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By Emma Farge
GENEVA, March 28 (Reuters) - Commodity trading houses areexpanding aggressively in Africa as they look to add volume andtake on assets that promise to benefit from a continentachieving some of the highest economic growth in the world.
Merchant traders have historically been mostly concernedwith shipping Africa's oil onto global markets but are nowviewing Africa as a destination market for fuels and areinvesting in the storage and retail networks the continent needsto develop.
But their growing involvement in a region where several topfirms have faced legal problems or payment delays may worrywould-be investors at a time when the firms, typically privatelyowned, are scouting for new forms of capital.
While several firms have ruled out following commoditytrading house Glencore in a public listing of shares,some are issuing bonds or partial sales to fund their quest forassets.
Some of the most alluring assets are in Africa's fuelmarket, which is set to grow by 40 percent by 2020 to 4.3million barrels per day, according to Ecobank Research.
"If you want to be in Africa, you have to be prepared toinvest. Sub-Saharan Africa is growing at a very decent rate andthe highest regional area in the world today," said GrahamSharp, co-founder of oil trader Trafigura and a senior adviserto consultants Oliver Wyman.
"There are some great opportunities there, but it's not inthe traditional trading business."
Trafigura and commodity firm Vitol have both bought hugenetworks of oil service stations from oil majors BP andRoyal Dutch Shell over the past few years.
Trafigura is now considering floating its subsidiary PumaEnergy, an energy distribution company that has invested over$800 million in Africa over the past 10 years.
IMPORT DEPENDENT
One reason the fuel business is so attractive is thatAfrican countries have made slow progress in building their ownrefineries, leaving them increasingly dependent on importedfuels and the traders that can source and deliver them.
Trading houses have spotted this deficiency and, using theirnewly acquired service stations and storage assets, areextending their reach to landlocked interior countries such asZambia and Uganda.
"Intra-regional flows of petroleum products in Middle Africarepresent a major growth area, particularly with the advent ofnew oil producing countries ... and the increasing energy demandof Middle Africa's consumer markets," said Rolake Akinkugbe,Ecobank's head of oil and gas research.
Trading houses are also using their growing cash reserves tostart exploring and pumping oil, a sector long dominated bylisted oil majors.
"They want deals that put more oil on their books to buildtrading mass, and that's what they've always done," said GaryStill, an executive director at UK consultancy CITAC.
"But we're also seeing trading houses like Glencore andVitol becoming very interested in the upstream. I think they'vegot the money for these projects and will go for it," he added.
Glencore has signed a contract to export Chad's oil in 2013after it agreed to invest more than $300 million in the centralAfrican country's Badila and Mangara oilfields to boost oilexports via the Cameroon pipeline. Its warehousing and logisticsunit Pacorini has also made its first break into Africa.
Vitol also signed a long-term contract with former Frenchcolony Gabon to export its oil.
OCCUPATIONAL HAZARDS
In the more traditional business of trading, low margins arepushing traders to seek out higher oil volumes by negotiatingfor contracts with African governments and state oil firms.
Know-how and connections through local staff or "fixers" cangive a firm a competitive advantage.
Jean Claude Gandur, chairman of AOG, stunned the industrywhen he completed a sale of his upstream business AddaxPetroleum to China's Sinopec Group for $7.2 billion in 2009.
Now he plans to invest $400 million in the African oilsector and aims to buy Nigerian acreage. The group's expansionin Nigeria may benefit from having a former executive AfolabiOladele of state oil company NNPC on its board.
Swiss-based Mercuria also employed a son of the formerNigerian opposition leader Moshood Abiola to help with businessdevelopment in west Africa.
But deals do not always go according to plan in a regionplagued by corruption and oil-fuelled civil strife.
Gunvor, historically strong in Russian oil markets, hired ateam of traders from Addax Petroleum in 2009-2010 to expand inwest Africa.
It now accuses a former employee of fraud and embezzlementwith respect to a Republic of Congo oil contract after Swissauthorities launched a money laundering probe. Gunvor itself isnot subject to the investigation and is a plaintiff in theproceedings.
Trafigura, which corporate filings show gets nearly 30percent of its oil turnover from Africa, was locked in a legaldispute last year after buying a cargo of oil the South Sudanesegovernment said was looted by its northern neighbour.
The proceeds from the cargo, worth around 58 million euros($75 million), were later seized by an English court toestablish ownership.
A court document dated Nov. 7 and seen by Reuters showedthat a settlement had been reached, though some of the detailsremained confidential. Trafigura declined to comment
Even so, Trafigura has agreed to begin exporting Dar Blendcrude, it said on Wednesday.
Glencore was the first to secure an agreement to marketnewly independent South Sudan's oil, but the deal was laterscrapped after opposition from some South Sudanese officials.
In Nigeria, top trading houses like Mercuria and Glencoreare owed dozens of millions of dollars for fuel deliveries thatin some cases date back over three years.
"Africa can be a minefield," said Akinkugbe at Ecobank.
"You have to do your homework and have a local champion whocan help bridge the knowledge gap."
