Platts Works to Maintain Integrity of North Sea Brent Oil Benchmark

Platts will further enhance its methodology for assessing the price of Dated Brent crude oil, the world's premier oil benchmark.

Platts currently determines its Dated Brent assessment by tracking the most competitively priced of Brent, Forties, Oseberg and Ekofisk crudes produced in the North Sea. On June 7, 2007, Platts implemented a quality threshold of 0.6% sulfur for Forties crude oil to be considered in Platts' North Sea assessments. Today Platts is further enhancing the quality standard on Forties crude by introducing a "price de-escalator" that will adjust downward the price of oil delivered by a seller to a buyer at sulfur levels above 0.6%.

Both actions were taken to ensure the integrity of the benchmark and to maintain the continuity of the assessment process reflecting consistent quality in crude oil grades. Today's action followed a constructive dialogue with oil industry participants about implementing a mechanism to deal with cases where the crude oil delivered contains sulfur exceeding the 0.6% quality parameter.

"We believe the enhancements to our assessment methodology will help bring greater transparency to this complex market," said Dan Tanz, editorial vice president at Platts. "Platts consulted intensively with the industry over a period of weeks and considered a number of options to improve the workability of the quality standard. In the end the options narrowed to two: either remove Forties from the assessment process, or introduce a quality standard to contend with potential erratic price behavior of the Forties blend. We chose the second option as we believe Forties serves the valuable purpose of providing a sufficient volume of crude to underpin the benchmark. We believe that greater volume underpinning a benchmark ensures wider market representation and an assessment reflective of market value."

Dated Brent is used in spot and long-term contracts to value around 60% of the 85 million barrels of crude oil produced in global oil markets each day. According to a press release on June 7 by the Forties Pipeline System (FPS), the summer quality of Forties crude oil will be significantly downgraded as a result of field maintenance activities. FPS said the Forties crude blend beginning in August will contain a significantly higher percentage of Buzzard, a more sulfurous and heavier crude oil. Since sulfur is an impurity that lowers the value of a crude oil, this would result in a distortion in the value of the Dated Brent benchmark if left unaddressed.

"Quality of crude oil and the need for standards have become an issue in the North Sea as new streams are blended into established benchmark grades," said Jorge Montepeque, Platts Global Director of Market Reports. "Platts is committed to delivering reports and assessments that are reflective of the market value of Dated Brent; and these methodology enhancements will help us do that."

The price de-escalator, effective July 2, provides for an amount of $0.40 cents per barrel for every 0.1 degree of sulfur over the 0.6% quality threshold. The 40-cent de-escalator will be effective through calendar year 2007 unless there is a significant and sustained event in the crude oil market that would necessitate an interim review. Platts in September 2007 will initiate a consultation with the industry to determine the de-escalator mechanism for the 2008 period.