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    Danish Renewables Player Exits LNG

Summary

Orsted will pay Glencore to take control of the business.

by: Joseph Murphy

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Danish Renewables Player Exits LNG

Danish renewable energy producer Orsted has agreed to divest its loss-making LNG business to Glencore, it said on December 18.

Orsted, which is focused on wind, solar and bioenergy generation, said it would pay Glencore to take control of the business, which consists of a long-term regasification capacity agreement at the Dutch Gate LNG terminal in Rotterdam, as well as five LNG purchase contracts.

The regasification deal covers 3bn m3/yr of capacity up until 2031.

“Even though Orsted’s LNG team has performed well during the last few years, the business has been loss-making and is projected to remain so for years to come,” the company said. “Further financial improvements would require further contractual commitments.”

Orsted wants to expand its renewable energy globally, and said LNG would not play a part in this strategy. The deal, due for completion next year, will positively impact the company’s core earnings (Ebitda) from 2020 onwards, even though it will book a loss on the transaction itself.

Glencore and its rivals Gunvor, Trafigura and Vitol have traditionally focused more on oil trading but have moved into LNG in recent years to grab a slice of the growing market for spot trade. Gunvor expects to expand its LNG delivery by 45% this year to 16mn mt, while Glencore recently said it expected to boost its trade to 11mn mt. Trafigura, meanwhile, has reported around 10.7mn mt of voumes for this year, and not far behind is Vitol, which forecast in September it would deliver at least 10mn mt.