Energy star Cominotto spies LNG arbitrage potential

There is prime opportunity to exploit the differences in regional markets for liquefied natural gas (LNG), according to leading energy investor Roberto Cominotto of Swiss & Global.

The Euro Stars AAA-rated manager, who runs the €22 million Julius Baer EF Energy Transition fund, said companies in the sector have benefited recently from strong demand for LNG infrastructure and renewed investor interest.

However, Cominotto said the burgeoning nature of the industry means there are still many inefficiencies and inconsistencies which can be exploited by investors as global demand grows.

‘It is not an international story at present, it is very much a regional story,' said Cominotto.

'There are regional price differences for LNG and the lack of a national market. It would be possible to potentially arbitrage the differences in price between these markets.’

Cominotto highlighted the stark differences between markets such as the US, which has oversupply issues and therefore low prices, and Japan, which is attempting to move more towards alternative energy sources.

‘LNG is $3 per MMBtu (one million British thermal units) in the US and this compares to $17 in Japan – if you could somehow get it from North America over to Japan, then you could capitalise on that difference,’ Cominotto said.

Pictet's Japanese equity trio, Citywire AA-rated managers Adrian Hickey, Serena Robinson and Sam Perry, recently told Citywire Global of Japan's potential to become a major global player in the sector.

At present, while Cominotto is aware of the opportunities for trading LNG, he said he is investing further down the value chain in order to benefit from the growth across the industry as a whole.

‘The plays we have in LNG are further down the value chain, so the liquefaction, shipping, re-gasification and distribution, as we believe produces of natural gas will continue to suffer from relatively low gas prices.’

The Julius Baer EF Energy Transition Fund has returned 19.1% in US dollar terms since its launch in October 2008.

This compares to its Citywire benchmark, the WilderHill New Energy Global Innovation index, which has fallen 37.5% over the same period.