Oliver Wyman is a global management consulting firm that uses industry expertise to help utilities and other energy firms maximise value as they tackle the challenges presented by the energy transition.
With EAGC & CEE around the corner, Gastech Insights spoke with Roland Rechtsteiner, Partner, Oil and Gas at Oliver Wyman to hear a trader's perspective on the European gas market dynamics and the burgeoning trends which are shaping the industry.
Gastech Insights: What impact have disruptive technologies already had on the commodity trading market and how are they likely to transform the sector in future?
Roland Rechtsteiner: Most players have been able to bring down costs using automation tools. We see a few successful blockchain pilots, but the inertia of the sector is non-negligible and frankly, at-scale benefits are still questionable for commodity trading applications.
Predictive analytics, however, are on everybody’s mind and currently successfully being developed by all major players in the market. First-movers are already reaping the commercial benefits and fast-followers committing significant resources. For smaller players, it is difficult to keep up as capital and human resource requirements are high. In the longer-term, this will lead to a stronger bifurcation of the market and change trading operating models.
Gastech Insights: What trends do you see developing in the European utility sector, will utilities continue to divest non-core assets?
Roland Rechtsteiner: In many cases, utilities did not offload non-core assets. They have divested from assets that one might have considered core at some point. The merits of vertical integration are challenged. Today, many utilities look for new sources of revenue, be it infrastructure (e.g. broadband) or digitally enabled customer interfaces (e.g. smart home, etc.).
Gastech Insights: What new opportunities will the commoditization of the LNG market bring for traders?
Roland Rechtsteiner: As the LNG market rapidly becomes more liquid, the availability of trading instruments is also increasing. However, more importantly, we expect margin to move downstream, e.g. as LNG displaces higher cost fuel oil in power generation and transportation. Traders can stimulate demand and secure a supply margin in addition to monetising optionality.
Gastech Insights: How is the market adjusting to higher oil and gas prices, and is the bullish run sustainable?
Roland Rechtsteiner: The fundamentals are stable, however, geopolitical uncertainties have been particularly prominent in recent months. In some developing markets with weaker local currencies, fuel prices are hitting prohibitive levels. Most clients see the oil market in the $70-90/barrel range for 2018/2019.
Gastech Insights: What are your clients most concerned about, and what advice do you have for them to overcome the challenges ahead?
Roland Rechtsteiner: New business models and more efficient operating models in the face of digitalization and energy transition rank high on the management agenda. Advanced predictive analytics tools, as well as downstream growth, are core to additional value creation. As always, the key is to make concerted steps cognizant of their financial and strategic merits, rather than just placing bets.
Gastech Insights: You are moderating a panel on the Traders’ Day at EAGC in Berlin next month. Why should market participants attend the conference?
Roland Rechtsteiner: It has been an eventful year, global gas demand is increasing and the LNG market has been growing steadily. EAGC provides a good forum to reflect and look ahead.
If you would like to hear more about the European gas and LNG market from a trading perspective, register to attend EAGC | CEE, 7-9 November in Berlin to participate in the Traders Day discussions on 7th November. Do not miss out and book your place today.
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