Vitol 2018 volumes and review
• Crude oil and product volumes increase to 7.4 million barrels per day
• IPOs for Viva Energy and Vivo Energy
• Re-acquisition of 50% of VTTI (with IFM Investors)
• First investment in Brazilian downstream sector
Statement from Russell Hardy, Group CEO, Vitol:
Vitol’s performance in 2018 was stable. Traded volumes of crude oil and products rose to 7.4 million barrels per day which, combined with the increase in the underlying price of oil, resulted in turnover of $231 billion. We continue to manage our business prudently with a focus on the careful management of both physical and financial risks.
Core trading business
Fundamentals through 2018 were broadly balanced, much more so than the evolution of flat price over the year would suggest. Demand growth, at 1.4 million barrels a day, was strong, but offset by a large increase in non-OPEC (largely US) production, especially in the second half of the year. Early in the year stocks reached the OPEC target of a five year mean which, along with buoyant economic data, lent support to prices. The decision by the US to re-impose sanctions on Iran caused prices to rally again at the end of the third quarter, after a modest decline in July. The subsequent gradual increase in OPEC 11 production in 4Q, along with continued increases in US production and a more dampened political and economic outlook for 2019 led to an unprecedented liquidation in length by financial participants which dragged prices down sharply at year-end.
Crude and product trading volumes (excluding LNG and LPG) increased slightly to 357 million metric tonnes (2017:349m mt), increasing our daily traded volumes to 7.4 million barrels per day. Crude oil volumes, which continue to represent the largest part of our business have risen to 3.8 million barrels a day, an increase of 1.5 million barrels a day over the last five years. Product volumes have been mixed, with a 30% increase in gasoline volumes to 44 million metric tonnes largely offset by some decline in fuel oil and naphtha volumes.
Our LNG business continues to grow; volumes increased to 7.8 million metric tonnes and we signed a number of long-term marketing and supply agreements with market participants worldwide, establishing a solid platform for growth as the market evolves.
We continue to optimise our complementary asset portfolio. During 2018 Viva Energy Australia and Vivo Energy, our Australian and African downstream businesses, listed on the Australian Stock Exchange and London and Johannesburg Stock Exchanges respectively. These remain interesting businesses and we retained a significant shareholding in both.
Varo Energy, in which Vitol has a 33% shareholding also announced its intention to list on Euronext Amsterdam. However, due to unfavourable market conditions, it was decided not to proceed.
In January, we completed our acquisition of Noble Americas, which has contributed to our overall increase in volumes. More broadly within the region, we see investment opportunities in central and southern America also and have acquired a 50% share in Rodoil, a Brazilian downstream company serving 1700+ service stations and a market leader in southern Brazil. In November we announced the acquisition of 50% of VTTI, the terminals company we founded in 2006, from Buckeye Partners by Vitol Investment Partnership II, an investment vehicle sponsored and managed by Vitol and IFM Investors. VTTI is now owned jointly by IFM Investors and Vitol.
Upstream, our Ghanaian project, in which we are partnering with GNPC and Eni, continues to progress well, with first gas delivered in August 2018. The project will provide 180MMscf of gas per day for at least 15 years. Overall oil and gas production is ramping up to 85,000 barrels of oil equivalent per day. Vitol is also part of a consortium which is in the process of acquiring oil producing assets offshore Nigeria from Petrobras Oil and Gas B.V. These assets represent fractional interests in fields that produce circa 20% of Nigerian production. We anticipate this transaction will close later this year.
We are cognisant of the increasing move to alternative sources of energy and are considering how our skillsets can best be deployed in these new areas. In the meantime, we are investing in new and established technologies which may form an important part of the energy transition. In January, our joint-venture with Low Carbon, VLC Energy, completed the construction of the UK’s largest battery park portfolio, a key resource for a system looking to build its renewable capacity. Also with Low Carbon, we announced our intention to invest in renewable energy assets across Europe, with a focus on large-scale wind generation. As a major participant in Europe’s power markets, it is important that we understand and participate in renewable power generation.
There is an increasing focus on the long-term outlook for oil demand. We are supportive of the need to move to more renewable sources of energy. However, at present, we do not see how this can be achieved across all sectors in the near to mid-term, without halting economic development in large parts of the world. We anticipate that oil demand will continue to grow for the next 15 years, even with a marked increase in the sales of electric vehicles, but that demand growth will begin to be impacted thereafter.
We are cognisant of the responsibilities which our business entails and will continue to engage with relevant stakeholders in all jurisdictions. We continuously review our way of working and seek to improve our performance across a range of metrics, every day. Technology has played a key part in the development of the business to date and we are seeking to ensure that we leverage its capabilities to enhance our trading and our internal processes and controls.
Finally, I wish to thank our customers, stakeholders and colleagues for their support.