BP's Asian petchems trade exit expected - traders

02 October 2008 06:22  [Source: ICIS news]

SINGAPORE (ICIS news)--BP’s exit from pure petrochemicals trading in Asia did not come as a surprise given thin profit prospects as the industry has been  facing headwinds for the most part of the year, traders said on Thursday.

 

The British oil and gas major had let Singapore-listed China Aviation Oil Corp (CAO) to take over the business, which no longer fits into its core trading strategy.

 

“The risk-reward ratio for pure trading is no good in the current market, so most traders had kept to supply and distribution,” said a trader in Singapore.

 

Included in BP’s trading portfolio that was passed over to CAO are aromatics products like benzene, toluene, mixed xylenes, paraxylenes, styrene monomer, as well as olefins like ethylene.

 

“There are limited opportunities to profit from pure trading as price directions are nearly impossible to forecast. At the same time, back-to-back trades are becoming increasingly scarce, so discretionary trading had dwindled,” added another trader based in Singapore. 

 

Liquidity in the aromatics market had dwindled in the past two quarters while volatile swings in crude values had heightened trading risks in petrochemicals and prompted many traders to keep to the sidelines.

 

CAO has officially begun operations of its newly-inherited petrochemical trading business today.

 

“This inheritance did not involve CAO taking over any assets nor any outstanding rades from BP,” said a CAO spokesperson.

 

“We took in the [two] traders from BP’s integrated supply & trading (IST) business after they decided to exit the market,” she said.

 

This move will allow CAO to expand its business beyond supplying jet fuel to the Chinese civil aviation industry and trading in related oil products.

 

“Embarking on the trading of petrochemical products is in line with our corporate strategy. We are happy that BP presented us with the opportunity to inherit its Asia petrochemicals portfolio and team,” said Meng Fanqiu, Chief Executive Officer of CAO.

 

BP is the second largest shareholder of CAO where it holds a 20% stake through BP Investments Asia Limited, based on its 2007 annual report. China National Aviation Fuel Group Corp. owns 51.19% of CAO.

 

“BP decided to discontinue the trading of most petrochemical products as it was no longer a strategic fit with its core trading business. We had approached CAO with the proposal for it to take over this business, as we thought it would be a strategic fit for CAO,” said Michael Bennetts, CEO of BP’s IST business in the Eastern Hemisphere.

 

With additional reporting by Clive Ong and Mahua Chakravarty

 

To discuss issues facing the chemical industry go to ICIS connect

ICIS Copyright © Reed Business Information 2009

Author: Bohan Loh
+65 6780 4359

< previous article(ICIS Chemical Business podcast November 2, 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.