The annual Abu Dhabi International Petroleum Exhibition & Conference (ADIPEC) is being held from November 11 to 14.
During his opening remarks, Dr. Sultan Ahmed Al Jaber — the CEO of the Abu Dhabi National Oil Company — officially announced a new deal to trade futures on a type of crude called Murban.
ADNOC will do so in partnership with Intercontinental Exchange, which will launch ICE Futures Abu Dhabi, or IFAD.
Energy executives from industry titans like BP, Shell, and PetroChina were on hand to join the festivities — and sign up as official partners.
The announcement was the talk of day one at ADIPEC. Here's what we saw.
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ABU DHABI — Dr. Sultan Ahmed Al Jaber couldn't help but smile.
He'd just officially announced a new deal to trade futures on a highly valuable type of crude oil produced in his native United Arab Emirates, and the crowd had gone wild with applause.
It was part of his opening remarks at the 2019 edition of the Abu Dhabi International Petroleum Exhibition & Conference (ADIPEC). In what was an otherwise straight-laced address — touching upon other timely subjects like sustainability and digitization — the CEO of the Abu Dhabi National Oil Company clearly enjoyed sharing the news, which appears set to change the energy industry as we know it.
The resource in question is called Murban, a light crude grade of which 1.7 million barrels a day are produced in the UAE, accounting for more than half of the nation's output. In order for the futures to be transacted widely, Intercontinental Exchange will launch ICE Futures Abu Dhabi, which will be known as IFAD.
Based on comments made by Al Jaber, it's clear both he and those at ICE view Murban futures as a potential third major global crude benchmark — something that can slot in alongside Brent and WTI. Al Jaber also remarked that the futures will allow ADNOC to extract even more value from its precious crude.
"This is a very important, historic day for Abu Dhabi, ADNOC, and the industry," he told a packed room of reporters and oil executives during a post-announcement press conference. "Given significant flows of Murban, particularly in Asia, we believe the market is very ready for a new, more geographically relevant market."
The launch of IFAD is hardly Al Jaber's first big splash since taking over as CEO of ADNOC in 2016. In November 2017, he issued a $3 billion bond, the first in company history. It ended up three times oversubscribed.
Then, in December 2017, he completed an $851 million initial public offering for 10% of the company's oil distribution unit. It was Abu Dhabi's biggest IPO in a decade. And in October 2018, Al Jaber sold a 5% stake in ADNOC's drilling arm to Baker Hughes for $550 million, valuing the unit at roughly $11 billion.
Based on Monday's press conference at ADIPEC, he has the entire industry's attention.
A who's who of energy-industry royalty
Even before Al Jaber and his fellow energy-industry titans took the stage to sign, the buzz in the conference hall was palpable.
"Bob Dudley from BP is over there," one unnamed attendee remarked to his colleague. "We sat on the wrong side. They're all here."
Who exactly? Chief executives from BP, Total, PetroChina, Shell, Vitol, Taiwan's PTT, Japan's JXTG, Korea's GS Caltex, and Inpex. They flanked Al Jaber as he delivered remarks, then simultaneously signed the shareholder agreement, inking themselves as partners for ICE's new exchange.
"Murban has the characteristics to be a great new global crude market," Dudley, the CEO of BP, said in a prepared remark. "I think we're watching today, in the oil and gas industry, a piece of history."
Russell Hardy, group CEO of Vitol, added: "Murban already serves as a reference group for many Asian refiners, and the launch of this new benchmark will facilitate hedging and enable the development of a strong, complementary financial market."
Following the conference, the lively throng that followed Al Jaber — from the opening ceremony, through the airport-hangar-sized convention center, and into the conference hall — swelled further in size after the presser ended. The ADNOC CEO snapped photos with each individual partner as onlookers took their own camera-phone shots.
Rationale from an ICE president
After the hubbub surrounding the announcement died down a bit, Business Insider sat down for an interview with Stuart Williams — president of ICE Futures Europe — to discuss the rationale for the agreement. He also provided the line of thinking from ICE's point of view.
Williams laid out three key reasons why the partnership makes sense:
1) Abu Dhabi and the United Arab Emirates have long proven to be effectively governed
"Within the region, you have the perfect combination of a location that has rule of law and a regulatory system that's very familiar to the global community," Williams told Business Insider.
2) ADNOC made a key change in its distibution approach in order to get the deal done
"You've got a national oil company in ADNOC that's extraordinarily strategic and forward-thinking in the sense that it's now willing to go destination-free, which is a key component for benchmarking," Williams said.
3) The existence of a Murban exchange will make it much easier to hedge Asian oil risk
"You have a global benchmark that is Brent, a US benchmark that is WTI, and now we're going to have an Asian benchmark at a comparable grade," he said. "You have comparable qualities across different geographies, which makes the ability to hedge crude coming out of any of those regions, coming into Asia, that much more precise."
In the end, Williams sees the two entities fitting together nicely, in complementary fashion.
"We bring a distribution network, ADNOC brings its fantastic crude with a regulatory system in place," he said. "It has a good chance going forward to becoming a global benchmark."Join the conversation about this story » NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption