Brent s evolution as a global benchmark

Transcription

1 Brent s evolution as a global benchmark Dave Ernsberger Global Head of Energy Pricing, S&P Global Platts September 2017

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3 Evolution of the North Sea Benchmark 1976 First oil from the Brent oilfield 2007 Sulfur de-escalators introduced 2007 Dated BFOE with introduction of Ekofisk 2017 Troll added to BFOE and Dated Brent 1985 Platts launches first Cash Brent assessments 2007 Buzzard oilfield enters production 2011 Decision to widen Dated Brent, cash BFOE to day 2016 Dated Brent CIF Rotterdam launched 1987 Dated Brent assessed for the first time 2002 Forties and Oseberg added to form Dated BFO; day pricing window 2012 Platts launches 25-day Brent on January Full monthahead Brent from February 2, ICE follows with March Brent production goes into sharp decline day Brent market 2013 Quality Premiums introduced on Ekofisk and Oseberg 2014 Quality Premiums formula updated

4 Platts methodology engagement & development Stakeholder briefings around the world Platts editors hold more than 1,500 meetings with the oil industry each year Technical workshops address key benchmark evolution, such as Dated Brent and Dubai, Oman crude Online methodology videos to explain major changes

5 Latest evolution: Implieds in assessment process Source: S&P Global Platts Market on Close assessment process, September 22,

6 The BFOE Crudes from 2018 Brent, Forties, Oseberg, Ekofisk & Troll in Brent Brent Forties Sullom Voe Mongstad Sture Oseberg Ekofisk Hound Point Teesside Troll Rotterdam (CIF Dated Brent) Rotterdam 6

7 Current North Sea situation #PlattsLOF The North Sea continues to make up a significant proportion of the crude slate processed in Northwest European refineries, but is no longer the largest. Along with regional end-user demand, there has been an increase in trade flow to the Far East, particularly for UK s Forties and Ekofisk, the largest two BFOE streams. North Sea production remains in steady decline, despite promise from new fields due to come online within next five years. New fields overwhelmingly heavier, more sour and largely more acidic than current production. Foinaven (UK) Flotta Gold (UK) Asgard (Norway) Gullfaks (Norway) Clair (UK) Statfjord (Norway) Schiehallion (UK) Troll (Norway) Oseberg (Norway) Grane (Norway) Brent (UK) Alvheim (Norway) Forties (UK) Duc (Denmark) Ekofisk (UK/Norway)

8 Reinforcing the North Sea basket Platts now includes Norway s Troll in basket of crudes reflected in Dated Brent, Cash BFOE and associated assessments for loadings from January 2018 Troll adds around 200,000 barrels/day (~20%) of deliverable supply to the North Sea basket, building a broader foundation for Brent for years to come Troll, Mongstad Troll is a light, sweet crude delivered on an FOB basis from Mongstad in Norway Platts will continue to consider the potential inclusion of a Quality Premium for Troll

9 Recent production boost slows recent decline BFOE Crude Production , b/d 1,000,000 Brent 1,000,000 Forties 800, , , , , , , , ,000,000 Oseberg 1,000,000 Ekofisk 800, , , , , , , , Source: S&P Global Platts Analytics

10 Previously-discussed BFOE candidates Basis Production API Gravity Sulfur % Tan mgkoh Flotta Gold FOB 55,000 b/d Troll FOB 200,000 b/d DUC FOB 80,000 b/d Statfjord CIF 150,000 b/d Gullfaks CIF 180,000 b/d Sverdrup (2019) FOB 375,000 b/d Production volume and quality are key factors when selecting grades Flotta Gold and DUC have less significant volumes for Dated Brent Statfjord and Gullfaks trade CIF delivered in non-standard cargo sizes Sverdrup is projected to be quality-inconsistent with the existing Dated Brent basket Source: S&P Global Platts

11 Outlook for the new North Sea basket BFOE production plus Troll: , b/d 1,200,000 Forties Ekofisk Oseberg Brent Troll 1,000, , , , , Source: S&P Global Platts Analytics

12 Non BFOE-type grades growing part of North Sea million b/d Total North Sea projected production 2.5 Light, Sweet, Low Tan Remaining North Sea Production Source: 2023 S&P Global 2024 Platts 2025Analytics

13 Dated Brent now assessed both FOB and CIF #PlattsLOF Dated Brent is now assessed on both an FOBloading basis and on a CIF-delivered basis Considers freight, Platts cross-north Sea Aframax assessment and annual WS rates Mirrors BFOE and includes Quality Premiums for Oseberg and Ekofisk Based around delivery dates, rather than loading dates FORTIES BRENT EKOFISK OSEBERG Designed to adjust to changes in the BFOE and global crude markets Not necessarily constrained by geographic or qualitative restrictions Room to broaden delivery to NWE rather than just Rotterdam refining hub

14 Dated Brent CIF Rotterdam Assessment launched March 2016 Crude Intake by Region, Rotterdam Calculated as net-forward from FOB values for BFOE Arrival price takes account of voyage time and quality premiums Bids and offers can be published in Platts Market on Close (MOC) Arctic Sea 5.79% Black Sea 7.84% South America 2.31% North America 3.13% North Africa 1.05% Middle East 25.89% Platts sees Dated Brent CIF Rotterdam as key part of market West Africa 9.45% Natural outlet for North Sea crude oil, including BFOE Platts not currently planning to add non-north Sea grades in Other North Sea CIF grades may have a role to play in CIF Rotterdam North Sea 20.20% Baltic Sea 24.34% Source: S&P Global Platts Analytics

15 Rotterdam in Platts MOC

16 More information available on CIF Rotterdam 16

17 The road ahead for Brent Evolutions will continue for Brent from 2018 onwards FOB solutions find strong support in industry Potential new crude streams in the future Likely to need quality adjustment tools CIF could provide strong basis, particularly if FOB falls short Work well underway to establish CIF trading processes and norms Could provide basis for deeper Atlantic Basin deliverability More information available at: 17

18 Q&A 18