Natural gas/LNG house of the year: Macquarie

Energy Risk Awards 2022: Macquarie steers clients through short-term volatility while laying longer-term foundations for the energy transition

Craig Fisher, Macquarie

In a year marked by volatility, Macquarie’s natural gas business continued to provide vital support to clients navigating unpredictable market conditions. It also participated in boundary-pushing initiatives designed to bring greater accountability to industry efforts to prepare for the energy transition.

Macquarie’s natural gas offering spans both the physical and financial markets, covering physical trading and execution, and asset management and optimisation, as well as derivatives, credit and funding structures. The 80-strong front-office team in North America moved an average of 9.75 billion cubic feet (Bcf) per day of marketed physical gas volumes in 2021 from offices in Houston, Calgary and Mexico City. Building on its core offering, Macquarie has expanded its product range to address the growing environmental needs of clients in this market.

In addition to structured gas supply with carbon offsets, renewable natural gas and hydrogen, Macquarie participated in the first responsibly sourced gas (RSG) transaction to use a digital registry to encode and verify environmental, social and governance (ESG) metrics in August 2021. The deal will see Macquarie supply Canadian distributor Énergir with gas bundled with ‘digital natural gas’. It will use Xpansiv’s digital fuels programme, which provides a registry to record and validate independent data covering the origin, energy content and methane intensity of the gas.

“This important innovation establishes unprecedented levels of transparency and detail and will further catalyse the certified natural gas market,” says Craig Fisher, Macquarie’s co-head of Canada Gas. Énergir’s director of gas supply and renewable gases development, Vincent Regnault, called it a “milestone transaction” that will help customers and stakeholders participate in the energy transition and support Énergir in meeting its own target of contracting 100% of its system gas supply through its Initiative for the Responsible Procurement of Natural Gas by 2030.

In Europe, Macquarie’s team consists of more than 30 staff working on its gas and liquified natural gas (LNG) desks. Many European utility clients faced significant margin calls in the volatile market conditions of the past year. Macquarie provided them with support through a range of financing products such as prepays, extended financing terms and cargo financing, as well as liquidity products such as unmargined lines for physical supply.

Tim Bourn, Macquarie

Market volatility also significantly increased client hedging needs. In response, Macquarie provided derivatives products across a wide range of gas, electric and oil indices during 2021. “Macquarie’s strong credit and balance sheet allowed us to continue our presence in the market and be there for our clients during an extremely challenging time for many in the market,” says Erik Petersson, Macquarie’s head of Europe, the Middle East and Africa gas and power.

The global LNG market has also been an area of focus for the business since it traded its first physical cargoes in late 2019. To date, Macquarie has transacted more than 70 LNG cargoes and has also developed risk-management structures with embedded derivatives across indices including JKM, TTF, Brent and JCC.

The post-Covid economic picture and supply concerns stemming mostly from the invasion of Ukraine led to extremely unpredictable conditions and record prices for this market in 2021. The average spot price for LNG in Asia was $17.9 per metric million British thermal units (MMBTU) in 2021, compared with $4.1 per MMBTU in 2020. Macquarie stepped up its efforts to help clients manage their LNG portfolios and liquidity in this environment. This included extending payment terms and voyage financing, as well as providing liquidity structures in which Macquarie assumes margin requirements on behalf of the client.

“Macquarie has a track record of providing financing structures across a range of commodities, and we were able to bring that expertise to our LNG clients in ways that helped them solve their immediate challenges but will also become an ongoing source of funding for many,” says Tim Bourn, global head of LNG and co-head of North American power, gas and emissions at Macquarie.

As natural gas markets continue to become more interconnected, Nick O’Kane, head of commodities and global markets for Macquarie, expects the firm’s LNG enterprise will be critical in aligning its business to the market and its clients’ needs, both of which are increasingly global.

“Natural gas is a significant part of the Macquarie platform and, as clients continue to rely on this as a transition fuel during the energy transition, our product offerings and market expertise will remain critical to them,” O’Kane says. “Macquarie is unique in our breadth of both physical logistics and financial capabilities, and we remain well positioned to deploy this platform to help market participants manage their risks and unlock opportunities.”