11th October 2016
Mid-sized oil trader BB Energy is looking to expand aggressively in Africa and the former Soviet Union via new deals and asset purchases
The company's risk appetite is still high despite having significant sums of money trapped in Morocco and new assets will help it expand its oil trading volumes by 10 percent a year over the next five years, Mohamed Bassatne said.
Several oil majors and trading houses, including BB Energy, are owed over $1 billion by Moroccan refinery Samir, which they supplied with crude and products but failed to receive payments for after the government ordered it into liquidation in 2015.
Samir's filings estimated BB Energy's debt at $122 million. BB Energy and other Samir creditors have not disclosed the amount they are owed.
"It's not life-threatening at all. Is it an exposure? Yes it is an exposure but nothing that can't be handled," Bassatne told the Reuters Commodities Summit in London.
"I don't think we owe a single bank, a single penny on Morocco and we have no liquidity issues. It has had no effect on our trading or our investment pattern. We have made arrangements with banks and I think everyone is happy."
Dubai-based BB Energy, founded in 1937 in Lebanon, initially specialized in trading heavy oil products in the Mediterranean and has expanded more recently in the United States and Asia.
Bassatne said the company has been trading with Samir for 12 years but things got out of control when "politics got in the way".
The refinery's largest shareholder, Saudi billionaire Mohammed al-Amoudi, fell out with the Moroccan government, which accused the refiner of owing it $1.33 billion in tax.
"It is an extraordinary action ... and that's why, unfortunately, we all got caught ... Economically, it (the refinery) should never have been turned off even if there was a claim from the government. It would have been much better for the government and creditors if they had continued running the refinery and done some kind of deal," Bassatne said.
He said he still believed Samir's suppliers would be able to recoup the debts but it was going to take a long time as Moroccan laws do not allow for a quick restructuring.
The company currently trades around 17 million tonnes of oil and products a year, compared to 303 million tonnes by top global trader Vitol.
Unlike in the past, when traders used to be asset light, BB Energy and its peers were now looking to acquire assets as a way to penetrate new markets and secure business.
"We are looking aggressively at assets, primarily in Africa and the CIS (the former Soviet Union)," Bassatne said.
He said the trading landscape had changed since the 2008 global financial crisis when banks became less willing to lend to trading houses and after their capital requirements were tightened.
"The number of players has definitely dropped dramatically ... There are not many mid-sized companies left."
Among the remaining players, two strategies prevail. Some mid-sized players are holding onto their niche markets, which they understand very well, while others try to leverage their specialty by adding more products and gaining access to new markets through acquisitions, he said.
BB Energy was pursuing the second option, he said. It has expanded its presence in Turkey by acquiring an asphalt terminal and retail stations, established a propane business in Bangladesh and is investing in refined products in Zimbabwe and Ghana.
It has also entered the liquefied natural gas market with deals in Mexico, Nigeria and Egypt.
The firm just opened its 11th office worldwide, in Moscow, where it seeks to set up deals such as financing projects for small oil firms in exchange for the resulting production.
"In Russia, we have been working with independents on pre-financing. We are prepared to take risks," Bassatne said.
This original article was published on Reuters.
T: +971 4 432 8300