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Friday, 15 October 2010

JP Morgan enters LNG market with Cheniere deal

Wed Mar 31, 2010 6:53pm EDT

* JP Morgan to take import capacity at Sabine Pass
* Cheniere expects to buy more LNG with JP Morgan
NEW YORK, March 31 (Reuters) - JPMorgan Chase & Co (JPM.N) announced its entrance into the LNG market on Wednesday under a deal signed with U.S. liquefied natural gas importer Cheniere Energy (LNG.A).
Under the two-year deal, JP Morgan and Cheniere will jointly look for buying opportunities in the global LNG market, combining Cheniere's existing LNG assets and experience with JP Morgan's greater buying power.
JP Morgan will now have import rights for up to 2 billion cubic feet per day of gas at the Cheniere's Sabine Pass import terminal in Louisiana.
The aim is to afford Cheniere the opportunity to buy more cargoes of LNG and give JP Morgan access to an asset like Sabine Pass which gives the bank a firm foothold in the market.
"We can buy much larger quantities of LNG with the help of JP Morgan than we could by ourself," Charif Souki, chief executive officer of Cheniere Energy, told Reuters. "They have a balance sheet and we have assets, which is a pretty good match."
JP Morgan is the latest in a list of banks looking to get into LNG trading, following the likes of Morgan Stanley, Citi Group and Barclays Capital.
Morgan Stanley, probably the most established of the banks in the LNG market, owns assets it can supply LNG to in Spain and Argentina, giving it more flexibility in the market. JP Morgan's access to Sabine will provide a similar opportunity.
While the LNG market is small and difficult for new entrants to penetrate, it is growing as new production comes online and the spot market becomes more active.
"We see a market changing very rapidly and we see a greater need for intermediaries," said Paul Polosi, head of Global Power, Gas, Coal and Emissions at J.P. Morgan.
Cheniere tried to sign a similar deal with Morgan Stanley a few years ago, which did not come to fruition, but Cheniere's Souki said that now, as the market grows, a long term partnership with JP Morgan could develop.
(Reporting by Edward McAllister; Editing by David Gregorio)

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