Dubai — Japan's Inpex, one of nine international energy firms that will launch Murban futures contracts next year alongside Abu Dhabi National Oil Co. and the Intercontinental Exchange, expects the light crude to be in demand as it is coveted to produce IMO 2020-compliant fuels, the company's CEO said.
ICE, ADNOC and the nine international companies will launch the contract on a new Abu Dhabi exchange in the biggest shake-up to oil pricing in the Middle East in years. Inpex already has stakes in onshore and offshore concessions in Abu Dhabi, including fields that produce Murban.
"As a producer and seller of Murban crude, we are seeing a growing demand for Murban crude from customers wishing to decrease their intake of high-sulfur crudes and diversify their supplies to facilitate the production of IMO-compliant fuel," Takayuki Ueda said in a written interview with S&P Global Platts. "We expect this trend will grow even further after IMO 2020 comes into effect next year."
The IMO 2020 rules stipulate that sulfur content in fuels needs to be cut to 0.5% from 3.5% to lower emissions. Murban is the main onshore crude grade of Abu Dhabi with an API degree of 40 and a sulfur content of about 0.7%-0.8%.
Murban is produced by ADNOC Onshore. The Murban concession, which produces approximately 1.7 million b/d of crude oil, is 60% owned by ADNOC, with the remaining 40% shareholding held by BP, Total, Inpex, GS Caltex of South Korea, CNPC and Zhenhua of China.
"We look forward to the launch of an exchange that will further enhance the stability and transparency of Murban crude prices in addition to improving the grade's medium- to long-term trading value, and is expected to position Murban futures alongside the most significant global oil benchmarks," Ueda said.
More than half of Inpex's production in the fiscal year up to March 2019 -- or 231,000 barrels of oil equivalent per day -- was from the Middle East and Africa region, with most of it coming from Abu Dhabi.
"Steps are being taken to pursue development work with the aim of increasing oil production capacity of the Abu Dhabi Onshore Concession to 2 million b/d," Ueda said. ADNOC aims to boost the Abu Dhabi onshore production capacity to 2 million b/d by the end of 2020, according to its website.
Offshore, Inpex is working with its partners to raise production in Lower Zakum to 450,000 b/d, he said without giving a timeline, and at Upper Zakum to 1 million b/d by 2024. The Satah and Umm Al Dalkh oil field concessions have a combined target production capacity of 45,000 b/d, he added, without giving a timeline.
"In summary, our Abu Dhabi operations will continue to play a key role in our growth for the foreseeable future," Ueda said.
Inpex, which won onshore Block 4 concession in ADNOC's first competitive oil and gas licensing round, is currently engaged in exploration activities in the block and preparing to start drilling.
Inpex's interest in exploration activities is part of a company-wide 2040 Vision to boost exploration work and Abu Dhabi is a prime area of growth in this field, Ueda said.
Meanwhile Inpex is working with ADNOC to implement an agreement to set up an LNG bunkering business in the UAE, he said.
"Inpex and ADNOC Logistics & Services continue to be in dialogue on the establishment of an LNG bunkering business in the UAE after signing a memorandum of understanding on an LNG bunkering partnership in late 2018," he said. "The long-term goals of this partnership include unlocking new demand for LNG and expanding our customer base, while strengthening our existing business relations with ADNOC."
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