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ADNOC drops destination restrictions for all crude grades ahead of Murban futures launch

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ADNOC drops destination restrictions for all crude grades ahead of Murban futures launch


ADNOC says 1.034 mil b/d of Murban available for April export

Ruwais upgrade, cavern storage to boost export volumes

Murban futures contract set to begin trading March 29

London — "This is to create more freely traded commodity that can be traded on the global markets," Khaled Salmeen, ADNOC's executive director of downstream industry, marketing and trading, said in a media briefing. "The removal of the restrictions will bring additional value to our customers [and] to ADNOC."

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ADNOC had previously made its flagship Murban crude destination-free, and the announcement now unchains its Das, Upper Zakum and Umm Lulu grades.

ADNOC and the Intercontinental Exchange are launching an Abu Dhabi-based exchange called IFAD on March 29, on which the Murban futures contract and related cash-settled derivatives and inter-commodity spreads will trade, subject to regulatory approval.

To improve transparency around the contract, ADNOC said it would publish monthly a report on the projected volumes of Murban available for export in the 12 months ahead. The report will be made available on the 27th of each month at 9 am UAE time (0500 GMT), or the first working day after if the 27th falls on a Friday, Saturday or official UAE holiday.

In its first report published in February, ADNOC said it would have 1.034 million b/d of Murban available for export in April, falling to 1.001 million b/d in May. For June, the first delivery month for the new futures contract, the volume rises to 1.040 million b/d and then 1.070 million b/d in July and August. No explanation was given for the volume changes.

Supporting exports

Murban is ADNOC's largest crude by volume, with a production capacity of about 2 million b/d, out of the company's total capacity of around 4 million b/d. It is produced from 2,000 onshore wells in 12 fields, and ADNOC describes the grade as light and sweet.

The company plans to boost its oil production capacity by 25% to 5 million b/d by 2030, and half of that capacity will be from Murban, Yaser al-Mazrouei, ADNOC's upstream executive director, said at the briefing. By the end of 2021, the grade should see a 65,000 b/d boost from developments underway at the giant Bab field, he added.

To free up volumes for export, ADNOC will upgrade the existing West refinery at its Ruwais facility to process crudes other than Murban in a $3.1 billion project slated for completion in 2022.

ADNOC can also support exports of Murban by drawing from inventories, including at underground caverns being developed in the eastern emirate of Fujairah that can store up to 42 million barrels of crude. That project is also scheduled for completion in 2022, and should allow ADNOC to navigate any of the UAE's production quota commitments under its OPEC membership, Salmeen said.

"In terms of our projects, they are all on track and I don't forecast any delays," said Salmeen.

The UAE has a current OPEC quota, which covers production but not exports, of 2.626 million b/d

Setting OSPs

The official selling prices for Murban exports will be based on the futures contract settlement, which will go to delivery for two months ahead, once launched.

OSPs for ADNOC's Upper Zakum, Das and Umm Lulu grades will be priced at a differential to Murban, but those will be announced on an M-1 timeframe, or early in the month before the month of loading.

Murban will be the second physically delivered futures contract to trade on a regional exchange after the Dubai Mercantile Exchange's Oman crude futures.

It is also a deliverable grade in the S&P Global Platts benchmark Dubai and Oman crude assessments. ADNOC has been pricing its crudes based on Platts Dubai.

ADNOC, which produces almost all of the crude in the UAE, has signed several memorandums of understanding with international oil companies to use the Murban futures contract to price at least some of their crude trades, including Chevron, Trafigura and Occidental.

It announced two additional MOUs on March 3, with China's Unipec and Rongsheng Petrochemical Co., and ADNOC continues to work to explore other such agreements, Salmeen said.

"We have already a good partnership around owners of Murban as well as the owners of IFAD, who have an interest to ensure this is a success," he said. "Similarly, there are other agreements that we would consider [and] at this time we have announced two, and that continues to develop."

IFAD is being launched with nine partner companies that include BP, GS Caltex of South Korea, Japanese companies Inpex and ENEOS, PetroChina, Thailand's PTT, Shell, Total and Vitol.

ADNOC Onshore, the subsidiary that oversees Murban production, has BP (10%), Total (10%), CNPC (8%), INPEX (5%), ZhenHua Oil (4%) and GS Caltex (3%) as partners, with ADNOC retaining a 60% stake in the concession.

Murban export availability

April 1.034
May 1.001
June 1.040
July 1.070
August 1.070
September 1.077
October 1.023
November 1.042
December 1.080
January 2022 1.082
February 2022 1.091
March 2022 1.091

Unit: million b/d

Source: ADNOC