My friend CL has been looking for business opportunities in the Petroleum Trade for six years . He has contacted numerous brokers who claim to have the ability to supply millions of metric tons of Russian D2 L 0.2-62(GOST305-82). Normally, the deal would involve monthly delivery either by vessel or by pipeline to Tank Farms in Rotterdam. There would be a procedure o how to transact and how to pay but never too clear on the delivery. These are not the issues we are addressing in this posting. There is one issue we wish to clear before we go into details on the procedures or the payment. These issue will be addressed in subsequent postings. This friend of mine is excited about a recent "opportunity" whereby someone who claims to be the translator for GAZPROM in China tells him that an arrangement can be made, through this so called translator, with GAZPROM to supply 2 million Metric Tons of D2 L 0.2-62(GOST305-82) per month for 36 months. The price is extremely attractive and is in the region of Platt's price less 20 to 25 %. You can imagine how excited my friend can be if you work out briefly the amount of profit that can be generated per month based on 2 million Metric Ton.
My friend works hard on this deal and approaches potential joint venture parties who might support him on the funding. One of the party asks about the quantity of diesel that Russian refineries as a whole produce in a month. My friend has no idea and therefore turn this question to me. To get the answer, I turn to the report produced by British Petroleum. (http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622).
From the report and look up the Oil section, we can determine that the total refinery capacity of Russia is 5616 K Barrel per day or roughly 0.8 Million Metric Ton per day or 24 Million Metric ton per month assuming that the Russian refineries work non-stop throughout the month(very doubtful assumption knowing that Russian Refineries are among the oldest).
For each Barrel of Crude oil, roughly 9.2 percent of the refinery output is Diesel. If Russian refineries can process 24 Million Metric Ton of Crude oil per month, the maximum amount of diesel produces will be 9.2% of 24 Million Metric Ton which is 2.2 Million Metric Ton. I tell my friend that this so called the translator for GAZPROM in China is definitely a scam because there is no way for GAZPROM to be able to deliver 2 million Metric Ton of D2 per month to him knowing that the whole of Russia can only produce 2.2 Million Metric Ton per month and there are many types of diesel. On the same token, one can immediately deduced that all the so call deals available on different trading portals on the internet are scams if they claim to be able to supply unbelievably large quantity.