The past year has been a turbulent one for both energy producers and consumers in Asia, faced with low oil prices, an increased global supply of liquefied natural gas (LNG) and growing market liberalisation.
For consumers, the 60% drop in the price of Brent crude since mid-2014 resulted in massive losses on hedges executed when prices were above $100 a barrel. For producers, it has created razor-thin margins and a pressing need to manage cashflow and lock in profits. This is now a prerequisite for obtaining much-needed funding.
While many banks have pulled back from physical commodities and reserve-based lending, other counterparties have really stepped up their offering in Asia. Oil and gas major BP – this year's energy dealer of the year – has been increasingly partnering with Asian producers over the past 18 months. Its aim is to offer holistic solutions that provide producers with access to various financial services, says Iain Lawson, BP's Singapore-based head of structured products for the eastern hemisphere. "We will step in to off-take the crude and also provide a hedge, or even a fixed price for it, which makes the project more bankable for a lender than a small producer standing alone," he says.
BP has been equally active with consumers, in some cases helping to restructure distressed hedges. BNP Paribas, the winner of our oil dealer of the year award, has also been active in this area, leveraging liquidity for consumer transactions from structures put in place with refineries. Much of this work has taken place in China, where the bank – also 2016's base metals dealer of the year – has also grown its presence in the base metals market, setting up shop in onshore China earlier this year. The BNP Paribas China metals desk provides physical metal deliveries, as well as financing and hedging to local companies and onshore subsidiaries of multinational clients.
Price volatility and the need to preserve working capital has been a theme across all commodities in the last year, especially precious metals. Citi's increased activity, especially in gold markets across Asia, won it our precious metals dealer of the year award. Its inventory financing solutions combining risk management were particularly noteworthy.
Renewable energy has become a greater focus in Asia recently as governments try to meet growing energy demand while reducing pollution. This has created a huge need for project financing, which Societe Generale Corporate & Investment Banking (SG CIB) – this year's commodity finance house of the year – stepped in to meet.
"We can see a clear acceleration of renewable energy in Asia-Pacific, so it's at the centre of our strategy," says Daniel Mallo, the bank's Asia-Pacific head of energy, infrastructure, metals and mining finance.
Asia's electricity and gas markets are also developing quickly, with Japan's energy market liberalisation central to this. The Singapore Exchange, this year's exchange of the year, has been quick to respond to the changing needs of the market, pushing ahead with its electricity, LNG and freight offerings.
As the Asian market becomes ever more complex, the need has grown for sophisticated commodity trading and risk management (CTRM) software and effective ways of managing data. Both OpenLink, winner of our CTRM and ETRM software house of the year, and GlobalView, our data provider of the year, have recently developed products particularly applicable to Asia.
For more details on our awards, please click on the links below.
The week in Risk.net, May 19-25 2017Receive this by email