Inside the long coming and overdue crackdown on the corruption in the world of commodity trading.
After the Monjasa Commodity Fraud (that has locked its founder 3 years in jail), a bribing scandal has rocked the Singapore market place. This time a trader from BP Global Trading PTE has been caught bribing the market.
This prosecution has a profound economic significance.
It shows that the Singaporean authorities are now prone to react to the alleged baksheeshs, the price being losing transparency (if not any of its market relevance) as the economics authorities aim to establish new pricing benchmarks in Asia with the hope of maintaining their dominance as the Asia regional trading hub.
As always, incriminating a pedigreed trader is the best PR demonstration showing others (the Glencore, Hin Leong…etc) the red line.
In Geneva, Switzerland, the authorities have also not waited their turn to incriminate “theirs” pedigreed trader, sending the cantonal law enforcement unit to one of Geneva’s Divas established since 1986.
Little known facts on Addax:
1) They are major actor in the African trade to the point that their terms (the Nyala terms) in the tanker market are the reference superseding the SHELLVOY6.
2) the founder was gunning for the Frenchs.
3) The Canadian Authorities were investigating ADDAX for corruption in 2009.
JC Gandur founder of ADDAX has been quoted saying
“Peace has no value for our assets”[1]
A crude quote also revealing that perhaps a trader sometimes skirts the law, going right to the edge morally.
Traders fight for nothing but the domination in the international trade, ADDAX Petroleum could be the best example of it. In this long and dark river Gandur is known to have inserted himself in France’s neo colonial African heritage and beyond (English-speaking countries). Friend of the major Quai D’Orsay customers (African clientele), he has judiciously picked his sides in a world where the political, military, international financial institutions and the clans warfare are intertwined.
Onshore, ADDAX is a sophisticated trader extracting , transporting and trading a flow of clean products and oil grades.
Offshore, ADDAX was a part of the French intelligence apparatus in WAF conferring them enormous political goodwill- a valuable trading asset.
Their shipping arm, Nyala shipping S.A, are a major actor in the African trade to the point that their terms in the tanker market are the reference superseding the SHELLVOY6.
Addax belongs to a special sub-category of traders.
While most of the traders also correspond to physical operations and therefore purchase or the sale of a cargo with a view to deliver it (taking a position on the market as a result of the anomalies in order to make a profit), traders like ADDAX also breathe on extremely good contracts, licences practically irrespective of the market forces.
Addax purchases crude oil, mainly NPPC (The Nigerian Major) under FOB contracts and resell to sellers at Dated brent plus a premium.
With only a very limited trade view, no technological advances, or whatsoever… the only competitive advantages underpinning a business on the “ADDAX model” is an alloy of contracts, personal relationships doped by the instinct of a real businessman in the long dark river flowing, inexorably towards a vast ocean of mysteries.
NIGERIA: CHINESE OIL FIRM BUYS ADDAX PETROLEUM 2009 June 29, 15:14 (Monday)
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CONFIDENTIAL
CONFIDENTIAL
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ENRG – Economic Affairs–Energy and Power | EPET – Economic Affairs–Petroleum and Natural Gas | NI – Nigeria | PREL – Political Affairs–External Political Relations
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TE – Telegram (cable)
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Canada Ottawa | Central Intelligence Agency | China Beijing | Defense Intelligence Agency | Department of Commerce | Department of Energy | Department of the Treasury | Economic Community of West African States (ECOWAS) | Joint Analysis Center Molesworth | Nigeria Abuja | Secretary of Defense | Secretary of State | United States Africa Command
Content
1. (SBU) Chinese oil company Sinopec has agreed to purchase Addax Petroleum for $7.2 billion. The deal was announced on June 24 after several weeks of press and industry speculation that Addax was seeking a buyer. Contacts at the Nigerian National Petroleum Corporation confirmed that Sinopec and the Korean National Oil Company had both made offers to purchase the Swiss petroleum company. An executive with a major US oil company told Abuja Econcouns that Sinopec paid a significant premium in terms of dollars per barrel of reserves for Addax. The acquisition is expected to take several months to complete. 2. (C) Addax is the largest of the second tier oil companies operating locally and a well-known name in Nigerian oil and gas. Its new Lagos headquarters building is a prominent landmark located across the street from the ExxonMobil headquarters. Although based in Switzerland, Addax is listed on the Toronto Stock Exchange. It has operations or interests in Nigeria, Gabon, the Kurdish region of Iraq, and the Nigeria-Sao Tome Joint Development Zone. As of December 31, 2008 the company had 324 million barrels of proven and probable (2P) oil reserves in Nigeria, more than half of the company’s total 2P reserves worldwide. In Nigeria, most of its oil fields and oil blocks are near offshore of Rivers and Akwa Ibom states. It has one small onshore field producing oil in Imo State and is exploring in a deep offshore oil block 80 miles off the Nigerian coast. In the past six months, the company has suffered from a series of pirate attacks on boats servicing its oil platforms off of Rivers and Akwa Ibom states. Department of Petroleum Resources statistics show the company produces around 100,000 barrels of oil per day from its Nigerian operations. Addax has a reputation in the local industry for less than transparent business practices. A Canadian Poloff recently remarked to Energy that Addax executives went out of their way to avoid interaction with the Canadian High Commission. He surmised this was because company executives did not want too much attention focused on its activities in Nigeria.
Gandur should be credited to have branded Addax and sold the intangible assets value embedded in its African operation, something for which many have promised but few succeeded to deliver due to an underestimation of the numerous barriers to business, costs and risks to overcome as an operator in Africa.
Offshore, new regimes have brought new networks with them… Countries have re-evaluated royalties, the contracts and papers signed with the previous regimes.
When the diva deprived from its cenacles and got acquired by a new sponsor who thought it had paid for cheap barrels, a compelling dominant position on the African market with a trading desk infrastructure in Geneva.
However pretty soon they realized the lost the French umbrella, this intangible value of relations that included fiscal privileges and contractual terms that had been favorably obtained.
The marriage has not been a smooth and leveled integration in the small but orderly Swiss corporate world ruled by a strict set of business etiquette.
Management-wise, the on–shore (Switzerland) decisions executed by ADDAX–Sinopec (with very few business instincts) have created a malaise.
As related by Le Temps, some irregularities were brought by its auditor to the attention of the new executive management but Addax has ignored, deviated or denied the big 4 accounting firm requests.
Deloitte had to formally terminated its contract, because in any case, at any price couldn’t sign “some of the company economics dealings…”
The Swiss federal police authorities has raided ADDAX Geneva office this Monday, its no. 1 trading authority has been arrested for corruption charges.[2]
Perfect (and subtle) timing just ahead of the FT commodities summit.
Considering, the aftermath of the 08 post-crash/debacle, only 2 mid-level bankers (UBS) have been prosecuted into the U.S Courts …any fines levied against net banks were negotiated privately between bank CEOs and the Govt.. If we can’t reign in institutional corruption in the United States, can we expect much from Africa (or the Swiss-business-minded) ?
The chaos generated by Addax & Oryx is the nightmare of any trader or lender in commodity trading.
It was in 1983, Rudy Guliani is then U.S Attorney for Southern District of New York he took Mark Rich & its high rollers associates to the court.
After that I reckon stand-by U.S banks involved in the financing of the commodity trade the Morgan Guarantee, Chemical bank, Bank of New York, Chase left the commodity business suddenly deemed the activity “too risky”.
Rightfully or wrongly, we’ll be told by certain people that the diva of the Geneva oil trading scene is the exception to the rule or a “random anomaly” of the commodity markets...
Addax, once a diva of the Geneva oil trading scene is no longer a member of the Swiss Trading and Shipping Association (STSA) representing the companies active in commodity trading and shipping activities, trade finance and related services.
The Swiss will find self-comfort as ADDAX is no longer “theirs” : it’s the “Other people“ problem but it remains highly likely that they will have more problems onshore with other MDs.
As an old wolof proverb says:
“The rotten fish pollutes the whole kitchen”.
________________
Sources and Notes
[1] “Trouble is my business”, https://www.forbes.com/forbes/2007/1015/099.html Forbes, 5 October 2007.
[2] Le Patron d’Addax Petroleum arrêté à Genève, Le Temps 24 March 2017
Simon Jacques is a certified Energy Risk Professional, as distinguished by the prestigious Global Association of Risk Professional
Simon Jacques
Structurer
Advising the producer, processor and end-user in North America.
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