Interview: As world shrinks, BB Energy eyes global distillates growth

By Libby George and Ahmad Ghaddar

LONDON (Reuters) - The world's diesel markets are becoming easier to trade, with more transparency and uniform standards, a development that mid-size trader BB Energy sees as an opportunity to expand its team and develop a fully global presence.

The company, founded in Lebanon 81 years ago, is aiming to go global with its distillates trading, moving beyond its Mediterranean roots and eyeing a team that can edge into business from Venezuela to Turkey that traditional oil majors view as too risky.

Newly-hired global head of distillates, Frederic Lassau, told Reuters in an interview that rapidly shrinking sulphur standards are increasingly making the world easier for traders to navigate, and destroying traditional two-way trade flows.

Normal routes, such as the distillates flow from the U.S. Gulf to Europe, are no longer uniform, with Europe turning into an exporter so quickly that ships turn around mid-journey for a more profitable market.

This, he said, is taking away so-called "niche" markets from companies like BB Energy, forcing them to expand their physical trading volumes and expertise.

"Globally, markets are becoming more interconnected. Today, there is no two-way flow ... transparency is growing," Lassau said of diesel, adding that as a result, companies need local expertise - and traders - present in every part of the world.

"We cannot stay that small".

Distillates accounted for roughly half of BB Energy's total trading volumes of 19 million tonnes of crude and products worldwide in 2017. But the company is preparing to muscle into Latin America, India and other growing markets in order to sustain its margins and expand the company.

After joining BB Energy five months ago, following nine years at Shell and five at Total, Lassau recently snapped up a ready-to-work team from Noble Energy in the United States, which was selling its oil trading business amid a cash crisis, and last year purchased physical assets in markets as varied as Australia and Turkey.

The company is eyeing further physical asset purchases in Africa, and said growing demand across Asia - and increasing limits on the level of sulphur that can be burned in distillates in that region - will create more opportunities for companies like BB Energy - if they are prepared.

"That's going to change very fast," Lassau said of countries like India, which is currently a net exporter of fuel.

He also said that Asia is becoming a low-sulphur fuel market "much faster than anticipated".

While major firms, including Lassau's former employers have competitive global teams already, BB Energy can find a niche in particular by targeting risky deals through extending open credit and pre-finance to buyers.

"The majors ... want to be super safe. It's a low risk environment," Lassau said.

While the company has been burned in the past - including getting millions of dollars stuck in Morocco after the country's refinery collapsed in 2015 - Lassau said building local networks could keep the company safe on future deals.

He said BB Energy is also exploring buying tanks, blending facilities and other assets in order to prepare for a dramatic cut in sulphur in the world's shipping fuels imposed from 2020 by the International Maritime Organization (IMO), which Lassau called a "a gigantic opportunity".

"IMO is great for a shop like us. It will create niche markets in every single region," he said.

"And the point is that no one is prepared."

(Reporting by Libby George and Ahmad Ghaddar, editing by David Evans)