SUBSCRIBER NOTE: Platts to amend North Sea Quality Premium calculations

Following an extensive review of feedback submitted during a formal review process announced on October 15, 2013, Platts confirms that it will update the calculation used to establish Quality Premiums for Oseberg and Ekofisk crude oil in its North Sea Dated Brent, cash Brent (BFOE) and related assessment processes for cargoes. As described in detail below, Platts will base QP calculations on one month of data and 60% of observed price differences. Platts has studied the performance of the QP mechanism in more than 10 months of operation, and carefully reviewed all feedback received to its latest review of methodology. The data reviewed and feedback received confirm that these changes will help ensure that QPs are positioned to reflect current market trends, and better facilitate delivery of Oseberg and Ekofisk cargoes into the North Sea crude oil assessment process.

IMPLEMENTATION DATE: This update will be effective for QPs announced on May 1, 2014, and apply to cargoes loading in June 2014 onwards.

TIME SPAN REFLECTED IN CALCULATIONS: Under its updated methodology, Quality Premiums will be calculated for Oseberg and Ekofisk using one month of data, compared to two months of data in its current calculations. For example, the QP announced on May 1 will reflect assessments conducted between April 1 and April 30, inclusive. Platts believes that this will make QPs more responsive to, and more reflective of, current price trends in the physical markets. Platts notes that a full month of assessment data typically embraces more than 40 loading days in the North Sea dated cargo crude oil market. A month of data, coupled with a calculation ratio, should therefore continue to appropriately mitigate the potential impact of maintenance programs, while preserving Platts core aim of ensuring that QPs appropriately represent a prevailing value of crude for prompt physical delivery.

CALCULATION METHODOLOGY: In this update, Platts will also increase the ratio of the net price differences between these grades and the most competitive grade of crude among Brent, Forties, Oseberg and Ekofisk. The ratio will be increased to 60% of the net difference, up from 50% in its current calculation process. Platts believes that increasing the ratio will increase the likelihood that Oseberg and Ekofisk cargoes will be readily deliverable into BFOE nominations, and further increase their relevance to the Dated Brent assessment process.

QP THRESHOLD: Platts has revised the thresholds applied for minimum QPs to ensure that the lowest QP for Oseberg and Ekofisk can be 25 cents/barrel, or else a QP of zero is published. Under its revised calculations, a QP of zero would be announced if 60% of the observed price difference equates to less than a net 25 cents/b. This means that if 60% of the observed premium leads to a value of less than 25 cents/b, a QP of zero would be published. Under its current calculations, a QP of zero is announced if the absolute observed price difference between the grades is less than a gross 50 cents/barrel.

ANNOUNCEMENT OF QPS: Platts will continue to announce QPs on the first publishing day of each month, a month prior to the escalators coming into effect. As an example, Platts will announce new Oseberg and Ekofisk escalators on the first business day of March, for cargoes loading in April. This calendar aligns with typical trading practices, where April cargoes are primarily traded in the month of March.

FORTIES AND BRENT: Platts will continue to publish QPs for only Oseberg and Ekofisk, and there will be no QPs for Brent or Forties crude oils in its assessment processes. The Platts Dated Brent assessment has been designed to reflect the value of light, sweet North Sea crude oil, as embodied by Brent itself. Platts continues to believe it would be counter-intuitive for Brent to carry a QP for delivery against physical Brent trading. Moreover, Brent and Forties are already competitive within the Dated Brent assessment process without further adjustment. Quality Premiums are intended to increase the relevance of higher quality crudes to Brent, the basis crude, while instruments like de-escalators are similarly intended to heighten the relevance of lower quality crudes to Brent.

REVIEWS OF METHODOLOGY: Platts will continue to hold regular public forums for the review of its North Sea crude oil methodology in order to publicly analyze, review and address any application issues.

Platts appreciates all feedback that has been provided on the review of QPs in its assessment processes. Platts will provide an updated Question & Answer document, along with other relevant data that further elaborates on commonly raised issues from all respondents, on its website at http://platts.com/price-assessments/oil/dated-brent. Please send all further comments and queries to europe_crude@platts.com and pricegroup@platts.com. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.