Petrol and Gas Trade Finance (SIC 06100)

Trade and Stock Finance for Petrol and Gas

Trade Finance Global / Finance Products / Petrol and Gas Trade Finance (SIC 06100)

What is Petrol & Gas Trade Finance?

As with many other commodities, pricing volatility drives commercial strategy for firms engaged in the international trade of petrol and gas. Geopolitical, operational and financial risks in the industry have always been substantial, but a range of trade finance tools exist to mitigate these risks and unlock profits.

Petrol & Gas Trade Finance

After several years of uncertainty trapping the price of Brent crude into a weak range between $40 and $50 per barrel, the price of oil has rebounded. US oil production is steadily growing as fracking technology unlocks new yields, and CEOs in the oil and gas sector are increasingly positive about the outlook for their firms. Global natural gas markets also look set for a bright future of steady growth on the back of rising industrial demand and increasing supply of LNG from the USA.

Trade in petrol & gas requires exorbitant amounts of capital to invest in exploration, extraction, transportation and processing via a high-tech, expensive physical and digital infrastructure. As a result, most firms engaged in the trade of petrol & gas have highly complex and specialised finance needs which can only be met by structured finance. This type of finance differs from conventional trade credit facilities, instead offering bespoke financial instruments to large corporate or financial institutions to meet their complex financing needs. Their aim is to provide non-flow financing solutions by creating structured risk mitigation products for clients across a number of asset classes. TFG can discuss, design and administer such products.

Products financed

Broadly, petrol and gas trade finance focuses on financing ventures involving volumes of petrol and natural gas. These can take the form of:

  • Crude oil
  • Petroleum
  • Natural gas
  • Liquefied natural gas (LNG)
Petrol & Gas Trade Finance Requirements
  • You are an established business with clear revenue streams
  •  You are considered suitable to receive credit
  •  Your proposed venture has confirmed buyers or sellers of petrol and gas with the infrastructure to undertake the transaction
How the transaction works

Trade in petrol & gas requires exorbitant amounts of capital to invest in exploration, extraction, transportation and processing of either product via a high-tech, expensive physical and digital infrastructure. This infrastructure often extends across international boundaries as part of a complex supply chain. Conventional finance products are often not appropriate for such major conglomerates, who instead require structured commodity finance products to spread risk and realise returns. TFG can create securities from a combined pool of assets with corresponding risk levels to manage the risks inherent in firms’ international transactions and promote liquidity by offering structured returns to outward investors.

What are the SIC Codes for Trade in Petrol & Gas?

There are two SIC codes to denote businesses engaged in the extraction of crude petroleum (06100) and the extraction of natural gas (06200). Support activities for the extraction of these products are covered by code 19209.

Other industry codes this information might be relevant to include:

19209   Other treatment of petroleum products (excluding petrochemicals manufacture)
35210   Manufacture of gas
46711   Wholesale of petroleum and petroleum products
35220   Distribution of gaseous fuels through mains
35230   Trade of gas through mains

Full tariff schedules for petroleum and natural gas can be found on gov.uk.

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Case Study

Gas Exporter, Petrol & Gas Finance

A large oil & gas firm required complex structured financial products to balance risk across its business operations. TFG was able to construct appropriate securities to support the firms operations.


Petrol & Gas Trade Finance 2021

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Benefits

  •  Bespoke financial products tailored to your organisations’ specific needs
  •  Finance the growth you need by bringing high-volume commodities to new markets and customers
  •  Manage the risk posed to your business in a volatile investment climate

 

What is Stock Finance?

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About the Author

Deepesh Patel is Editorial Director at Trade Finance Global (TFG). In this role, Deepesh leads efforts in developing TFG’s brand, relationships and strategic direction in key markets, including the UK, US, Singapore, Dubai and Hong Kong.

Deepesh regularly chairs and speaks at international industry events with the WTO, BCR, Excred, TXF, The Economist and Reuters, as well as industry associations including ICC, FCI, ITFA, ICISA and BAFT.

Deepesh is the host of the ‘Trade Finance Talks’ podcast and ‘Trade Finance Talks TV’. He is co-author of ‘Blockchain for Trade: A Reality Check’ with the ICC and the WTO, alongside other industry research.

In addition to his work at TFG, Deepesh is a Strategic Advisor for WOA, and works closely with ITFA. He also sits on the Fintech Working Group of the Standardised Trust.

Prior to TFG, Deepesh worked at Travelex where he was responsible for the cards business and the Travelex Money app in Europe, NAM, UK and Brazil. Deepesh is Chair of Governors and co-opted LA Governor of the Wyvern Federation, which has responsibility for 5 primary schools in South London.

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