Asked how he ended up in commodities trading, Jon explains how the vital connection between the transaction, product and client drew him to the sector.
How did I get into commodities? It’s a good question. I certainly didn’t take a traditional route in, I spent the first 10 or 11 years of my career working in or connected to investment banks, and I spent eight years working at Morgan Stanley in London with a finance operational slant.
Getting involved in a couple of commodity transactions I found that I was able to connect with the transaction, product and client in a way that I hadn’t with purely financial transactions. So, having decided, for a variety of reasons, to move on from Morgan Stanley I began looking at commodity trading companies – keeping the trading expertise I had but starting to apply it specifically to commodity companies.
Fundamentally, my first move was still connected to trading, but I started to get a bigger understanding of the role of commodities which plays significantly to one of my life passions. I’m very interested in history and energy and resources, and their connection with how humans have developed and continue to develop. I find it fascinating; I love the topic, so to work in it is great!
Your enthusiasm is interesting considering the way the fuel sector is currently regarded – as a necessary evil, perhaps?
Energy is absolutely a necessity, and we certainly need to evolve the industry and our sources of energy. And that’s probably the biggest challenge of working in commodities and fuel but is also what I like about it – it is a necessity of everyday life for everyone and that’s why the current environment is such a challenge…
There is a realisation of the need to transition, and I believe it’s natural for an energy or fuel company to be part of driving that. We are already involved in energy distribution and supply so who better to understand what a customer really needs to transition?
Unfortunately, there is no magic wand to get to the solution, so you have to face the reality on the way. It’s fine to have an ambition to no longer use oil products, but how do you go from where you are today to that ambition? It’s a fascinating challenge and one I believe Mabanaft can play a part in.
How did this transition of yours lead you to Mabanaft and the role of CEO?
After my time at Gazprom, I left intending to take a short career break, but received a call about Mabanaft from the then CEO. Hearing all about a 75-year-old Germany-based family company with a desire to change, and set a more sustainable future, I was fascinated.
It wasn’t the obvious next step for me but there was something about the business; the shareholders have the desire to do something different and it is compelling.
With the size of the UK business, I wonder how many realise that the business is part of an even larger group or that it is still family-run?
You could be right, but it still is. It was built on the backbone of importing product, storing it, transporting it, and supplying it to customers and, through our petrol stations, truck stops, last mile distribution and wholesale businesses, that’s still, fundamentally, what we do today. Over the last 75 years we’ve expanded this model from our home in Germany into other North West European countries, including the UK.
We benefit enormously from our long history and strong foundation of loyal customers, assets, and skilled people. They are the backbone of what we do today and fundamental to our ability to meet evolving customer needs.
To deliver a sustainable business, as we continue to supply our customers with energy, our products will, similarly, need to evolve.
Moving to your current role amid some of the biggest challenges of our time, what are you hoping to deliver, both to the business and to customers?
It’s vital that we remember what we are and what our strengths are. We are operating at various points along the downstream value chain, with the ability to access supplies in various locations. We’ve got terminals, we’ve got logistics infrastructure and we’ve got end customers. Where we could see an opportunity for improvement was to increase business effectiveness across our value chain.
Our purpose is two-fold. Firstly, we want to make what we do today as efficient as possible and make sure that we are orientated towards our customers and really understanding what they want. We supply fuel to customers and remembering that that’s our purpose is super important.
The second part is how we’re going to improve our service to customers. Our customers are aware of the need to consider their own sustainability – their emissions and fuel efficiency – and we want to help those customers by providing solutions. With our existing capabilities we can help them to manage their own carbon footprint, enabling them to transition at their own pace.
Our existing customer base is, typically, made up of those operating in the hard-to-electrify sectors – those with heavy trucks, ships, planes or agricultural, construction and small industrial sites using liquid fuels. They all have an increasing desire to manage their carbon footprint and emissions but can’t immediately switch to electricity.
I believe our role is to offer options that work today, but to also go on a journey with those customers that helps them to fully decarbonise over time. Low carbon liquids may not be the final solution for all sectors, but we believe they are a step that you can take now on the path between A and B. No one can sit and do nothing while they wait for the final answer. The transition journey can begin now.
With that strategic overview, what would you like to achieve personally in your time with Mabanaft?
We are a company with a long history and strong brand so maintaining those established values with our loyal customers now, while ensuring we are on a path that also delivers for our customers in the future, that’s the most important thing.
The other aspect is operational; I’d like to streamline our various businesses and cultures globally, to harness the power of our total organisation to deliver solutions catered to our customers’ future needs.
As you look to deliver on your ambition for Mabanaft, what’s the best piece of advice you have ever received?
It’s basically to trust your instinct. If you’re the one making the decisions, do all the analysis that will give you the best chance of a high-quality decision then trust that outcome and your instinct and go with what you believe because, often, you only get one chance.
What do you see as your focus for the next few years?
We’ve already done a lot of transformative work in the business. We’ve changed the way that we operate, we’ve invested in additional people bringing new capabilities, and we’ve refocused on certain activities. But throughout all this, we remain very focused on the end game – selling a product to a customer – and ensuring that the customer is our starting point.
We made these changes to be more efficient in the way that we serve our current and future customers and to help them transition at their own pace by providing them with more solutions. We need to remember that’s why we did it.
What role can Mabanaft play in the shift to future fuels to decarbonise the transport, heat and commercial sectors?
We are experts with a long history in sourcing, handling, transporting, and selling liquid fuels to customers. It’s what we’ve been doing for the last 75 years. These same customers are going to need liquid fuels in the future so we are working out how we can give them different options to start them on that journey.
We believe that there isn’t a single answer and there are multiple solutions that we need to follow. There are solutions readily available now to immediately reduce their emissions and carbon footprint. We believe that our customers’ customers will be demanding these changes in the very near future and we have solutions that will help them now.
A prime example is logistics companies where we can offer low carbon solutions that don’t involve buying a new truck or changing their entire supply chain. We are already engaged in supply of an expanding portfolio of biofuels, such as renewable diesel or HVO.
This year we will take our first ammonia molecules from our joint investment in Gulf Coast Ammonia LLC. It’s a product we believe will become an important part of the energy mix by the end of the decade. It can be a carrier of hydrogen, enabling it to be imported where it is either not abundant or too expensive to produce, and it can also be used as a direct burn, replacement fuel – for example in the marine sector, where we see significant potential for our business.
Many customers may be on a path to hydrogen but with many years of work still needed to deliver low carbon hydrogen as a solution. The basics of any reliable fuel supply are that it’s got to be affordable, and it’s got to be available which is why we are, currently, focussed on viable near-term solutions and hydrogen derivatives.
With the current challenges around economic hydrogen production at scale what needs to happen to get to that point?
It’s the classic chicken and egg. You need significant demand in order to justify investment in production, but these investments are heavily reliant on access to green power which will only become affordable when there is production at scale. This is why I believe regulation is needed, as well as subsidy in the short term, and companies that are willing to form partnerships to combine capabilities and share the investment risk as they establish new markets or supply chains.
Whether it is for wind, solar or other new power generation, there will be a need for new grid capacity, new machinery etc. so the investment required is enormous. Regulation, subsidies and technology will all need to be used, but the good thing is that those things are already happening even if it is a slow burn.
Taking the Inflation Reduction Act in the US as an example, that’s a massive government incentive to invest in the production of green hydrogen which can make the difference needed to get a business case over the line. With reliable production, someone will commit to the offtake and then you can find a customer because the price becomes reasonable – these things can then snowball.
And then other governments can replicate it?
It’s interesting the way you just described that, because the idea of conforming across governments or countries is essential. You can’t be in a situation where the certification, for example, for a low carbon project is X in one country but Y in another.
Typically, if you look at where the investments are today, it’s where there’s already an abundance of renewable energy sources, whether wind, solar, or hydro, for example, but low demand for the energy in that country. The Middle East is a classic example, Australia another and South America too, but the issue is with transporting the excess. If you produce green ammonia in Saudi Arabia, for example, and the regulatory regime doesn’t match the regulatory regime where you want to sell that product, that creates a massive problem. This is why there needs to be conforming across markets and that’s why regulation is so important.
The same also applies to low carbon solutions. As I said earlier, I don’t believe we can suddenly jump to green in one step so, if you take our ammonia business for example, we plan to utilise carbon capture in the production. 18 months ago, that would have seen it called blue ammonia which highlights the need for greater definition in terms of what level of carbon intensity means that an energy source can be considered low carbon.
Are these reductions achieved through offsetting or actually achieved?
They are actually achieved and, personally, I don’t believe that voluntary offsetting can be the only solution. The only long-term solution is to drive efficiency and to switch to lower carbon fuel. HVO is a great example in the UK with typical ghg emission savings in the range of up to 90% reduction compared with diesel and you can make up the balance to zero with voluntary offsets. That’s a much more compelling solution than to continue utilising diesel and using offsets to get to 100%.
If you could get one message across to Mabanaft customers, what would it be?
As the same reliable partner that we’ve always been and will continue to be, we’re going to work with you in the long term to offer the range of low carbon or alternative energy solutions you need, to manage your own fuelling and sustainability journey. We are ready when you are.
We will be the same Mabanaft, offering the same products, but we’re also going to start helping them in a longer-term relationship to meet their own sustainability needs.