How one of the tiniest oil markets cost Singapore-based Trafigura $1.5b

Firm says staff in Mongolia manipulated payments while concealing overdue debts

Trafigura Group is a giant of commodity trading. On any given day, it handles enough oil to supply the entire needs of France three times over. Its global reach stretches from US crude oil export infrastructure to fuel stations in more than 20 countries across Africa, Asia and Latin America.

Yet in a distant corner of its empire, far from the attention of top executives in Geneva and Singapore, a crisis has been brewing for some time.

On Oct 30, the company admitted it faces a loss in Mongolia of up to US$1.1 billion (S$1.5 billion), linked in part to suspected fraud by its own employees. Trafigura alleges that staff manipulated payments while concealing a mountain of overdue debts, allowing the exposure to run out of control for years without raising any red flags.

For people inside and outside Trafigura, the revelation was a bombshell. Most shocking was the scale of the likely loss relative to the size of Mongolia's oil market. There are over 100 countries that use more oil than Mongolia, according to data from the US Energy Information Administration, among them Luxembourg and Nepal. Its consumption of about 35,000 barrels a day is worth roughly US$1 billion a year. For Trafigura, Mongolia made up less than 0.3 per cent of all the oil it traded.

This account is based on interviews with eight people with direct knowledge of Trafigura and its activities in Mongolia, who asked not to be identified due to the sensitivity of the subject. On Oct 30, Trafigura chief executive officer Jeremy Weir said the company was "bitterly disappointed" by the situation and was confident it was isolated to the Mongolia business, and the company's investigation is ongoing.

The announcement, confirming an earlier report by Bloomberg, represents a painful sequel to the 2023 revelation that Trafigura had fallen victim to a massive alleged nickel fraud.