Shell sets quality premium as part of North Sea brent oil terms

Royal Dutch Shell Plc will require buyers to pay a premium for forward sales of North Sea crude to compensate for differences in the quality of benchmark oil grades.

The price of Brent, Ekofisk and Oseberg oil sold under 25- day forward contracts will be adjusted by a premium based on their price difference relative to the Forties grade, Shell said in an amendment to its so-called SUKO 90 terms and conditions published on Feb. 8. The new rules will go into effect today and apply to cargoes for May delivery onwards, according to the notice.

Sellers of BFOE forward contracts may deliver Brent, Forties, Oseberg or Ekofisk crude cargoes. Under the new rules, when a seller supplies Brent, Ekofisk or Oseberg, as opposed to Forties, the buyer will be obligated to pay a premium to compensate for the lower quality of Forties, according to Shell.

“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,” Jonathan French, a Shell spokesman based in London, said in an e-mailed statement. “It will therefore contribute toward higher liquidity and better price discovery.”