Platts Initiates ESPO Price Assessments for East-Bound Russian Oil

Platts began publishing on a daily basis an official price assessment for the new ESPO crude oil, Russia's first petroleum flow from the Eastern Siberian Pacific Ocean pipeline targeted for Asia. The price assessment, Platts ESPO, reflects an open market end-of-trading-day price.

Platts today assessed ESPO at the close of physical market trading in London at $74.01 per barrel (/bbl), compared with the Urals assessment at $72.93/bbl and Dated Brent at $73.32/bbl. ESPO is lighter and contains less sulphur than Urals, the most common Russian crude oil for export.

The Eastern Siberian Pacific Ocean pipeline, rail and port facilities at Kozmino in Russia's Far East provide the country with the logistics to target increasing amounts of oil to Asia, rather than to the West.

Platts' new ESPO daily assessments follow more than a year of consultation with Russian energy ministry officials, producers, consumers, transportation and other petroleum industry experts.

"We view the ESPO project as an important step towards diversifying the outlets for Russia's crude oil market, demonstrating the increasing role that Russian oil plays in the world's supply needs," said Mr. Vitalii Vasilievich Karaganov, director of the department of oil and oil products processing at Russia's Ministry of Energy. He made his comment at the November 2 announcement of Platts being selected to provide the Russian Ministry with pricing information on the new oil stream.

Russia's Eastern Siberian Pacific Ocean pipeline, which currently runs from 2,757 kilometres from Taishet in East Siberia to Skovorondino in the Amur region of Russia, near the border with China, has a capacity of 600,000 barrels per day. The pipeline will later reach Kozmino near Vladivostok and the capacity will grow to one million barrels per day by 2012 and to 1.6 million b/d by a later date. The initial Russia-to-Asia export rate by ship will be 300,000 b/d.

"ESPO trading into the Asian spot market has begun with some cargoes changing hands using Platts Dubai as their benchmark of reference," said Jorge Montepeque, Global Editorial Director Markets & Price Assessments, "Over time, ESPO is well positioned to serve the market as a major price indicator of spot oil values in the Far East, particularly in northern Asia, an area of low oil production and high demand. ESPO exports are set to grow and the oil has a wide equity ownership, key elements for an emerging benchmark."

Prior to Platts beginning its daily ESPO price assessments, Russia's Rosneft sold on November 23 the first ESPO cargo through a tender auction at a 50-cent premium to the average Platts Dubai prices published for December. Rosneft awarded the tender to International Petroleum Products OY for 100,000 metric tons of ESPO crude for December 27-29 loading free on board Kozmino basis.