It's not just investment banks who trade. Energy companies are major players within the energy trading space and also train graduates to be traders. Hannah Langworth speaks to Steve Deighton, Director of IST Business Trading & Development, and Charlotte Stacey, IST Graduate Lead, at BP to find out more.
Why should graduates consider working in the energy sector?
SD: Energy companies provide heat, light, and mobility, so their work touches everybody's lives.
Working in energy is also particularly exciting at the moment because of the current volatility in the energy markets. This volatility is due to a number of factors, including political tension in the Middle East, the increasing involvement of large funds in the energy sector, shifts in the value of the dollar, and fluctuations in demand for energy caused by the current global recession.
What is IST, and how does trading fit into BP's business?
SD: IST stands for Integrated Supply and Trading - it's BP's supply and trading arm. BP's business is about finding oil and gas around the world, getting it out of the ground safely, refining crude products into useful products, and then selling those products. IST is involved in every step of this process.
How do BP's trading activities differ from the way in which investment banks participate in the energy markets?
SD: Investment banks focus on the financial trading associated with the energy markets, for example, in energy-related derivative products. We're involved with these as well, as one of the biggest players globally. But our emphasis is on physical trading, which means facilitating the movement of crude oil and other products around the globe every day to supply our production facilities, refineries and sales networks. The investment banks, by contrast, are small players in the physical markets.
The other difference is that investment banks' involvement in the energy markets tends to be a very small part of their overall trading operations. By contrast, we focus and specialise on trading in the energy sector. BP is recognised as probably the foremost trainer and developer of talent in the energy trading business, and many of the top energy traders at investment banks and other trading houses learnt their craft at BP.
Can you tell us a bit more about your trading graduate scheme?
SD: The scheme is a three-year programme of three one-year rotations. These give those on the scheme a solid understanding of how the energy markets work, as a platform from which they can go on to become successful energy traders.
Graduates might spend some time in analytics, studying information about supply and demand in the energy markets and putting it into formats which will be useful to the traders as they make their trading decisions. They might also spend some time in a control role, looking at the risk exposure and the profit and loss of a trading book on a daily basis, which will help them to understand how traders put together and manage a portfolio of positions. A third typical role would be in operations, which involves looking after the movement of our products around the world - for example, making sure that ships arrive to collect cargo on time, that the correct cargo is loaded onto the ship, that the captain knows where the ship is going and how to get there on time, and that the cargo is correctly discharged at the other end.
During this three year period, graduates won't do any trading themselves, because we think this time should be purely about their learning and development. At investment banks graduates may well get to trade at an earlier stage, but we feel it's better to invest in graduates by training them carefully first to ensure they develop into great traders in the future. We don't rush our recruits, but give them the full toolkit they need before they start trading, which we believe takes two to three years.
What kind of graduates are you looking for?
CS: We ask for a minimum of 320 UCAS points in an individual's top three A-Levels or an equivalent qualification, and a 2:1 in their undergraduate degree. Beyond that, we look for individuals who are able to demonstrate successes outside of academia. We're also looking for a passion for what we do. When I'm interviewing candidates, it's important that they're inquisitive about the energy industry and are keen to learn more by joining a company like BP with its deep level of expertise. Applicants need to have done their own in-depth research into the sector over a period of time.
SD: I'd add that candidates also need to have good analytical, negotiation and people skills. I also look for applicants who have a real interest in trading and some entrepreneurial flair. People can demonstrate that they have these through their involvement in student societies, and we've also had applicants who've set up their own businesses, or been involved in other relevant activities.
Can you outline the application process?
CS: The first part is an online application, which consists of an initial screen and a number of online tests. If candidates pass these tests, there'll be a further screening process and they'll then be invited to the first round of on-site assessment.
This first round includes a competency interview, a technical interview and a trading simulation exercise. In addition, we'll spend quite a lot of time during the day talking to candidates about BP, the culture here, and the graduate programme. So although we're assessing the candidates, the day's also about them deciding whether or not we're a company they'd like to work for.
Candidates who pass this stage are then invited to a final one day assessment centre, which involves activities like group exercises and case studies, all specifically related to the energy industry. That's the final stage, and recruitment decisions will be made at the end of that day.
SD: During the application process, applicants will also get the opportunity to see our trading floor, and meet traders and people currently on the graduate scheme. We also take candidates out to dinner with a group of our employees, so they can find out more from them about BP, IST and the graduate scheme.