Exclusive: BP's mighty trading unit under scrutiny as earnings drop

Thu Mar 14, 2013 10:45am EDT
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By Dmitry Zhdannikov

LONDON (Reuters) - BP's oil trading division, the alma mater for a generation of the world's top traders and a former cash-generating machine, is under greater scrutiny after becoming a weak link for the oil major.

The company says the unit, which once generated a tenth of profits, was responsible for its failure to fully deliver on a pledge to improve performance at its refining division.

BP last restructured its trading desk in 2010 to put more focus on fast growing markets in China and India, and denies more big changes are planned: "Major interventions are neither considered necessary nor are contemplated," it said in a statement.

But industry sources and former insiders say the weak performance has sparked an internal debate about the unit. The developments at BP, once the most powerful oil trading desk, highlight generally weak performances across many trading units at oil majors and trading houses over the past three years due to relatively low market volatility.

"If earnings drop too close to the cost level, the reforms debate will intensify," one former BP trading insider said.

Another former BP insider, now with a rival, said: "For the first time in a generation there is a debate, soul searching going on at their trading desk as people are asking questions - have we lost our competitive advantage?"

BP has not released separate figures for the performance of its trading desk since 2005, but in regulatory filings it noted that the unit disappointed last year.

"In March 2010, we outlined an opportunity to deliver an additional $2 billion of performance improvement by 2012 relative to a 2009 base-line," it said.   Continued...

A rainbow is seen behind the logo of a BP fuel station in Barnstaple in south west England October 17, 2012. REUTERS/Toby Melville