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ADNOC can rely on stored Murban for trading futures contract amid OPEC+ cuts

Abu Dhabi National Oil Co., the UAE’s biggest energy producer, can tap stored Murban crude to underpin any physical trading of the futures contract of its flagship grade that will be launched on an Abu Dhabi-based exchange on March 29, a company official said March 3.

ADNOC is also building underground caverns in the eastern emirate of Fujairah that can store up to 42 million barrels of crude and which are set to be completed on schedule by 2022, Khaled Salmeen, ADNOC’s downstream industry, marketing and trading director, told a virtual media briefing.

The Intercontinental Exchange and ADNOC are launching Murban futures contract on ICE Futures Abu Dhabi (IFAD) and the contract includes the option of physical delivery. IFAD is being launched with nine partner companies that include BP, GS Caltex of South Korea, INPEX and ENEOS of Japan, PetroChina, PTT, Shell, Total and Vitol.

“We do have significant reserves in our storage and that will be expanded as our Fujairah project comes on stream,” said Salmeen. “We believe that such availability of storage can deal with the forward months of any of these contracts to ensure that supply is uninterrupted. OPEC quotas are on production not on market supply and hence our local and international storage can easily deal with that difference if it occurs in the future.”

OPEC+ quota

The UAE, OPEC’s third-biggest producer, has been a proponent of further easing of OPEC+ cuts, which are expected to remain in place until April 2022.

The UAE has a current quota of 2.626 million b/d but its production capacity is over 4 million b/d.

ADNOC 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. Currently, ADNOC has the capacity to produce 2 million b/d of Murban, nearly half of the company’s total capacity.

Murban, one of four crude grades sold by ADNOC, is produced by ADNOC Onshore.

BP (10%), Total (10%), INPEX (5%) and GS Caltex (3%) are equity shareholders in ADNOC Onshore, with ADNOC retaining a 60% stake in the concession. The other ADNOC Onshore partners are CNPC (8%) and ZhenHua Oil (4%).

More MOUs

ADNOC has also signed a number of memorandums of understanding with companies to explore using Murban futures to price their crude in a bid to ensure a wide adoption of the contract.

China’s Unipec and Rongsheng Petrochemical Co. are the latest companies that have agreed to explore this option, Salmeen said.

ADNOC and ICE Futures Abu Dhabi signed agreements with several Japanese end users, including Cosmo Oil Co., to explore pricing their oil against the Murban futures, the national oil producer said Jan. 4.

The agreements with Japanese firms follow the signing of MOUs with Chevron, Trafigura and Occidental to explore using Murban futures to price US crude heading to Asia.

On track

ADNOC continues to work to explore other such agreements, Salmeen said.

“We continue to work with customers, partners and producers around the world,” he said. “I think, 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. Similarly, there are other agreements that we would consider [and] at this time we have announced two and that continues to develop.”

Also to free up Murban for export, ADNOC plans to upgrade the existing West refinery in in its Ruwais facility to process crudes other than Murban and free it up for export. The $3.1 billion crude flexibility program will allow the West refinery to process crudes such as Upper Zakum and others once it is completed in 2022.

“In terms of our projects, they are all on track and I don’t forecast any delays,” said Salmeen.
Source: Platts

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