* Small to mid-sized traders sidelined
* Egypt's financial situation worsens
* Swiss trading giants become consistent bulk suppliers
* Litasco, Vitol, Glencore to supply about $1.7 bln gasoil
By Julia Payne
LONDON, June 21 Egypt is relying increasingly on
large Swiss trading houses for fuel supplies as it struggles to
avoid energy shortages and unrest, while smaller players cut
back on deliveries for fear of non-payment.
Egypt's finances have been crippled by a fall in tourism
revenue since the 2011 revolution, a weakening of its currency
and a rise in fuel subsidies, which account for one fifth of
government spending. It owes over $5 billion to fuel suppliers.
Traders such as BB Energy, AOT Trading, Eminent, Augusta and
Sahara have almost completely stopped supplying Egypt, leaving
big players - such as Vitol, Glencore,
Gunvor, Trafigura, Litasco and Mercuria - to
dominate the market.
"We're not looking at Egyptian tenders any more," one trader
at a small firm said. He was burned last year when Egypt's
financial difficulties delayed its payment for cargoes, leading
to demurrage charges. He then spent months trying to recoup
All the trading houses declined to comment.
The dominance of major traders mirrors events in Greece last
year during the peak of its financial troubles, when its largest
refiner Hellenic had to rely on Vitol and Glencore for
oil supplies after it could no longer receive bank guarantees.
Like Hellenic, Egyptian state oil firm EGPC has to pay hefty
premiums to secure supplies as traders face additional shipping
and credit expenses.
In Egypt's latest and biggest tender to buy gasoil, the
premiums it paid over regular Mediterranean prices amounted to
$17-$23 a tonne, up from the already high $16-$19 premiums at
the end of 2012.
Vitol, Litasco and Glencore will supply around $1.7 billion
worth of gasoil to Egypt, or 55 out of around 70 cargoes, to the
ports of Alexandria, Dekheila and the Red Sea port of Suez in
the six months from July through December.
Gasoil is essential to help meet peak summer fuel demand for
harvesting crops, travel and air-conditioning.
Litasco, the trading arm of Russian oil firm Lukoil
, is emerging as the biggest supplier of gasoil for the
second half of 2013 after having little presence previously,
according to information on major 2012 and 2013 tenders.
Vitol held a significant position in 2012 and holds an even
larger one in 2013. Glencore, dominant in 2012, has been less
important this year. BP was the only Western major to
supply significant volumes of gasoil over both years.
Egypt, which produces its own energy, became a net oil
importer in 2008 as its population grew fast and fuel subsidies
mushroomed. It is also moving rapidly to become a net importer
of natural gas after years of being a large exporter.
But it has been slow to pay for fuel imports, and suppliers
face consistent discharging delays, which leads to high
"The cost of doing business has gone up. Tankers sometimes
sit for a long time before discharging, and this incurs
additional costs," a source at a trading house said, explaining
one of the reasons that traders expect Egypt to pay hefty
The hurdles have discouraged some big companies such as
Shell and BP, which have cut back steeply on fuel oil
deliveries, traders say. BP and Shell declined
"Traders are dominating the picture, although I do not think
majors have completely given up," one trading source said.
Cairo is seeking a $4.8 billion loan from the International
Monetary Fund, which wants Cairo to reform its fuel subsidies,
but the government has been hesitant due to fears that such a
move could trigger public discontent.