What is Petrol & Gas Trade Finance?
As with many other commodities, pricing volatility drives commercial strategy for firms engaged in the international trade of petrol and gas. Geopolitical, operational and financial risks in the industry have always been substantial, but a range of trade finance tools exist to mitigate these risks and unlock profits.
Petrol & Gas Trade Finance
After several years of uncertainty trapping the price of Brent crude into a weak range between $40 and $50 per barrel, the price of oil has rebounded. US oil production is steadily growing as fracking technology unlocks new yields, and CEOs in the oil and gas sector are increasingly positive about the outlook for their firms. Global natural gas markets also look set for a bright future of steady growth on the back of rising industrial demand and increasing supply of LNG from the USA.
Trade in petrol & gas requires exorbitant amounts of capital to invest in exploration, extraction, transportation and processing via a high-tech, expensive physical and digital infrastructure. As a result, most firms engaged in the trade of petrol & gas have highly complex and specialised finance needs which can only be met by structured finance. This type of finance differs from conventional trade credit facilities, instead offering bespoke financial instruments to large corporate or financial institutions to meet their complex financing needs. Their aim is to provide non-flow financing solutions by creating structured risk mitigation products for clients across a number of asset classes. TFG can discuss, design and administer such products.
Broadly, petrol and gas trade finance focuses on financing ventures involving volumes of petrol and natural gas. These can take the form of:
- Crude oil
- Natural gas
- Liquefied natural gas (LNG)
- You are an established business with clear revenue streams
- You are considered suitable to receive credit
- Your proposed venture has confirmed buyers or sellers of petrol and gas with the infrastructure to undertake the transaction
Trade in petrol & gas requires exorbitant amounts of capital to invest in exploration, extraction, transportation and processing of either product via a high-tech, expensive physical and digital infrastructure. This infrastructure often extends across international boundaries as part of a complex supply chain. Conventional finance products are often not appropriate for such major conglomerates, who instead require structured commodity finance products to spread risk and realise returns. TFG can create securities from a combined pool of assets with corresponding risk levels to manage the risks inherent in firms’ international transactions and promote liquidity by offering structured returns to outward investors.
What are the SIC Codes for Trade in Petrol & Gas?
There are two SIC codes to denote businesses engaged in the extraction of crude petroleum (06100) and the extraction of natural gas (06200). Support activities for the extraction of these products are covered by code 19209.
Other industry codes this information might be relevant to include:
|19209||Other treatment of petroleum products (excluding petrochemicals manufacture)|
|35210||Manufacture of gas|
|46711||Wholesale of petroleum and petroleum products|
|35220||Distribution of gaseous fuels through mains|
|35230||Trade of gas through mains|
A large oil & gas firm required complex structured financial products to balance risk across its business operations. TFG was able to construct appropriate securities to support the firms operations.
Speak to our trade finance team
- Bespoke financial products tailored to your organisations’ specific needs
- Finance the growth you need by bringing high-volume commodities to new markets and customers
- Manage the risk posed to your business in a volatile investment climate