Oando’s Trading Business
Oando Supply and Trading Limited and Oando Trading Limited (Bermuda) represent the products trading division of the Oando group. Business activities covered in our trading division include the trading of refined and unrefined petroleum products to refiners, marketing companies world-wide and other trading companies. Oando Supply and Trading is responsible for deliveries into Nigeria, whilst Oando Trading is responsible for supply into other markets. Products traded include gasoline, gas oils, kerosene, aviation fuel, distillates, naphtha, fuel oils, bitumen, base oils, and liquefied petroleum gas. The business also maintains a presence in the world’s products freight market in terms of vessels chartered on spot and time charter basis for delivery of oil and oil products to various customers worldwide.
2007 Review
Business Environment - At the beginning of 2007, crude oil was hovering around $60 a barrel and by December 2007 the price was closer to $90. This trend was indicative of the rise of petroleum products prices in the international market in 2007. The conflict in the Middle East, violence in Nigeria, political strife in Pakistan and the shrinking of oil inventories in the United States led to a steady rise in oil prices. Instability arising from mortgage market crisis and speculators overall were also a significant contributor to oil price increases in 2007.
In 2006, the Petroleum Subsidy Fund (PSF) which is regulated by the Petroleum Product Pricing Regulatory Agency (PPPRA) continued to encourage the uninterrupted supply of gasoline and Household HK cargoes into the country.
Oando Trading and Oando Supply & Trading took advantage of this opportunity and sold over 40 cargoes of PMS to marketing companies who were eligible to import under the Petroleum Subsidy Fund. For the better part of 2007, the criteria set by NNPC for oil trading firms to supply them with petroleum products remained unchanged i.e. only companies with over $5bn in turnover were eligible to supply the NNPC however we were still able to supply 3 spot cargoes as a result of our good relationship with the NNPC. In addition, a much sought after 30,000 barrel per day crude oil contract was signed between NNPC and Oando in December 2007.
Though endemic in the oil trading industry, our cargo losses for the year were 0.2% which was well below the industry average of 0.3%. This was due to the combination of the use of international super cargo inspectors and a marked improvement in operational efficiency.
Performance
Despite the difficulties the business faced, its turnover position was $1,501m (N186bn) which was a 9% decrease compared to our performance in 2006. This notwithstanding improved margin efficiencies led to a 32% increase in our Gross margin over the previous year.
Outlook for 2008
In summary, the trading businesses performed over budget in 2007 and are set to do the same in 2008. We will focus on our sourcing strategy and leverage our experience, capacity and expertise in securing long-term off-take volumes from refineries along the coast of West Africa. In 2008 we will continue to implement our competitive pricing, increased flexibility and exclusivity at source strategies. We are poised to form strategic alliances with our upstream operations and also get involved in the trading of its crude production. |
