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GDF Suez Pulls Plug on Gas, Power Spec Trading

GDF Suez Energy North America last week shut down its speculative natural gas and power trading operations, which were based in Houston.

"After many challenging years in our speculative trading business in North America, we've made the difficult decision to close it, effective Nov. 20," spokeswoman Julie Vitek said in a statement.

"Eight traders were affected by this decision. All would be eligible to apply for other jobs within the company as they become available."

By most accounts, the closing of the GDF Suez desk is not likely to have a major market impact. "From what I saw they weren't a huge book, at least what I saw," said a Houston-based trading adviser.

"While they didn't state it, I think it could be a little fallout from Dodd-Frank. These guys don't want to be swaps dealers, and you've got many extra layers of reporting and hoops to jump through. If you are trading spec you are kind of a swaps dealer."

The company said it "will remain active in all of the competitive U.S. markets where we have a presence, both in wholesale power generation and in retail electricity sales, and will continue managing the various commercial activities for them, for example, hedging, dispatch (for the wholesale generation business), fuel procurement, and Renewable Energy Certificate purchases (for the retail business)."

Another factor potentially entering into the equation is the increasing difficulty marketers are having adding value to the buying and selling of physical gas. With basis differentials collapsing into key Northeast markets, the margin left for a marketer is getting thin indeed.

"...[T]he once Northeast premium market has all but dissipated today," thanks to abundant supplies of gas from the Marcellus Shale, not to mention the Utica Shale, which has yet to come into its own, Credit Suisse analysts said in a note last August (see Shale Daily, Aug. 14).

In June, Oneok shut down its natural gas marketing business in a nod to the reality of flattened basis spreads and the more challenging gas trading environment (see Daily GPI, June 13). JPMorgan Chase & Co. and Hess Corp. have also recently announced their exits from gas marketing for varying reasons (see Daily GPI, July 31; July 29).

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