* ADNOC to list Murban crude as futures contract on an exchange
* Lifts Murban crude destination restrictions
* May implement new Murban forward pricing between Q2/Q3 2020
* Abu Dhabi announces higher oil and gas reserves, new gas finds (Adds details)
DUBAI, Nov 4 (Reuters) – Abu Dhabi’s Supreme Petroleum Council (SPC) approved on Monday the launch of a new pricing mechanism for Abu Dhabi National Oil Cos (ADNOC) flagship Murban crude, ADNOC said, part of the state energy company’s broader transformation strategy.
Long seen as one of the most conservative oil firms in the Middle East, ADNOC has been overhauling its trading operations to capture added value and adapt to market changes.
The SPC, Abu Dhabi’s highest governing body for the oil and gas industry, also announced a rise in the UAE’s oil and gas reserves, ADNOC said in a statement.
ADNOC’s Murban crude would be listed as a futures contract on an internationally recognised exchange and ADNOC will engage with customers and other stakeholders in coming months for the implementation of its new forward pricing mechanism, it said.
ADNOC said it expected to implement its new Murban forward pricing mechanism between the second and third quarters of 2020, adding that Monday’s approval also included the lifting of destination restrictions on ADNOC’s sales of Murban.
“The forward-looking decision … to list Murban on an internationally recognised exchange and improve the terms of sale of ADNOCs Murban crude, is another significant step in our transformation,” ADNOC’s CEO Sultan al-Jaber said.
“The initiative will enable our customers and other market participants to better price, manage and trade their purchases of Murban.”
Reuters reported last month that ADNOC has chosen the Intercontinental Exchange (ICE) to launch a regional oil benchmark based on its Murban crude grade by next year.
The move offers a more transparent pricing system for ADNOC’s customers, as it would mean they would know what they are paying in advance, rather than waiting for about two months to find out the price of oil they have already received under the current retroactive pricing system.
The Murban contract will create an alternative benchmark to the most commonly used Middle East standard, the Dubai/Oman benchmark operated by the Dubai Mercantile Exchange and traded on CME’s electronic platform.
“The (Murban) futures contract will be traded on an independent and regulated exchange and is expected to demonstrate a highly liquid forward price curve, given the market appetite for Middle East crude,” ADNOC said.
Murban light crude production is around 1.6-1.7 million barrels per day. For many years the UAE has traditionally sold oil directly to end-users, mainly in Asia, based on retroactive pricing rather than the forward pricing used by Saudi Arabia, Kuwait and Iraq.
Most Middle Eastern grades are priced off the Dubai/Oman benchmark for Asian exports, off Brent-related indices for European exports and U.S. indices for U.S. shipments.
The SPC also announced a rise in oil and gas reserves as well as new unconventional gas discoveries in the emirate of Abu Dhabi.
The boost would move the UAE to sixth place in the global rankings for oil and gas reserves with 105 billion stock tank barrels of recoverable oil and 273 trillion standard cubic feet of conventional gas, ADNOC said.
The UAE, the third-largest oil producer in OPEC behind Saudi Arabia and Iraq, pumps around 3 million bpd, produced mostly by ADNOC. (Reporting by Rania El Gamal; Editing by Dale Hudson, Louise Heavens and Emelia Sithole-Matarise)