By Ben Winkley
LONDON--Oil-pricing agency Platts has Monday proposed changes to
the way it assesses the price of the global crude-oil benchmark,
Dated Brent.
McGraw-Hill Cos. (MHP)-owned Platts said it would introduce a
price-escalator to reflect quality premiums for delivery of Oseberg
and Ekofisk, two of the four key regional grades that make up
Brent-Forties-Oseberg-Ekofisk, known as BFOE, as well as a wider
delivery period in its Dated Brent and BFOE assessments.
Platts said its proposals weren't a reaction to last week's
unilateral decision by Royal Dutch Shell PLC (RDSB) to change its
terms of trade in the North Sea.
Shell proposed adding a 25% premium to Brent and Oseberg, and a
50% premium to Ekosfisk. Platts has proposed a 50% premium for
Oseberg and Ekofisk, but none for Brent.
The fourth grade, Forties, is normally cheaper than the others,
meaning that it is more often delivered into forward contracts.
Barrels of Brent, Oseberg and Ekofisk are often saved for the spot
market where they can attract higher prices.
Some saw Shell's move, which was endorsed by BP PLC (BP), as an
attempt to force Platts's hand.
Platts "has been exploring the concept for approximately 18
months," said Jorge Montepeque, its global editorial director. The
announcement came as the industry gathers in London for
International Petroleum Week.
The moves by Shell and Platts are aimed at improving both
liquidity and price discovery in the physical market that feeds
through to the setting of Dated Brent, against which billions of
dollars of global oil-trade is valued.
Liquidity can be a problem in the North Sea, where volumes are
relatively low and can easily be affected by pipeline or platform
outages. This happened in Autumn 2012, when a prolonged outage at
the giant Buzzard field cut the supply of Forties and meant there
wasn't enough oil being sold into the forward contract.
Platts also said that effective March 2015, its North Sea price
assessment processes will move from the current system of
considering cargoes for delivery 10- to 25-days ahead, to a system
of 10- to full-month ahead cargoes. It is also opening
consultations regarding a possible move to a 45-day-ahead loading
period for cargoes considered in its Dated Brent assessment
process, with implementation possible in 2018.
Platts provides energy information in competition with Dow Jones
Newswires and The Wall Street Journal.
Write to ben.winkley@dowjones.com
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