BB Energy sees opportunities in logistics
As the US becomes a key export market for crudes and LNG, the complexity of local logistics is creating new trade opportunities
As in past years, the oil market continues to produce new challenges and 2018 was no different. At BB Energy (BBE), the company goal is to overcome these events and ensure that business continues to grow by continuing to hire the best in the field and to increase our foothold in key areas.
BBE's long-term strategy has placed particular emphasis on the US market and Africa. The US has become a key export market for crudes and LNG and the complexity of the local logistics present further opportunities for new trades. With the new team in place in Houston, we have been able to execute our first pipeline trades, export LNG from the US and have taken some storage positions in the Americas. This has allowed BBE to expand our oil product business into Central and South America as well as allowing the global book to take advantage of arbitrage opportunities.
In addition to the above, BBE continues to make progress on Africa in both the downstream and cargo trading. We have acquired a controlling interest in several downstream assets which we will use a trading hub for Central Africa. These infrastructures are now being used to their full potential, for example we are now able to use both the Kenya and Tanzania routes to enhance our cargo trading as well as overland supply to DRC and the neighbouring countries. These assets have also allowed us to be competitive in winning part of the Zambian fuel supply tender—cementing our strategy and enhancing our in-land profile.
In West Africa, BBE has been awarded its first NNPC crude export contract and established a strong local on-shore presence for product sales from Lagos and Calabarto local distributors. The company has made in-roads in Ghana by processing crude at the refinery. Product sales are being made to local licensed players and pre-financing cargoes for export. All these activities re-enforce our belief that the long-term future of our business is to focus on the last-mile delivery—a strategy that will be deployed in other parts of the world where we trade.
On the LPG front, the group continues to grow its fully-integrated business in Bangladesh and going forward BBE will look for opportunities to emulate the same models in the new markets where we operate.
The key to growth will remain BBE's ability to finance business and to be able to offer financing structures that suit BBE's customers' needs, while ensuring that the relevant risks are properly managed. We have done this by increasing our revolving credit facility to $245m and our bilateral lines to more than $3.7bn, and by regularly accessing the bank and the insurance market to cover the credit and performance risks.
Due to the above-mentioned strategy the group expects further growth in the 2019 sales volume, which is expected to grow at a rate of 10 to 15%.
BBE continues to seek the best industry professionals to join the group. This can be challenging but as proven from the hiring made over the past few years—the company has strongly benefited from the skills and knowledge base they bring with them.
The middle-distillates sector is also likely to provide new trading opportunities, with the introduction of lower sulphur-content rules for shipping fuel in 2020. The International Maritime Organisation (IMO) has set 2020 as the implementation date for a reduction in the sulphur content of fuel oil used by ships to 0.5% from the current 3.5% limit. From BBE’s point of view this will create trading and blending opportunities.