Ryan Marsden and Harold Gan, COO & CFO, Concord Energy Singapore
Ryan Marsden and Harold Gan, COO & CFO of Concord Energy discuss the remarkable evolution of the Singaporean Physical Oil trading company, highlighting how the Lion State’s conducive business environment and mature financial sector, have helped propel the company’s and commodity trading industry’s ascent over the last 15 years.
Concord Energy has evolved considerably since its inception in 1998. What have been the three core growth engines that have driven such remarkable growth?
Ryan Marsden: In 2008, Concord Energy consisted of 25 people in Singapore, with sole focus on South East Asia. Today, we have 60 people, with locations in Geneva and branch offices in London, Dubai, and Shanghai. Crucially, Singapore has provided us with an environment to grow in a focused, methodical manner.
Harold Gan: The core area of the group, first and foremost, has been physical trading. Indeed, we have traditionally been an oil trading company, with niches in various areas of South East Asia. We soon realized, maybe earlier than other homegrown trading entities, that we needed to expand our capabilities beyond physical oil trading. As a result, Concord Energy has transformed into an asset development business, acquiring footholds in areas across the value chain.
Ultimately, going forward, in addition to holding physical assets, our ambition is to become a company with a fully integrated supply chain.
Concord was growing at the same time that the financial sector was developing its oil and gas focus. As such, we grew in partnership with the expansion of the domestic financial sector. Indeed, a unique strength of Singapore is that the trading sector has traditionally operated on a sophisticated, structured trade finance platform, which has catalyzed the rapid growth of this market.
What has been the motivation behind shaping Concord into an increasingly integrated company?
HG: As markets mature, margins often compress: oil is no exception. All commodity trading companies have confronted the same challenges, and have realized they need to become increasingly integrated, establish a foothold in tangible assets and trade around logistics, as compared to purely trading physical flows to survive in a shifting environment. Traders need to be offering greater value-added packages to compete—encompassing interesting finance and logistical solutions to compete.
RM: We identified and anticipated these trends five years ago, and have changed the company’s focus accordingly. Concord Energy’s structure has evolved to incorporate more of a business development focus and we are progressing nicely in our efforts to become a more integrated company.
HG: Initially, being a relatively small-sized trading company, opportunities to develop were rare. As such, our approach was often simply based on what we could get access to. However, being located in Singapore, we were able to acquire some very strong and relevant human resources within our market space and incorporate them into the company to maximize their insight and expertise on nascent opportunities.
Our successful Fujairah Oil Terminal venture in the UAE was initially invested in in order to increase our reach across the supply chain. As a result of the strategic, high quality nature of this asset, we have managed to leverage on the opportunities which such an asset brings and engage some very strong partners. Today, in our portfolio, this now sits as a stand-alone, Joint Venture storage asset and has recently been followed up with an MOU to develop significant, strategic storage capacity in Malaysia with the Dialog Group that could provide strong logistic support to the Singapore oil trading community.
We are continuing to look to invest in an array of assets and our approach has always been straightforward. At the investment evaluation stage, we strive to understand how the asset works, what it offers our company, and from there we determine how we can integrate it into our current business. This approach allows us to escalate our investment in assets that we envisage will grow within and genuinely enhance our business model, eschewing ones that do not.
RM: At its core, this business strategy is both entrepreneurial and adaptable in its nature. As the market is becoming increasingly developed and mature, Concord Energy must evolve with it. It is not about just offering physical trading capabilities; we have to think about adding further value to producers and refiners.
HG: Our business approach has allowed us to understand the market in greater detail and in turn has presented us with further investment opportunities within Asia. Acquiring extra infrastructure in this region, complements our trading model.
RM: Singapore is not just a trading hub, but a banking hub. Financing is an essential part of our business. The challenge of the finance sector, alongside ours, will be continuing to adapt to and understanding the way the oil industry is developing.
Singapore’s competitive advantage over regional rivals is having an established trading and financial infrastructure located in a single place. Moreover, Singapore’s ability to evolve, adapt and learn from others, has allowed it to cultivate a highly conducive business environment. For example, New York, London and Geneva, have initiated many trade financing ideas and Singapore has been adept at jumping on such global trends and bringing that skill-set expertise into Asia.
Furthermore, Singapore is continuously striving to facilitate a business utopia and part of the way they achieve this is through constant open-dialogue between authorities and businesses. For instance, as a Singaporean company, we have open dialogue with the likes of IE Singapore as to how they can help us and how we can support Singapore.
In 2012, there was a proposal to transfer regulatory oversight of commodity derivatives under IE Singapore’s Commodity Trading Act (CTA) to the MAS (SFA Securities Futures Act), expected to come into place by late 2014. For the trading industry in Singapore, is this a move in the right direction?
RM: Yes. The world has changed and the oil industry is a market in a similar manner to other commodity or financial markets, such as FX or credit derivatives. As such in this day and age, it requires robust regulatory oversight, which needs to come from the established regulator, which in Singapore’s case, is the MAS.
What has impressed me is the MAS’ open and transparent style, as well their communicative approach to our concerns. In our experience, the MAS has been receptive and responsive to the quirks of our industry on a local and global level. As a result, I am confident that the regulations initiated will be in line with global necessities, whilst not handicapping the nature of oil trading in Singapore.
Concord Energy’ has been awarded Global Trader Status by IE Singapore. Can you elaborate on the meaning behind this?
HG: The Global Trader Scheme is a massive encouragement for companies to set up shop in Singapore. If companies contribute to the finance sector, economy and wider-society through domestic employment, they will be rewarded fundamentally through concessions such as tax incentives. Additionally, it gives companies straight-forward access to the previously discussed expansive and sophisticated financial infrastructure in Singapore.
RM: The Global Trader Status given by IE Singapore, verifies a company’s stature in the market. It is a public incentive scheme that is not only monetary driven but also has network benefits. It allows a company to have increased dialogue with the relevant authorities, such as IE Singapore. For Concord Energy, it has helped put us on the domestic and regional map, which is a crucial step for a growing company.
A 2013 IEA South East Asia report forecasts 80 percent growth increase in energy demand by 2035. How is Concord Energy positioned to capitalize on this forecasted energy growth?
HG: There is going to be massive energy growth in South East Asia and as discussed, we are identifying infrastructure opportunities in this region. Indeed, over the last six months, we have been targeting real growth opportunities. Nonetheless, a key area of concern in some of these emerging markets is the risks involved; for instance, nationalism, protectionism and the ‘quirks’ of those policies, official or otherwise. There are barriers to entry, which we need to look at closely.
RM: Similar to Singapore, we cannot stand still; we have to adapt and evolve. We are always looking for attractive opportunities that fit our company profile and South East Asia is very much within our profile.
Why has Concord Energy not penetrated the flourishing regional LNG market?
RM: LNG is a burgeoning market that we would love to enter; yet, the barriers to entry into that market are considerable. Opportunities in LNG are attractive, and it is tempting to dedicate resources to this space. Nonetheless, the competitors in this market are huge players: state backed entities and major multinational corporations backed by billions of dollars. Thus it may be challenging for us to compete in this arena and so we have to remain disciplined. However there are opportunities for us to be involved from a facilitation perspective but the big ticket, high profile LNG ventures, may be slightly out of reach for us currently. That being said, we continue to grow and LNG is very much on our radar.
In three years’ time, how would Concord Energy have evolved?
HG: By 2016, the company will have balanced its focus between pure physical trading and the fully integrated value added supply chain business. The trading business, in addition to being a standalone profit center, will supply our infrastructure and be a tool to enhance the assets within our portfolio.
To read more interviews and articles on Singapore, and to download the latest free report on the country, click here.