JBC offers clients in the oil and gas sector a range of consulting services from auditing, benchmarking and strategy advice to market outlooks and transaction support. Our team are a mix of energy industry veterans and professional consultants allowing us to bring real world experience plus business, process and technical innovation to our clients.

Strategic Advice

Making the right commercial decisions requires accurate unbiased market assessments and outlooks. JBC offers its clients independent strategy and advisory services. These services are delivered to clients in a suite of briefings, workshops and management reports. Utilising our extensive database of supply, demand and price forecasts together with 25 years of experience, JBC offers clients an objective view of crude oil, refined product and natural gas markets and their expected development over the short, medium and long term.

Strategic Advisory

The Challenge: The management at our client company, a transnational integrated energy and utility provider with a paper oil trading business in Asia, had a gut feeling that there was an opportunity to enter the East of Suez physical oil market but needed hard data to provide a buy-in for the idea with Top Management in HQ. Furthermore, the client was looking to identify niche business opportunities rather than an opening in the market that would pit them against the major international oil companies and trading organisations.

The Solution: JBC provided the client with an independent assessment of the East of Suez oil markets for the time period under review. Our consultants assessed the developments of oil demand, oil supply, refining capacity expansions (and closures) and the resulting impact these developments would have on regional and country specific refined product balances and trade opportunities. In addition, the consultants used a peer review to assess feedback from a broad cross section of energy industry perspectives and opinions from Asian-based participants on the current state of East of Suez petroleum markets and trading. This resulted in a report that provided the client with pertinent, non-public information from credible industry sources that was a representative assessment of future market challenges, scenarios and opportunities.

Our Approach: JBC is an industry leader in forecasting developments in global oil and markets. Our ability to perform market outlooks is powered by a proprietary supply, demand and pricing model that has been developed over 20 years. The JBC model allows us to make accurate supply, demand and trade balance assessments on a product-by-product basis including regional and country specific import and export requirements. In addition, among our consultants we have industry veterans that give us access to high level decision makers in the industry that allow us to get inside information not freely available to other consultants.

The Outcome: Basis JBC’s reports the management of the Asian subsidiary were able to clearly identify physical oil market opportunities and challenges. Furthermore, the client was able to back up their initial gut feeling with hard data and put forward their business plan to the company’s Top Management. As a result the company is currently pursuing physical oil trading opportunities in the East of Suez markets.

Audits & Benchmarking

Trading risk management is a perpetual work-in-progress that requires diligent oversight, review and updating. Technological innovation and dynamic markets are constantly changing the energy landscape, prompting companies to adapt and evolve. For two decades JBC has advised the world’s leading oil and gas companies on how to optimise their supply, trading and risk management enterprises. We have done this by rigorously auditing existing policies, operations, procedures, strategies and processes and then benchmarking our findings against international standards and best practices. These reviews often highlight deficiencies or gaps within a company’s current portfolio that may impact its overall efficiency and profitability.

Supply, Trading & Risk Management Audit

The Challenge: In 2009 our client, a major Asian national oil company, engaged JBC as they needed to expand their trading operations in the United Kingdom in order to facilitate a requirement to purchase greater and more varied volumes of crude oil from the Atlantic Basin in order to feed a substantially increasing domestic refining sector. However, internal processes, a lack of personnel with relevant trading expertise, reporting bottlenecks and out dated software systems prevented them from reaching their objective.

The Solution: By auditing the client’s supply, trading and risk management activities, JBC was also able to provide the client with a benchmarking report that showed how its current activities compared against industry leading organisations that had adapted internationally recognised best practices for trading and risk management. Based on this benchmark report, JBC was able to provide a list of clear and actionable recommendations that could be immediately implemented by the client which would move them closer to their objectives within a matter of months. JBC was also able to introduce the client to a reputable and affordable third party trading software provider that was able to automate many of our recommendations on internal processes and risk management which is still in place today.

Our Approach: JBC approaches all of its engagements by first listening to the client. We want to understand the uniqueness of the challenges our clients face. We then ask the relevant questions to identify problem areas. Once we have framed the problem our unique combination of energy industry veterans and professional consultants combine to dissect the problem and to find solutions that meet our clients’ objectives. Finally, we provide recommendations that will allow our clients to meet their objectives in the shortest possible timeframe with the minimum amount of cost.

The Outcome: Following JBC’s recommendations the client grew from 18 personnel to more than 80 in a short time period and has continued to grow year after year successfully meeting the goals of its parent company in Asia while simultaneously expanding is portfolio into third party trading. The company has also enhanced its reputation as an industry leader and as attractive employer to some of the industry’s brightest talent.

Risk Management Advisory

Energy and commodity markets are fraught with risks. The only common denominator of these risks are their elusiveness and unpredictability. Understanding potential exposures and devising ways of minimising risks present formidable challenges to modern trading organisations. JBC offers integrated risk management solutions for global oil and gas markets. Our consultants understand the complex nature of the energy industry and are specialists in market exposures, arbitrage, inventory management, counterparty risk, pricing and energy security. It is our belief that there is no “one size fits all” risk management solution. Instead a company must employ disciplined analysis, evaluation and introspection. A company needs to understand the unique environment it operates in, what risks it faces and how it can best manage these. JBC consultants have hands-on experience in hedging upstream, downstream and customer risk. JBC can also support clients in developing or selecting energy trading and risk management software solutions that meet their specific corporate needs, risk profiles and budgets.

Risk Management Advisory

The Challenge: Our client, an import dependant national oil company, faced substantial difficulties after entering a number of loss making derivative oil market transactions with several large financial institutions. The size of the losses put the management within the client company under substantial political, legal and financial pressure. This was further compounded by the fact that the client company did not fully understand the complex financial instruments which they had traded.

The Solution: By working closely with the client company and its management JBC was able to breakdown each of the deals entered by the client thereby providing greater understanding of the company’s position. Furthermore, JBC was able to provide the client with advice and insight on how to trade in complex financial instruments such as options and advise on how these instruments can have serious negative impacts on the company if not fully understood.

Our Approach : In this engagement JBC needed to fully understand the client’s physical and paper market portfolio to understand its ultimate position and exposures. Once these positions were understood, we went tackled the task of communicating our findings to the client. This was done in series of reports and presentations by the company’s most senior consultants.

The Outcome: Unfortunately, not all outcomes are 100% positive. JBC was not able to save the company from the losses incurred prior to our engagement. Nevertheless, thanks to our advice the company better understands the complexities of trading sophisticated derivative instruments and has adopted a more risk appropriate strategy that will save it from making similar mistakes in the future.

Pricing Mechanisms

JBC works closely with clients to develop an in-depth understanding of sophisticated pricing mechanisms used in contracts for the purchase and the sale of crude oil, refined products and natural gas. Our consultants have shaped formula related pricing mechanisms for refined products in the countries of the Southern African Customs Union, LNG in the Middle East and energy prices in Europe. JBC is currently supporting several large crude oil producers across the globe in the formulation of official selling prices.

Pricing Mechanisms

The Challenge: A customs union which controlled the pricing and imports of refined petroleum products into a number of African countries was under attack from its stakeholders over the fairness of its pricing mechanism. Making matters more complicated was the fact that the mechanism needed to be deemed fair by a plethora of stakeholders with competing interests. These included refiners, oil companies, government agencies, consumer groups, market participants, shipping companies and oil traders.

The Solution: In coordination with the key stakeholders, JBC developed a new pricing mechanism that is transparent in its build up and reflects actual costs elements involved in importing refined products into the customs union. Transparency was key in building trust and confidence in the new mechanism as all stakeholders can track changes in specific market conditions and how these changes will impact import prices without having to call into the question the entire pricing system.

Our Approach: A key element for successfully reaching a consensus with the stakeholders was to have them involved in finding the solution from the beginning. To ensure this ‘buy-in” JBC worked closely with the stakeholders involved in the supply chain. This also allowed the consulting team to establish the real costs associated with importing refined product into the customs union. These costs which took into account market realities including accepted norms for purchasing, pricing and shipping of refined products where used to develop economic models to evaluate the commercial alternatives for fuel imports from the relevant major refining centres to the customs union under different scenarios. Once completed JBC designed suitable market related adjustments that needed to be made to sustain product availability taking into account spot versus term supply premiums, quality difference premiums and changes in freight costs.

The Outcome: The countries of the customs union in agreement with the oil industry and other stakeholders agreed to use JBC’s pricing mechanism. The JBC pricing mechanism was then enacted in legislation that is still in place today.

Trading & Risk Process Design & Documentation

With the onset of greater regulatory oversight of the energy and commodity trading industry, the need for the clear documentation of rules, regulations, events and processes has become an increasingly important compliance measure. Working in close coordination with its clients, JBC provides fully integrated documentation services that begin at the design phase. Our consultants are always working to incorporate best standards and practices into our clients trading and risk management processes and manuals.

Trading & Process Design & Documentation

The Challenge: Our client, a Singapore based crude oil, refined product and natural gas trading company, needed to improve the efficiency of its front, middle and back office operations in order to meet targets put in place by the company’s board of directors. However, the company’s internal workings were largely unstructured and it had no formal job descriptions, processes or documentation in place to guide employees in their duties. The result was lack of responsibility and accountability amongst employees and mistrust between departments.

The Solution: JBC provided the client with a comprehensive documentation and eventual redesign of the company’s internal processes that culminated in the creation of a trading & risk management policy and procedure manual that outlines the roles, reporting lines, authorities and responsibilities of each department, function and employee.

Our Approach: As a starting point the consulting goal was to understand how things were working at the point of JBC’s engagement. To accomplish this, JBC’s consultants worked hand-in-hand with the client in order to document all of the current processes in place in the front, middle and back office. This was done by sitting down with each individual employee within the company and then jointly mapping out their roles, their responsibilities and how their functions interacted with other departments. Once JBC had completed this mapping process, the consultants began to draft individual job descriptions for each member of staff, and the processes for each department in the front, middle and back offices. Once the drafts were completed, the consultants were able to identify gaps in employee skill levels, processes and general inefficiencies that were contributing to the organisation operating below desired levels of performance. The consulting team was then able to suggest how these gaps could be overcome through training, hiring some new talent and process re-design. Once agreed with the client, JBC was able to guide the client in the implementation of its advice and provide supporting material in the form of a trading and risk management policy and procedure manual which was distributed to each employee.

The Outcome: The client’s management was able to meet the key objectives as instructed by the board of directors, employee accountability and efficiency improved while inter-department conflict was significantly reduced.

Asset Integration & Optimisation

Our consultants provide oil and gas companies with assessments on the integration and optimisation potential of business units and assets into their broader corporate organisation. Our expertise includes internal restructuring, asset optimisation and the allocation of responsibilities between business units in planning, refining, distribution and trading.

Asset Integration & Optimisation

The Challenge: Our client, a subsidiary of a major crude oil producer, was in the preliminary stages of building a world scale refinery and petrochemical complex. However, in order to satisfy its lenders that it could fully meet its obligations, the client needed to prove that they would be able to profitability integrate the new facility into their portfolio and secure buyers for the refined product and petrochemical offtake in both the local and international market.

The Solution: JBC developed a marketing plan to support the business case for the new refinery and petrochemical complex. This included a detailed market entry strategy for each of the petroleum products forecast to be produced by the refinery, analysis of competitors in the market and their likely responses to refinery, and the building of financial model to forecast potential profitability. The report also framed the contractual terms to be used by the refinery in the purchase of crude oil and the sale of product, counterparty analysis and policy, and the logistics that would be required to deliver product into the refinery’s domestic and international markets.

Our Approach: In order to successfully build the marketing plan JBC first needed to fully understand the refinery and petrochemical complex. The consultants, supported by the client’s technical advisors, were able to calculate the configuration of the refinery. Given the refinery configuration together with the assumed crude feedstock, the product offtake was able to be calculated. The next stage was to identify the outlook for these products when the refinery was scheduled to come online. This was done by utilising JBC’s proprietary supply, demand and pricing model that allow us to model a country’s import or export requirement on a product by product basis. The result of this analysis allowed us to forecast where each product would command the greatest premium. This allowed us to identify customers both in the local and international market.

The Outcome: The client’s lenders approved the marketing plan and released the funds to the client. The refinery and petrochemical complex is currently under construction and should start operations by 2016.

Expert Witness

JBC has a proven track record in providing clients with expert independent witness testimony and support in trade dispute litigations and arbitrations. We offer clients an in-depth understanding of the complexities of the industry, combined with superior analytical ability.

Expert Witness

The Challenge: A legal dispute arose between an oil trading company and oil marketing company over the value of a number of refined product transactions. Falling to reach an agreement the dispute was referred to the international court of arbitration and a consultant from JBC was requested to act as an expert witness with the challenge of calculating the theoretical replacement value of refined products including the costs of bringing the product to a discharge port.

The Solution: Using our 20 years of experience in calculating oil price values, JBC provided a report in which it modelled the value of refined products at the time of discharge at the port. The consultants then provided an expert witness report and testimony with which we assisted the court of international arbitration to come to a ruling. During the hearing the JBC expert witness underwent extensive questioning on the replacement value of the cargoes and the differences between invoices and replacement values which they were able to provide clarity upon.

Our Approach: In order to calculate the replacement values, JBC built a model based on certain parameters to derive a representative market price for a defined amount of refined products at the day of discharge at the discharge port. In order to cross check these assumptions JBC consulted trading sources, price reporting agencies and market participants. In this model JBC calculated from the discharge date the voyage time from the most nearby refining centre and arrived at an implied B/L date. From the implied B/L date JBC derived the assumed trade date. Using various adjustment factors, JBC’s consultant arrived at the FOB product value. Freight costs were then calculated by using published freight rates from the assumed trade date adjusted for the size of the delivery. On the basis of the FOB cargo value and the freight costs the consultant calculated the insurance costs to bring the products to the discharge port. Calculating the sum of the FOB product value plus freight and insurance the JBC consultant arrived at the replacement value of the product at the day of discharge at the discharge port.

The Outcome: The international court of arbitration was able to make a ruling on the cases under dispute and the judge praised the contribution of the JBC consultant and their ability to bring a high degree of clarity to a complex matter.