Supermajor BP likely sees its return on average capital employed in its large oil trading business at around US$2.5 billion annually, according to Bloomberg’s estimates based on the company’s most recent capital markets disclosures.
BP, like most of the other Big Oil companies, doesn’t disclose how much its oil trading unit makes or how profitable those operations are.
Europe’s oil and gas supermajors such as BP, Shell, and Total have vast oil trading operations and often trade more volumes of crude oil than the biggest independent commodity traders such as Trafigura, Vitol, or Glencore.
In BP’s case, trading is typically delivering “close to a 2% return uplift” to returns, chief executive officer Bernard Looney said on BP’s capital markets day presentation this week. Looney gave trading as one example how the integration of BP’s renewables portfolio with the rest of the business can help the company to deliver 8-10 percent returns from renewables—a major focus area for the UK-based firm that wants to move from an international oil company to an integrated energy company.
Based on this ‘2 percent return uplift’ and BP’s return on average capital employed (ROACE) of US$124.2 billion a year over the past five years, Bloomberg has estimated that the return of BP’s oil trading business is some US$2.5 billion.
BP declined to comment on this estimate to Bloomberg News.
Oil trading in the volatile second quarter of 2020 actually helped save some of the European supermajors from posting even larger losses than they did.
BP said that “Oil trading delivered an exceptionally strong result,” while Shell and Total reported surprise profits for Q2, thanks to strong oil trading business when prices were highly volatile. Shell cited “very strong crude and oil products trading”. At the same time, Total’s CEO Patrick Pouyanné said that the results were “driven in particular by the outperformance of trading activities, once again demonstrating the relevance of Total’s integrated model.”