The post-COVID economic recovery in 2021 had already bolstered demand for global gas and LNG talent before Russia’s invasion of Ukraine in February 2022. But with the war in Ukraine disrupting the global energy map and trade flows, gas and LNG utilities, power companies, traders and producers across different regions have been sharpening their hiring requirements in an increasingly competitive talent market.
EU’s Contingency Plan
The repercussions of the war in Ukraine on global gas markets are continuing to unfold with reports last week that Russia’s state-controlled gas exporter Gazprom had cut flows to several European Union countries. Gazprom had already cut gas supplies in April to Poland, Bulgaria and Finland for not complying with a Kremlin decree to pay their bills in roubles instead of euros or dollars.
With Russian gas accounting for at least a third of Europe’s gas needs, EU nations have been under mounting pressure to cut their reliance on this source while still pursuing efforts to deliver on the energy transition agenda.
But in response to reduced gas flows from Russia last week, Germany is turning to coal-fired generation due to increased risks of energy shortages. This is despite the EU’s REPowerEU Plan announced in May, when the European Commission said it wants to rapidly reduce Europe’s dependence on Russian fossil fuels by accelerating the transition to cleaner fuels and joining forces to achieve a more resilient energy system and a true Energy Union. Before that, in March, the Commission presented proposals to reduce the EU’s dependence on Russian gas by two thirds before the end of 2022 as part of a plan to become independent from all Russian fossil fuels “well before 2030”.
This will be challenging to achieve both from an economic and logistical perspective, not least because of the proportion of the volumes that need to be covered against a structurally tight market and high prices. In addition, news of a fire at the US Freeport LNG plant in Texas earlier this month shows just how fragile the supply chain can be.
The next winter season could bring unprecedented supply risks and scenarios. It is these very challenges and uncertainties that market participants in Europe, United States and Asia are bracing themselves for by strengthening their teams and optimizing their trading strategies. The threat of gas supply shortages from Russia has already sent gas and energy prices hitting record-breaking levels over the past months at the Netherlands’ TTF gas hub, the gas price benchmark in western Europe.
Upgrading Talent Needs
HC Group had already observed continued demand for gas curve traders in late 2021 and early 2022 as higher gas and power prices in the post-COVID economic recovery underscored the need for risk management and hedging. But as a direct consequence of the war in Ukraine, some small and middle-sized entities have been reducing their exposure on the forward market.
They are limiting their position to the next six to 12 months’ timeframe amid tighter restrictions on credit lines and liquidity provisions from banks and other financial institutions. As has been the case for many commodities, the price spikes and squeeze on liquidity spurred by the ongoing war has pushed up the cost of trading with participants struggling to afford higher margin calls and higher equity requirements.
In this context, a lot of the current recruitment efforts has been placed on either backfilling the positions left vacant by employees’ departures, or on optimizing trading capabilities around existing assets and physical operations.
But recruiters are also looking beyond next winter in anticipation of increased activity on both the procurement and supply fronts from 2023 onwards. Key gas importers such as Germany and Italy are planning new LNG import capacity from 2024 at the earliest. Germany, which imports 40% of its gas from Russia, has engaged with alternative suppliers like Qatar, which is also expected to raise its capacity to 126 mtpa by 2027, up from 77 mtpa currently. In Asia, the need to shift away from coal continues to underpin gas and LNG demand. However, in some countries like China, there are signs that high LNG prices are already causing demand destruction and reducing buying from end-users.
Elsewhere, and with new LNG liquefaction capacity being developed in the United States, HC Group expects more demand for LNG talent with experience in the European market from US LNG sellers and project developers from mid-2023 to support future origination and business development efforts. Increased activity in the US LNG export industry adds to growing demand for local gas traders in the domestic market to bridge a gap in mid-level talent with three to seven years of experience. Recruiters are increasingly turning to gas schedulers keen to grow and step into trading roles.
As observed by HC Group across its offices in the United States, EMEA and APAC, utilities and producers in all these regions have upgraded their hiring requirements, both in terms of numbers and skillsets. “Many are looking at building entire teams across front-, middle- and back-office, from traders, analysts, originators to deal structuring, business development and optimization roles,” said Josh Clayton, Senior Associate at HC Group’s energy practice in London. Those interested in LNG roles are expected to come with experience in regasification and storage activities in the European market, he added. Clayton pointed out however that, aside from the effects of the Ukraine war, new hires are also serving the diversification of company’s portfolios with products such as ammonia and biofuels as part of the energy transition.
Analysts in Demand
As part of these sophistication trends, practically all players have been strengthening their analytics functions to meet the need for enhanced risk management in increasingly interconnected gas and LNG markets. But demand for top-rate analysts is exceeding supply as many junior analysts are more interested in taking a trading seat in their next career move, as mentioned in a previous HC Insider article here. HC Group continues to see this trend across merchant traders and trading houses, resulting in trading benches becoming gradually populated by junior individuals. This is exacerbated by the growing involvement of higher-paying banks and hedge funds in commodities, who are pushing the level of remuneration up, making it challenging for other merchant traders and trading houses to compete.
This is also forcing other players such as middle-sized participants and national oil companies in the Middle East to re-align and update their compensation structures. Given the current gas and LNG market conditions and price trends, bonuses based on more transparent calculations and mechanisms, rather than on discretionary terms, look more attractive and reflective of the potential rewards that can be reaped from high risk and volatility management.
As a result, recruiters are faced with a scarcity of analysts who fit the evolving skills requirements as the digitalization of commodities trading is increasing the need for more quantitative profiles and data experts. Many have turned to data and intelligence organizations and consultancies.
To conclude, the promise of higher volatility from next winter and the variety of needs from different companies – if not competing – means talent have plenty of opportunities to choose from. In addition, the unprecedented level of uncertainty on gas and LNG markets means employers have had to be open-minded on the profile of their new recruits and salaries to acquire top-rate talent who will help them navigate the coming months and years. – FS
For queries related to HC Group’s Gas & LNG activities, please contact:
Josh Clayton, Senior Associate, HC Group's energy practice in EMEA.
Amelia Chahal, Senior Associate, HC Group's energy practice in APAC.
Andy Morrison, Director, Gas, Power and Renewables, HC Group's energy practice in the United States.