FINANCIAL TIMES TUESDAY JULY 17 2012

FINANCIAL TIMES TUESDAY JULY 17 2012

Commodities

Commodities
Slow spin: crude oil now
trades at about $100 a
barrel, well below the $147
a barrel level of 2008
AFP

In This Issue

Leading trading houses race

to get in on bumper profits

METALS STORAGE Warehouse wars

have created long delivery delays

and infuriated consumers such as
Coca-Cola and PepsiCo Page 4

Degree courses under

scrutiny

QUALIFICATIONS

Many current
CEOs began on
the bottom rung.
Can academic
training match
skills learnt
on the job?
Page 5

China experiences falling

demand for big coal

FADING FORTUNES Policy shifts in

Beijing are leading traders to ask if

the glory days are over for the
black stuff, raising concerns the
countrys appetite for commodities
in general is waning Page 6

US weighs the cost

of gas exports to
economy
LIQUID NATURAL
GAS Fledgling

efforts to exploit
export markets
could be
hampered by
domestic political
concerns
Page 7

Contributors
Javier Blas
Commodities Editor
Jack Farchy
Markets Reporter
Gregory Meyer
Markets Reporter
Leslie Hook
Beijing Correspondent
Emiko Terazono
Online Commodities Editor
Adam Jezard
Commissioning Editor
Steven Bird
Designer
John Wellings
Picture Editor
For advertising details, contact:
Ceri Williams on +44 (0)20 7873
6321, email ceri.williams@ft.com, or
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or your usual representative
Front page illustration: MEESON

Supercycle runs out

of steam for now
C

Javier Blas
considers the
outlook for the
growth in prices
and asks if we are
experiencing a lull
or if the end is near

itius, altius, fortius.

Mirroring the official motto of the
Olympic
Games,
the commodities market has
been faster, higher and
stronger during the past
decade.
Never in the modern history of the global economy
has the price of so many
commodities from oil, to
metals, to agriculture
risen as much and stayed as
high for so long.
The price increase has
come to be known as the
commodities supercycle: a
rare period of higher costs
underpinned on the demand
side by the industrialisation
and urbanisation of emerging
countries,
notably

China, and on the supply

side by years of under
investment during the 1980s
and 1990s.
Only a few months ago
the supercycle looked robust
enough to continue for
years, if not decades. After
all, China may already be
industrial and urban, but
other countries such as
India and Indonesia are
ready to follow its example.
But just as with athletes
following their strenuous
events in the Olympic
Games the commodities
supercycle is showing signs
of fatigue. Yet it would be a
mistake to say it is finished
completely. Rather, the
supercycle is entering a less
intense phase, in which

prices are likely to plateau

at about their current elevated level rather than continue to rise and rise, as
happened in the previous
phase between 2002 and
2012.
Raw material costs are,
therefore,
unlikely
to
plunge. And with supply
and demand so finely balanced, any sudden drop in
production caused by bad
weather, a strike or military
conflict, for example, could
send prices sharply up to
fresh record highs.
The scale and duration of
the commodities supercycle
matters far beyond the dayto-day business of raw materials markets and trading. It
directly affects many of the

Supply, demand
and prices suggests
the supercycle will
continue, but . . . a
bit less super and a
bit less cyclical

worlds largest basic industries, including mining companies such as BHP Billiton
and Rio Tinto, oil and gas
groups including ExxonMobil and BP, and agribusiness
companies including Deere
& Co, the maker and distributor of agricultural, commercial
and
consumer
equipment, and Cargill, as
well as countries ranging
from Saudi Arabia to Chile,
which are dependent on
natural resources output for
their prosperity.
After a decade of rising
prices interrupted briefly by
the global financial crisis of
2008-09, prices for many
commodities have fallen
back from record highs in
recent months. But they
remain at a much higher
level than before the supercycle started a decade ago.
Crude oil, for example, is
trading at roughly $100 a
barrel, well below the $147 a
barrel level of 2008. But it
remains well above the $18.5
average of the 1990s. This is
the same for many commodities. Iron ore is at about
$135 a tonne, below the peak
of almost $200 but still well
above pre-supercycle levels
of $15-$20. And the price of a
handful of commodities is
moving
above
previous
highs because of supply disruptions: soya beans, for
example, have traded in
July at $16.73 a bushel,
above the record high they
set in July 2008 and more
than double the pre-supercycle levels of $7 a bushel.
Supply,
demand
and
prices suggest the supercycle will continue, but it will
be a bit less super and a bit
less cyclical. Prices are
likely to settle higher, with
periodic spikes around their
new normal level.
The supercycles demise
has been pronounced
wrongly before. In the
2008-09 global financial crisis, the World Bank said it
was best understood as yet
another cycle in a long history of commodity price
cycles. It compared the
surge in prices that started
in 2002, as Chinese demand
for raw materials accelerated and the global economy
enjoyed steady growth, to
past boom and bust
cycles, such as the one that
followed the 1970s oil crisis.
Others echoed the World
Banks view, dumping commodities futures and the
shares of natural resources
companies. Yet commodities
recovered sharply, suggesting the financial crisis
would be no more than a
temporary blip, the effects
of which would be outweighed by robust demand.
Now the question traders
and analysts are debating is
whether the current drop in
prices signals the real end of
the cycle.
Ric Deverell, head of commodities research at Credit

Suisse, summarised the

view of many when he
asked in a note to clients
whether the market was in
front of a cyclical dip, or
the beginning of the end.
Mr Deverell, echoing a
widely held view, says
paraphrasing Noble prizewinning economist Milton
Friedman that broad
changes in commodity
prices are always and everywhere a function of global growth.
As
global
economic
growth recovers in years to
come, so will commodities
prices. As such, the current

phase is just a pause in the

supercycles
continuing
spin.
But as China heads into a
sustained period of slower
and
less
commodity
intensive growth, investors are growing worried
that the years of doubledigit percentage price gains
for commodities across the
board are now over.
Commodities prices may
spike from time to time as
food raw materials are
doing right now. However,
the gains will no longer be
synchronised across energy,
food, metals and minerals.

The change would mean

few opportunities for traders and investors.
Long-only passive investors tracking popular commodities indices such the
S&P GSCI and the DJ-UBS,
who have simply ridden
year-after-year price gains
without worrying about the
difference between, say,
aluminium and cocoa, are
unlikely to make as much
money.
Equity investors will also
have to become choosier,
discriminating
more
between oil explorers and
copper miners. However,

the change in climate provides opportunities to other

investors.
Private equity in particular is benefiting from the
drought of credit as banks
take a step back from the
sector. The commodities
trading houses themselves,
with their renewed appetite
to expand vertically across
the supply chain, may well
benefit too.
The supercycle may be
deflating a bit, but the consensus is that a bit of
strong global economic
growth may well inflate it
again.

FINANCIAL TIMES TUESDAY JULY 17 2012

FINANCIAL TIMES TUESDAY JULY 17 2012

Commodities

Commodities

Storage stacks up for traders

Metals warehouses
Jack Farchy says a
former backwater
has now become
highly profitable

he stacks of metal
stretching in every
direction look alike
to the untrained
eye. But for Charles Bucknall, managing director of
warehousing
company
NEMS, each pile is judged
on how efficiently it can be
stored and moved.
One squat heap of darker
metal in the nondescript
shed in Sunderland, northeast England is lovely fullplate cathodes nickel,
which is valuable and
dense, stacking 6 tonnes to
each square metre. Another
pile of knobbly aluminium
wrapped in a piece of wire
is terrible old ingots, hard
to handle, and packing as
little as 3 tonnes per sq m.
Such prosaic considerations are bread and butter
for warehouse companies.
But they disguise a revolution that has transformed
the industry from a backwater of the metals world to
a cash cow for banks and
trading houses.
As slack demand and low
interest rates spur traders
to hold large quantities of
metals from aluminium to
zinc, storage has become
enormously profitable. The
biggest names on Wall
Street such as Goldman
Sachs and JPMorgan, as
well as leading trading
houses, have been racing to
buy warehousing companies and get in on the
boom. Mr Bucknall calls the
current boom the halcyon
days of the warehousing
industry.
The reasons for the
upturn in fortunes are
straightforward. When the
global economy fell into
recession in 2008, demand
for industrial metals dried
up, leaving banks and traders to mop up the surplus.
Inventories of metal registered on the London Metal
Exchange rose from just
1.5m tonnes at the start of
2008 to 6.2m tonnes by the
end of 2009. This year,
inventories hit 7m tonnes.
The increase in stocks
feeds straight through to
warehouses revenue. All
warehouses are making
money at the moment, Mr
Bucknall says, but you
need to make money in
order to pay for the costs of
bringing the metal in.
Charging up to $0.53 per
day for each tonne of metal
stored, the global LME
warehousing industry could
see revenues of as much as
$1bn this year, according to

Showing its mettle: Charles Bucknall, NEMS managing director, says warehousing is enjoying halcyon days

Total LME inventories

LME warehousing capacity

Million tonnes

Number of warehouses

Others (owned by traders) 22

NEMS

C. Steinweg (independent)

Others (independent)

95

NEMS (Trafigura) 30
CWT (MRI Trading)

Henry Bath
(JPMorgan)

0
2002 03

04

05

06

07

08

09

10

169

36
104

148

Pacorini
(Glencore)

130
Metro (Goldman Sachs)

11 12

Sources: Bloomberg; LME; FT research

figures from the LME and

industry executives.
A large share of that pot
is controlled by the four
leading companies. For
example, Henry Bath, a 218year-old logistics group that
was bought by JPMorgan in
2010, saw its net profits
surge from just under $30m
in 2008 to $114m in 2009,
and $72m in 2010, according
to Companies House filings.
C Steinweg, a privately
owned storage and logistics

company in Rotterdam, has

the largest network of LMEregistered warehouses and
makes profits of about
$150m a year, industry executives say. The other two
leaders are Pacorini of Italy
and Metro International in
the US.
For Mr Bucknall, the
industry has come full circle. He cofounded NEMS in
the last great industry
boom following the collapse
of the Soviet Union in the

1990s. Russians were heaving aluminium out and it

was going into car parks, so
we set up an LME warehouse, he says.
The current wave has
propelled NEMSs expansion. It has shifted its focus
from its back yard in Sunderland which, two centuries on from Britains industrial revolution, is no longer
an important centre for
metals demand to Asia.
NEMS has grown a lot,

The biggest
change has been
the rush to grab
the warehouse
operations

he says. We had small

warehousing capacity in
China, now we have the
most extensive range of
warehousing in China of
everyone.
The expansion has been
helped following its acquisition by Netherlands-based
Trafigura, the second-largest metals trader, in a wave
of consolidation that began
in 2010. Elsewhere, Goldman Sachs bought Metro
for almost $550m, Glencore
bought Pacorini for $209m,
while other banks and traders, including Barclays,
Noble Group, and Louis
Dreyfus Commodities, are
attempting to enter the
industry by buying smaller
companies.
The biggest change has
been the rush to grab the
warehouse operations in
the past three years, Mr
Bucknall says.
But the change of ownership of about 60 per cent of
the global metals warehousing industry in that time
has created tensions. LME
rules require warehousing
companies to be operated at
arms length. But the shift
of ownership to banks and
trading companies has triggered a wave of warehouse
wars as each trader tries
to store metal in their own
warehouses.
The result is long queues
to take delivery of metal
from some LME warehouses
that have created a disconnect between LME prices
and the physical market
and infuriated metal consumers such as Coca-Cola,
GM and PepsiCo.
Mr Bucknall concedes
its terribly difficult to get
metal at the moment. But
he argues the queues will
disappear when the global
economy recovers. When
real consumption comes
back it will erode gradually
the queues in these critical
mass operations.
More worrying for the
recent acquirers of warehousing companies may be
the long arm of regulators.
Aluminium consumers have
already been complaining
in private to regulators, say
people familiar with the situation. Moreover, Federal
Reserve
regulations
in
theory restrict US banks
from
owning
physical
assets, even if banks can
find a loophole when it
comes to warehousing.
Yet bumper profits trump
such concerns as warehouse owners enjoy their
success. Glencore even
attempted a merger of its
warehousing business with
Steinweg, with talks breaking down only over price.
As JPMorgan says: The
firm is not considering a
sale of Henry Bath. We are
committed to this business.

Universities provide new blood for sector

Qualifications
Emiko Terazono
asks if degrees can
match on-the-job
training schemes
There is a long list of executives in the commodities
world who started their
careers at leading resource
groups and trading companies. Among them are Ian
Taylor, chief executive of
oil trader Vitol, who started
at Shell: Glencore boss Ivan
Glasenberg, who started in
the trading houses traffic
department in Johannesburg: and Marco Dunand,
Mercuria co-founder, who
worked at Cargill after
graduating from the University of Geneva.
Commodities trading has
traditionally been something learnt on the job and,
until the 1990s, the large
companies took in dozens of
interns and trainees a year,
teaching them the basics.
Many oil and energy traders
learnt their skills at BP and
Shell, while Cargill taught
its large trainee intake how
to trade grains and other
agricultural commodities.
However, those numbers
of interns have shrunk and
resource companies are
only taking in a handful of
graduates each year. The
question is whether universities
offering
various
courses in commodities
trading and trade finance
can fill the gap.
Most companies say they
cast their net far and wide
when recruiting, and do not
limit themselves to graduates with specialist qualifications in commodities.
However, technical knowledge adds an edge to highly
motivated candidates with
a strong academic background, say those who have
been on the courses.
Cass Business School in
London offers one-year masters courses in shipping,
trade and finance, and
energy, trade
and finance,
while Paris
Dauphine
University
has a masters course
on
financial

markets, commodity markets and risk management.

We try to open students
minds,
says
Philippe
Chalmin, who teaches economic history at Paris Dauphine. In order to succeed
in commodities, you need
to be flexible, he adds.
The Singapore Management University set up its
International Trading Institute in 2007, providing
finance and commodities
trading courses at the
undergraduate level as well
as for executives and professionals.
SMUs launch of commodities trading courses has
been part of Singapores
push to establish itself as a
hub for commodities in an
effort to rival that of
Geneva. The courses add to
the available pool of talent
for the commodities trading
groups, as well as for the
companies which service
the industry.
The University of Geneva
and the Geneva Trading
and Shipping Association
(GTSA), which represents
trading companies and
banks active in commodities, created a master's
degree in international trading, commodity finance and
shipping in 2008.
Students need to be hired
on a part-time basis by a
trading house, shipping
company, specialised commodity finance bank, or a
commodities services company based in the Lake
Geneva region to enrol in
the 18-month course.
Geert
Descheemaeker,
secretary-general of the
GTSA, which was set up in
2006, says: We felt we
needed to do something
about training young people
to interest them to go into
our business.
He adds that there was a
need for the industry to
engage with local talent in
their 20s, who were otherwise interested in finding
jobs only at the UN or in
investment banks in Switzerland.
About two-thirds of the
students on the course are
from
Switzerland
and
neighbouring France, while
the rest come from as far as
China, as well as Russia
and Bulgaria.
The course distinguishes
itself from other university
degrees by having
the
industry
finance the training of the students by making part-time
employment
in the commodities secGeert
Descheemaeker:
We felt we needed
to do something
about training
David Wagni

tor mandatory while they

study. Mr Descheemaeker
says 95 per cent of those
who go through the course
stay with the companies
and banks who backed
them.
When the course was
launched, the University of
Geneva struggled to gain
recognition from both students and business, and the
course started with 16 students in the first year. How-

ever, as word spread, there

has been a rise in applications, and last year, the
number of students totalled
34. Companies that have
sponsored students in the
past include Cargill, Mercuria, Louis Dreyfus, Vitol,
Trafigura, Coca-Cola, Bunge
and BNP Paribas, which
has a large commodities
trade finance operation in
Geneva.
SGS, the inspection com-

pany, and auditors Ernst &

Young have also been supporters of students in the
programme.
The recent downturn in
the commodities markets
and the global economic
outlook may, however, have
had an effect on the ability
of companies to offer positions to students.
Eliane Palivoda Herren,
programme co-ordinator for
the masters course at the

University of Geneva says

that some of the companies
that have supported the
course in the past are
unsure about whether they
can hire staff during the
coming academic year.
However,
says
Mr
Descheemaeker, many of
the GTSA members realise
the importance of maintaining their support to keep
the programme going. Its
really the future, he says.

FINANCIAL TIMES TUESDAY JULY 17 2012

FINANCIAL TIMES TUESDAY JULY 17 2012

Commodities

Commodities

US weighs
the cost of
gas exports
to economy
LNG
Political worries
could hamper plans
to sell abroad, says
Gregory Meyer

In a hole: trains from western China have been delivering coal into ports already piled high with the stuff at the same time as Beijing aims to reduce its reliance on the commodity

Reuters

Chinas demand for big coal wanes

Fading fortunes
Leslie Hook finds
policy shifts are leading
traders to ask if the
glory days are over

s trains loaded with coal

chug their way from far
western China toward
the teeming eastern seaboard, their long migration across
thousands of kilometres, through
mountains and deserts, epitomises
Chinas huge energy needs.
The energy vacuum on Chinas
east and southern coast extends
like a long arm, not only to coal
mines in the most remote corners
of China, but also across the
world, from Australia to Indonesia to the US.
China is the worlds biggest consumer of thermal coal, which it
burns in power stations to fuel its
industries and megacities, and the
country is a key driver for global
coal markets.
But, although Chinas economy
is still humming along with
growth forecast above 7 per cent
for this year, coal demand has a
much gloomier story to tell.
Coal prices in Australia have

slid 30 per cent since January,

partly because of slack Chinese
demand. Meanwhile all those
trains from western China and
ships from Queensland have
recently been delivering their coal
cargoes into ports already piled
high with the stuff.
Last month coal inventories at
Qinhuangdao, a key trading port,
hit levels not seen since the financial crisis of 2008, although they
have since fallen slightly.
There is a lot of coal floating
out at sea, said Liu Jihong, a
Dalian-based purchasing manager
for coal trader SCM. We stopped
importing at the end of May, he
added, citing weak coal demand
because of a slowing economy and
more electricity being generated
by hydropower.
Behind the recent coal build-up
looms a larger question: is Chinas
broader appetite for commodities
waning in the long term? China
has been the engine driving the
global commodities supercycle
over the past five years, but this
year has seen a clear slowdown in
Chinese demand growth across
many commodity classes. While
the recent dips in Chinese
demand have been driven in part
by the eurozone crisis and a weak
US recovery, Chinese traders say
a more fundamental shift is also

at work as China is moving

toward a slower, less commodity
intensive growth model. Some ask
whether this could be the beginning of the end of the global commodities supercycle.
Chinas leaders have been
remarkably clear about what they
want this shift to look like. Last
year Beijing set out targets for the
12th five-year plan (which covers
2011 to 2015), the impact of which
is now beginning to manifest

Beijing aims to reduce

reliance on coal as an
energy source and may
ultimately cap coal
production, too
itself because many detailed
implementation plans for the current five-year period have only
been released over the past six
months.
Among the targets that will
have the most impact on commodities are Beijings plans to reduce
energy intensity relative to economic output by 16 per cent by
2015; cut fossil fuel dependence to
87 per cent of energy supply; and
boost natural gas consumption to

8 per cent of energy supply, from

4 per cent in 2010.
Chinese leaders have also
vowed to conduct research for a
possible carbon tax or emissions
trading scheme, which would
have big implications for fuels
such as coal and crude oil, and
the first pilot carbon trading
schemes will start next year.
At the same time restrictions on
the property sector, which are
separate from the five-year plan,
have cooled Chinas construction
market over the past year, biting
into demand for steelmaking
ingredients such as iron ore and
coking coal.
While it will take years for
Beijing to actually implement its
vision of a country that is no
longer dependent on resource
intensive,
highly
polluting
growth, the shift will have a profound effect on commodities markets globally. The effects will vary
greatly
between
commodity
classes.
Soft commodities such as corn
and soybeans are expected to see
continued demand growth, as rising incomes and urbanisation
mean the Chinese spend more
money
on
meat
and
processed foods.
Natural gas is also likely to
benefit as Beijing replaces coal-

fired power stations with gas-fired

ones, and as more Chinese cars
run on natural gas instead of petrol.
Analysts expect Chinas gas
demand to grow by about 15 per
cent per year for the next five
years.
Other commodities, such as
coal, are set to see long-term
declines in demand growth
because of shifting policy priorities. China is the worlds biggest
producer of coal by volume and is
also one of worlds top importers
of thermal coal. But that could
change. Beijing aims to reduce
reliance on coal as an energy
source and may ultimately cap
coal production too, although
such a cap would be difficult to
enforce.
The US-based Lawrence Berkeley National Laboratory estimates
Chinas coal demand will peak
around 2030 because of substitution from other energy sources,
and that overall energy demand
will plateau around 2040.
Meanwhile coal traders are
acutely aware their industry is no
longer finding favour in the eyes
of Beijings policy planners. As
one trader for a state-owned coal
company put it: The glory days
of big coal are already behind us.
Now we are in a sunset period.

One molecule of natural gas

is chemically the same as
another, but where it is
found has enormous implications for global politics.
The price of gas in the US
following the shale drilling
boom is now a third of that
in western Europe and a
fifth of that in Asia.
In another commodity
market such as corn or oil
merchants would seize on
these price disparities to
buy in the US and ship it to
the expensive continents.
This would narrow the
price gap until profit margins become thin, as they
mainly are for international
physical trading houses.
With gas it is not that
simple. Expensive facilities
are needed to cool the gas
to -162C so it can be put
into ocean-going tankers.
But companies are now trying. Their efforts have
important implications for
US gas supplies, energy
security and prices.
As of last month, more
than a dozen applications
had been filed to export liquefied natural gas (LNG)
from the contiguous US
mainland. The total capacity of all the applications is
18.7bn cu ft per day, or 28
per cent of US consumption.
Proponents argue the
export liquefaction terminals will help drain a market so glutted that prices
fell to a 10-year low this

year. The impact on domestic US prices, where gas is

used for heating, cooking,
generating electricity and
manufacturing, will be
modest, they say.
Chemical and manufacturing groups warn exporting LNG is like giving away
a new-found comparative
advantage for the US economy. Some lawmakers, analysts and even hedge funds
bet the shipments will dramatically increase prices as
they match global markets.
The US already exports
natural gas in its naturally
gaseous state via pipeline to
Mexico and Canada, but
volumes were only 3.93bn
cu ft per day last year. The
state of Alaska also exports
a little LNG to Japan. US
dry gas production totalled
66.7bn cu ft per day in 2011,
the most on record.
The US Department of
Energy must approve each
export project. By law, it
must find that exports to
countries with which the
US does not have free trade
agreements the bulk of
them do not harm the
public interest.
The department made
such a finding on the only
application it has so far
approved, for Cheniere
Energys 2.2bn cu ft per day
Sabine Pass project in Louisiana. But a flurry of other
proposals following Sabine,
which was first built as an
LNG import terminal, has
saddled DoE officials with a
difficult
question:
how
much gas can the US export
before it hurts? In its Sabine Pass approval, it wrote:
The cumulative impact of
these export authorisations
could pose a threat to the
public interest.

US natural gas
Bn cubic feet per day

Dry gas production*

Gas consumption*
Gas imports*
Gas exports by pipeline*
Pending LNG exports
from contiguous
US states
0
Sources: EIA; DOE

* 2011

20

40

60

US Department of Energy found exports from the Sabine Pass project in Louisiana do not harm the public interest

Every other project has

since been delayed as the
DoE considers this aspect.
A study by its independent
analytical and statistics
wing, the Energy Information Administration, found
that, between 2015 and 2035,
the LNG exports would add
3 per cent to 9 per cent to
consumers gas bills and
between 1 per cent and 3
per cent to electricity bills,
depending on the volume
and pace of exports.
Larger export levels lead
to larger domestic price
increases,
while
rapid
increases in export levels
lead to large initial price
increases that moderate
somewhat in a few years,
the administration said.
The study examined cases
of between 6bn cu ft per
day and 12bn cu ft per day
of exports, well below the
current slate of projects.
Earlier this month, LNG
prices in Japan and Korea
were $14.15 per m British
thermal units, gas in the
UK was $8.634 and the US
benchmark
was
$2.737,
according to Platts, the
energy information service.
Teri Viswanath, director
of commodity strategy at
BNP Paribas, says aggressive exports would raise
prices and that electric utilities would be hit hardest.
Sending gas abroad would
mean utilities burn more
coal: US consumers will be
competing to some extent
with international consumers for US gas. Thats the
part that becomes difficult
and challenging from a
political standpoint.
After an uncontroversial
start, new LNG exports
have indeed become a political battleground. Congressional Democrats Ed Markey, a Massachusetts congressman, and Ron Wyden,
congressman from Oregon,
have urged the White
House to limit gas exports.
At issue is whether the
US wants to export its
energy wealth in the form
of an unfinished commodity

or as products such as
petrochemicals or steel, to
which American workers
have added value. The
stakes are high. A December study by IHS Global
Insight on behalf of Americas Natural Gas Alliance
found shale gas would significantly boost economic
growth and tax revenue,

but assumed LNG exports

would not top 2 per cent of
domestic production.
Eurasia Group, a political
risk consultancy, says that,
whoever wins the White
House in November, new
LNG exports will probably
only reach 6bn cu ft per day
by 2020 as technical, local
and political challenges

slow the pace of project

development.
Some energy hedge funds
have taken to buying longterm futures as they eye the
prospect of US gas converging with the rest of the
world. It is a risky wager,
dependent not only on
demand for heat and light,
but on political winds.

FINANCIAL TIMES TUESDAY JULY 17 2012