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Case study: Statoil seeks clear oversight of trade finance Facing a growing call from its smaller counterparties for trade finance arrangements, international energy company Statoil sought greater control over its transactions.

Case Study: Statoil Seeks Clear Oversight of Trade Finance

by Annie Lamngoc Sebergsen, Head of Trade Finance Sales Norway, Nordea

If you received Letters of Credit worth hundreds of millions of dollars, you’d want a robust trade finance system. Facing a growing call from its smaller counterparties for trade finance arrangements, international energy company Statoil sought greater control over its transactions.

Statoil is an international energy company and the world’s third-largest net seller of crude oil, moving over 100 million tons each year. With a growing call for trade finance arrangements from its counterparties, the company wanted a clear oversight of all its transactions.

Statoil’s experience of trade finance is as a receiver of Standby Letters of Credit (LCs) from smaller counterparties. “We typically receive around 700 to 1,000 LCs each year,” says Gunnar Steinsson, Statoil’s Head of Credit, Marketing and Trading. “That might not sound like many but the values involved can run up to hundreds of millions of dollars. We need a robust trade finance system, which gives us all the information we require in one place – we can’t afford to lose money on any transaction.”

Approach

Statoil has relationships with more than 15 core banks. Two years ago, the company invited its core banks to participate in the tender to become its main trade finance bank. “All the banks submitted a tender,” says Steinsson. “But ultimately we chose Nordea as it demonstrated the best competence and expertise in trade finance and it has a strong presence in the main region in which we operate. We were also very impressed with the sophistication of Nordea’s electronic trade finance tools.”

With Nordea as its main trade finance house bank, Statoil now has a clear oversight of its arrangements in this area. All of its incoming LCs are routed through Nordea, which checks they have been issued by an approved bank, giving Statoil complete peace of mind. And Statoil is also benefitting from Nordea’s expert knowledge of trade finance. Nordea advises Statoil on risk pricing and entry into new markets, and supports knowledge sharing on LC terms across the company’s credit teams.

Implementation

The transition from Statoil’s previous trade finance banking arrangement to Nordea was carried out in several phases. This involved creating new web portals for trade finance, and setting up access rights and authorisation processes. Nordea also worked with Steinsson’s team to establish appropriate formats for guarantees and embed new working practices. The project was co-ordinated by a member of the internal credit team in partnership with dedicated experts from Nordea. “The sophistication of Nordea’s trade finance tools ensured that the transition was as smooth as possible,” says Steinsson. “But even more important to successful implementation was the great working relationship we have with Nordea. I’ve been at Statoil for five years, but the company’s involvement with Nordea stretches back at least 20 years.”

Following the transition period, Statoil has continued to benefit from Nordea’s commitment to maintaining strong relationships with its partners. “Our operational department in Stavanger is in contact with Nordea at least twice a week,” says Steinsson. “Nordea helps ensure that the guarantees we receive can be trusted and seeks clarification if the language or format used is unclear. We can then ship with confidence that we’ll receive payment.”

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