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Brent: A User's Guide to the Future of the World Price Marker

Essential reading for:

• Traders operating in the BFO market and trading other Brent-related contracts;
• Oil producers and consumers in the physical market who use Brent as a reference price and who may find their contracts determined in future by the price of an alternative grade;
• Refiners and traders looking to source oil direct from the producers;
• Taxation authorities using the Brent market as a component of the tax reference, cost recovery, profit sharing or royalty oil price;
• Companies financing oil fields collateralised by Brent hedges;
• Asset traders whose price assumptions are based on the Brent marker;
• Crude oil exchanges offering Brent contracts or using the Brent market as a component of the cash settlement price; and,
• Economic planners, advisers and administrators, both legal and financial.

CEAG's new study `Brent: A User's Guide to the Future of the World Price Marker' takes an in-depth look at the physical commodity that underpins the Brent marker out to 2012. It's publication in February 2007 coincides with the commencement of production from the 200,000 b/d Buzzard field through the Forties pipeline system, a key component of the 21-Day BFO contract. Now that Buzzard is onstream and is producing the expected quality from the first wells, a new issue has arisen on future wells, which will be discussed in the report.

In 2004 CEAG published an extensive study of the 21-Day BFO market. This discounted fears about the acid content of Oseberg Blend and highlighted the future impact of the new Buzzard field on the Forties Blend stream. Key findings from the first study will be included as an appendix for comparative purposes.

This new study provides a detailed examination of the substantial changes in the equity ownership of the major North Sea Blends. This is based on the field ownership data of the UK Department of Trade and Industry and the forward production database of Deloitte Petroleum Services.

It suggests that the market may benefit from the inclusion of new grades in the 21-Day BFO contract. It examines North Sea infrastructure and identifies key facilities supporting the smooth operation of the market.

Contents by Chapter

Chapter One - The equity ownership of cargoes of North Sea Blends. The market shares of the big players and the interests of the minority producers 2005-2012.

Chapter Two - The number of cargoes produced per month 2005-2012

Chapter Three - The quality of North Sea Blends 2005-2012. What is known and what is not.

Chapter Four - The Implications for the 21-Day BFO market and the components of the dated Brent reference price quotation.

Chapter Five - What if...? This examines the key system infrastructure supporting the production of the blends and the changes that would occur under various scenarios.

Appendix One - Key findings from the first study.

Appendix Two - A detailed breakdown of major blend ownership by company by year to 2012.

About the Authors

Liz Bossley, the CEO of CEAG, has more than 25 years of hands-on trading experience. She is the author of a number of books, studies and articles.

Les Cambridge is a senior CEAG associate with 30 years experience in crude oil marketing, pricing and evaluation of technical/economic factors in both upstream and downstream areas.

Amanda Jones is a CEAG associate and research assistant for this study.

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