Jon Olson, co-founder of TruMarx Data Partners Inc., believes the liquefied natural gas (LNG) business is “hamstrung” by antiquated processes to buy and sell the super-chilled fuel, but his company is among many that are racing to digitalize the space and boost liquidity with a modern trading platform.
NGI: Can you briefly explain TruMarx’s business and its online transaction platform?
Olson: TruMarx is the parent company and the developers of the Comet marketplace. Over the past 10 years, Comet has facilitated nearly a quarter of a million physical deliveries between its 300-plus subscribers, including multinational [and] national energy companies, banks, trading companies and utilities. The platform currently supports custom, confidential and bilateral transactions in 16 commodities, including most recently LNG.
NGI: When did the company start facilitating LNG trading and why exactly did it enter the sector?
Olson: Following our success in supporting natural gas and power trading in North America, we opened our Singapore office in 2018 with an intention to focus on the ever-growing LNG market’s trading requirements.
Commodity markets in general, and particularly the physical side of the energy commodities
business, is hamstrung by significant friction from a reliance on overly manual, proprietary and antiquated processes. Specifically, LNG transactions are often benchmarked to other commodities like crude oil and pipeline natural gas in various geographic regions. Asia, the largest LNG demand center, routinely benchmarks their LNG purchases to crude oil, creating significant price dislocations. There is a lack of liquid risk management tools available and little price discovery.
Traditional LNG transactional processes require slow, burdensome and expensive use of intermediaries throughout each step, including collateralization, clearing, storage, fractionalization, currency settlements, margin, risk compression and other steps. Internal communication is tedious and stymies liquidity. Furthermore, given the rapid growth in LNG volumes, ever-increasing trading velocity and transactions that are increasingly being traded spot, market participants are facing the real possibility that their manual processes will be overwhelmed, or they will have to pass on available transaction opportunities.
The market players, including LNG market experts on our LNG advisory board, were calling for digitalization and we are able to provide just that.
NGI: Can you explain how LNG is transacted on Comet?
Olson: Originators enter trade details into our request for proposal (RFP) tool and distribute to as many counterparties as desired through to response, which is confidential to all but the originator. A comparison tool allows buyers and sellers to view competing offers and supports negotiation and execution. The trade then moves through Comet’s collaboration tool for ease of internal approvals and an automated award notification is activated. By using Comet our clients report their trading cycles are compressed by up to 70%.
NGI: What kind of subscribers is Comet serving?
Olson: Comet provides services for the global energy market, supporting transactions in natural gas, power, natural gas transportation and storage, heatrates, renewable energy certificates, biodiesel, renewable identification numbers and LNG.
The Comet platform was originally designed and built with the collaboration of some 85 energy institutions. We support the whole spectrum of buyers and marketers.
NGI: In what part of the world are your LNG subscribers trading most?
Olson: Asia currently represents 75% of the LNG market consumption. Saying that, we see the green shoots of development in other areas of the world as we regularly speak with companies looking ahead to future LNG growth.
NGI: Are the company’s efforts to further develop its LNG transactions focused on any particular part of the world?
Olson: Our LNG business focus is on Asia. However, we also work with companies around the world as they begin to push their LNG trading into the Asia-Pacific region. By using Comet, these companies have the ability to instantly access over 300 trading counterparties.
NGI: Do you think your platform will help create more price transparency and liquidity in the global LNG market?
Olson: Comet is all about liquidity – allowing for a faster and more connected way for all players in the market to compete for and secure the best deals. Transparency and liquidity are different beasts. Saying that, we are 100% confidential. Comet does not record or post deals and prices like an auction site or a bulletin board. Only the originator of the RFP sees all prices, no data is shared, seen or sold to the market.
NGI: Does that mean the company has no plans to utilize bids and offers on its platform to help create a trade-based LNG price index?
Olson: This is probably a good place to talk about our LNG advisory committee. Made up of some of the most experienced members of the LNG world, our advisers provide us a direct line to the industry. They help us to understand what our customers need to perform better, faster, more efficiently and thus, more competitively.
While we have no specific plan to get into the data business, we certainly have the experience and ability to do so. However, until our customers provide direction in this area, we remain focused on providing solutions to empower those trading LNG.
Editor’s Note: This segment is one in a regular series by NGI’s LNG Insight. Conversations with experts explore news and issues throughout the global LNG market that matter most to the industry in North America and beyond. Excerpts have been edited for brevity and clarity.
Jon Olson is CEO of TruMarx Data Partners, which launched the Comet trading platform in 2009. He has more than 20 years of experience in the energy and commodities market data and software industries, as well as previous experience working in investment banking, venture capital and securities brokerage.
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