Mercuria, the Swiss energy trader, has struck a series of deals with pipeline companies and oil producers in North America as it looks to become a major exporter of US crude.
Mercuria’s plans show how the world’s biggest commodity traders are looking to profit by connecting their global network of customers to the oil flows unleashed by the US shale boom.
Most shale producers lack the experience and logistical reach to tap markets in far-flung parts of the world, while low freight rates and differences in pricing between the US and markets in Europe and Asia has made it profitable for large oil traders to ship US crude overseas.
“We have the infrastructure and we are putting it on the table for our counterparties to optimise oil flows,” Mercuria’s chief executive Marco Dunand told the Financial Times. “As the market becomes more global it’s imperative to have a global presence.”
In an effort to expand its North American oil business recently Mercuria signed a marketing agreement with Extraction Oil & Gas, a Denver-based producer. This follows the acquisition crude supply and marketing business in the Rocky Mountains earlier in the year. Mercuria has also inked in a deal to export liquefied petroleum gas from the Marcellus Shale formation for Range Resources.
“We are connecting North American producers to markets some of them couldn’t reach before,” said Dan House, head of physical crude trading at Mercuria. “By next year we could be in a position to export significant volumes.”
Mercuria exported its first cargo of US crude in August joining rivals such Trafigura, the trading arm of BP, and Vitol in looking to capitalise on Washington’s decision to end a 40-year restriction on crude oil exports.
While US production has slowed this year because of lower oil prices — they have moved than halved since mid-2014 — exports have been rising. They averaged just over 500,000 barrels per day in the first five months of 2016, up 9 per cent on last year’s daily average.
US shale producers scored a significant victory in December when US lawmakers lifted the crude oil export ban, imposed after the Arab oil embargo in the 1970s. Much of the ultralight shale oil produced from US shale deposits is not best suited for use in its domestic refining system, which was upgraded during the decade from 2000 to handle heavier crudes. It is, however, suitable for many refineries in Europe and further afield.
Mr House said the view that everyone in the US shale patch was suffering from the oil price was too simplistic.
“People are leveraged in vastly different ways and there are those who are still able to thrive and try new things. We’re helping to plug North America into the global market we trade every day,” he said.
Founded in 2004 by former Goldman Sachs commodity traders Mr Dunand and Daniel Jaeggi, Mercuria started by supplying crude to customers in Asia.
It is now one of the world’s biggest oil traders. In 2015, it reported net income of $286m, up from $273m a year earlier, and moved almost 2m barrels a day of oil and petroleum products such as diesel and gasoline.
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