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Background

In June 2007 the Price Reporting Agency Platts introduced a quality differential specific to Forties blend crude oil. Following a period of uncertainty, this change was reflected in the Shell standard forward contract (SUKO 90) in July 2007.

»Ê¹ÚÌåÓýapp new clause recognised that if the proportion of sulphur in the crude oil exceeded 0.6% then the buyer would be entitled to a discount of US 4 cents per barrel for every full increment of 0.01% (zero point zero one percent) over 0.6%. For example, if the sulphur assay showed that the proportion of sulphur was 0.629% then the buyer would get a discount of 8 cents per barrel. If the level rose to 0.63% then the discount would also rise to 12 cent per barrel.

»Ê¹ÚÌåÓýapp underlying cause was the introduction of Buzzard field into the Forties system. Buzzard crude oil had significantly more sulphur than other Forties blend fields and contributed a very large volume to Forties production. In the summer; when other fields shutdown for maintenance; the proportion of Buzzard would rise significantly with a commensurate increase in sulphur levels over the previous maximum of 0.6%.

For deliveries with NDDs on or after 1 July 2007, as long as a company provided evidence of the sulphur levels in a disposal (the normal quality assay on loading would provide this) then, for any NAL disposal, the statutory value of that cargo would be reduced by the amount of the de-escalator.

Practice

Since July 2007, Platts have periodically changed the amount of the de-escalator, and LB Oil & Gas has accepted these de-escalation elements in NAL values.

Platts� Forties Sulphur de-escalator

For example, with a 40 cent de-escalator:

No.	Level of Sulphur % by mass	US Cents per barrel
1	0.60	0
2	0.61	4
3	0.62	8
4	0.63	12