(Repeats story to some subscribers)
* Shell's rules start Monday for May and beyond cargoes
* Rules would improve liquidity in North Sea market -Shell
* Platts says will ignore Shell's terms for now
LONDON/NEW YORK, Feb 8 Royal Dutch Shell has
unilaterally amended the rules of one of the important
components of the North Sea Brent market, which sets the basis
of billions of dollars of oil trade worldwide in an effort to
support trading liquidty.
Shell said it would alter its SUKO 90 terms which govern how
forward BFOE (Brent, Forties, Oseberg and Ekofisk) cargoes are
In an amendment to terms and conditions posted on its
website Shell said BFOE forward cargoes loading in May 2013 and
thereafter will be governed by a new "quality premium"
wording, in a move the oil major said was aimed at bolstering
liquidity in the key North Sea market.
The SUKO 90 terms are the standard terms for the forward
BFOE cargo market, a complex interlocking market for bilateral
forward oil sales contracts in the North Sea that underpin Brent
crude futures, the benchmark for global oil prices.
The Brent benchmark has come under scrutiny from oil market
analysts as overly reliant on increasingly small streams of
North Sea crude oil production, which critics say leaves the
Brent price open to distortion and manipulation.
Shell said it will apply a new quality premium to BFOE
forward month contracts - referring to deals in Brent, Forties
Oseberg and Ekofisk crudes - the four crudes deliverable against
a commitment to supply a forward BFOE cargo. Such cargoes,
traded in months, turn physical under nomination procedures also
spelt out in SUKO 90 terms whereby loading dates are assigned to
individual cargoes, which are thereafter referred to as Dated
The Shell amendment does not apply to Dated Brent itself.
Other major participants in the forward BFOE market did not
immediately publicly endorse or reject Shell's proposed changes.
But price reporting agency Platts, which sets the generally
accepted Dated Brent physical price that underlies oil sales
contracts worldwide, said in a statement it would disregard
Shell's new terms until it had had time to consult more widely
with market participants.
The split between Shell and Platts comes as a steady decline
in North Sea oil output and unplanned oilfield outages have
raised questions about Brent's credibility as a global
benchmark. These small, local supply losses can boost world
"The new robust and transparent quality premium mechanism
will support the Brent benchmark by allowing for more crude
grades and cargoes to be used in establishing the underlying
market price," Shell said in an emailed statement.
"It will therefore contribute towards higher liquidity and
better price discovery."
Some traders who do business with Shell were cautiously
accepting of the major's new terms, which, if bilaterally agreed
to, take effect on Monday. Once May 2013 BFOE is the spot month
this will take on greater significance as industry participants
are still trading oil for earlier months.
"They look set to improve liquidity. They should make more
cargoes eligible to set the price," said one.
Platts did not rule out eventually accepting Shell's new
terms but said it wants a formal review involving all
"stakeholders" before any changes to the BFOE trading terms take
"While the industry may be exploring alternative concepts,"
Platts said in an email to subscribers on Friday following
Shell's announcement, "Platts assessments shall not reflect
escalators until a formal methodology change has been proposed,
announced, and reviewed with all interested stakeholders, and
In an addition to the SUKO 90 terms posted on its website,
Shell listed a series of quality premiums that will apply
depending on whether a cargo of Brent, Forties, Oseberg or
Ekofisk is delivered into a contract.
Forties is usually the cheapest of the four crudes. North
Sea traders say that at the moment it is the one that most often
tends to be delivered into the contracts.
Shell said it will apply the mechanism to BFOE forward
contracts it trades with its own counterparties using SUKO 90
terms for delivery in May 2013 and later.
(Additional reporting and writing by Robert Campbell; Editing
by Anthony Barker and Bob Burgdorfer)