* ADNOC first says wants to replace Brent, retracts comment
* ICE, where Brent trades, to co-own new Abu Dhabi exchange
* Murban contract push is part of ADNOC reform
(Updates with new comments)
By Rania El Gamal and Ron Bousso
ABU DHABI, Nov 12 (Reuters) - A United Arab Emirates plan to
launch its own global oil benchmark was thrown into confusion on
Tuesday after comments made by its own national oil company.
ADNOC first said it sees Murban as a contract to replace
the global Brent benchmark, only to retract the comment.
The development highlights a complex nature of Abu Dhabi
National Oil Company's (ADNOC) Murban futures contract.
It will be traded on a new local exchange, ICE Futures Abu
Dhabi (IFAD), that will be co-owned by Abu Dhabi, several oil
majors and the Intercontinental Exchange Inc, which is
also home to Brent trading.
"We want to give the industry Murban as a replacement for
Brent crude futures," Philippe Khoury, the head of trading at
ADNOC, told Abu Dhabi's main annual oil show.
He said Brent production volumes were declining. The
industry has long complained about falling North Sea production
which makes Brent illiquid and vulnerable to manipulations.
But ADNOC later retracted Khoury's comment and changed it to
"our ambition is for the market to use Murban as a price marker
alongside Brent crude futures, the global benchmark for oil".
ADNOC said it was retracting the comments because they did
not reflect the company's position.
ICE did not respond to a request for comment.
ICE wants to launch the new exchange in the first half of
2020 to host ADNOC's flagship Murban crude grade.
"We still have to demonstrate that over time the community
can trust the crude as a benchmark," Khoury added.
Oil majors BP, Total, Inpex, Vitol
, Shell, Petrochina, Korea's GS
Caltex, Japan's JXTG and Thailand's PTT have
agreed to become partners in the new exchange.
The exact split of stakes in the new exchange has yet to be
decided. Abu Dhabi owns ADNOC and is effectively a market maker
for Murban.
Vitol CEO Russel Hardy said it would take time to build
liquidity on the new exchange, and that Brent, a basket of
different crude qualities, and U.S. West Texas Intermediate
(WTI) were very established.
"There's a great deal of different constituents playing in
those markets ... these things will take time to build up on the
exchange here," he said at the same panel discussion.
"It is right to have that level of ambition but it will take
some time to build that level of liquidity," he said of ADNOC's
plans for Murban.
The new contract will create an alternative benchmark to the
most commonly used Middle East standard, the Dubai/Oman
benchmark operated by the Dubai Mercantile Exchange (DME) and
traded on CME's electronic platform.
Abu Dhabi's Supreme Petroleum Council last week approved the
launch of a new pricing mechanism for Murban crude as part of
ADNOC's broader transformation strategy. It authorised the state
energy firm to remove destination restrictions on Murban sales.
ADNOC plans to implement new Murban forward pricing between
the second quarter and third quarter of 2020.
UAE Energy Minister Suhail al-Mazrouei said earlier on
Tuesday that he saw no conflict between his country's compliance
with OPEC output cuts and plans to list Murban.
He said the UAE remained committed to cuts agreed by the
Organization of the Petroleum Exporting Countries, plus allies
led by Russia. These countries have since January implemented a
deal to cut output by 1.2 million barrels per day (bpd) which
lasts until March 2020, in an attempt to boost prices.
"I don't think there is a conflict in floating Murban with
the fact that UAE is going to comply with whatever we agree to
with OPEC ... I am not worried about that," Mazrouei told
reporters.
Murban light crude output is around 1.6-1.7 million barrels
per day. The UAE has traditionally sold oil directly to
end-users, mainly in Asia, based on retroactive pricing rather
than the forward pricing used by Saudi Arabia, Kuwait and Iraq.
The UAE, the third-largest OPEC producer behind Saudi Arabia
and Iraq, pumps around 3 million bpd, produced mostly by ADNOC.
(Reporting by Rania El Gamal, Ron Bousso, and Stanley Carvalho;
Writing by Lisa Barrington and Dmitry Zhdannikov;
Editing by Louise Heavens and David Evans)
BP (BP.)
