Commodity merchant Gunvor, long known in the industry as one of the key traders of Russian oil, is studying growing opportunities in North America resulting from the shale oil boom and is looking at select trading assets including parts of JPMorgan Chase & Co.’s business, Reuters reported late on Tuesday.
Gunvor chief executive and co-founder Torbjorn Tornqvist said the firm saw opportunities in North America and had been in contact with the Wall Street bank, which put its physical trading business up for sale this summer for around U.S. $3.3 billion.
“Yes, we can confirm that we have contacted JPMorgan and we have been looking at some of their assets,” Tornqvist said. “It is an important part of our business to always look at assets. Out of the 10 we are looking at maybe one or two will go all the way.
“We are obviously in the area of looking to expand our arbitrage assets. And that goes for all commodities, not only oil, we are looking at other commodities as well.”
JPMorgan’s assets include oil storage tanks in Canada and its Henry Bath global network of metal warehouses. The bank sent out its prospectus to several potential buyers last month as it decided to sell the unit due to tighter regulations and political scrutiny on banks active in commodities.
Several years ago, Switzerland-based Gunvor handled as much as 40% of Russia’s seaborne crude oil exports via a number of long-term deals with Russian energy majors such as Rosneft, Surgut and TNK-BP.
It has moved to diversify, opening offices across the world and beginning to trade other commodities, while ceding some parts of its Russian trading book to rivals Vitol and Glencore after premiums at tenders of firms such as Rosneft spiked steeply.
Tornqvist said that shipping Russian crude now makes up less than a third of the firm’s business, as it has moved into areas such as gasoline and diesel trading, refining, production and metals.
“We are a global diversified company whereby Russia plays an extremely important role,” Tornqvist said, adding the firm was already involved in projects looking at exporting liquid petroleum gas (LPG) from the United States, a by-product of the shale oil boom that is not subject to the same export restrictions as crude.
Tornqvist said the logistical bottlenecks that have sprung up in North America due to the shale oil revolution and growing output from Canada’s oil sands had generally created attractive trading opportunities. The United States’ emergence as a major exporter of refined products such as gasoline, diesel and natural gas liquids (NGLs) is another attractive area.
“Obviously we see a lot of opportunity there, there are certain things that we have done… We are involved in LPG as a by-product of natural gas, and taking that out from the United States. And we look forward to being involved in similar projects in the future,” Tornqvist said.
“There will also be blending opportunities between the heavy crude oils from Canada and the lighter U.S. crude oils,” Tornqvist said. “There will be good opportunities in North America for many years to come.”
JPMorgan has a collection of long-term leases on more than a quarter of the oil tanks in Hardisty, Alberta, the main storage and transportation hub for output from Canada’s oil sands.
The bank holds over 6 million barrels of storage space in tanks leased from pipeline company Enbridge Inc, according to market sources. Crude traders in Canada’s oil capital Calgary say they provide a powerful trading tool.
Gunvor has also diversified into commodity extraction in recent years, buying a $400 million stake in a troubled Montana coal mine in 2011. In the past year, Gunvor has hired metals specialists and started trading.
Energy still represents the lion’s share of the business with refined products trading accounting around two thirds of the energy business.
“We have changed our strategy quietly in Russia. We have made a lot of investments in oil terminals. We are working a little bit less with volume but we try to have more quality in our trading, rather than chasing volumes,” said Tornqvist.
He said he expected the firm’s turnover in 2013 to remain near record levels seen in 2012 “with a slight bias to the upside”. He also said the firm was working on its upstream strategy in oil but it was likely to remain a rare, opportunistic activity with trading still very much dominating the business.
Gunvor owns two refineries in Europe having snapped them up a low prices in 2012 after independent refiner Petroplus went bankrupt.
“We had a good run on those refineries and even this year we have managed to keep them profitable,” he said, but added: “I have no illusions about the difficulties that the European refinery sector will have to go through.”
Over the next two years, U.S. plants as well as new refineries in China and the Middle East will take further market share away from Europe, prompting 5-10 plants in Europe to close down and reducing its refining capacity by a tenth or 1 million barrels per day, Tornqvist said.
“Governments would like to be seen doing something. But the reality is there is not much they can do. This is a process which is necessary and it is long overdue,” Tornqvist said.
SOURCE: PRIME, 2013