UAE Plans Oil Trade Overhaul to Boost Middle Eastern Clout

For now, Aramco trades only oil products and non-Saudi crude.

OILMONSTER.COM- The United Arab Emirates’ state-run ADNOC, long seen as one of the most conservative oil firms in the Middle East, plans an overhaul for its trading operations as it seeks to emulate the success of rival oil majors and bolster its regional influence.

The company has splurged on hiring former employees of private-sector peers and wants to launch a regional oil benchmark, possibly this year, similar to international markers Brent and WTI, four sources familiar with the plans said.

The plan is not yet finalised and still has to be approved by UAE authorities, such as the Abu Dhabi Supreme Petroleum Council, the sources said.

ADNOC did not respond to a request for comment.

“ADNOC hopes the benchmark will allow it to earn more money and gain bigger prestige in the region. This all fits into a drive by (Abu Dhabi Crown Prince) Sheikh Mohammed bin Zayed to turn the UAE into a regional leader,” one of the sources said.

The UAE, the third-largest oil producer in the Organization of the Petroleum Exporting Countries, behind Saudi Arabia and Iraq, pumps around 3 million barrels per day. It plans to boost output to 4 million bpd by 2020. Most of that oil is produced by ADNOC, based in the country’s capital, Abu Dhabi.

For many years it has traditionally sold oil directly to end-users, mainly in Asia, based on a retroactive pricing system rather than the forward pricing used by Saudi Arabia, Kuwait and Iraq.

Now, the company wants to launch full, in-house trading for refined products and crude as part of energy-sector reforms under Sheikh Mohammed and ADNOC Chief Executive Sultan al-Jaber.

The reforms will seek to go further than those at Saudi state oil giant Aramco, which is also seeking to expand its trading operations to capture added value, the sources said.

For now, Aramco trades only oil products and non-Saudi crude.

ADNOC is considering dropping destination restrictions on all of its oil and allowing it to trade freely on the open market, as part of a broader transformation to become more proactive and adaptive to market changes, the sources said.

 Courtesy: www.reuters.com