Adnoc removes destination clauses on sale of four crude grades including Murban

Murban crude futures will begin trading on March 29 following its switch to forward pricing last year

Abu Dhabi National Oil Company will remove destination clauses on the sale of four of its crude grades following the start of trading of its Murban Crude Oil Futures contract later this month.

Abu Dhabi's Murban, Upper Zakum, Das and Umm Lulu crude grades will be exempt from destination restrictions, Khaled Salmeen, executive director of Adnoc's downstream industry, marketing and trading directorate told reporters on Wednesday.

Removing destination clauses allows Adnoc’s customers to sell its crude grades onwards freely, with no restrictions on future resale.

The removal of destination restrictions will bring "additional value" to customers and to Adnoc, Mr Salmeen said.

The company also published its first Murban Export Availability report on its onshore subsidiary's website. The report will allow market participants to have an insight into available volumes for 12 months.

"That's an extremely important step because [what] it does [is to] give everybody a clear, similar visibility, around the export availability of Murban to the international market," Mr Salmeen said.

Adnoc's Murban crude futures will begin trading on March 29 following its switch from retroactive pricing to forward pricing last year.

ICE Futures Abu Dhabi will start trading its flagship futures contract and a range of related cash derivatives against the widely-traded Brent and West Texas Intermediate contracts this month.

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That's an extremely important step because [what] it does [is to] give everybody a clear, similar visibility, around the production and the availability of Murban to the international market

The ICE Murban Crude Oil Futures contract will be based on a two-month delivery period, with the first contract for June delivery expiring at the end of April.

Murban is Abu Dhabi's flagship crude grade, which flows at approximately 1.7 million barrels per day.

By 2030, nearly 50 per cent of Adnoc's crude production will be Murban, according to Yasser Al Mazrouei, executive director, upstream at Adnoc.

Abu Dhabi's state oil company plans to raise its production capacity to 5m bpd by 2030 from just over 4m bpd presently.

The drive towards boosting Murban production will come from "3000 wells, with an investment of multiple billions of dollars over the coming 10 years", Mr Al Mazrouei said.

Adnoc's other crude grades, Upper Zakum, Das and Umm Lulu will be priced at a differential to Murban. Grades traded under Murban futures will be priced two months ahead, Adnoc will announce the prices for Upper Zakum, Das and Umm Lulu a month prior to loading.

Murban is produced from fields with a total capacity of 2m bpd as of the end of 2020, according to Mr Al Mazrouei.

Production capacity of Bab, Abu Dhabi's biggest onshore oil field, will be raised from over 420,000 bpd to 485,000 bpd by the end of the year, he added.

On Wednesday, Adnoc also signed agreements with Rongsheng Petrochemical Singapore and China's Unipec to explore the possibility of using the Murban futures contract.

“IFAD will provide us with more alternatives to hedge and optimise our crude pricing portfolio,” said Leo Yang, trading general manager at Unipec Asia.

In 2019, Adnoc agreed a deal with oil majors including BP and Total, trading house Vitol and Asian energy companies to set up the international futures exchange for Murban.

Intercontinental Exchange Abu Dhabi is based at the Abu Dhabi Global Market, the capital’s international financial centre. Companies that signed the partnership include Thailand’s PTT, Japan’s JXTG and Inpex, BP, France’s Total, South Korea’s GS Caltex, PetroChina, Anglo-Dutch major Shell and Vitol.

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