First Atlantic LNG freight swap trade concluded as Affinity arranges further deal
LNG traders JERA Global Markets and Vitol have executed the first Atlantic LNG freight swap against The Baltic Exchange's BLNG3 assessment in a bilateral trade arranged by Affinity Financial Products LLP, Navigate PR Ltd says in a press release.
The BLNG3 assessment provides a freight rate benchmark for LNG shipments between Sabine Pass and Tokyo. The benchmark is on a time charter equivalent basis with a panel of independent shipbrokers providing headline time charter rates and a ballast bonus and/or position fee assessment to give an effective rate paid by a charterer on round voyage terms.
"Following on from our initial trade in July when the Baltic's BLNG1 assessment went live, we are very pleased to have been able to arrange a bilateral trade against the BLNG3 route," said Benjamin Gibson, Head of LNG Derivatives at Affinity. "Interest in BLNG3 has been off the charts as this trade lane links an increasingly liquid spot market in the Atlantic and the key demand centre for LNG in Japan. As the LNG market continues to commoditise, freight is now catching up with the cargo in terms of transparency and the ability to trade BLNG3 will become an important tool along with JKM and Henry Hub."
Baltic Exchange Chief Executive, Mark Jackson, added: "Our BLNG3 route only went live in mid-August and we're delighted to see the first trade settled against it. The Baltic's LNG assessments are being quickly adopted by this developing market as an accurate and reliable benchmark."
Sarah Behbehani, JERA Global Markets SVP LNG, commented: "As part of JERAGM's efforts to increase the transparency of the LNG market, we are very happy to confirm that we have concluded the first LNG freight swap against the Baltic Exchange's Sabine Pass to Tokyo index. The management of LNG freight price exposure is a key element of portfolio optimisation and risk management, however LNG freight derivatives have been slower to develop compared to LNG and gas-linked financial products. Freight exposure arising from US LNG is of particular importance for the development of the market, given the US Gulf Coast's position as a marginal source of supply across the Atlantic and Pacific basins."
Affinity confirmed that the trade was done over-the-counter (OTC) and executed bilaterally using an ISDA contract.
Gibson added: "Further bilateral trades will help develop the understanding and adoption of freight benchmarks within the industry. We are delighted to have supportive counterparties such as JERA and Vitol who will transact on this basis and, furthermore, the market is engaged with several Exchanges who have expressed an interest in listing contracts priced against the Baltic routes."
About Affinity: Affinity is the global market leader in LNG brokerage, providing prompt and term chartering services, newbuildings, second hand S&P brokerage, JKM financial swaps, LNG bunkering and infrastructure advisory.
The team works with all major LNG ship owners and charterers with an established network of contacts throughout the entire LNG value chain from international oil & gas majors, through midstream service providers, and down to final LNG buyers.
Affinity Financial Products LLP is the regulated arm of the group and is authorised and regulated by the FCA.
About Jera Global Markets: JERA Global Markets is a leading utility-backed seaborne energy trader specialising in LNG, coal and freight with a platform to trade across all key markets worldwide. We operate one of the largest seaborne energy portfolios in the world which gives us an in-depth understanding of the way local, regional and international energy markets behave. These insights enable us to help our customers increase security of supply, optimise their portfolios and improve the risk management of their
assets.
About Vitol: Vitol is an energy and commodities company; its primary business is the trading and distribution of energy products globally – it trades over seven million barrels per day of crude oil and products and, at any time, has 250 ships transporting its cargoes. Vitol's clients include national oil companies, multinationals, leading industrial and chemical companies and the world's largest airlines.
Founded in Rotterdam in 1966, today Vitol serves clients from some 40 offices worldwide and is invested in energy assets globally including: almost 16mm3 of storage across seven continents, 480kbpd of refining capacity and circa 6,500 service stations across Africa, Australia, Brazil, Eurasia and in Northwest Europe. Revenues in 2018 were $231 billion.
With over 7.8 million tonnes of LNG delivered in 2018 (expected to rise to at least 10 million tonnes in 2019) and an extensive global trading and logistics network developed over a decade of delivering to customers, Vitol is one of the largest and most experienced independent traders of LNG. Its LNG portfolio comprises multiple medium and long-term contracts which are underpinned by contracts with relevant infrastructure, including shipping.
About the Baltic Exchange:The Baltic Exchange is the world's only independent source of maritime market information for the trading and settlement of physical and derivative contracts. Its international community of over 640 members encompasses the majority of world shipping interests and commits to a code of business conduct overseen by the Baltic.
