by Jitendra Sharma, Group Manager, Treasury & Insurance, Emirates National Oil Company Limited (ENOC) LLC
In February 2014, Emirates National Oil Company (ENOC) concluded the first of a number of important contracts in Tanzania, an important strategic market for the company. This brought a number of operational and risk management challenges including large volumes of transactions which ENOC’s treasury found difficult to handle. In this article, Jitendra Sharma, Manager, Group Treasury, ENOC outlines how the company opted for relationship bank Abu Dhabi Commercial Bank’s (ADCB) outsourced export Document Preparation Services for letter of credit handling, delivering significant commercial and operational advantages.
A key part of ENOC’s international expansion strategy is to develop our footprint in Africa, where the provision of reliable energy is essential to building economic prosperity and stability. An important country for us as part of this strategy is Tanzania, and we have been developing our activities there throughout 2014. The first deal was transacted in February 2014 for $300m through the Tanzania government, which was a sizeable transaction. However, we soon realised that rather than dealing with a single counterparty, we were actually conducting business with up to 50 mid-cap and small to medium-sized enterprises (SMEs). This created a different risk dynamic dealing with a single counterparty, and involved issuing a very large number (over 200) letters of credit (LCs) reflecting each product sale. As our treasury department is accustomed to dealing with a small volume of high-value transactions, we were not equipped to manage this scale of labour-intensive processing, and it was a struggle to fulfill the first contract. Ultimately, we achieved it, but we recognised the urgent need to find an alternative solution for subsequent contracts.