When Dubai-based trading firm Montfort launched in 2021, it made a big splash in the market. Headed by ex-Trafigura veteran Rashad Kussad, the firm hired senior talent away from some of the world’s biggest trading companies and quickly became a mainstay in the market focusing on gasoline blending in Fujairah and niche (but profitable) trades in other markets.
As with any new flashy entrant in Dubai, many speculated about Montfort’s ‘backer’ – more a testament to the region’s opaque market than the firm’s actual business dealings. Montfort quickly expanded, buying up assets in Africa and becoming a mainstay in East Africa’s import trade (MEES, 1 August).
But despite its growing regional profile, the firm’s acquisition of German utility Uniper’s 67,000 b/d Fujairah refinery in early 2023 came as a shock to the entire market (MEES, 17 February 2023). Not only did Montfort beat major trading houses like Vitol and Litasco in its ~$70mn bid, it did so with the backing of Ahmed Dalmook Al Maktoum’s Private Office, a member of Dubai’s ruling family.
REFINERY WOES
On paper, the acquisition was a risky but clever move. The ‘Fort Energy’ refinery is one of two simple topping plants at Fujairah designed to run heavy sweet crudes that yield very low sulfur fuel oil (VLSFO) - the other being Vitol’s 80,000 b/d unit - which is a prized commodity in Fujairah’s bunker market post-IMO 2020. The purchase bolstered Montfort’s portfolio, opened up a (potentially) steady cashflow, and afforded it a natural hedge against overexposure on clean products.
But it also created three problems. First, heavy-sweet crude is difficult to come by: Dar and Nile blends from Sudan and South Sudan, and Chad’s Doba are the only easy feedstocks to secure, putting Montfort in direct competition for supplies with Vitol. Secondly, managing a refinery isn’t easy – especially for a trading house. Even Vitol manages its Fujairah ops from its technically savvy refinery desk in London, leaving its Bahrain and Singapore desks to trade the output. Third, feedstock isn’t cheap: a VLCC of heavy-sweet crude would cost around $140mn at current market prices – double what Montfort paid for the refinery.
Montfort suffered from all three. The firm, operating under its refining arm Fort Energy, was hit with an outage at one of the refinery’s two units in May 2023 (MEES, 4 August 2023). The refinery then went completely offline for an extended period and restarted a year later (MEES, 2 August 2024). Even when online, the firm struggled to source feedstock: MEES understands Chinese state firm Sinopec was underwriting crude supplies (MEES, 8 March 2024). The damage was clear in 2024 when Montfort scaled back its fuel oil desk. Its occasional naphtha blending and gasoil supplies to Tanzania (seemingly on behalf of Adnoc) have been its main lifeline in recent times.
BOUNCING BACK?
Much of Dubai’s trading community has written off Montfort’s demise as an ‘not if, but when’ scenario for more than a year. But the firm’s fortunes could be changing. Montfort has recently secured a Panamax tanker on time-charter for six months with the aim of lifting Sudanese crude for its refinery, according to a market participant.
MEES reported last week that the firm was in the process of moving its refinery away from its current location in Fujairah’s VTTI (MEES, 22 Augustt), and can now credibly report that the planned location is within the vicinity of the nearby Vopak Horizon terminal (see map).
Fujairah Oil Storage Facilities And Refineries
That the planned relocation is to Vopak specifically is an important detail that must not be overlooked: Aramco Trading Fujairah (ATF) is Vopak’s biggest client at the terminal, which is also the only products terminal in Fujairah with its own dedicated berth, including a VLCC jetty. This enables Aramco to skip the queue that all other firms suffer at Fujairah Oil Tanker Terminals (FOTT) which handles the port’s other 12 terminals.
ATF is a key bunker supplier in Fujairah, but has caused Vopak headaches over the last year. MEES understands that the longtime client has handed back gasoline tanks in recent months, and Vopak – one of the few ‘clean’ terminals not handling Iranian barrels in Fujairah – is keen to retain the trading giant as clients unwilling to trade dodgy barrels are in comparatively short supply, leading to significantly lower tankage costs for ATF.
One theory posited to MEES is that Montfort will essentially relocate to Vopak and become supplier to ATF’s fuel oil desk. Aramco certainly has the cash and could use the supply. Montfort needs the escape from two years of petroleum purgatory. A source claims the refinery move may cost Montfort upwards of $20mn, though this has been neither confirmed nor denied. To finance this, Montfort may be looking to sell one of the refinery’s two units.
The problem comes back to Sudan, the key supplier of Fujairah’s feedstock. Vitol boasts long ties to Sudan and thrives in an environment that requires the flexibility only a private trading firm can navigate. In other words, Vitol can do things Aramco cannot.
However, the UAE has imposed a blanket ban on “maritime interactions” with Port Sudan, and early indications suggest this extends to Sudan’s nearby Bashair oil export terminal. Take the vessel ‘Sand’, which MEES reported last week was signalling Fujairah carrying Sudanese crude despite the embargo, but the vessel changed its signal to ‘Oman’ on 23 August. With Sand seemingly diverting, Fujairah will receive no crude from Sudan in August, although it seems inevitable that sooner or later the cargo will end up there.
