years’ experience in a trading environment, many of them within the physical Oil world which means that a LNG portfolio player can learn much more than how to hedge pricing exposures. We can assist delegates in understanding the benefit of commercial optimisation of a portfolio and help drive change within an organisation, moving towards a liquid and transparent spot LNG market, with all the threats and opportunities that this entails.