Mercuria is to direct half its investments into energy transition projects as the commodity trader prepares for an aggressive shift away from fossil fuels.
“We have committed as a company that, within five years, 50 per cent of all investments are going to be for the energy transition,” co-founder Marco Dunand told the FT Commodities Global Summit on Wednesday. “We have started and have invested well over $500m.”
The comments show how commodity traders that have reaped huge profits from the oil market in recent years now want to play a role in renewable energy and clean fuels such as hydrogen, which are expected to grow rapidly as the world shifts to green forms of energy.
Speaking at the same event, Russell Hardy, chief executive of Vitol, the world’s biggest independent oil trader, said it aimed to put half of its investments in renewables and transitional energy, such as gas. The trading house has committed over $1bn in capital for renewable projects.
Torbjörn Törnqvist, Gunvor chair, said it was increasing its investments in power trading, existing renewable technology as well as decarbonisation technologies.
Trafigura, another of the world’s biggest oil traders, last year announced plans to build or buy 2 gigawatts of solar, wind and power storage projects over the next few years through a joint venture with fund manager IFM Investors.
Dunand, who built Geneva-based Mercuria into one of the biggest independent oil traders, also said he had been a “closet environmentalist” since university but felt he could now finally “out” himself as one.
“I think that for the first time politically we can see the US, China and Europe align on this issue,” he said.
Dunand said that while Mercuria would continue to invest in fossil fuel projects it would not back large ventures such as Vostok Oil, the huge arctic oil venture that Russian oil company Rosneft is developing. Trafigura has already taken a 10 per cent stake in the project, while a consortium led by Vitol is in talks about acquiring 5 per cent.
“Every time the company invests into say an upstream [oil and gas] asset . . . we are going to have to put the equivalent money into the energy transition,” Dunand said. “And therefore we will pay a lot of attention to where we invest. We would not be investing into a major Arctic project or a major project that will need many years to develop.”
Mercuria, founded in 2004 by former Goldman Sachs traders Dunand and Daniel Jaeggi, trades more than 2m barrels of oil a day.
Unlike some of its peers, which are primarily focused on physical oil trading, Mercuria has also pushed into financing, offering clients complex services more akin to those offered by investment banks. In 2014 it bought part of JPMorgan’s physical commodities trading business to bolster its operations, particularly in power markets.
Turning to the oil market, Dunand said he expected oil demand to be somewhere in the region of 100m barrels a day by the end of the year, which would be a “bit short of pre-Covid levels”.
In the long term, he predicted the crude price to stay at about $70 a barrel as oil producers calibrate production around various climate commitments and shifting willingness among consumers to reduce consumption.
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