Metals News
Trafigura Eyes More Investments, Headcount in Asia
industry news
May 16,2012

(Reuters) - Swiss-based Trafigura Beheer BV TRAFG.UL is evaluating more investments in Asia and increasing headcount as it expands operations to tap the region's growing energy and commodities demand, a senior company executive said.

There is a shift in the global oil demand centre from the West to East as Asian economies expand. As part of plans to tap this growth, the world's third largest independent oil trader recently announced its first acquisition of a stake in a refinery project in India.

"We've already demonstrated that we're putting investments into the region. We're going to be looking at further opportunities around our trading business," Jonathan Pegler, the director of oil for Asia-Pacific told the Reuters Global Energy & Environment Summit.

"To fit with our business needs, we may well be taking more storage in different parts of Asia."

The expansion will be across oil, bulk commodities, which include coal and iron ore, and refined metals, he said.

The Singapore office could expand to include other businesses within the group in future such as Puma Energy, its downstream subsidiary. Puma currently manages the company's joint venture storage facilities in Malaysia, Pegler said.

"We're excited about the many opportunities the region is presenting to us," he said at the company's new office in Singapore's central business district, overlooking the Marina Bay. "We were nine people in Asia in 2000 and we recently relocated to the new office that can take 250 people to cater to immediate expansion plans."

Pegler declined to comment on the number of employees at the Singapore office due to the company's policy and he also did not elaborate on the projects as they were still under evaluation.

Traders may need to store more crude flowing from West to East as more refineries are being built in Asia while those in Europe and the United States face closure on weak economics. Increasing use of cleaner fuel in Asia will also provide trade opportunities.

"We're seeing markets moving towards cleaner fuels as customers demand them and refineries make them," Pegler said.

"This is the biggest development in the product side of the market and is something that we're keen on supporting by optimizing the supply chain and assisting with the availability of cleaner fuels."


Just last month, Trafigura made its first move into refining in Asia, investing $250 million for a stake in Nagarjuna Oil Corp Ltd's (NOCL) planned refinery and storage in southern India.

The 120,000 barrels-per-day (bpd) plant - India's third privately owned coastal refinery - will process mainly sour crude and start commercial operations in the first half of 2013.

State-run Indian Oil Corp (IOC) has "recently committed to taking lots of the offtake from the refinery," Pegler said, adding that the bulk of the refinery's products will go into the domestic market.

The east coast "region is short in products and has a strong growth profile in terms of demand, making the proposition of a refinery in that location highly viable", Pegler said.

"It is also located on the major East-West trade routes, making it an advantaged location from an international trading perspective. We also like our partners in the project."

By investing in the refinery project, trade sources said Trafigura replaced BP (BP.L) as NOCL's crude supplier. International oil companies are shifting their focus to oil and gas exploration and cutting back on less profitable downstream refining and retail businesses.

"It's given Trafigura a unique investment opportunity right now," Pegler said.

Trafigura has been on a buying spree since last year, with its unit Puma Energy picking up assets in Africa, central and south America from oil majors such as Exxon Mobil (XOM.N), Chevron (CVX.N) and BP.

The purchases would soon include a majority stake in Kenya's KenolKobil as Puma stocks up on assets ahead of a possible initial public offering.


Despite the robust outlook for Asia, the euro zone political and debt crisis has cast a gloomy outlook on the global economy, causing Brent crude to slip more than 6 percent in the past two weeks.

It touched a high of $128.40 a barrel for the year in March because of supply disruption from North Sea to Africa and on fears that Western sanctions could halt exports from OPEC's second largest producer Iran. <O/R>

"The biggest risk to oil price at the moment is the European situation and declining demand that is apparent in Europe and the West," Pegler said.

"If the trend continues, I suspect we'll see weaker oil prices overall."

Pegler said the market is fairly priced with crude at $90 to $110 a barrel.

"Clearly China is impacted at the moment in terms of exported industrial output, but there are no specific Chinese worries where the underlying economy is robust," he said.

China's implied oil demand in April dropped to a six-month low and recorded its first yearly decline in at least three years, as a sputtering economy and high crude prices squeezed the appetite of the world's second-largest oil consumer.

But Pegler sought to allay concerns, saying he did not believe there was "significant demand destruction at these prices, and there's certainly no shortage in supply aside from short-term supply disruptions". He was referring to the Western sanctions targeted to stem the flow of petrodollars to Tehran to force it to halt a nuclear program.

Pegler said buyers have already found alternatives for lost Iranian barrels, but "all parties involved see the need to come up with an international solution".



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