The Macquarie Group’s advantage in the oil and derivatives markets comes from industry expertise that goes beyond traditional energy and even commodity markets. This was particularly evident during the market turmoil of 2020 and is also essential for the bank’s low-carbon activities in the perspective of the energy transition.
“We offer tailor-made coverage to a wide variety of customers, not just your typical energy customers,” says Daniel Vizel, head of global oil trading at Macquarie Group. Taking the example of a food producer who must control packaging costs, he adds: “We can support coverage in highly illiquid markets, including those related to plastic packaging, which require a great deal of industry expertise. . And while these commodities do not have liquid swap markets, Macquarie’s ties to the refiners that produce them, along with his ability to own the physical molecules, allows the team to develop risk management solutions.
As a result, Macquarie has provided capital solutions to clients such as refineries throughout the tough conditions of 2020. “We were able to use our own team’s knowledge of global storage assets and product expertise, especially during a year in which many companies had liquidity problems because there was not much demand for petroleum products, ”says David Hochberg, global head of Macquarie Commodities Trading, the physical business of company oil trading.
Macquarie was able to provide much needed initial capital to refineries by purchasing oil from the tanks of refinery customers. He then shared some of the margin from the sale further along the curve, where prices were higher due to expectations of an economic recovery.
“Part of this business involved quality unfinished products that did not have a benchmark swap or futures contract allowing the customer to monetize their storage themselves,” Vizel explains. This contributed to a particularly busy first third of the year for Macquarie, with three times more physical petroleum solutions executed for customers than during the same period in 2019.
As financing became more expensive last year, Macquarie looked for opportunities in the oil and commodity markets to provide supply chain solutions so customers didn’t have to borrow on their working capital.
In renewable gas, Macquarie financed two production facilities and refinanced a third last year. The use of renewable gas as a transportation fuel, especially for heavy vehicles, has been motivated by policies such as the Renewable Fuels Standard (RFS) and the low carbon fuel standard (LCFS) programs in the we. As such, the team’s understanding of these environmental compliance markets adds another dimension to their offering in this market, says Ozzie Pagan, commodity finance manager for the Americas at Macquarie Group.
“The value of income for the producer comes from the transformation of waste gas into pipeline grade natural gas and [accessing] downstream value in the transportation fuel supply chain, ”he explains.
In the we this creates an opportunity to capture the value of the RFS and LCFS programs, which in turn encourages investment, says Pagan. “Macquarie’s understanding of compliance markets enables us to provide structures that place value on hard-to-cover revenue items. “
For example, in March 2021, Macquarie entered into a diesel supply contract that took into account a customer’s needs in RFS compliance credits or renewable identification numbers (Rins). The team developed a structure in which a refinery provided a supply of diesel in exchange for the Rins it needed to comply.
“Rather than our customer buying the Rins and holding them until they needed them, we bought them and kept them on our balance sheet. The Rins were needed towards the end of the transaction, so the customer delivered diesel to us and received the Rins in exchange, as payment, ”explains Vizel. “He effectively provided the client with off-balance sheet Rins financing. We were able to market the diesel to our other customers and we offered payment terms on the back of this diesel position to those who needed financing. “
Macquarie was also instrumental in delivering what is believed to be the world’s first shipment of carbon neutral oil in January 2021. Working with long-term client Occidental Petroleum, Macquarie organized and structured the deal, bringing together a set of solutions to market and move the energy company’s oil, as well as offsetting its emissions from production to combustion.
As Hochberg explains, these kinds of transactions – which can take months to complete – are not only based on innovative structures, but also on a strong commitment to customers and the development of an understanding of the markets. “Vanilla transactions are easy, these transactions are much more personalized; although we hope some will become more standard over time. It takes a significant commitment on the part of the office, as well as the organization, to make these agreements. “