Exxon and Chevron beef up energy trading to take on European rivals
US supermajors seek to emulate success of transatlantic peers such as Shell, BP and Total
ExxonMobil and Chevron are chasing a bigger slice of the $70bn energy trading business, expanding their operations to capture a boom in liquefied natural gas and catch up with rivals Shell and BP.
The two US supermajors have traditionally been more risk-averse than their European peers, preferring to focus on oil and gas production, but are now prioritising the lucrative sector.
“Inside Exxon, they say only three things now matter: Guyana [where the company is developing a huge offshore oilfield], the US and trading,” said one senior gas trader.
An executive at one of the companies said of energy trading that “I want to scale it now. I need all the talent.”
Exxon and Chevron are focusing on LNG, which consultants at McKinsey believe, together with gas and power, will soon eclipse oil as the biggest driver of commodity trading profits.
Both companies have appointed new heads of LNG trading, based in Asia, where demand is expected to grow the fastest. Exxon hired Sid Bambawale from Vitol to run its LNG trading business, while Chevron promoted Frankie Lee, formerly its UK manager, to lead its global desk.
The two companies have also struck a series of deals with third parties for roughly 7mn tons a year each of US LNG to expand their trading portfolios.
Exxon and Chevron were forced to watch from the sidelines two years ago when the likes of Shell, BP and TotalEnergies, along with commodity traders such as Vitol and Trafigura, captured more than $104bn of earnings before interest and tax between them, according to McKinsey, as energy prices lept in the aftermath of Russia’s full-scale invasion of Ukraine.
Those groups’ energy trading desks quickly moved to shift cargoes of oil and gas from elsewhere in the world to Europe to fill the gap as the supply of Russian gas was shut off. Profits fell back to $70bn last year, the consultancy said, while predicting that they would hit $115bn by 2030. Shell, the world’s largest LNG trader, sold 66mn tons last year, more than twice the total that it produced.
Peter Clarke, head of Exxon’s LNG division, said the US supermajor was changing its approach.
“If you go back in history, you found a customer, and you signed them up for the full offtake and you had a ship that basically went backwards and forwards,” he said. “Today it is totally different,” Clarke added, explaining that Exxon now also buys gas from other producers and pools it into a global sales portfolio.
Chevron has adopted a similar strategy, with Freeman Shaheen, president of global gas, saying customers wanted greater flexibility.
“If it is too warm or too cold they need more, or less,” he said. “If I take a step back and create a diverse portfolio of supply and a diverse portfolio of customers, we can help that happen. Now what I’m excited about is putting the puzzle together.”
The companies’ moves coincide with a rapid expansion of the US LNG industry, which is set to more than double its export capacity from 85mn tonnes a year at the start of last year to about 180mn tonnes by 2028, according to the US Energy Information Administration.
The coming surge in gas exports prompted the Trump administration to press Europe this month to sign more deals, after the EU committed to buy $750bn of energy from the US over the next three years.
“In the past, the US consumed all the gas they produced,” said Benjamin Lakatos, executive chair of MET Group, an energy producer and trader in Switzerland. “Now they have excess production, they have to sell.”
He added that LNG profits were constantly shifting along the value chain from producer to consumer. “If you are only in one segment, you have two, three good years and then a terrible year,” he said. “If you want to be successful in LNG, you need to be everywhere.”
But industry insiders caution that Exxon in particular could struggle to adapt its culture to allow trading to flourish.
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“People tend to go to Exxon and then leave around 18 months later, frustrated at having to do things the Exxon way,” said one trader.
Another analyst pointed to a different barrier for the US groups, saying “it may be difficult for them to accept paying traders more than their chief executives. That’s a mindset the Europeans got comfortable with a long time ago.”
While Shell and BP do not disclose how much their traders earn, independent traders do reveal their annual bonus pool. Trafigura, for example, shared $3bn for the first half of 2023 between roughly 1,200 shareholders, almost all of whom were traders and executives at the business.