Sultanate of Oman and Dubai Mercantile Exchange Ltd agree next steps
Muscat, Oman - April 18, 2006: The Sultanate of Oman's Ministry of Oil and Gas (MOG) and the Dubai Mercantile Exchange Ltd Limited (DME) today announced the successful completion of their joint working group's efforts to develop a new Middle East sour crude futures contract. Since signing a Memorandum of Understanding (MoU) in February 2006, the two parties have undertaken an intensive analysis of the benefits and implications of developing an Oman-backed physical crude oil futures contract.
Under the terms of the MoU, a working group was established to identify the elements necessary for creating a successful, physically linked Middle East sour crude oil futures contract. The working group, consisting of senior professionals from Oman's Ministry of Oil and Gas, Ministry of Finance, Petroleum Development of Oman, the New York Mercantile Exchange Inc. (NYMEX) and the DME, reported its findings to the joint Steering Committee, comprised of senior leadership from both the Ministry of Oil and Gas and the DME.
The Steering Committee unanimously approved the working group's findings and instructed it to engage the energy and financial communities on the specific terms of the draft futures contract in preparation for launch in the fourth quarter of 2006.
This development builds upon the historic role that both Dubai and Oman have played in providing the crude oil benchmark for pricing Middle Eastern crude oil.
Welcoming the announcement, H.E. Nasser bin Khamis Al Jashmi, Undersecretary of Oil and Gas for Oman said: "The creation of a successful, physically linked Middle East sour crude oil futures contract is a concept we sincerely support, given our role in the pricing of Middle Eastern crude. In this respect, we believe the timing is opportune to lead this initiative and very much look forward to receiving market feedback on the contract."
Ahmad Sharaf, Chairman of the DME commented: "We are delighted to have reached this milestone with Oman's Ministry of Oil and Gas. Together, we will seek to build on the valuable and long-standing relationship between Oman and Dubai to develop a Middle East sour crude oil futures contract that will be traded on the DME. We alsofirmly believe the Tatweer-NYMEX partnership is a combination of both regional and industry expertise that will help us in our goal of launching a world class exchange in Dubai."
Gary King , Chief Executive of the DME, added: "This historic initiative has positive implications for the entire region and will open alternative investment channels for the development of its energy and capital markets. By working closely with Middle Eastern oil producers, who are supplying the growing energy demands of regional and Asia Pacific economies, the new electronic Exchange will provide the means to manage price and credit risk in a transparent and open marketplace."
The current market situation presents an ideal opportunity for the development of a liquid crude oil futures benchmark. While the Middle East is the world's largest hydrocarbon region, it has yet to develop a transparent futures contract. The two leading crude oil futures benchmarks, West Texas Intermediate and Brent, reflect the value of sweet crude oil, and are therefore not representative of Middle East sour crude oils. The unique collaboration between the Sultanate of Oman and the DME has examined this anomaly in the context of growing market challenges concerning the need for a robust and liquid price discovery mechanism for Middle East crude oil.
The DME is a joint venture between Tatweer, a member of Dubai Holding, and NYMEX, Inc.