The explosives that you make are not for a BF quest, but an alternate way to exit act 1 (you can take the stairs in the room north of General Bram's room or use the explosives). Both exit rooms were locked (the keys in Samuel's lair), and if you explored everywhere on that level of the citadel, you should have heard a warning about something where explosives could come in handy (in the <span class='standouttext'>Spoiler : </span><span class='spoiler'>forge, to the east and far north</span>). Using the explosives gives you experience points, where taking the stairs does not.
If a BF merchant is asking for explosives, then there should be some explosives on the third level of the final dungeon in the act 1 BF.
