Hot off Nickel Fraud, Trafigura Faces Big Losses in Mongolia Oil

Oil trading giant Trafigura has agreed to debt repayment plans with its oil products customers in Mongolia, which will lead to significant losses for the trader in Mongolia, Bloomberg reported on Thursday, saying the losses could be in the hundreds of millions of dollars. 

“We have been trading oil and metals in Mongolia for a number of years. We have a good track record of successfully recovering debts from counterparts in emerging markets,” Bloomberg cited a Trafigura spokesperson as saying. 

The spokesperson refrained from putting a dollar amount on the losses, with other unnamed sources cited by Bloomberg revealing that the trader had uncovered some issues with its Mongolia oil business. 

Mongolia’s oil market is negligible, comparatively, with annual consumption hovering around 35,000 bpd as of 2021 and worth approximately $1 billion, with most of the country’s oil coming from Russia and China via rail networks, according to Bloomberg. 

While the losses are expected to be significant, Trafigura's most recent earnings showed profits of over $7 billion, which suggests the losses it is facing in Mongolia will be manageable, according to Bloomberg, which also noted that the company supplied $240 billion in products in 2022. 

For Trafigura, the news is more likely to affect reputation, coming on the heels of a nickel fraud that cost the company, which is owned 100% by its 1,200 employees, more than $500 million. That fraud prompted an internal reorganization at Trafigura last fall. 

In December, Reuters reported that Trafigura had accused an Indian businessman, Prateek Gupta, of substituting nickel with lower-value metals. At the time, the trader was also looking into its own staff to determine whether anyone had colluded with Gupta. During a court case in London in December, Trafigura said it was satisfied that its staff had not been colluding with Gupta in the fraud. 

By Charles Kennedy for Oilprice.com

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